|
on Economic Design |
|
Issue of 2017‒08‒13
three papers chosen by Guillaume Haeringer, Baruch College and Alex Teytelboym, University of Oxford |
| By: | Laurens Cherchye; Thomas Demuynck; Bram De Rock; Frederic Vermeulen |
| Abstract: | We show that transferable utility has no nonparametrically testable implications for marriage stability in settings with a single consumption observation per household and heterogeneous individual preferences across households. This completes the results of Cherchye, Demuynck, De Rock, and Vermeulen (2017), who characterized Pareto efficient household consumption under the assumption of marriage stability without transferable utility. First, we show that the nonparametric testable conditions established by these authors are not only necessary but also sufficient for rationalizability by a stable marriage matching. Next, we demonstrate that exactly the same testable implications hold with and without transferable utility between household members. We build on this last result to provide a primal and dual linear programming characterization of a stable matching allocation for the observational setting at hand. This provides an explicit specification of the marital surplus function rationalizing the observed matching behavior. |
| Date: | 2017–07 |
| URL: | http://d.repec.org/n?u=RePEc:ete:ceswps:588222&r=des |
| By: | Lach, Saul; Neeman, Zvika; Schankerman, Mark |
| Abstract: | We study the design of a government loan program for risky R&D projects that generate positive externalities, undertaken by entrepreneurs in a competitive capital market environment. With adverse selection, the optimal contract requires a high interest rate but nearly zero co-financing by the entrepreneur. This contrasts sharply with observed policies, typified by a low interest rate and high co-finanacing requirement. When we add moral hazard (endogenous success), the optimal policy consists of a menu of at most two contracts, one with high interest/zero self-finanacing and a second with a lower interest but also a co-finanacing requirement. Calibrated simulations compare the optimal policy and observed program designs in terms of innovation and welfare. |
| Keywords: | additionality; entrepreneurship; government nance; innovation; mechanism design; R&D; start-ups |
| JEL: | D61 D82 O32 O38 |
| Date: | 2017–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:12199&r=des |
| By: | Dmitry Dagaev (National Research University Higher School of Economics); Andrey Zubanov (National Research University Higher School of Economics) |
| Abstract: | We propose a theoretical model of a round-robin tournament with limited resources motivated by the fact that in a real-world round-robin sport tournament participating teams are sometimes forced to distribute their effort over an extended period. We assume that the participating teams have a limited amount of effort that must be distributed between all matches. We model the outcome of each match as a first-price sealed-bid auction. Results are aggregated after all matches are played with respect to the number of wins. The teams distribute their effort striving to maximize the expected payoff at tournament completion. For a three team tournament, we describe the set of all subgame perfect Nash equilibria in pure strategies. For tournaments with a relatively low first prize, we found two types of equilibria: ‘effort-saving’ and ‘burning out’, both leading to unequal payoffs. In contrast, for tournaments with a large first prize a limited budget of effort, in general, does not allow for the first or the last move advantage to be exploited. |
| Keywords: | contest, round-robin tournament, limited resources, first-price auction, first-mover advantage. |
| JEL: | C73 D44 |
| Date: | 2017 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:171/ec/2017&r=des |