Essays in economic theory

1. Signaling product quality through price and advertising. I show that when advertising expenditures cannot be perfectly observed, price and advertising would never be simultaneously employed to signal quality. The basic idea is that when price alone is a sufficient statistic for quality, signaling via advertising is an unnecessary and wasteful expenditure. I show that if advertising is not too inefficient, then all signaling must be done by advertising and that price and quality must be uncorrelated.;Many authors in this field ignore the possibility that advertising may have a direct effect on demand, by informing consumers about the existence of a new product. I highlight the dangers of this simplifying assumption. I show that when this assumption is relaxed, advertising could even be inversely correlated with quality.;2. Recursive utility, monotonicity and the rate of impatience. The basic idea behind recursive utility is to represent the total utility of a consumption plan by repeated application of an aggregator function. The aggregator combines current consumption and future utility, yielding current utility. In short, the infinite discounted sum of time additively separable utility is replaced by a process of infinite recursive substitution. The utility of a consumption sequence ;The research succeeds in two ways. First, a simple condition for the monotonicity of the optimal program is presented. This condition is useful because it allows for models with nonconvex production technologies. Second, I develop a new and completely general method for perturbing the "discount rate" implicitly defined by any aggregator function. I then discover conditions under which a reduction in rate of impatience will yield greater savings in every period.;3. Comparative dynamics of steady states and cycles. This paper explores the sensitivity of an optimal savings plan to the exponential discount factor of a time-additively separable objective. Two examples illustrate that reducing the rate of impatience does not always result in greater capital accumulation. (Abstract shortened with permission of author.)...