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on Utility Models and Prospect Theory |
| By: | Patrick Becker; Felix Brandt; Satyanand Rammohan |
| Abstract: | We consider the random assignment problem with abstract continuous and convex preferences. In particular, we admit preference relations that are not constrained by independence or transitivity. By extending the Hylland--Zeckhauser pseudo-market mechanism, we show that weakly efficient and envy-free random assignments always exist. For preferences that can be represented via skew-symmetric bilinear (SSB) utility functions -- which generalize linear expected utility functions -- we prove the existence of efficient and approximately envy-free random assignments. Efficient and envy-free random assignments exist under a mild additional assumption on preferences. These findings have notable implications for ordinal random assignment, where ordinal preferences are extended to preferences over lotteries via the pairwise comparison (PC) extension. While the probabilistic serial rule and popular random assignments frequently and significantly violate PC-efficiency and PC-envy-freeness, respectively, random assignments that satisfy both conditions do exist. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.13730 |
| By: | Arnaud Dupuy |
| Abstract: | We study how individuals trade off outcome ("what") and process ("how") utility in high-stakes strategic decisions, namely professional tennis. Using optimality conditions and the second-service rule, we derive a sufficient condition for the nonparametric lower bound on the weight of process utility to be positive. Under mild shape restrictions, the high-frequency data indicate that most players likely value process utility positively. We then develop a structural model that recovers player-specific preferences over outcomes and processes. Estimates show that players systematically sacrifice success probabilities to increase process utility, with economically meaningful consequences for match outcomes and expected earnings. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.23539 |
| By: | Oleynov, Anton |
| Abstract: | Contemporary sustainability debates increasingly recognize that ecological crises cannot be understood solely through assumptions of rational utility maximization and growth-centered development. Drawing on insights from behavioral economics, well-being research, and sustainability studies, the paper develops a broader conception of utility that incorporates emotional, relational, and cultural dimensions of human welfare. It makes three contributions. First, it proposes emotional utility, relational utility, and cultural utility as complementary dimensions of human welfare that help explain why well-being depends upon psychological stability, social relationships, and culturally meaningful forms of life. Second, it introduces the concept of behavioral sustainability, defined as the long-term reproduction of sustainable patterns of behavior through supportive social, emotional, cultural, and institutional conditions. Third, it illustrates the relevance of this framework through the case of Thailand, where concepts such as sabai-sabai, kreng jai, nam jai, and the Sufficiency Economy Philosophy reflect culturally grounded understandings of well-being that go beyond material accumulation. The analysis suggests that sustainability should be evaluated not only according to ecological outcomes and economic performance but also according to its capacity to support trust, belonging, resilience, and enduring quality of life. Sustainable development therefore requires conceptions of welfare that account for what people need to live well, not only what they consume. |
| Date: | 2026–06–08 |
| URL: | https://d.repec.org/n?u=RePEc:osf:socarx:2n43g_v1 |
| By: | Richard Layard; Ekaterina Oparina |
| Abstract: | Optimal public policy requires a social welfare function defined over individual utilities. While there is substantial research on income-based social welfare functions, no published study has directly elicited public preferences over utility when measured by subjective wellbeing. Using a novel survey instrument with a representative UK sample (N=2, 068), we estimate the public's social welfare function for life satisfaction. We find significant aversion to wellbeing inequality, with a median isoelastic parameter $\alpha$=0.48. This implies a social welfare function approximately equal to the sum of square roots of individual utilities. The median respondent values improving the wellbeing of the least satisfied by one unit roughly twice as much as improving the most satisfied by one unit. Our findings provide ethically grounded distributional weights for wellbeing policy evaluation and cost-benefit analysis. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.13752 |
| By: | Burbidge, John (School of Economics, University of Waterloo) |
