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We analyze contract choices, loan-repayment behavior, and welfare in a model of a competitive credit market when borrowers have a taste for immediate gratification. Consistent with many credit cards and subprime mortgages, for most types of nonsophisticated borrowers the baseline repayment terms are cheap, but they are also inefficiently front loaded and delays require paying large penalties. Although credit is for future consumption, nonsophisticated consumers overborrow, pay the penalties, and back load repayment, suffering large welfare losses. Prohibiting large penalties for deferring small amounts of repayment-akin to recent regulations in the US credit-card and mortgage markets-can raise welfare.

Copyright © 2012 by the American Economic Association.

To date, few firms have used a customer-focused approach to serve the world's poorest people - a full two-thirds of the world's total population at the so-called 'bottom of the economic pyramid' (BOP). Much more prevalent has been a mass-produced approach that assumes that the poor in developing economies can only afford basic, cheap products emphasising functionality. In this classic product approach, often little more is done than push existing or barely adapted products onto shantytown dwellers and rural villagers. Consequently, real value that opens up new market spaces for companies and produces longer-term value for the customer has been lost. Our research reveals that contemporary enterprises that have taken the leap to the customer-focused way of doing business in the developing world grow markets and their stake in them, outperforming traditional enterprise and industry product approaches. The crucial steps in this approach are becoming better known but deserve much more attention.

© 2010 London Business School

In our paper, the target of a proposed merger, by setting a reserve price, is able to screen prospective acquirers according to their (expected) ability to generate merger-specific synergies. Both empirical evidence and many merger models suggest that the difference between high and low-synergy mergers becomes smaller during booms. Thus, a target's opportunity cost for sorting out relatively less fitting acquirers increases and, hence, targets screen less tightly during booms, which leads to a hike in merger activity. Our screening mechanism not only predicts that merger activity is intense during booms and subdued during recessions but is also consistent with other stylized facts about takeovers and generates novel testable predictions.

© The Author 2011. Published by Oxford University Press on behalf of The Review of Economic Studies Limited.

The hedonic value of an outcome can be influenced by the alternatives to which it is compared, which is why people expect to be happier with outcomes that maximize comparative value (e.g., the best of several mediocre alternatives) than with outcomes that maximize absolute value (e.g., the worst of several excellent alternatives). The results of five experiments suggest that affective forecasters overestimate the importance of comparative value because forecasters do not realize that comparison requires cognitive resources, and that experiences consume more cognitive resources than do forecasts. In other words, because forecasters overestimate the extent to which they will be able to think about what they didn't get while experiencing what they got.

With permission of Elsevier

I develop a structural demand model for mobile telephony that facilitates the identification of network effects and inter-network compatibility. Network effects are measured as the dependence of consumer willingness to pay on the installed base of subscribers, compatibility as the relative extent of cross- and own-network effects. Estimating the model using quarterly panel data from the Polish mobile telephone market for the period 1996-2001, I find strong network effects and, despite full interconnection of the mobile telephone networks, low compatibility. I also show that ignoring network effects leads to overestimation of demand elasticity.

With permission of Elsevier