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on Contract Theory and Applications |
| By: | Panagiotis Kanellopoulos; Maria Kyropoulou; Hao Zhou |
| Abstract: | We study financial systems from a game-theoretic standpoint. A financial system is represented by a network, where nodes correspond to firms, and directed labeled edges correspond to debt contracts between them. The existence of cycles in the network indicates that a payment of a firm to one of its lenders might result to some incoming payment. So, if a firm cannot fully repay its debt, then the exact (partial) payments it makes to each of its creditors can affect the cash inflow back to itself. We naturally assume that the firms are interested in their financial well-being (utility) which is aligned with the amount of incoming payments they receive from the network. This defines a game among the firms, that can be seen as utility-maximizing agents who can strategize over their payments. We are the first to study financial network games that arise under a natural set of payment strategies called priority-proportional payments. We investigate the existence and (in)efficiency of equilibrium strategies, under different assumptions on how the firms' utility is defined, on the types of debt contracts allowed between the firms, and on the presence of other financial features that commonly arise in practice. Surprisingly, even if all firms' strategies are fixed, the existence of a unique payment profile is not guaranteed. So, we also investigate the existence and computation of valid payment profiles for fixed payment strategies. |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2107.06623&r= |
| By: | Bester, Helmut |
| Abstract: | This paper analyzes fairness and bargaining in a dynamic bilateral matching market. Traders from both sides of the market are pairwise matched to share the gains from trade. The bargaining outcome depends on the traders' fairness attitudes. In equilibrium fairness matters because of market frictions. But, when these frictions become negligible, the equilibrium approaches theWalrasian competitive equilibrium, independently of the traders' inequity aversion. Fairness may yield a Pareto improvement; but also the contrary is possible. Overall, the market implications of fairness are very different from its effects in isolated bilateral bargaining. |
| Keywords: | Fairness,inequity aversion,bargaining,ultimatum game,matching market,search costs,competitive equilibrium |
| JEL: | C78 D5 D6 D83 D9 |
| Date: | 2021 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:fubsbe:202111&r= |
| By: | Matteo Bobba; Tim Ederer; Gianmarco León-Ciliotta; Christopher A. Neilson; Marco Nieddu |
| Abstract: | This paper studies how increasing teacher compensation at hard-to-staff schools can reduce inequality in access to qualified teachers. Leveraging an unconditional change in the teacher compensation structure in Peru, we first show causal evidence that increasing salaries at less desirable locations attracts better quality applicants and improves student test scores. We then estimate a model of teacher preferences over local amenities, school characteristics, and wages using geocoded job postings and rich application data from the nationwide centralized teacher assignment system. Our estimated model suggests that the current policy is both inefficient and not large enough to effectively undo the inequality of initial conditions that hard-to-staff schools and their communities face. Counterfactual analyses that incorporate equilibrium sorting effects characterize alternative wage schedules and quantify the cost of reducing structural inequality in the allocation of teacher talent across schools. |
| Keywords: | Inequality, teacher school choice, teacher wages, matching with contracts |
| JEL: | J31 J45 I21 C93 O15 |
| Date: | 2021–07 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:1273&r= |
| By: | Lamiraud, Karine (ESSEC Research Center, ESSEC Business School); Stadelmann, Pierre (Service de la santé publique, Etat de Vaud) |
| Abstract: | Our article deals with pricing strategies in Swiss health insurance markets and focuses on the relationship between basic and supplementary insurance. We analyzed how firms’ pricing strategies (i.e., pricing of basic and supplementary products) can create switching costs in basic health insurance markets, thereby preventing competition in basic insurance from working properly. More specifically, using unique market and survey data, we investigated whether firms use bundling strategies or supplementary products as low-price products to attract and retain basic insurance consumers. To our knowledge, this is the first paper to analyze these pricing strategies in the context of insurance/health insurance. We found no evidence of bundling in the Swiss setting. We did however observe that firms used low-price supplementary products that contributed to lock in consumers. A majority of firms offered at least one of such product at a low price. None offered low-price products in both basic and supplementary markets. Low-price insurance products differed across firms. When buying a lowprice supplementary product, consumers always bought their basic contract from the same firm. Furthermore, those who opted for low-price supplementary products were less likely to declare an intention to switch basic insurance firms in the near future. This result was true for all risk category levels. |
| Keywords: | Managed Competition; Swiss Health Care Systems; Pricing; Consumer Inertia; Switching Costs; Supplementary Insurance; low-price supplementary product; Bundling |
| JEL: | I10 |
| Date: | 2020–05–13 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:essewp:dr-20004&r= |