nep-gth New Economics Papers
on Game Theory
Issue of 2018‒09‒10
24 papers chosen by
Sylvain Béal
Université de Franche-Comté

  1. On the gamma-core of asymmetric aggregative games By Stamatopoulos, Giorgos
  2. Persistence of Power: Repeated Multilateral Bargaining By Agranov, Marina; Cotton, Christopher; Tergiman, Chloe
  3. Quadratic Games By Nicolas S. Lambert; Giorgio Martini; Michael Ostrovsky
  4. Characterizing Envy-Free, Strategy Proof, and Monotonic Mechanisms in Queueing Problem By Youngsub Chun; Duygu Yengin
  5. kth price auctions and Catalan numbers By Nawar, Abdel-Hameed; Sen, Debapriya
  6. Exploration vs Exploitation, Impulse Balance Equilibrium and a specification test for the El Farol bar problem By Alan Kirman; FranÃffois Laisney; Paul Pezanis-Christou
  7. Using Persistence to Generate Incentives in a Dynamic Moral Hazard Problem By Aislinn Bohren
  8. Auctions with Limited Commitment By Qingmin Liu; Konrad Mierendorff; Xianwen Shi; Weijie Zhong
  9. EFFICIENT PARTNERSHIP FORMATION IN NETWORKS By Bloch, Francis; Dutta, Bhaskar; Manea, Mihai
  10. Costly Pretrial Agreements By Anderlini, Luca; Felli, Leonardo; Immordino, Giovanni
  11. Game-theoretic dynamic investment model with incomplete information: futures contracts By Oleg Malafeyev; Shulga Andrey
  12. Strategic Implications of Counter-Geoengineering: Clash or Cooperation? By Daniel Heyen; Joshua Horton; Juan Moreno-Cruz
  13. Equilibrium Provider Networks: Bargaining and Exclusion in Health Care Markets By Ho, Katherine; Lee, Robin S.
  14. Trading Networks with General Preferences By Jan Christoph Schlegel
  15. Group-Shift and the Consensus Effect, Second Version By David Dillenberger; Colin Raymond
  16. Latent Agents in Networks: Estimation and Pricing By Baris Ata; Alexandre Belloni; Ozan Candogan
  17. Communication with Partially Verifiable Information: An Experiment By Valeria Burdea; Maria Montero; Martin Sefton
  18. The Effect of Positive Mood on Cooperation in Repeated Interaction By Proto, Eugenio; Sgroi, Daniel; Nazneen, Mahnaz
  19. Unobserved Heterogeneity in Auctions By Philip A. Haile; Yuichi Kitamura
  20. Promoting a Reputation for Quality By Daniel Hauser
  21. The Political Economy of Patrons, Brokers, and Voters By Gallego, J; Li, C; Wantchekon, L
  22. Other-regarding preferences and giving decision in risky environments: experimental evidence By Mickael Beaud; Mathieu Lefebvre; Julie Rosaz
  23. Experimental evidence on bank runs under partial deposit insurance By Peia, Oan; Vranceanu, Radu
  24. Optimal Unemployment Insurance and Redistribution By Boadway, Robin; Cuff, Katherine

  1. By: Stamatopoulos, Giorgos
    Abstract: This paper analyzes the core of cooperative games generated by asymmetric aggregative normal-form games, i.e., games where the payoff of each player depends on his strategy and the sum of the strategies of all players. We assume that each coalition calculates its worth presuming that the outside players stand alone and select individually optimal strategies (Chander & Tulkens 1997). We show that under some mild monotonicity assumptions on payoffs, the resulting cooperative game is balanced, i.e. it has a non-empty gamma-core. Our paper thus offers an existence result for a core notion that is considered quite often in the theory and applications of cooperative games with externalities.
