This thesis aims to answer questions on heterogeneity found in individual decision making owing to differences in preferences and motives. In the first chapter I examine how individual's gender affects bargaining behaviour in an Ultimatum Game. I use a method of priming to make differences in gender roles salient. The results show that due to the prime, both men and women responder ask for a lower minimum acceptable offer when they are partnered with a male proposer, after controlling for personality traits, intelligence and risk preferences. Regardless of their gender, the prime influences behaviour of both men and women in a similar manner. Also, consistent with the literature, I find no significant difference in the Proposer behaviour. The second chapter looks at the relationship between induced mood and cooperative behaviour in a repeated interaction using the Prisoner's Dilemma game. We find that players with an induced positive mood tend to cooperate less than players in a neutral mood setting. This difference is highest in settings with an uncertain number of repetitions and with no communication. We find that the difference is driven by both less accurate beliefs about partners' choices and a less rational reaction to these beliefs among the players in the positive mood treatment. This interpretation of the data is corroborated by a systematic analysis of the text used during communication. The third chapter looks at the idea of multiple motives in social dilemma, using the Public Goods game and the Trust game. We look at the causal effect of mood, risk and beliefs, and find that people in positive mood put in more effort compared to people in neutral mood and perform better in the cognitive intelligence test. However, we find that mood in presence of ambiguity is overpowered by beliefs and decisions in public goods game and trust games are driven mostly by belief rather than participant's mood.

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The shift towards a green consumerism has been globally evident since the 1980s. Government, business and individuals have become increasingly aware of the concept of “green” to reduce the environmental footprint of goods and services. These movements have also spawned a dramatic increase in the number of researches into consumer’s green behaviours. Major advances in green consumption literature in the past years have been made with a focus on the following dimensions: personal beliefs (Kilbourne & Pickett, 2008); environmental knowledge (Chan, 2001); environmental attitudes (do Paco et al., 2013); environmental values (Koller et al., 2011); social influence and government policies (Ozaki, 2011) and a set of environmental barriers (Bray et al., 2011). Many of these prior studies have involved models derived from the field of psychology (Ozaki & Sevastyanova, 2011), sociology (Gadenne et al., 2011), and institutional change (Shove, 2010). Although prior studies have paid significant attention to the role of customer perceived value in marketing performance and customers’ purchase decision making process, empirical research on the concept of perceived green value (PGV) is scarce. The term is operated as a unidimensional construct in Chen & Chang (2012) and Haws et al.’ (2014) studies, which are only concerning about the environmental consciousness aspect. However, these findings are limited by not explicitly capturing various motivations for the concept. Therefore, the first objective of this research is to corroborate and further advance the construct of PGV developed by Chen & Chang (2012) and Haws et al (2014) in the green marketing literature. Specifically, it conceptualises the construct as a second-order construct that is created from five reflective first-order constructs: ecological, functional, symbolic, experiential and epistemic values. Second, past literature fails to examine the factors needed to reflect explicitly the value-costs attributes of customers’ purchase behaviours towards green products. To date, there has been limited research into comprehensively understanding customers’ perceptions and the decision making process towards the value vs. monetary cost comparison of green products. Therefore, aiming to supplement existing knowledge on green consumption behaviour, this research adapts the consumption value theory and utility theory framework in the context of green consumption. The Utility Theory provides the conceptual underpinning of this issue by asserting that consumers’ perceived utility of buying a product is derived from the difference between the values of a product (acquisition utility) and the price paid (transaction utility) in a purchase (Thaler, 1985). The second objective of this research is to provide an overview of the interacting effects of PGV with acquisition and transaction utility perceptions on green purchase intention. Third, despite their ethical perceptions, it is often the case that greenly minded consumers rarely purchase green products. This gap is important, yet poorly understood by researchers (Carrington et al., 2010). To bridge this gap, this research further adds support to extant research by showing that the impact of the utilities of consumption on green products purchase intention depends on different types of customers. We introduce three moderating factors: customer innovativeness, customer knowledge and price sensitivity, to further identify the utility-intention gap. Given the weak utility-intention relationships found in many prior studies (e.g. Apaolaza-Audrain et al., 2012), an improved way of assessing the factors through which different customers may weight on purchase intention are warranted. This doctoral research uses the mixed research method. In the first study, this doctoral research integrates the literature on scales of consumption value and ecological value (e.g. Keller et al., 2011; Chen and Chang, 2012) in a green consumption context. The PGV measures were then refined and confirmed through unstructured interviews with people capable of understanding green products. Then a questionnaire is distributed to the customers (n=296) in an online database. The second study adopts the survey strategy and aims to test the whole research model (n=437). The confirmatory factor analysis and validity analysis suggest that the PGV has a high order factor and it has five dimensions: ecological, functional, symbolic, experiential, and epistemic. The Structural Equation Modelling results highlight the importance of PGV having a strong effect on customer’s green product purchase intention. Moreover, it found that the link between PGV and purchase intention is mediated by the acquisition and transaction utilities. The results also suggest that the moderating roles of customer innovativeness and environmental concern in the acquisition utility-purchase intention relationship are proven to be significant, while price sensitivity also has a negative moderating effect on the transaction utility-purchase intention relationship. This research extends the existing green consumption research by first testing a practical five-dimensional scale of perceived green value. The reliabilities, factor analysis and validity tests confirm the multidimensional construct of PGV scale and its five dimensions demonstrate that consumers assess green products, not just in functional terms of expected performance, but also in terms of individuals’ concern to the environment (ecological value), self-expressive benefits of what the green product communicates to others (symbolic value), the enjoyment derived from the green product (experiential value), and interest in green products (epistemic value). Moreover, this research adapts utility theory to build up the conceptual model and adopts the economic view to investigate the mediating roles of acquisition utility and transaction utility in the value-intention relationship. In addition, this doctoral research provides empirical support for the utility-intention gap. The inclusiveness of the moderating effects of individual factors on the utility-intention link calls for the development of better framework to trace the paths involved. This research fills this gap by considering customer innovativeness, environmental concern and price sensitivity to clarify the moderating effects on the probability of customer’s green product purchase intention.