| Abstract: | Governments use taxes to pay for some of their expenditures. Setting aside the benefits of the expenditures, the taxes economic agents have to pay reduce their well being. One objective of the optimal taxation literature is to find tax systems that minimize the loss of well being, given the government's revenue requirement. Thus one way to frame the optimization problem is to have the government choose tax rates (or prices) to maximize individual utility given the revenue requirement. Given the prevalence of price-times-quantity expressions in budget constraints, taking derivatives with respect to tax rates or prices yields rules expressed in terms of quantities. One of Terence Gorman's many insights was that if the objective is to find rules about prices, reframe the problem so that the government chooses quantities; derivatives of p times q with respect to q yield rules about p or tax rates. Below I show that some optimal tax problems are simplifi ed by assuming the government chooses quantities to maximize revenue subject to a fixed level of individual utility. The distance function, which is de nied as the number by which one must scale the arguments of the utility function to yield a particular level of utility, plays a central role. |
| Keywords: | Taxation, optimal tax problems |
| Date: | 2026–01–08 |
| URL: | https://d.repec.org/n?u=RePEc:wat:wpaper:26004 |
| By: | Daniel Baumgarten (Department of Economics, Ludwig-Maximilian University Munich); Sergei Snegirev; Barbara Schöndube-Pirchegger (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg) |
| Abstract: | This paper studies how inequity aversion affects the optimal incentive contract in a multi-task principal–agent model with a non-congruent performance measure. We assume that the agent is inequity averse relative to the principal. The agent is envious if he/she expects to get less than the principal and feels guilty, if he/she expects to be paid more. The agent performs two equally productive tasks, but the contractible performance measure is more sensitive to one task than the other, generating a congruity problem. We find that it is never optimal to offer a contract, which leaves the agent envious. Rather, in equilibrium the principal offers either an equal-pay contract or a contract that leaves the agent feeling guilty. For a lower range of the agent’s reservation utility, the only feasible contract is an equal-pay contract. It requires a distortion of incentives and thus results in agency costs from avoiding inequity in addition to agency costs from incongruity. It follows that the principal would prefer to hire a purely self-interested agent as opposed to an inequity averse one. For an upper range of reservation utilities, a contract that leaves the agent feeling guilty is feasible and preferred to an equal-pay contract. This contract results in costs from inequity, but also reduces costs from incongruity. If the first effect dominates the second, hiring an inequity averse agent again turns out to be detrimental. However, we identify scenarios in which the second effect dominates and hiring an inequity averse agent benefits the principal. Acknowledging that an agent might derive extra utility from being paid more than the principal, rather than to feel guilty, we extend our analysis to capture a status-seeking agent. We find that an agent with such preferences requires less pay but his/her effort choice amplifies the congruity problem. Depending on which of the two effects dominates, the principal either prefers to hire a self-interested or a status-seeking agent. |
| Keywords: | moral hazard problem, multi task, social preferences, inequity aversion |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:mag:wpaper:26014 |
| By: | Fenghui Yu |
| Abstract: | This paper develops a unified explicit solution theory for optimal execution through sequential limit-order placement in a limit order book. Rather than controlling only the trading speed of a metaorder, we determine how individual limit orders should be quoted over time. The model incorporates signal-dependent drift, price impact, inventory risk, and execution risk, with fills modeled by point processes whose intensities depend on the submitted quotes. We formulate four execution criteria: expected terminal wealth, expected terminal wealth with running inventory penalty, CARA utility of terminal wealth, and CARA utility with running inventory penalty. For general price-impact and inventory-penalty functions, we derive the corresponding HJB equations and show that all four problems reduce to a triangular finite-dimensional structure which can be solved explicitly, leading to fully explicit value functions and optimal quotes across all cases. We also prove well-posedness, admissibility, and verification results. The explicit formulas reveal connections between quoting strategies under different criteria, support long-horizon asymptotic analysis, and show numerically that signal-dependent drift can substantially affect optimal execution. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.24242 |
| By: | Rafa{\l} Komendarczyk; Walter Block; John Levendis; Frank Tipler |