    Keywords: cooperative game; aggregative game; balancedness; core
    JEL: C71
    Date: 2018–08–11
  2. By: Agranov, Marina; Cotton, Christopher; Tergiman, Chloe
    Abstract: In a variety of settings, budgets are set by a committee that interacts repeatedly over many budget cycles. To capture this, we study a model of repeated multilateral bargaining by a budget committee. Our focus is on the transition of agenda setting power from one cycle to the next, and how such considerations affect bargaining and coalition formation over time. Specifically, we compare a rule that approximates the budget process in many parliamentary democracies in which a vote of confidence is traditionally attached to each budget proposal, and a rule that approximates the budget process in congressional systems where party leadership must maintain the support of a majority of other legislators to hold onto power. As is standard in the literature, we use stationary equilibrium refinements to make predictions about behavior in our environments. In a controlled laboratory experiment, we find no support for the standard equilibrium refinements used in the literature. In sharp contrast to the theoretical predictions, in the experiment, both rules give rise to stable and persistent coalitions in terms of coalition size, identity, and shares of coalition partners and feature high persistence of agenda-setter power. Our results call into question the validity of restricting attention to history independent strategies in dynamic bargaining games. We conclude by showing that weakening the standard equilibria concepts to allow players to condition on one piece of history (the most recent deviator) is enough to generate equilibria which are consistent with outcomes and behavior observed in the experiments.
    Keywords: Financial Economics, Political Economy
    Date: 2016–12
  3. By: Nicolas S. Lambert; Giorgio Martini; Michael Ostrovsky
    Abstract: We study general quadratic games with multidimensional actions, stochastic payoff interactions, and rich information structures. We first consider games with arbitrary finite information structures. In such games, we show that there generically exists a unique equilibrium. We then extend the result to games with infinite information structures, under an additional assumption of linearity of certain conditional expectations. In that case, there generically exists a unique linear equilibrium. In both cases, the equilibria can be explicitly characterized in compact closed form. We illustrate our results by studying information aggregation in large asymmetric Cournot markets and the effects of stochastic payoff interactions in beauty contests. Our results apply to general games with linear best responses, and also allow us to characterize the effects of small perturbations in arbitrary Bayesian games with finite information structures and smooth payoffs.
    JEL: C62 C72 D43 L13
    Date: 2018–08
  4. By: Youngsub Chun (Seoul National University); Duygu Yengin (School of Economics, University of Adelaide)
    Abstract: Given a group of agents, the queueing problem is concerned with finding the order in which to serve agents and the (positive, zero, or negative) monetary transfers they should receive. In this paper, we explore the central open questions in queueing problem. First, we characterize the class of strategy-proof and envy-free mechanisms. Note that no-envy implies queue-efficiency in the queueing problem. We also characterize the subclasses that generate bounded deficit or no-deficit. Then, we address the open questions regarding solidarity in the queueing problem and characterize the classes of queue-efficient and strategy-proof mechanisms which satisfy respectively (i) cost monotonicity and (ii) population/slot monotonicity. Finally, we prove that among the envy-free and strategy-proof mechanisms, the only ones that satisfy either cost monotonicity or population monotonicity are an extension of the Pivotal/Reward-based Pivotal mechanisms.
    Keywords: Queueing problem; no-envy; queue-efficiency; strategy-proofness; population monotonicity; slot monotonicity; population solidarity; cost monotonicity; VCG mechanisms; Pivotal mechanisms; Reward-based Pivotal mechanism; Symmetrically Balanced VCG mechanism
    JEL: C72 D63 D71 D82
    Date: 2018–02
  5. By: Nawar, Abdel-Hameed; Sen, Debapriya
    Abstract: This paper establishes an interesting link between kth price auctions and Catalan numbers by showing that for distributions that have linear density, the bid function at any symmetric, increasing equilibrium of a kth price auction (k is 3 or higher) can be represented as a finite series of k-2 terms whose lth term involves the lth Catalan number. Using an integral representation of Catalan numbers, together with some classical combinatorial identities, we derive the closed form of the unique symmetric, increasing equilibrium of a kth price auction for a non-uniform distribution.
    Keywords: kth price auction; the revenue equivalence principle; Catalan numbers; Jensen's identity; Hagen-Rothe's identity
    JEL: C72
    Date: 2018–08
  6. By: Alan Kirman (École des Hautes Études en Sciences Sociales, CAMS (Paris)); FranÃffois Laisney (Zentrum für Europäische Wirtschaftsforschung (ZEW), Mannheim); Paul Pezanis-Christou (School of Economics, University of Adelaide)
    Abstract: The paper reports on market-entry experiments that manipulate both payoff structures and payoff levels to assess two stationary models of behaviour: Exploration vs Exploitation (EvE, which is equivalent to Quantal Response Equilibrium) and Impulse Balance Equilibrium (IBE). These models explain the data equally well in terms of goodness-of-fit whenever the observed probability of entry is less than the symmetric Nash equilibrium prediction; otherwise IBE marginally outperforms EvE. When assuming agents playing symmetric strategies, and estimating the models with session data, IBE yields more theory-consistent estimates than EvE, no matter the payoff structure or level. However, the opposite occurs when the symmetry assumption is relaxed. The conduct of a specification test rejects the validity of the restrictions on entry probabilities imposed by EvE for agents with symmetric strategies, in 50 to 75% of sessions and it always rejects it in the case of IBE, which indicates that the symmetric variant of these models have little empirical support.
