Economic Theory最新文献

Abstract

A model that only focuses on economic relations, and in which efficiency and equity are defined in terms of resource allocation may miss an important part of the picture. We propose a canonical extension of the standard general equilibrium model that embeds economic activities in a larger game of social interactions. Such a model combines general equilibrium effects with social multiplier effects and considerably enriches the analysis of efficiency and equity. Efficiency involves coordination between economic and social interactions, may depend on social norms, and may strongly interact with the distribution of resources. Equity can be defined in a comprehensive, socioeconomic way, and a decomposition into an economic and a social component is possible.

While COVID-19 lockdown measures disrupt production worldwide, they also shock workers’ perceptions and beliefs about the economy and may hence have long-lasting effects after the pandemic. We study a belief-scarring mechanism in the context of labor markets and embed this mechanism into a multi-country, multi-sector Ricardian trade model with input–output linkages. Our quantitative analysis indicates that pandemic shocks leave persistent and substantial belief-driven negative impacts on the post-COVID economy. We find that international trade (without sectoral input–output linkages) worsens the post-COVID economic losses due to a labor-misallocation effect when workers misconceive comparative advantages, whereas input–output linkages dampen such losses. When allowing both trade and input–output linkages, a third and negative effect emerges because the presence of the global supply chain amplifies the stake of efficient allocation according to true comparative advantages and hence makes information friction even more costly. Thus, trade, with input–output linkages, exacerbates the post-COVID losses for the globe as a whole.

We analyze the equilibrium of a bilateral bargaining game (Nash, 1953, Econometrica, 21: 128–140). where at least one of the individuals has a preference for morality (homo moralis). We show that the equilibrium set crucially depends on these moral preferences. Furthermore, our comparative static analyses provide insights into the distributional implications of individuals’ moral concerns and the composition of society. A comparison of the set of equilibria in our model with those under selfish preferences, Kantian equilibrium, fairness preferences, altruistic preferences, and inequality averse preferences reveals important differences.

Abstract

A social planner wants to rank people. Utilitarianism implies that a natural ranking which orders people from most to least sensitive to their rank is the best ranking. But people’s feelings toward the social planner, like blame or gratitude, can depend both on their assigned rank, and on the alternatives they might have been assigned. As a result, the social planner needs to do pairwise comparisons and there may not be a best ranking due to intransitive cycles. This paper shows the possibility of the coexistence of a best choice and non-transitivity. It illustrates how to tell when a best ranking exists, and that when it exists, it is indeed the natural ranking. When this best does not exist, an alternative second-best group ranking strategy is proposed.

Abstract

We consider stopping problems in which a decision maker (DM) faces an unknown state of nature and decides sequentially whether to stop and take an irreversible action, or pay a fee and obtain additional information. We discuss the value and quality of information. The former is the maximal discounted expected total payment the DM can generate under a history-dependent fee scheme. We show that among all history-dependent fee schemes, the upfront fee scheme (as opposed, for instance, to pay-for-use) is optimal: it achieves the value of information. The effects on the optimal strategy of obtaining information from a more accurate source and of having a higher discount factor are distinct, as far as expected stopping time and its distribution are concerned. However, these factors have a similar effect in that they both enlarge the set of cases in which the optimal strategy prescribes waiting.

We study a common agency problem in which two downstream firms, who are local monopolists and receive private demand signals, offer secret menus of two-part tariff contracts to their common supplier. While direct communication is not possible, they may still exchange their information through signal-contingent menus of vertical contracts. We show that a perfect Bayesian equilibrium exists in which information is transmitted, and downstream firms obtain nearly the first-best industry surplus. The use of both fixed charges and slotting fees is necessary for such a result. Our analysis provides a novel explanation for the use of slotting fees in vertical contracting based on its value as an information transmission device.

We develop a piecewise deterministic control model to study optimal lockdown and vaccination policies to manage a pandemic. Lockdown is modeled as an impulse control that allows the decision maker to switch from one level of restrictions to another. Vaccination policy is a continuous control. Decisions are taken under the risk of mutations of the disease, with repercussions on the transmission rate. The decision maker follows a cost minimization objective. We first characterize the optimality conditions for impulse control and show how the prospect of a mutation affects the decision maker’s choice by inducing her to anticipate the net benefit of operating under a different lockdown state once a mutation occurs. The problem admits infinitely many value functions. Under some parametric conditions, we show the existence of a minimum value function that is a natural candidate solution. Focusing on this specific value function, we finally study the features of the optimal policy, especially the timing of impulse control. We prove that uncertainty surrounding future “bad” versus “good” mutation of the disease expedites versus delays the adoption of lockdown measures.