| Abstract: | This paper presents an axiomatization of Ludwig von Mises' praxeology in many-sorted first-order logic, isolating the foundational layer. We introduce a formal language with five sorts ({\sf Actors}, {\sf Actions}, {\sf Ends}, {\sf Things}, {\sf Times}) and six primitive relations ({\em Acts}, {\em Avail}, {\em EndOf}, {\em Use}, a preference order, and a time order), together with a base axiom system organised into three layers: the structure of action itself, the actor's preference order together with its revelation in choice, and material scarcity. The base system captures purposeful action in its bare praxeological form. Working entirely within the base system we derive the core classical Misesian propositions as Hilbert-style theorems: the asymmetry of revealed preference, the existence of opportunity cost, the structural scarcity of time, the subjectivity of opportunity cost, the law of diminishing marginal utility, and the increasing marginal disutility of labour. Where a theorem requires structure beyond the praxeological core -- as with diminishing marginal utility -- the additional premises are made explicit; identifying these hidden premises is one of the methodological payoffs of the approach. A self-contained {\em Lean} companion encodes the language as {\em Lean} type classes and constructs concrete models -- a three-period Robinson Crusoe economy and its infinite-time extension -- whose acceptance by the type-checker is a constructive consistency proof of the full base theory. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.18292 |
| By: | Weilun Cheng; Zongxia Liang; Sheng Wang; Xiang Yu |
| Abstract: | This paper investigates a mean-field game (MFG) problem for mean-variance (MV) portfolio management, highlighting a new type of relative performance encoded by the peer-based risk aversion. Specifically, the risk aversion is formulated as a piecewise form that depends on whether the individual's wealth is above or below the population average. Due to the inherent time-inconsistency in the MV criterion, together with the piecewise risk aversion, we encounter a class of time-inconsistent MFG, new to the literature. Our goal is to seek a mean-field equilibrium, characterized by a forward-backward stochastic differential equation (FBSDE) system and a mean-field consistency condition. The new challenge stems from the discontinuous coefficients induced by the piecewise risk aversion. In response, we first propose a smooth regularization technique and obtain the existence of the equilibrium in the intra-personal game for the representative agent by establishing the solution to the discontinuous multi-dimensional FBSDE. Next, by invoking fixed-point arguments and convergence analysis as smoothing regularization vanishes, we conclude the existence of the mean-field equilibrium in the time-inconsistent MFG. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.25824 |
| By: | Nicole B\"auerle; Anne MacKay |
| Abstract: | We consider a continuous time investment problem in a multi-asset Black-Scholes market with the following features: The assets' drifts are not known and constitute a source of model ambiguity. However, there is a prior distribution (knowledge) on the possible drifts. Our investor is ambiguity averse and wants to maximize a mean-variance criterion for the terminal wealth where ambiguity aversion is incorporated in a smooth way. We consider here the criterion introduced in Maccheroni et al. 2013 where the variance is decomposed and each part is weighted differently to account for different levels of market risk and model ambiguity aversion. We use a novel approach to find the optimal dynamic investment strategy within the class of all adapted strategies which allow for learning. We also present a number of numerical results which help to understand how the model parameters affect the optimal investment strategy. In general it turns out that ambiguity averse investors invest less in the risky assets. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.11318 |
| By: | Sang Hu; Xun Yu Zhou |
| Abstract: | In this paper we study optimal exit strategies of gamblers with cumulative prospect theory (CPT) preferences in games where the expected payoff is strictly negative at each play, and formulate the problem as optimal stopping on asymmetric random walks. Applying a geometric transformation of the underlying cumulative gain/loss process, engaging randomized strategies and changing the decision variable from stopping times to probability distribution of the accumulated gain or loss at exit time, we solve the problem via the Skorokhod embedding. Drastically different from the fair gamble problem studied by \cite{HeEtal2019:StoppingStrategies}, we show that the unfair problem in the infinite time horizon has finite values for a wide range of CPT parameter specifications. We then present the analytical solutions in the case of piece-wise power utility and power probability distortion functions. Compared to the strategies used in fair gambling, the CPT gamblers in unfair gambles are less loss-tolerant and choose not to gamble at all when the games are sufficiently unfavorable. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.10337 |