    Keywords: congestion games; exploration vs exploitation; quantal response equilibrium; impulse balance equilibrium; specification test; experimental economics
    JEL: C7 C92
    Date: 2018–08
  7. By: Aislinn Bohren (Department of Economics, University of Pennsylvania)
    Abstract: This paper studies how persistence can be used to create incentives in a continuous-time stochastic game in which a long-run player interacts with a sequence of short-run players. Observation of the long-run player's actions are distorted by a Brownian motion and the actions of both players impact future payoffs through a state variable. For example, a firm or worker provides customers with a product, and the quality of this product depends on both current and past investment choices by the firm. I derive general conditions under which a Markov equilibrium emerges as the unique perfect public equilibrium, and characterize the equilibrium payoff and actions in this equilibrium, for any discount rate. I develop an application of persistent product quality to illustrate how persistence creates effective intertemporal incentives in a setting where traditional channels fail, and explore how the structure of persistence impacts equilibrium behavior. This demonstrates the power of the continuous-time setting to deliver sharp insights and a tractable equilibrium characterization for a rich class of dynamic games.
    Keywords: Continuous Time Games, Stochastic Games
    JEL: C73 L1
    Date: 2016–10–15
  8. By: Qingmin Liu; Konrad Mierendorff; Xianwen Shi; Weijie Zhong
    Abstract: We study the role of limited commitment in a standard auction environment. In each period, the seller can commit to an auction with a reserve price but not to future reserve prices. We characterize the set of equilibrium profits attainable for the seller as the period length vanishes. An immediate sale by efficient auction is optimal when there are at least three buyers. For many natural distributions two buyers is enough. Otherwise, we give conditions under which the maximal profit is attained through continuously declining reserve prices.
    Keywords: Auctions, Limited Commitment, Mechanism Design, Coase Conjecture
    JEL: D42 D44 D82
    Date: 2018–09–05
  9. By: Bloch, Francis; Dutta, Bhaskar; Manea, Mihai
    Abstract: We analyze the formation of partnerships in social networks. Players need favors at random times and ask their neighbors in the network to form exclusive long-term partnerships that guarantee reciprocal favor exchange. Refusing to provide a favor results in the automatic removal of the underlying link. When favors are costly, players agree to provide the first favor in a partnership only if they otherwise face the risk of eventual solitude. In equilibrium, the players essential for realizing every maximum matching can avoid this risk and enjoy higher payoffs than inessential players. Although the search for partners is decentralized and reflects local incentives, the strength of essential players drives efficient partnership formation in every network. When favors are costless, players enter partnerships at any opportunity and every maximal matching can emerge in equilibrium. In this case, efficiency is limited to special linking patterns: complete and complete bipartite networks, locally balanced bipartite networks with positive surplus, and factor-critical networks.
    Keywords: Financial Economics
    Date: 2018–02–02
  10. By: Anderlini, Luca; Felli, Leonardo; Immordino, Giovanni
    Abstract: Settling a legal dispute involves some costs that the parties have to incur ex-ante, for the pretrial negotiation and possible agreement to become feasible. Even in a full information world, if the distribution of these costs is sufficiently mismatched with the distribution of the parties' bargaining powers, a pretrial agreement may never be reached even though actual Court litigation is overall wasteful. Our results shed light on two key issues. First, a Plaintiff may initiate a law suit even though the parties fully anticipate that it will be settled out of Court. Second, the "likelihood" that a given law suit goes to trial is unaffected by how trial costs are distributed among the litigants. The choice of fee-shifting rule can only affect whether the Plaintiff files a law suit in the first place. It does not affect whether it is settled before trial or litigated in Court.