This thesis consists of three independent chapters investigating behavioural mechanisms of cooperation and coordination. In particular, chapter 1 analyses a voluntary contribution game and proposes a simple behavioural mechanism to achieve social efficiency. Specifically, in this mechanism, each player can costlessly assign a share of the pie to each of the other players, after observing the contributions, and the final distribution of the pie is determined by these assignments. In a controlled laboratory experiment, I find that participants assign the reward based on others' relative contributions in most cases and that the contribution rates improve substantially and almost immediately with 80 percent of players contribute fully. Chapter 2 studies the effects of costly monitoring and heterogeneous social identities on an equity principle of reward allocation. The investigation is based on the mechanism proposed in chapter 2. I hypothesised that the equity principle may be violated when participants bear a personal cost to monitor others' contributions, or when heterogeneous social identities are present in reward allocations. The experimental results show that almost half of the allocators are willing to sacrifice their own resources to enforce the social norm of equity principle. Likewise, with the presence of heterogeneous social identities, though a few participants give more to their in-group member, the majority of them still follow the equity principle to allocate. Chapter 3 explores the behavioural mechanism of communication and leadership in coordination problems. Specifically, I consider two types of leaders: cheap-talk leaders who suggest an effort level, and first-mover leaders who lead by example. I use experimental methods to show the limits of these two mechanisms in avoiding coordination failure in a challenging minimum effort game, with low benefits of coordination relative to the effort cost. The results suggest that both types of leadership have some ability to increase effort in groups with no history, but are insufficient in groups with a history of low effort.

This dissertation joins a vibrant conversation in macroeconomics about the role of financial frictions in business cycles spurred on by the recent financial crisis. Our proposed study contributes to this lively debate in a fundamental way by putting forward two DSGE models. Firstly, we consider a DSGE model which accounts for the financial sector and assumes a distorted steady state. Unlike in studies where the welfare effects of distinct policy bodies i.e. the central bank and the macroprudential institution are not tracked, in our proposed model we derive welfare-based loss functions that trace associated inefficiencies emerging from both nominal and financial distortions. Therefore, to the best of our knowledge, this model is the first to consider welfare-based mandates to the central bank and the macroprudential institution that targets related inefficiencies. In addition, a key innovation of this model is the use of such welfare-based mandate in a game-theoretical framework. Secondly, we introduce a DSGE model, which in addition to financial frictions, is augmented with stochastic volatility and nominal rigidities. This model is then used to assess the effectiveness of conventional, unconventional monetary policies and macroprudential policies in mitigating the effects of disturbances in the presence of risk shocks. To the best of our knowledge, this second model is the first to analyse the effectiveness of unconventional monetary policy and macroprudential policies with stochastic volatility. Furthermore, another key novelty of our research is the analysis of the interactions between three policy options, namely conventional, unconventional monetary and macroprudential policies.

This dissertation contributes to the analysis of firm heterogeneity, turnover, and worker reallocation in frictional labour markets. Chapter 1 presents empirical evidence using German longitudinal matched employer-employee data on the relationship between worker flows and employer characteristics. In particular, the analysis distinguishes between employer-to-employer reallocations and movements into and out of non-employment. It also documents the relationship between worker movements and establishment wage, size and age. The empirical results constitute a motivation for the following chapters. Chapter 2 analyses equilibrium in a labour market characterised by a stationary growth economy with heterogeneous firms and frictional unemployment. The model extends the Coles and Mortensen (2016) framework in two directions: it introduces vintage effects and endogenous worker search effort. New start-up firms are created with a productivity drawn from a technology frontier which grows over time. However, as a given firm’s productivity is fixed, its quality declines relative to the market average. In addition, workers can choose their search intensity. Chapter 3 provides a quantitative exploration of the theoretical model presented in Chapter 2. It estimates the parameters of the model using simulated minimum distance and evaluates its performance in capturing some features of the data: in particular, the model is able to match the establishment size distribution and the relationship between hires and employment.