| By: | Burbidge, John (School of Economics, University of Waterloo) |
| Abstract: | Mirrlees (1971) examined taxation for redistribution with imperfect information - the government can observe earnings but not wage rates or hours worked. Mirrlees assumed a one-good model with a continuum of types. Stiglitz (1982) worked out the two-type example of the Mirrlees model. This paper extends the distance-function approach to the Ramsey (1927) problem in Burbidge (2025a) to study optimal tax structures along the utility possibility frontier, upf, with two types and two goods. |
| Keywords: | Taxation, redistribution, Mirrlees model |
| Date: | 2026–01–08 |
| URL: | https://d.repec.org/n?u=RePEc:wat:wpaper:26003 |
| By: | Aman Ray; Srikanth B. Pai |
| Abstract: | Parties in spatial competition rarely choose platforms that reverse their ideological order. Mutual leapfrogging is the strongest form of reversal: each party locates beyond the other party's ideal point. In voting models without abstention single-peakedness rules out such reversals. We show that this conclusion does not survive endogenous abstention. There is a spatial voting model in which voter and party preferences are single-peaked, yet mutual leapfrogging occurs in pure-strategy equilibrium. The equilibrium survives because some deviations change which voters participate. We prove that such equilibria are impossible under a sufficient ordinal condition: parties agree on how to rank leftward and rightward deviations from their ideal points. The condition is general enough to cover symmetric single-peaked utilities and common translated utility shapes. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.25131 |
| By: | Burbidge, John (School of Economics, University of Waterloo) |
| Abstract: | This paper explores the optimal behaviour of a government intent on redistributing from the top to the bottom of the earnings distribution, whose tax-transfer instruments are weaker than those assumed by Mirrlees (1971) but stronger than those assumed by Sheshinski (1972). I prove that one may obtain fi rst-order welfare gains by switching from Sheshinski's linear progressive tax-transfer system to one based on consumption taxation. In addition, I show the Atkinson-Stiglitz Theorem rests on unrestricted nonlinear earnings taxation. In an optimal progressive earnings and consumption tax-transfer system the Corlett-Hague understanding of the Ramsey tax problem - tax goods more complementary with leisure, holding utility constant, at higher rates, even if leisure is additively separable from goods - plays an important role. As redistribution proceeds this force is counterbalanced by the Mirrleesian result that taxing the work effort of lower wage types is an efficient way to cope with incentive compatibility constraints. |
| Keywords: | Optimal taxation, Separability |
| Date: | 2026–01–08 |
| URL: | https://d.repec.org/n?u=RePEc:wat:wpaper:26007 |
| By: | Pierpaolo Battigalli; Giovanni Di Bartolomeo; Stefano Papa |
| Abstract: | We examine the role of inequity aversion in decision-making, particularly as it relates to the opportunity cost of reducing inequality. Focusing on a simple dictator game, our results suggest that the link between such opportunity cost and sharing rates is more complex than it appears at first glance. |
| Keywords: | social preferences, inequality aversion, opportunity costs |
| JEL: | A13 C91 D01 D64 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:ter:wpaper:00193 |
| By: | Karabarbounis, Loukas |
| Abstract: | Micro estimates of the Marshallian elasticity of labor supply are small and typically positive, whereas cross-country and time-series patterns of hours imply a strong negative relationship between wages and hours. I reconcile these two apparently contradictory observations using a single utility specification and taking into account heterogeneity in non-labor income. Micro estimates condition on non-labor income, while macro variation allows capital income to adjust alongside labor income, which strengthens the income effect. A model with heterogeneous households and exogenous capital income yields closed-form expressions in which the distribution of the labor share shapes the gap between the micro and the macro elasticities. A cross-sectional regression of hours on wages that conditions on the labor share recovers the macro elasticity. A dynamic model with heterogeneous households and incomplete asset markets reproduces both elasticities as outcomes when disciplined by joint moments of wages, hours, consumption, and wealth. The income effects that bridge the gap between the two elasticities imply marginal propensities to earn that lie in the range of estimates of micro studies on lottery winners. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:cpr:ceprdp:21600 |
| By: | Lijun Bo; Yijie Huang; Tingting Zhang |