    Keywords: Costly Negotiations; Court Litigation; Pretrial Agreements
    JEL: C79 D23 D86 K12 K13
    Date: 2018–07
  11. By: Oleg Malafeyev; Shulga Andrey
    Abstract: Over the past few years, the futures market has been successfully developing in the North-West region. Futures markets are one of the most effective and liquid-visible trading mechanisms. A large number of buyers are forced to compete with each other and raise their prices. A large number of sellers make them reduce prices. Thus, the gap between the prices of offers of buyers and sellers is reduced due to high competition, and this is a good criterion for the liquidity of the market. This high degree of liquidity contributed to the fact that futures trading took such an important role in commerce and finance. A multi-step, non-cooperative n persons game is formalized and studied
    Date: 2018–08
  12. By: Daniel Heyen; Joshua Horton; Juan Moreno-Cruz
    Abstract: Solar geoengineering has received increasing attention as an option to temporarily stabilize global temperatures. A key concern surrounding these technologies is that heterogeneous preferences over the optimal amount of cooling combined with low deployment costs may allow the country with the strongest incentive for cooling, the so-called free-driver, to impose a substantial externality on the rest of the world. We analyze whether the threat of counter-geoengineering technologies capable of negating the climatic effects of solar geoengineering can overcome the free-driver problem and tilt the game in favor of international cooperation. Our game-theoretical model of asymmetric countries allows for a rigorous analysis of the strategic interaction surrounding solar geoengineering and counter-geoengineering. We find that the free-driver outcome becomes unstable once counter-geoengineering is available, but not always with benign effects. The presence of counter-geoengineering leads to either a climate clash where countries engage in a non-cooperative escalation of opposing climate interventions (negative welfare effect), a moratorium treaty where countries commit to abstain from either type of climate intervention (indeterminate welfare effect), or cooperative deployment of solar geoengineering (positive welfare effect). We show that the outcome depends crucially on the degree of asymmetry in temperature preferences between countries.
    Keywords: climate intervention, solar geoengineering, counter-geoengineering, free-driver, strategic conflicts, game theory, cooperation, externality, global warming, international environmental agreements
    JEL: Q54 H41 D62 D02 D74
    Date: 2018
  13. By: Ho, Katherine; Lee, Robin S.
    Abstract: We evaluate the consequences of narrow hospital networks in commercial health care markets. We develop a bargaining solution, Nash-in-Nash with Threat of Replacement, that captures insurers' incentives to exclude, and combine it with California data and estimates from Ho and Lee (2017) to simulate equilibrium outcomes under social, consumer, and insurer-optimal networks. Private incentives to exclude generally exceed social incentives, as the insurer bene fits from substantially lower negotiated hospital rates. Regulation prohibiting exclusion increases prices and premiums and lowers consumer welfare without significantly affecting social surplus. However, regulation may prevent harm to consumers living close to excluded hospitals.
    Date: 2018–07
  14. By: Jan Christoph Schlegel
    Abstract: We establish the lattice theorem, rural hospitals theorem, and a group-incentive-compatibility result for terminal buyers (sellers) with unit demand, in a general bilateral trading network without making the assumption of quasi-linear utility in transfers.
    Date: 2018–08
  15. By: David Dillenberger (Department of Economics, University of Pennsylvania); Colin Raymond (Department of Economics, Amherst University)
    Abstract: Individuals often tend to conform to the choices of others in group decisions, compared to choices made in isolation, giving rise to phenomena such as group polarization and the bandwagon effect. We show that this behavior, which we term the consensus effect, is equivalent to a well-known violation of expected utility, namely strict quasi-convexity of preferences. In contrast to the equilibrium outcome when individuals are expected utility maximizers, quasi-convexity of preferences imply that group decisions may fail to properly aggregate preferences and strictly Pareto-dominated equilibria may arise. Moreover, these problems become more severe as the size of the group grows.
