A long-standing challenge for welfare economics is to develop welfare criteria that can be applied to allocations with different population levels. Such a criterion is essential to resolve the optimal population problem, i.e., the tradeoff between population size and the welfare of each person alive. A welfare criterion that speaks to this issue inherently requires evaluating the welfare of nonexistent

This paper shows that social networks are likely to induce sector concentration and sector trapping in the labor market. We develop a two-sector economy with endogenous allocation of the labor force between sectors and social networks that favor the transmission of job information. We show that social networks can induce sector concentration even when sectoral productivities and entry costs are perfectly

The relationship between public debt, growth and volatility is investigated in a Barro-type (1990) endogenous growth model, with three main features: we consider a small open economy, international borrowing is constrained and households have taste for domestic public debt. Therefore, capital, public debt and the international asset are not perfect substitutes and the economy is characterized by an

We study an equilibrium model of “revenue diversion” by management and its effects on talent allocation and the earnings distribution. In our occupational choice model with “workers” and “managers”, the talent allocation depends on earnings across occupations. Revenue diversion makes the allocation inefficient. It contributes, beyond productivity differentials, to income inequality and the Pareto tail

Coalitional manipulation in voting is considered to be any scenario in which a group of voters decide to misrepresent their votes in order to secure an outcome they all prefer to the outcome of the election when they vote honestly. The present paper is devoted to studying coalitional manipulability within the class of scoring voting rules. For any such rule and any number of alternatives, we introduce

Investments in human capital are individual and collective choices carrying significant external effects. Educated parents and friends accelerate our own human capital accumulation. Skilled colleagues at work increase our own productivity. Sharing experiences with cultured people is gratifying by itself. We introduce human capital externalities in a stylized model à la Uzawa (1965) and we find that

We propose an extension of the incomplete markets general equilibrium model with production to situations in which firms can default (bankruptcy). In the model, firms are owned by a single individual whose roles as entrepreneur and consumer are anonymous. Assets are exogenously collateralised and are seized together with future output in case of default. Default is thus endogenous as output determines

We reconsider the theory of Thompson aggregators proposed by Marinacci and Montrucchio (Marinacci and Montrucchio, 2010). We prove the existence of a Least Fixed Point (LFP) solution to the Koopmans equation. It is a recursive utility function. Our proof turns on demonstrating the Koopmans operator is a Scott continuous function when its domain is an order bounded subset of a space of bounded functions

We study the consumption and portfolio selection problem of a finitely lived agent who derives utility from the stock of durable goods. We show that the agent’s effective relative risk aversion implied by the optimal portfolio tends to decline and approaches zero, as the planning horizon approaches, whereas the agent exhibits constant effective relative risk aversion in the infinite horizon model of

We provide a utility representation theorem for the revealed preference of an agent choosing in an arbitrary space endowed with a separable partial order. The result can be applied to construct new revealed preference tests for choices over infinite consumption streams and probability distribution spaces, among other cases of interest in economics. As an illustration, we construct revealed preference

This paper presents a bilateral network formation model that explains why some empirical degree distributions exhibit the increasing hazard rate property (IHRP). In my model, a sequentially arriving node forms a link with an existing node through a bilateral agreement. This newborn node prefers a highly linked node; however, the more links an existing node has, the more the marginal return from an

This article examines how pollution and its health effects during childhood can affect the dynamics of inequalities among households. In a model in which children’s health is endogenously determined by pollution and the health investments of parents, we show that the economy may exhibit inequality in the long run and be stuck in an inequality trap with steadily increasing disparities, because of pollution

This paper studies the impact of migration and workers’ remittances on human capital and economic growth when young individuals face debt constraints to finance education. We consider an overlapping generations model à la de la Croix and Michel (2007). In this no-commitment setting, education is the engine of growth. Individuals may choose to default on their debt and be excluded from the asset market

In this paper I discuss a standard model of life cycle consumption behavior when the discount rate depends on the state of health and health deteriorates with increasing age. I show that this feature allows the introduction of time-consistent discounting at a non-constant rate and to model, in a convenient way, the notion that individuals discount future payoffs at higher rates when the risk of death

We study the nature (constructive versus non-constructive) and the issue of real-valued representability of social welfare orders, on the set of infinite utility streams, satisfying the anonymity and asymptotic density-one Pareto axioms. We characterize the existence of representable and constructive social welfare orders (fulfilling the aforementioned axioms) in terms of easily verifiable conditions

This paper provides a complete characterization of Pure Strategy Nash equilibria (PSNE) in an oligopoly model with power demand function recently proposed in the literature (Huang, 2004; Blavatskyy, 2018). This characterization shows that, if the marginal cost of production is strictly positive, then either there is a unique symmetric PSNE (when the demand function is sufficiently elastic) or there