| Abstract: | This paper studies the optimal portfolio, consumption, and endogenous early retirement problem within a benchmark tracking framework by incorporating a new relative performance evaluation. In this framework, the investor maximizes expected lifetime consumption utility while managing the maximum wealth shortfall relative to a benchmark, with shortfall-management costs that may differ before and after retirement. Mathematically, the problem is a hybrid stochastic control problem involving both regular controls and an optimal stopping time, in which the running maximum process records the investor's largest benchmark shortfall. We introduce an auxiliary reflected state process and establish an equivalent hybrid stochastic control problem. By proving the convex duality theorem, we technically transform the original problem into a two-dimensional pure optimal stopping problem with state reflection. This enables us to characterize the geometric structure of the stopping set and derive the feedback-form optimal retirement boundary, as well as optimal portfolio and consumption policies. Analytical examples and numerical simulations reveal a two-stage structure with more conservative investment and more aggressive consumption after retirement. Driven by the retirement option, the expected largest shortfall risk follows a pronounced U-shaped pattern with respect to wealth. Shortfall management costs, labor income, and leisure preference significantly influence retirement timing, investment, and consumption. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.18935 |
| By: | Loukas Karabarbounis |
| Abstract: | Micro estimates of the Marshallian elasticity of labor supply are small and typically positive, whereas cross-country and time-series patterns of hours imply a strong negative relationship between wages and hours. I reconcile these two apparently contradictory observations using a single utility specification and taking into account heterogeneity in non-labor income. Micro estimates condition on non-labor income, while macro variation allows capital income to adjust alongside labor income, which strengthens the income effect. A model with heterogeneous households and exogenous capital income yields closed-form expressions in which the distribution of the labor share shapes the gap between the micro and the macro elasticities. A cross-sectional regression of hours on wages that conditions on the labor share recovers the macro elasticity. A dynamic model with heterogeneous households and incomplete asset markets reproduces both elasticities as outcomes when disciplined by joint moments of wages, hours, consumption, and wealth. The income effects that bridge the gap between the two elasticities imply marginal propensities to earn that lie in the range of estimates of micro studies on lottery winners. |
| JEL: | E21 E24 J22 |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35329 |
| By: | Tenghan Zhong |
| Abstract: | We study a finite-inventory risk-sensitive market making problem in which a dealer controls bid and ask quotes, faces Brownian midprice risk, and receives liquidity-taking orders through point processes with quote-dependent intensities. The objective is the certainty equivalent induced by exponential utility with terminal and running inventory penalties. We introduce an exact discrete entropy-regularized Bellman operator that applies log-sum-exp regularization to deterministic-action certainty-equivalent scores, rather than to a risk-neutral one-step reward. This distinction is essential because the exponential certainty equivalent does not commute with quote randomization. For time step \(h\) and entropy parameter \(\lambda\), we prove uniform convergence to the unregularized continuous-time risk-sensitive value at rate \[ O\bigl(h+\lambda(1+|\log\lambda|)\bigr). \] We also prove certainty-equivalent performance bounds for the induced Gibbs policies under a fresh-sampling relaxed implementation, in which quote marks are sampled at potential fill events rather than frozen over a time step. Under a quadratic growth condition on the Hamiltonian in the relevant quote coordinates, these policies concentrate around the unregularized optimal quote set. Finally, we show that a lower-cost Hamiltonian-Gibbs proxy satisfies a certainty-equivalent performance bound of the same order as the exact Bellman Gibbs policy. Numerical experiments in an Avellaneda--Stoikov specification support the predicted scaling for discretization error, entropy bias, policy gap, quote concentration, and exact-versus-proxy consistency. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.24878 |
| By: | Luigi Capoani |
| Abstract: | This paper provides a didactic and beginner friendly review of the gravity model and its conceptual translation from classical physics into international economics. After a brief introduction, it begins by establishing the structural and mathematical parallels between Newton's law of universal gravitation and the economic gravity equation, demonstrating how economic mass (GDP) attracts trade flows while geographic distance acts as a source of spatial resistance. The paper then examines the deterministic philosophical framework required to apply rigid natural laws to collective human behavior. Finally, it traces the chronological evolution of the literature, highlighting the historical divergence between the physics rooted approach developed by early demographers and Walter Isard and the utility based econometric adaptations that later emerged. The paper ultimately shows that, despite globalization, spatial friction remains a significant and measurable force shaping international trade and geopolitical interactions. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.10070 |