    Keywords: Aggregation of Preferences, Choice Shifts in Groups, Consensus Effect, Non-Expected Utility, Quasi-Convex Preferences
    JEL: D71 D81
    Date: 2016–09–30
  16. By: Baris Ata; Alexandre Belloni; Ozan Candogan
    Abstract: We focus on a setting where agents in a social network consume a product that exhibits positive local network externalities. A seller has access to data on past consumption decisions/prices for a subset of observable agents, and can target these agents with appropriate discounts to exploit network effects and increase her revenues. A novel feature of the model is that the observable agents potentially interact with additional latent agents. These latent agents can purchase the same product from a different channel, and are not observed by the seller. Observable agents influence each other both directly and indirectly through the influence they exert on the latent part. The seller knows the connection structure of neither the observable nor the latent part of the network. We investigate how the seller can use the available data to estimate the matrix that captures the dependence of observable agents' consumption decisions on the prices offered to them. We provide an algorithm for estimating this matrix under an approximate sparsity condition, and obtain convergence rates for the proposed estimator despite the high-dimensionality that allows more agents than observations. Importantly, we then show that this approximate sparsity condition holds under standard conditions present in the literature and hence our algorithms are applicable to a large class of networks. We establish that by using the estimated matrix the seller can construct prices that lead to a small revenue loss relative to revenue-maximizing prices under complete information, and the optimality gap vanishes relative to the size of the network. We also illustrate that the presence of latent agents leads to significant changes in the structure of the revenue-maximizing prices.
    Date: 2018–08
  17. By: Valeria Burdea (University of Nottingham, School of Economics); Maria Montero (University of Nottingham, School of Economics); Martin Sefton (University of Nottingham, School of Economics)
    Abstract: We use laboratory experiments to study communication games with partially verifiable information. In these games, based on Glazer and Rubinstein (2004, 2006), an informed sender sends a two-dimensional message to a receiver, but only one dimension of the message can be verified. We compare a treatment where the receiver chooses which dimension to verify with one where the sender has this verification control. We find significant differences in outcomes across treatments. Specifically, receivers are more likely to observe senders’ best evidence when senders have verification control. However, receivers' payoffs do not differ significantly across treatments, suggesting they are not hurt by delegating verification control. We also show that in both treatments the receiver's best reply to senders' observed behavior is close to the optimal strategy identified by Glazer and Rubinstein.
    Keywords: communication, partially verifiable messages, verification control, experiment
    Date: 2018–07
  18. By: Proto, Eugenio; Sgroi, Daniel; Nazneen, Mahnaz
    Abstract: Existing research supports two opposing mechanisms through which positive mood might affect cooperation. Some studies have suggested that positive mood produces more altruistic, open and helpful behavior, fostering cooperation. However, there is contrasting research supporting the idea that positive mood produces more assertiveness and inward-orientation and reduced use of information, hampering cooperation. We find evidence that suggests the second hypothesis dominates when playing the repeated Prisoner’s Dilemma. Players in an induced positive mood tend to cooperate less than players in a neutral mood setting. This holds regardless of uncertainty surrounding the number of repetitions or whether pre-play communication has taken place. This finding is consistent with a text analysis of the pre-play communication between players indicating that subjects in a more positive mood use more inward-oriented, more negative and less positive language. To the best of our knowledge we are the first to use text analysis in pre-play communication.
    Keywords: Financial Economics
    Date: 2017–11–11
  19. By: Philip A. Haile (Cowles Foundation, Yale University); Yuichi Kitamura (Cowles Foundation, Yale University)
    Abstract: A common concern in the empirical study of auctions is the likely presence of auction-specific factors that are common knowledge among bidders but unobserved to the econometrician. Such unobserved heterogeneity confounds attempts to uncover the underlying structure of demand and information, typically a primary feature of interest in an auction market. Unobserved heterogeneity presents a particular challenge in first-price auctions, where identification arguments rely on the econometrician’s ability to reconstruct from observables the conditional probabilities that entered each bidder’s equilibrium optimization problem; when bidders condition on unobservables, it is not obvious that this is possible. Here we discuss several approaches to identification developed in recent work on first-price auctions with unobserved heterogeneity. Despite the special challenges of this setting, all of the approaches build on insights developed in other areas of econometrics, including those on control functions, measurement error, and mixture models. Because each strategy relies on different combinations of model restrictions, technical assumptions, and data requirements, their relative attractiveness will vary with the application. However, this varied menu of results suggests both a type of robustness of identifiability and the potential for expanding the frontier with additional work.
    Date: 2018–08
  20. By: Daniel Hauser (Department of Economics, Aalto University)
    Abstract: I consider a model in which a firm invests in both product quality and in a costly signaling technology, and the firm's reputation is the market's belief that its quality is high. The firm influences the rate at which consumers receive information about quality: the firm can either promote, which increases the arrival rate of signals when quality is high, or censor, which decreases the arrival rate of signals when quality is low. I study how the firm's incentives to build quality and signal depend on its reputation and current quality. The firm's ability to promote or censor plays a key role in the structure of equilibria. Promotion and investment in quality are complements: the firm has stronger incentives to build quality when the promotion level is high. Costly promotion can, however, reduce the firm's incentive to build quality; this effect persists even as the cost of building quality approaches zero. Censorship and investment in quality are substitutes. The ability to censor can destroy a firm's incentives to invest in quality, because it can reduce information about poor quality products.