This thesis explores the role of inactivity in shaping unemployment fluctuations in frictional labour markets. In the First Chapter, I document several facts on the behaviour of inactive individuals in the United Kingdom using the Labour Force Survey, observing a high degree of heterogeneity within those that are not classified as being part of the labour force population. I analyse the behaviour of marginally attached individuals and those who do not desire to work and their role in explaining labour market fluctuations. Then, I use the results found in the First Chapter as a motivation for the rest of this thesis. In the Second Chapter, I consider a search and matching model where vacancies behave as a stock variable in the spirit of Coles and Moghaddasi (2017). Here, I include an exogenous partic- ipation margin and assume marginally attached search with a non-zero job finding probability. I calibrate and evaluate the performance of the model in generating the behaviour of unemployment and vacancies observed in the data for the UK. Finally, the Third Chapter introduces an endogenous participation decision: in every period non-employed individuals decide whether to look for a job or to be inactive according to the state of the economy. I numerically test how modelling the search choice affects the behaviour of individuals when the economy is hit by productivity and separation shocks.

This thesis is a collection of three essays studying firms in low income countries. The first chapter explores how relational contracts that substitute for formal contracts in the presence of weak institutions, are affected by changes to the outside option of one of the parties. I investigate this question by assessing how a change in the pay-off of cultivating an alternative crop by farmers affects the relationship with downstream buyers in the sugar industry in colonial Taiwan (1895-1945). Using novel historic sugar mill level data, I analyse effects on interlinked lending and the provision of inputs by mills to farmers following a reversal of the downward price trend of the main alternative crop, rice. In the second chapter, which is co-authored with Anna Baiardi, we empirically assess the importance of ethnic networks in facilitating international trade. In particular, we investigate the impact of ethnic Cantonese networks in the United States on the export performance of firms based in Southern China. In the third chapter, I investigate whether the dominance of small firms in developing countries can be explained by the production of customised goods, which allows smaller and less efficient firms to compete with larger and more efficient modern firms. I incorporate this hypothesis in a model, in which the key variables impacting the profitability of the customised technology and thus firm size are transport costs and income.

In the first chapter, I explore the problem of optimal contracting under delegation of information acquisition. I study a model where equity-holders of a fund delegate their portfolio allocation to a fund manager in an environment where: i) the expected return of the implemented portfolio depends on the ex-ante unknown future price of an asset, ii) the manager can acquire costly information about the future price, and iii) information acquisition is unobservable and unverifiable. I characterize the optimal contract which incentivizes the manager to obtain information and take the profit-maximizing position based on the available information. I show that the optimal contract implies a premium for positions against the publicly available information: a long position when an asset is considered overvalued, and vice versa. This premium leads the manager to adopt contrarian positions more often than the first best. I argue that this ‘bias against the flow’ is supported by empirical evidence. In the second chapter, I explore the impact of Credit Rating Agencies (CRAs) on capital markets. I argue that the source for potential inefficiencies arising from CRAs might be more pathological than the literature recognizes; even in the absence of conflicts of interest or other distortions resulting from players’ behavior, a CRA might have an adverse effect on critical economics variables. I develop a model of investment financing which, similarly to capital markets, is characterized by information asymmetry and lack of commitment. In the benchmark setting, the CRA is capable of perfect monitoring and reveals its private information truthfully and without cost. I explore the impact of such an “ideal” CRA on the interest rate and the probabilities of project financing and default. I find that introducing such a CRA may lead to under-financing of projects with a positive net present value (NPV) that would otherwise be financed; a higher expected interest rate; and a higher expected probability of default. These findings relate to the feedback effect, which is inherent in capital markets, and its asymmetric impact on firms of different quality. I evaluate the policy of restricting CRAs to provide hard evidence with their ratings, and suggest that it might have an unfavorable effect on the probabilities of project financing and default. In the third chapter, I explore the problem of security design with endogenous implementation choice. I study an economy where an entrepreneur raises capital to finance an investment project. My focus is on an environment where the entrepreneur shares the same characteristics as the representative entrepreneur in crowdfunding platforms: i) there is no record regarding her ability, ii) she might be associated with a negative-NPV project, and iii) she has limited liability. Asymmetric information regarding the entrepreneur’s ability between the entrepreneur and potential investors gives rise to a signaling game when the former issues securities to raise capital. I characterize the optimal security, and show that it is always optimal to reward the non-implementation of the project after financing takes place. I show that compared to a case where the entrepreneur is obliged to implement the project after raising capital, endogenizing the project implementation choice: i) prevents market breakdown, ii) leads to a more efficient allocation of resources, and iii) strengthens the incentive of an entrepreneur to invest in her productivity.