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This thesis considers how pollution affects economic activities. Chapters 2 considers effects of pollution on humans' health. In an overlapping generation model with capital accumulation, agents' status is negatively affected by pollution. Individuals may invest in private health to reduce the burden of the environmental degradation, but this reduces the aggregate savings. Lower savings reduce the capital accumulation dynamic, reducing the optimal growth of the economy. The government can intervene to improve agents' health with public health spending, which crowds out private health investment and is complementary to savings. This work shows that, according to the initial level of capital of the economy and to the “net dirtiness", i.e. the difference of the pollution elasticity with respect to output minus the public health spending elasticity, the economy experiences different longrun growth equilibriums. Chapter 3 evaluates and compare the capacity of an emission tax and of free issued (non-auctioned) permits in terms of the incentives in investing in emission abatement research and in the social welfare. In the model, firms compete a la Cournot with knowledge spillovers. There are two different timing of the game: one where the government can credibly commit to the level of environmental policy; and the second timing where the government cannot credibly commit, and adjust optimally the policy after the firms innovate. This work shows that firms invest more in research when the government can credibly commit to the chosen level of policy. Chapter 4 investigates the role of pollution as a source of income inequality. Blackburn and Chivers (2015), in an overlapping generation model without credit market imperfections but in presence of loss aversion and uncertain return of investment, model agents that inherited from their parent and leave as a bequest to their offspring a positive amount of human capital. If the human capital is below a certain threshold, the loss aversion strongly influence agents, thus avoiding the investment. This reduces their possibility of realising profits and agents may end up in a low-income growth equilibrium with persistent income inequality. We extend their model introducing the pollution flow, which reduces the productivity of human capital and an abatement policy, which mitigates the negative effect of pollution. This work shows that in the presence of pollution, income inequality may increase and that the government can mitigate it through pollution abatement.

This thesis comprises three chapters in the area of intermediation, advertisement and platform innovation. Chapter 1, Quality Uncertainty, Uninformative Advertising and Intermediation Margins, works two contributions. First, we modify Milgrom and Roberts (1986) model of price and advertising as possible signals of an experience good quality, in such a way to rule out the possibility of price signalling alone. Second, the resulting, more tractable, model is then used to contrast the potential benefits of advertisement and intermediation, modelled as quality certification, as alternative ways to overcome information asymmetries on the quality of new experience goods. We show conditions under which intermediation can be a better way of revealing a product's true quality than advertising. Chapter 2, Platform innovation in a two-sided market, studies dynamic innovation incentives in two-sided markets. We present a monopoly platform model with service quality innovations and innovation models of competing platforms. We show that, in a non-tournament duopoly model, platforms will end up in a prisoners' dilemma equilibrium where they conduct same positive R & D, even if their profit will be higher without R & D investments. This result is derived assuming perfect ex-ante symmetry of the platform, and focusing on an ex-post symmetric equilibrium. We then present three extensions with asymmetric network externalities, platform exogenous specialization in side innovations, and innovation tournament model. Chapter 3, A note on Armstrong (2006) monopoly platform model, shows that the set of assumption in Armstrong (2006) monopoly platform model is not sufficient to guarantee the existence of an interior equilibrium with positive demands. We then show that the problem can be fixed by assuming that platform connections generate direct intrinsic value to the connected agents.

This dissertation consists of three essays in development economics. The first essay is concerned with competition between two processing mills in the sugarcane market of Pakistan. I develop a two-stage duopsony game where, in the first period, mills fragmentize the market by investing in the procurement logistics and infrastructure to create captive segments in the market. In the second stage, mills take the segmentation given and compete in prices. The model endogenously determines the market fragmentation. In equilibrium, complete segmentation of the market emerges, mills buy cane from mutually exclusive segments of the market. Finally, I show that a binding price floor has no effect on the market segmentation. The second essay is concerned with coordination amongst processing mills. I analyse why sugar mills in Pakistan pay cane farmers by weight instead of sucrose content? I develop a two-stage pricing game. In the first stage, mills choose the price regime: pay by weight or sucrose content. In the second stage, for a given price regime, mills compete in prices. The model suggests that evaporation of moisture increases the effective transportation cost for farmers and hence reduces the competition between mills. Numerical solution to the game generates a coordination game. The fact that mills pay by weight, payoff dominant equilibrium, indicates a collusive behaviour among mills. However, I could not rule out the possibility of historical inertia when parameter values represent the historical conditions of the market. Finally, I suggest a price floor as an equilibrium switching policy. The final essay of this dissertation is concerned with cooperation between rural households. I study informal risk sharing contracts when players’ behaviour is motivated not only by their material payoff but also by intrinsic motivations. My results suggest that emotions such as envy, altruism, and intentions work in different directions. Envy and altruism not only reduce the critical discount factor that can self-sustain risk sharing but also make the sharing mechanism more equitable by reducing the number of equilibria in the repeated game. Finally, I study intention based preferences in an infinity repeated psychological game. The main result of the final chapter shows that intrinsic reciprocity based on expectations and intentions can reduce the level of informal insurance by increasing the critical discount factor.