| By: | Irene Aldridge |
| Abstract: | This paper proposes a computationally efficient mechanism for multi-dimensional matching markets where agents report preferences over object features rather than complete utility assessments. We use Singular Value Decomposition (SVD) to identify the principal direction of variation in feature space and match agents to objects along this dimension, reducing a complex multi-dimensional problem to an effectively one-dimensional problem solvable in $O(N \log N)$ time. We show that when data exhibit low effective dimensionality, our mechanism approximately maximizes Nash Social Welfare, satisfies distributional truthfulness, and achieves symmetry. We establish a novel connection between Nash Social Welfare and Geometric Distributionally Robust Optimization, providing robustness guaranties. Numerical experiments demonstrate that our approach achieves 99\% optimal welfare while running three orders of magnitude faster than direct optimization. The framework applies naturally to school choice, labor markets, and course allocation, where feature-based elicitation reduces the cognitive burden on agents. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.22865 |
| By: | Yurii Kvasiuk; Tianyi Li; Owen Colegrove; Moritz M\"unchmeyer |
| Abstract: | We explore the application of LLM-driven algorithm optimization to several common tasks in quantitative finance. MadEvolve, a general-purpose algorithm optimization framework inspired by DeepMind's Alpha-Evolve, was recently developed to optimize algorithms in computational cosmology. Here we demonstrate the utility of MadEvolve to optimize algorithmic trading strategies and alpha generation at the example of Bitcoin trading. On our simulation and backtesting setup, we achieve significant improvements on all tasks we considered, such as evolving feature sets for signal generation, optimizing separate components of the trading strategy, and jointly evolving the feature pipeline together with the execution strategy. Additionally, we compare our method to other agentic search approaches, specifically Claude Code, and carefully evaluate p-hacking probabilities on our simulation setup. Our findings strongly support the utility of AI-driven agentic and evolutionary algorithms for algorithmic trading and quantitative finance. |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2605.23007 |
| By: | Vito De Sandi; Federico Fiorani |
| Abstract: | This paper develops an axiomatic characterization of excessivist social welfare orderings, a class of welfare criteria inspired by limitarianism. The central idea is that income has positive social value only up to a richness threshold; above that line, further income increases reduce social welfare. The paper characterizes additive generalized-utilitarian orderings in which individual income is evaluated through a single-peaked function: increasing below the richness line and decreasing above it. The characterization relies on continuity, anonymity, separability, a restricted Pareto principle below the threshold, aversion to excessive richness, threshold-preserving Pigou- Dalton transfers, and ratio-scale invariance. An empirical illustration using LIS data for six European countries shows that the excessivist criterion can generate rankings that differ from standard utilitarian and inequality-adjusted welfare measures, especially when the richness line is treated as a moving relative benchmark or as an anchored real-income threshold. |
| JEL: | D31 D63 |
| Date: | 2026–05 |
| URL: | https://d.repec.org/n?u=RePEc:lis:liswps:919 |
| By: | Salustri, Andrea; De Bonis, Valeria |
| Abstract: | This paper examines the allocation of the family home under Italian law (Art. 337-sexies of the Civil Code) through a multidisciplinary lens that integrates civil law, sociology, and Law & Economics. While formally aimed at preserving the child’s domestic habitat and ensuring the best interest of the child, the analysis reveals that this measure functions as an indirect redistribution of economic value, significantly impacting parental income capacity and the practical implementation of co-parenting principles. By applying the theory of regulatory takings and the ECHR proportionality tests, the article highlights the shortcomings of the current allocation system which, in scenarios of inverse income asymmetry, can lead to deadweight losses in social welfare and drive the excluded owner toward poverty. The research develops an original economic analysis, introducing a child welfare function where the minor’s utility depends both on residential stability and on the economic and relational balance between parents. The findings demonstrate that excessive imbalances can lower the quality of co-parenting, making rent-free allocation counterproductive even for the child’s best interest. Finally, the study addresses the ISEE paradox, proposing the introduction of imputed rent as a flexible compensation mechanism and a reform of asset calculation criteria to treat the allocated property as temporary bare ownership, thereby harmonizing allocative efficiency with distributive justice. |
