We examine the relation between intensity of competition in the loan market and risk of bank failure, in a model with adverse selection. As well established, the presence of the two opposite margin and risk‐shifting effects creates conditions for nonmonotonicity: the conventional competition‐fragility view may be challenged at high interest rates. These rates may however be too high to be compatible

We address the problem of ranking distributions of attributes in terms of poverty, when the attributes are represented by binary variables. To accomplish this task, we identify a suitable notion of “multidimensional poverty line” and characterize axiomatically the Head‐Count and the Attribute‐Gap poverty rankings, which are the natural counterparts of the most widely used income poverty indices. Finally

We consider a standard optimal taxation framework in which consumers' preferences are separable in consumption and labor and identical over consumption, but are affected by consumption externalities. For every nonlinear, income‐dependent pricing of goods there is a linear pricing scheme, combined with an adjusted income tax schedule, that leaves all consumers equally well‐off and weakly increases the

Our paper intersects two topics in growth theory: the growth maximizing government size and the role of Social Capital in development. We modify a simple overlapping generations framework by introducing two key features: a production function à la Barro together with the possibility that public officials steal a fraction of public resources under their own control. As underlined by the literature on

We study two well‐known electronic markets: an over‐the‐counter (OTC) market, in which each trader looks for the best counterpart through bilateral negotiations, and a double auction (DA) market, in which traders post their quotes publicly. We focus on the DA–OTC efficiency gap and show how it varies with different market sizes (10, 20, 40, and 80 traders). We compare experimental results from a sample

There is robust evidence in the experimental economics literature showing that monopoly power is affected by trading institutions. In this paper, we study whether trading institutions themselves can shape agents' market behavior through the formation of anchors. We recreate experimentally five different double‐auction market structures (perfect competition, perfect competition with quotas, cartel on

When the article “Private protection and public policing, Hickey et al., 2021” was published online the funding statement “This work was supported by French National Research Agency grants ANR‐18‐CE41‐0003 and ANR‐17‐EURE‐0020” was not included and the affiliation of Tanguy van Ypersele should have read: Aix‐Marseille University (Aix Marseille School of Economics) CNRS, EHESS, Centrale Marseille, Aix‐en‐Provence

This paper applies conjectural variations (CVs) to a model of public good provision and shows that CVs are superior to Nash beliefs. In addition to imposing consistency, as Bresnahan, I show that consistent conjectures (CCs) are obtained from individual payoff maximization. CCs emerge as the unique subgame perfect Nash equilibrium (NE) in a two‐stage game in which beliefs are chosen in Stage 1 and

Universal health systems often rely on both pubic provision and contracting arrangements with private hospitals. This paper studies the optimal mix of public and private provision of health care services. We propose a model in which the regulator acts as athird‐party payer, and aims to ensure universal access to treatment at minimal cost. Patients need one unit of medical services and differ in the

Policymakers seeking to raise more tax revenues from multinational enterprises have two alternatives: to raise tax rates or to devote more resources to improve tax compliance. Tougher tax enforcement increases the cost of profit shifting, and thus mitigates tax competition. We present a tax‐competition model with two policy instruments (the corporate tax rate and the tightness of tax enforcement).

We revisit the cooperative model of coalition formation in economies with environmental externalities. Motivated by recent concerns over the true behavior and incentives of key players in international negotiations over the climate and the environment, we construct a cooperative game where the members of each coalition have uncertainty over the behavior of the nonmembers, and in particular they face

As a contribution to the ongoing worldwide economic research on epidemics in general and on the current Covid‐19 pandemic in particular, the Journal of Public Economic Theory is inviting submissions related to the numerous public economics issues acutely raised by the current health crisis. The following topics are clearly of interest (but consideration will not be exclusively limited to these): Normative

In this paper I propose a time‐consistent method of discounting hyperbolically and apply it to three canonical environmental problems: (i) optimal renewable resource use, (ii) the tragedy of the commons, and (iii) economic growth and pollution. I show that, irrespective of potentially high initial discount rates, time‐consistent hyperbolic discounting leads always to a steady state of maximum yield

We determine the optimal income tax schedule when individuals have the possibility of avoiding paying taxes. Considering a convex concealment cost function, we find that a subset of individuals, located in the interior of the income distribution, should be allowed to avoid taxes, provided that the marginal cost of avoiding the first euro is sufficiently small. This contrasts with the results of Grochulski

Due to technological, political, or practical considerations, most price mechanisms are not fully differentiated by time, location, and contingency of delivery. Rate or tax designers then face a trade‐off between the costs and benefits of using more complex price schedules. This paper studies the second‐best problem of designing, for a given market segment, a linear pricing schedule with a limited

What is the optimal default contribution rate or default asset allocation in pension plans? Could active decision (i.e., not setting a default and forcing employees to make a decision) be optimal? These questions are studied in a model in which each employee is biased regarding her optimal contribution rate or asset allocation. In this model, active decision is never optimal and the optimal default