    Keywords: Reputation, Advertising, Promotion, Censorship, Dynamic Games
    JEL: C73 D82 D83 D84
    Date: 2016–09–29
  21. By: Gallego, J; Li, C; Wantchekon, L
    Abstract: Formal models of political clientelism tend to focus on vote buying, the exchange of cash and goods for votes on election day. However, other components of the phenomenon, such as patronage, the exchange of public jobs and contracts for political support, are more important in order to understand the pervasive consequences of clientelism. We develop a game-theoretic model of patronage, in which candidates must decide between broker-mediated electoral strategies versus grassroots campaigns. Our model shows that patronage is more likely when public offices are relatively more valuable for brokers, a condition that is typical of institutional configurations that foster corruption. Moreover, setups that constrain candidates from funding grassroots campaigns and weaken ties between politicians and citizens make broker-mediated campaigns more likely. We show that patronage negatively affects citizens’ welfare, as winning brokers end up being appointed to public office, undermining the quality of civil servants and public goods provision.
    Keywords: Patronage, Clientelism, Corruption, Agency, Grassroots Campaigns
    Date: 2018–08–27
  22. By: Mickael Beaud; Mathieu Lefebvre; Julie Rosaz
    Abstract: This paper investigates if and how other-regarding preferences governing giving decisions in dictator games are affected in risky environments in which the payoff of the recipient is random. We demonstrate that, whenever the risk is actuarially neutral, the donation of dictators with a purely ex post view of fairness should, in general, be affected by the riskyness of the recipient’s payoff, while dictators with a purely ex ante view should not be. Our experimental data show no statistically significant impact of the recipient’s risk exposure on dictators’ giving decisions and, therefore, give weak empirical support to the purely ex post view of fairness. This result appears to be robust to both the experimental design (within or between subjects) and to the origin of the recipient’s risk exposure (chosen by the recipient or imposed to the recipient)..
    Keywords: laboratory experiments dictator games, background risk, other-regarding preferences, inequality aversion, impure altruism, ex ante and ex post views of fairness
    Date: 2018–09
  23. By: Peia, Oan (University College Dublin); Vranceanu, Radu (ESSEC Research Center, ESSEC Business School)
    Abstract: This paper presents experimental evidence on depositor behavior under partial deposit insurance schemes. In the experiment, the size of a deposit insurance fund cannot fully cover all deposits and the level of insurance depends on the number of depositors running on the bank. We show that this form of strategic uncertainty about deposit coverage exerts a significant impact on the propensity to withdraw, and results in a large frequency of bank runs. Runs are more likely when depositors have noisy information about the size of the insurance fund and as the maximum coverage increases, in line with a risk-dominant equilibrium selection mechanism. From a policy perspective, our results emphasize the limits of underfunded deposit insurance schemes in preventing systemic banking crises.
    Keywords: Bank runs; Deposit insurance; Risk dominance; Global games
    JEL: C91 D83 G02 G21
    Date: 2017–04–11
  24. By: Boadway, Robin; Cuff, Katherine
    Abstract: We characterize optimal income taxation and unemployment insurance in a search-matching framework where both voluntary and involuntary unemployment are endogenous and Nash bargaining determines wages. Individuals differ in utility when voluntarily unemployed (non-participants in the labour market) and decide whether to participate as a job seeker and if so, how much search effort to exert. Unemployment insurance trades of insurance versus moral hazard due to search. We show that it is optimal to have a positive linear wage tax without any redistributive concerns even if search is effcient so the Hosios condition is satisfied. We also allow for different productivity types so there is a redistributive role for the income tax and show that a proportional wage tax internalizes the macro effects arising from endogenous wages. Lump-sum income taxes and transfers can then redistribute between individuals of differing skills and employment states. Our analysis embeds optimal unemployment insurance into an extensive-margin optimal redistribution framework where transfers to the involuntary and voluntary unemployed can differ, and nests several standard models in the literature.
    Keywords: Demand and Price Analysis, Financial Economics
    Date: 2016–12

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