Deciphering the Liquidity and Credit Crunch 2007-2008

[Symposium: Early Stages of the Credit Crunch]

By Markus K. Brunnermeier

Journal of Economic Perspectives, Winter 2009

The financial market turmoil in 2007 and 2008 has led to the most severe financial crisis since the Great Depression and threatens to have large repercussions on the real economy. The bursting of the housing bubble forced banks to write down several hundr...

Reflections on Northern Rock: The Bank Run That Heralded the Global Financial Crisis

[Symposium: Early Stages of the Credit Crunch]

By Hyun Song Shin

Journal of Economic Perspectives, Winter 2009

The U.K. bank Northern Rock became the first high-profile casualty of the global financial crisis of 2007-2008 when it suffered its depositor run in September 2007. In spite of the television images of long lines of depositors outside its branch offices, ...

Leveraged Buyouts and Private Equity

[Symposium: Private Equity]

By Steven N. Kaplan and Per Stromberg

Journal of Economic Perspectives, Winter 2009

In a leveraged buyout, a company is acquired by a specialized investment firm using a relatively small portion of equity and a relatively large portion of outside debt financing. The leveraged buyout investment firms today refer to themselves (and are gen...

Beware of Venturing into Private Equity

[Symposium: Private Equity]

By Ludovic Phalippou

Journal of Economic Perspectives, Winter 2009

As a step towards understanding whether a private equity governance structure reduces overall agency conflicts relative to a public equity governance structure (as is often argued), this paper describes the contracts between private equity funds and inve...

Microfinance Meets the Market

By Robert Cull, Asli Demirgüç-Kunt, and Jonathan Morduch

Journal of Economic Perspectives, Winter 2009

In this paper, we examine the economic logic behind microfinance institutions and consider the movement from socially oriented nonprofit microfinance institutions to for-profit microfinance. Drawing on a large dataset that includes most of the world's lea...

The U.S. Equity Return Premium: Past, Present, and Future

By J. Bradford DeLong and Konstantin Magin

Journal of Economic Perspectives, Winter 2009

For more than a century, diversified long-horizon investments in America's stock market have consistently received much higher returns than investors in bonds: a return gap averaging 6 percent per year. An enormous amount of creative and ingenious work by...

Markets: Red Light States: Who Buys Online Adult Entertainment?

By Benjamin Edelman

Journal of Economic Perspectives, Winter 2009

This paper studies the adult online entertainment industry, particularly the consumption side of the market. In particular, it focuses on the demographics and consumption patterns of those who subscribe to adult entertainment websites. On the surface, thi...

Retrospectives: On the Definition of Economics

By Roger E. Backhouse and Steven G. Medema

Journal of Economic Perspectives, Winter 2009

Modern economists do not subscribe to a homogeneous definition of their subject. Surveying definitions of economics from contemporary principles of economics textbooks, we find that economics is the study of the economy, the study of the coordination proc...

Recommendations for Further Reading

By Timothy Taylor

Journal of Economic Perspectives, Winter 2009

Comments: Ramesh Ramankutty; Erik Berglof; and William Easterly and Tobias Pfutze

Journal of Economic Perspectives, Winter 2009

Notes

Journal of Economic Perspectives, Winter 2009

Editor's Note

By Andrew Postlewaite

American Economic Journal: Microeconomics, February 2009

Assessing Strategic Risk

By R. J. Aumann and J. H. Dreze

American Economic Journal: Microeconomics, February 2009

In recent decades, subjective probabilities have been increasingly applied to an adversary's choices in strategic games (SGs). In games against nature (GANs), the subjective probability of a state can be elicited from lotteries yielding utility 1 if th...

Asymmetric Networks in Two-Sided Markets

By Attila Ambrus and Rossella Argenziano

American Economic Journal: Microeconomics, February 2009

This paper investigates pricing decisions and network choices in two-sided markets with network externalities. Consumers are heterogeneous in how much they value the externality. Imposing restrictions on the extent of coordination failure among consume...

The Geography of Trade in Online Transactions: Evidence from eBay and MercadoLibre

By Ali Hortaçsu, F. Asís Martínez-Jerez, and Jason Douglas

American Economic Journal: Microeconomics, February 2009

We analyze geographic patterns of trade between individuals using transactions data from eBay and MercadoLibre, two large online auction sites. We find that distance continues to be an important deterrent to trade between geographically separated buyer...

Contracting with Third Parties

By Sandeep Baliga and Tomas Sjöström

American Economic Journal: Microeconomics, February 2009

In bilateral holdup and moral hazard in teams models, introducing a third party allows implementation of the first best, even if renegotiation is possible. Fines paid to the third party provide incentives for truth-telling and investment. This result h...

Moral Hazard and Customer Loyalty Programs

By Leonardo J. Basso, Matthew T. Clements, and Thomas W. Ross

American Economic Journal: Microeconomics, February 2009

Frequent-flier plans (FFPs) may be the most famous of customer loyalty programs, and there are similar schemes in other industries. We present a theory that models FFPs as efforts to exploit the agency relationship between employers (who pay for ticket...

Like Father, Like Son: Social Network Externalities and Parent-Child Correlation in Behavior

By Antoni Calvó-Armengol and Matthew O. Jackson

American Economic Journal: Microeconomics, February 2009

We build an overlapping generations model where an individual sees higher returns to adopting a behavior as many neighbors adopt the behavior. We show that overlap in the state of a parent and child's neighborhood can lead to correlation in parent-chil...

The Compromise Game: Two-Sided Adverse Selection in the Laboratory

By Juan D. Carrillo and Thomas R. Palfrey

American Economic Journal: Microeconomics, February 2009

We analyze a game of two-sided private information where players have privately known "strengths" and can decide to fight or compromise. If either chooses to fight, the stronger player receives a high payoff and the weaker player receives a low payoff....

Veto Constraint in Mechanism Design: Inefficiency with Correlated Types

By Olivier Compte and Philippe Jehiel

American Economic Journal: Microeconomics, February 2009

We consider bargaining problems in which parties have access to outside options, the size of the pie is commonly known and each party privately knows the realization of her outside option. We allow for correlations in the distributions of outside optio...