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Under repeated market interaction, reputation and competition may drive out of the market those firms that do not comply with their quality promises. One may thus presume that competitive pressure improves average market quality. This paper shows that the opposite may be true in an endogenous entry, repeated interaction, linear demand oligopoly model, in which introductory prices may be used as quality signals. Cheating firms may enter the market, fool even rational consumers, and exit the market when discovered, implying a failure of the basic reputation mechanism and an increasing time path of prices. Markets for closer substitutes tend to have a lower initial average quality and less trusting consumers, whereas the number of competitors has no clear relationship with average quality.

This paper displays a linear demand oligopoly model, in which firms endogenously decide whether to enter the market and whether to specialize on high or low quality products, and then repeatedly interact to sell experience goods. It shows that the intuition that low and rising prices grant compliance with quality promises extends to this setting, provided that high quality is sufficiently important to buyers.

We consider a broad class of intertemporal economic problems and we characterize the short and long-run response of the demand for a good to a permanent increase in its market price. Depending on the interplay between self-productivity and time discounting, we show that dynamic substitution effects can generate price elasticities of opposite sign in the short and in the long run.

We study a broad class of dynamic consumer problems and characterize the short and long-run response of the demand for a good to a permanent increase in its market price. Such response can be non-monotonic over time, and the short and long-run price-elasticity of demand may have opposite sign. This is a testable prediction and can arise even in the absence of income effects. Our results are robust to a variety of settings that are commonly used in the economic literature, and have relevant policy implications. We provide illustrative applications to models of human capital and labor supply, addiction, habit and taste formation, health capital, and renewable resources.

This paper studies the effect of social closure on crime and tax evasion rates using disaggregated data for Italian municipalities. It measures the degree of social openness of a community by the diversity of its surname distribution, which reflects the history of migration and inbreeding. It shows that, all else equal, communities with a history of social closure have lower crime rates and higher tax evasion rates than more open communities. The effect of social closure is likely to be causal, it is relevant in magnitude, statistically significant, and robust to changes in the set of included controls, in the specific measures of dependent and independent variables, in the specification of the regression equation, and in the possible sample splits. Our findings are consistent with the idea that social closure strengthens social sancions and social control, thus leading to more cooperative outcomes in local interactions, but it reduces cooperation on a larger scale.

Abstract
In a small open economy with heterogeneous firms, in which tariffs determine the mass of active firms, the gains from trade liberalization depend positively on the level of firm vertical heterogeneity (quality heterogeneity) and negatively on transportation costs. The benefits from temporary protection depend on the quality gap: for a given mass of backward firms, the relative gains from protection increase with their quality and decrease with the quality of advanced firms; for given production quality levels, the relative advantage of protection increases with the mass of backward firms.

Beyond direct damages, terrorism creates fear and insecurity, potentially reducing support for democratic institutions if these are deemed inadequate to tackle the threat, and increasing support for military governments. To investigate this possibility, we use data from Pakistan, a country that experienced an exponential rise in terrorism since 2001. Exploiting individual level data on democratic attitudes and district level information on terrorist attacks, we document that persistent exposure to terrorism (and more broadly to violence) is associated to a significantly lower support for democratic values. Results are robust to the inclusion of different sets of controls, to sample splits based on gender, urbanization and education, and to endogeneity considerations. Instrumenting terrorism and violence by the distance from the Pak-Afghan border and by religious fractionalization suggests that the documented correlation reflects a causal impact. Terrorism thus threatens not only individuals, but also democratic institutions.

Beyond direct damages, terrorism creates fear and insecurity, potentially reducing support for democratic institutions if these are deemed inadequate to tackle the threat, and increasing support for military governments. To investigate this possibility, we use data from Pakistan, a country that experienced an exponential rise in terrorism since 2001. Exploiting individual level data on democratic attitudes and district level information on terrorist attacks, we document that persistent exposure to terrorism (and more broadly to violence) is associated to a significantly lower support for democratic values. Results are robust to the inclusion of different sets of controls, to sample splits based on gender, urbanization and education, and to endogeneity considerations. Instrumenting terrorism and violence by the distance from the Pak-Afghan border and by religious fractionalization suggests that the documented correlation reflects a causal impact. Terrorism thus threatens not only individuals, but also democratic institutions.