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I propose a continuous-time model of price formation in a market where trading is conducted according to a limit-order book. Strategic liquidity traders arrive randomly in the market and dynamically choose between limit and market orders, trading off execution price with waiting costs. I prove the existence of a Markov equilibrium in which the bid and ask(More)
This paper characterizes the revenue maximizing allocation mechanism for a risk neutral seller that owns N, possibly heterogeneous, objects and faces I risk neutral buyers. Buyers' payoffs depend on the entire allocation of objects, on their type, and on the types of all other buyers. Types are independently distributed. The formulation allows for(More)
This paper studies the multidimensional screening problem of a profit-maximizing monop-olist who designs and sells goods with multiple indivisible attributes. The buyer's utility is linear in the probabilities of obtaining the attributes. The values of the attributes are buyer's private information. The paper solves the seller's problem for an arbitrary(More)
In many markets consumer biases do not affect prices, since competition forces firms to price their products close to marginal cost; competition protects the consumer. We show that noisy consumer product evaluations undermine the force of competition, enabling firms to charge high markups in equilibrium, even in highly competitive environments. We analyze(More)
and seminar participants at several marketing departments around the country, where I presented an early version of this paper in 2002. Brief abstract At Internet auction sites like eBay, nearly identical goods are often sold in a sequence of auctions, separated by small amounts of time. Upcoming auctions are announced several days in advance, so buyers can(More)
Authority and power permeate political, social, and economic life, but empirical knowledge about the motivational origins and consequences of authority is limited. We study the motivation and incentive effects of authority experimentally in an authority-delegation game. Individuals often retain authority even when its delegation is in their material(More)
This paper develops a framework to assess how fear of miscoordination affects the sustainability of cooperation. Building on theoretical insights from Carlsson and van Damme (1993), it explores the effect of small amounts of private information on a class of dynamic cooperation games with exit. Lack of common knowledge leads players to second guess each(More)