We examine the strategic delegation problem in the context of interregional negotiations under the subsidy policies of a central government. It is well known that when such negotiations are delegated to representatives, each region in a country elects its representative strategically, resulting in inefficient negotiation outcomes. This study focuses on a common subsidy policy called a cost‐matching

This paper shows how a specific tax—in contrast to an ad valorem tax—alters industry structure and firm‐level performance in a monopolistic competition framework, where firms chose product quality endogenously and differ exogenously in productivity (i.e., marginal production efficiency). Industry equilibrium mechanisms and selection based on productivity play a significant role: A specific tax shifts

We consider a model in which schools and colleges compete for high‐ability students, which are independently identified through a costly screening procedure. This independence creates a channel through which students' preferences affect the strategic interaction between schools: students with competing offers accept the most‐preferred one, increasing the screening costs of unpopular schools. When preferences

Household members share public goods and make intra‐household transfers. We show how these features of the household interact with the tax evasion decision, and identify the dimensions in which household evasion differs from individual evasion. In the model we present two members of a household choose how much to contribute to a household public good and how much self‐employment income to evade. We

This paper combines a sequential bargaining game between an enterprise and a fixed number of banks with a signaling game through which the enterprise reveals her project quality as well as her market‐speed on the lending market. We characterize subgame‐perfect Nash equilibrium loan contracts that are supported by separating perfect Bayesian equilibria in the signaling game. In contrast to existing

In this paper, we characterize some new links between stochastic dominance and the measurement of inequality and poverty. We show that: for second‐degree normalized stochastic dominance (NSD), the weighted area between the NSD curve of a distribution and that of the equalized distribution is a decomposable inequality measure; for first‐degree and second‐degree censored stochastic dominance (CSD), the

We study individually rational rules to be used to allot, among a group of agents, a perfectly divisible good that is freely available only in whole units. A rule is individually rational if, at each preference profile, each agent finds that her allotment is at least as good as any whole unit of the good. We study and characterize two individually rational and efficient families of rules, whenever

In this paper we study a model of weighted network formation. The bilateral interaction is modeled as a Tullock contest game with the possibility of a draw. We describe stable networks under different concepts of stability. We show that a Nash stable network is either the empty network or the complete network. The complete network is not immune to bilateral deviations. When we allow for limited farsightedness

This paper analyzes a nonsmooth model of probabilistic voting with two parties and a broad family of other‐regarding behavior, including fairness and quasi‐maximin preferences, income‐dependent altruism, and inequity aversion. The paper provides conditions for equilibrium existence and uniqueness. It also characterizes the Nash equilibrium in pure strategies when parties hold either symmetric payoffs

In many countries, there is an ongoing debate on the public funding of the higher education (HE) system. Our goal is to examine the theoretical justification for the establishment of HE institutions and analyze the self‐selection of students under different policies of student subsidies. We study nonstationary equilibria of an overlapping‐generation economy in a hierarchical education system. Given

I calibrate a Multiple‐Risk Susceptible–Infected–Recovered model on the covid pandemic to analyze the impact of the age‐specific confinement and polymerase chain reaction (PCR) testing policies on incomes and mortality. Two polar strategies emerge as potentially optimal. The suppression policy would crush the curve by confining 90% of the population for 4 months to eradicate the virus. The flatten‐the‐curve

Professional services are credence goods provided by certified experts (professionals). The most prominent examples of professional services are medical or legal services. Interestingly, the markets for such services are often subject to partial public provision: there is a low‐end segment, where the services of basic quality are provided for free and professionals are reimbursed by the government

We derive the optimal policy mix of Research and Development (R&D)‐subsidies and corporate tax rates towards a footloose R&D‐intensive firm. Increasing R&D‐subsidies strengthens the firm's incentive to offshore production. The firm's home government can offset this by offering an appropriate corporate tax concession. The optimal policy package exhibits a “Matthew principle”: higher R&D‐subsidies should

This paper examines the effects of various labor market institutions (policies) on the welfare of workers and employers. We consider self‐enforcing contracts between risk‐averse workers and risk‐neutral employers in a labor market with search frictions. Employers promise to smooth out shocks to wages while workers promise long‐term commitment to employers. In this environment, regulatory policies can

In several matching markets, to achieve diversity, agents' priorities are allowed to vary across an institution's available seats, and the institution is let to choose agents in a lexicographic fashion based on a predetermined ordering of the seats, called a (capacity‐constrained) lexicographic choice rule. We provide a characterization of lexicographic choice rules and a characterization of deferred

Growth in overall life expectancy is straining the Social Security budget, and the gap in life expectancy between the rich and poor is widening. Motivated by these facts, this paper does four things. First, we develop a simple way to summarize the degree of progressivity in a Social Security system. Second, we show that growth in the life expectancy gap over the last few decades unwinds three‐quarters