The paper demonstrates the generic existence of general equilibria in incomplete financial markets with asymmetric information. The economy has two periods and an ex ante uncertainty over the state of nature to be revealed at the second period. Securities pay off in cash or commodities at the second period, conditionally on the state of nature to be revealed. They permit transfers across periods and

Xenophobia is a social evil which leaves a trail of destruction wherever it passes through. A mathematical model is formulated and analyzed to gain an understanding of xenophobia in order to come up with strategies on how we can best control it. The xenophobia-free equilibrium is shown to be globally asymptotically stable when the corresponding threshold parameter is less than unity. Furthermore, the

The comparative dynamics of the feedback form of the consumption and health-investment demand functions in the health capital model of Grossman (1972) are thoroughly scrutinized for their refutable results. The usual comparative dynamics expressions, to wit, the individual partial derivatives of the demand functions with respect to the parameters and state variables, are not refutable under the basic

We introduce a variant of Milgrom and Weber’s (1985) model of n-person games with incomplete information (games for short) and define a correspondence that maps each game to its α-core (the α-core correspondences). Our main objective is to prove such a correspondence to be generically lower semicontinuous. For a multi-valued solution correspondence, the lower semicontinuity is relevant as a theoretical

A central result in Fullerton and McAfee’s (1999) analysis of fixed-prize research tournaments shows that if firms’ heterogeneous marginal effort costs are publicly known and the procurer can charge non-discriminatory entry fees, restricting entry to the two most efficient firms is optimal under a (fairly restrictive) sufficient condition on the form of heterogeneity. This note provides a complementary

The remoteness from a simple game to a weighted game can be measured by the concept of the dimension or the more general Boolean dimension. It is known that both measures can be exponential in the number of voters. For complete simple games it was only recently shown in O’Dwyer and Slinko (2017) that the dimension can also be exponential. Here we show that this is also the case for complete simple

For a many-to-one matching market where firms have strict and q-responsive preferences, we give a characterization of the set of strongly stable fractional matchings as the union of the convex hull of all connected sets of stable matchings. We also prove that a strongly stable fractional matching is represented by a lottery of stable matchings that are ordered in the common preferences of all firms

This paper considers voting rules for two alternatives, viz. the simple majority rule of K.O. May, the majority rule with bias of Fishburn and others, and the majority rule by difference of votes of Goodin and List, and of Llamazares. These all have been characterized axiomatically for profiles of fixed length, that is, for a fixed population. The aim of this paper is to study analogs of these results

This paper analyzes implications of network compatibility and competition on process innovation in differentiated network goods duopoly. It shows that firms’ R&D investments are strategic substitutes (complements) if effective network compatibility is less (more) than product substitutability, regardless of the nature of product market competition. If R&D investments are strategic complements, firms

This paper proposes two new solution concepts for transferable utility coalitional games that are Core selections, the Central Core and the Mid-central Core, with the first being set-valued and the latter point-valued. The basic idea at the root of the Central Core is to allow such Core elements that grant to each player at least the pay-off obtained from the centroid of the extreme points of the Core

River water trade is a method for reallocating water among riparian states in an efficient and self-enforcing fashion. In this study, we investigate the functioning of river water markets when the upstream state has the ability to build dams. Using a two-agent model, we describe the implications that dam ownership can have on agent welfare as well as on social welfare. We introduce and discuss the

Theories of decision-making are routinely based on the notion that decision-makers choose alternatives which align with their underlying preferences—and hence that their preferences can be inferred from their choices. In some situations, however, a decision-maker may wish to hide his or her preferences from an onlooker. This paper argues that such obfuscation-based choice behavior is likely to be relevant

The constrained equal welfare rule, fCE, distributes the surplus according to the uniform gains method and, hence, equalizes the welfare of the agents subsequent to the allocation process, subject to making nobody worse off. We show that fCE is the unique rule on the domain of surplus-sharing problems that satisfies efficiency, welfare monotonicity, path independence, and weak less first imposing an

This paper studies aggregate equilibrium models where firms cannot compute future prices with perfect accuracy. Instead, firms use approximations to infer prices. In equilibrium, we find that the precision with which firms can compute prices is endogenous and depends on the level of aggregate supply. At the same time, firms’ individual supplies, and thus aggregate supply, depend on the precision with

We consider a finite-agent Hellwig (1980) economy with an extension to allow traders to observe their neighbors’ signals in an exogenously given social network. There are two potential approaches for traders to process observed signals: directly infer information about the fundamentals from the complete collection of observed signals, or indirectly from an average of observed signals. The two approaches

This article presents a model of two firms with fixed budgets that simultaneously hire lobbyists to obtain exclusive contracts in multiple markets. In a pure-strategy equilibrium, neither firm can increase its payoff by using its reserves to hire more lobbyists in any market. Efficiency criterion is defined in order to facilitate the ranking of lobbyist allocations with the same payoffs, where efficiency