| Keywords: | allocation of the family home, regulatory taking, best interest of the child, co-parenting |
| JEL: | D61 D63 K36 K41 |
| Date: | 2026–06–20 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129640 |
| By: | Ashley C. Craig; Itai Sher; Ashley Craig |
| Abstract: | Less-salient taxes can ease the classic equality-efficiency trade-off by making people respond less to taxation. But deliberately obscuring taxes may be viewed as dishonest. This creates a three-way trade-off between equality, efficiency, and honesty. We analyze this trade-off in a simple setting with a linear income tax. We define and characterize the morally efficient frontier, trading off utilitarian welfare against honesty or transparency. Complete honesty is Pareto inefficient but not morally inefficient. More generally, any increase in honesty reduces utilitarian welfare. When utilitarian welfare is decomposed into equality and efficiency, the cost of honesty falls most robustly on equality: higher salience always reduces equality, while the effect on efficiency is ambiguous. This asymmetry is explained by the fact that salience increases the price of equality, which is the efficiency cost of a marginal increase in equality. Our approach could be applied to other settings in which utilitarian and procedural or deontological values conflict. |
| Keywords: | optimal taxation, salience, normative economics, inequality, internalities |
| JEL: | D30 D60 D63 H11 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12712 |
| By: | Mikitchuk, Marina |
| Abstract: | The literature has long attempted to study the conditions for the effectiveness of Official development assistance (ODA); however, the conclusions remain ambiguous. This article proposes a cross-country study of ODA effectiveness, taking into account both the donor’s motivation and the recipient’s initial state. Econometric analysis of data from 1991–2019 for 59 recipients showed that for countries with well-developed governance systems, aid is effective regardless of motivation and volume, though its marginal utility diminishes. The result confirms the importance of the recipient country’s initial state for aid effectiveness and the idea that development incentives fade with external funding. In countries with underdeveloped governance systems, ODA is beneficial only with altruistic motives and substantial volumes; otherwise, it leads to a decline in economic growth rate. The result supported the hypothesis that such a recipient cannot resist a donor pursuing self-serving interests or cope with the negative consequences of aid, particularly the Dutch disease syndrome. Substantial volumes of altruistic aid, indicative of donors’ attention to ODA implementation mechanisms, can prevent negative effects. The results expand understanding of the necessary conditions for effective aid delivery. |
| Keywords: | Official development assistance, aid conditionality, untying aid, donor motivation, panel data analysis |
| JEL: | F35 O43 |
| Date: | 2025–06 |
| URL: | https://d.repec.org/n?u=RePEc:pra:mprapa:129489 |
| By: | Thomas Valade; Michael Benzaquen; Matthieu Cristelli; Stanislao Gualdi; Pierre Lenders |
| Abstract: | At the intersection of rising wealth inequality and intensifying environmental pressures, we investigate a reverse causal relationship that has received comparatively little attention: wealth inequality may not only be a consequence of environmental crises, but also act as a structural obstacle to the ecological transition itself. We develop a stylized agent-based model in which heterogeneous agents, whose initial wealth follows a Pareto distribution, allocate their income between either a Brown or a Green sector through a utility function. The function is designed to capture the trade-off between short-term returns and exposure to long-term systemic risks. A central ingredient is that wealthier agents perceive themselves as less vulnerable to environmental shocks, thereby reducing the amount of resources available for the transition. We show that, beyond inequality thresholds compatible with those observed in most developed countries, the economy remains locked in a Brown regime, even when a substantial share of agents is sensitive to externalities. We then assess a set of stylized fiscal policies (basic income, carbon taxation, Green incentives, and a combined scheme) and find that their effectiveness depends strongly on the inequality regime and on the regressivity embedded in the fiscal mechanism, revealing multidimensional trade-offs between transition speed, cumulative environmental destruction, growth, and fiscal pressure. |
| Date: | 2026–06 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2606.14331 |