Economics

We consider transferable-utility profit-sharing games that arise from settings in which agents need to jointly choose one of several alternatives, and may use transfers to redistribute the welfare generated by the chosen alternative. One such setting is the Shared-Rental problem, in which students jointly rent an apartment and need to decide which bedroom to allocate to each student, depending on the student's preferences. Many solution concepts have been proposed for such settings, ranging from mechanisms without transfers, such as Random Priority and the Eating mechanism, to mechanisms with transfers, such as envy free solutions, the Shapley value, and the Kalai-Smorodinsky bargaining solution. We seek a solution concept that satisfies three natural properties, concerning efficiency, fairness and decomposition. We observe that every solution concept known (to us) fails to satisfy at least one of the three properties. We present a new solution concept, designed so as to satisfy the three properties. A certain submodularity condition (which holds in interesting special cases such as the Shared-Rental setting) implies both existence and uniqueness of our solution concept.

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, stable networks immune to bilateral deviations must be complete M -partite networks, with partitions of different sizes. The empty network is the efficient network. We provide several comparative statics results illustrating the importance of network structure in mediating the effects of shocks and interventions. In particular, we show that an increase in the likelihood of a draw has a non-monotonic effect on the level of wasteful contest spending in the society. To the best of our knowledge, this paper is the first attempt to model weighted network formation when the actions of individuals are neither strategic complements nor strategic substitutes.

Discretely-constrained Nash-Cournot games have attracted attention as they arise in various competitive energy production settings in which players must make one or more discrete decisions. Gabriel et al. ["Solving discretely-constrained Nash-Cournot games with an application to power markets." Networks and Spatial Economics 13(3), 2013] claim that the set of equilibria to a discretely-constrained Nash-Cournot game coincides with the set of solutions to a corresponding discretely-constrained mixed complementarity problem. We show that this claim is false.

Models of social learning feature either binary signals or abstract signal structures often deprived of micro-foundations. Both models are limited when analyzing interim results or performing empirical analysis. We present a method of generating signal structures which are richer than the binary model, yet are tractable enough to perform simulations and empirical analysis. We demonstrate the method's usability by revisiting two classical papers: (1) we discuss the economic significance of unbounded signals Smith and Sorensen (2000); (2) we use experimental data from Anderson and Holt (1997) to perform econometric analysis. Additionally, we provide a necessary and sufficient condition for the occurrence of action cascades.

The main aim of this paper is to prove the existence of a new production function with variable elasticity of factor substitution. This production function is a more general form which includes the Cobb-Douglas production function and the CES production function as particular cases. The econometric estimates presented in the paper confirm some other results and reinforces the conclusion that the sigma is well-below the Cobb-Douglas value of one.

Is more novel research always desirable? We develop a model in which knowledge shapes society's policies and guides the search for discoveries. Researchers select a question to study and how intensely to study it. The novelty of the question determines both the value and the difficulty of discovering its answer. We show that the benefits of discoveries are nonmonotone in novelty. Because of a dynamic externality, it can be optimal to incentivize research on more distant questions than myopically optimal to improve the evolution of knowledge. One reason is that the probability of a discovery and the novelty of a question are endogenously linked. They can be complements or substitutes depending on existing knowledge. We also analyze cost reductions and research awards as instruments to incentivize research. We find that while a benefit-maximizing funder's optimal funding mix depends on her budget, distant discoveries can only be incentivized through awards.

We analyze situations in which players build reputations for honesty rather than for playing particular actions. A patient player facing a sequence of short-run opponents makes an announcement about their intended action after observing an idiosyncratic shock, and before players act. The patient player is either an honest type whose action coincides with their announcement, or an opportunistic type who can freely choose their actions. We show that the patient player can secure a high payoff by building a reputation for being honest when the short-run players face uncertainty about which of the patient player's actions are currently feasible, but may receive a low payoff when there is no such uncertainty.

We offer a search-theoretic model of statistical discrimination, in which firms treat identical groups unequally based on their occupational choices. The model admits symmetric equilibria in which the group characteristic is ignored, but also asymmetric equilibria in which a group is statistically discriminated against, even when symmetric equilibria are unique. Moreover, a robust possibility is that symmetric equilibria become unstable when the group characteristic is introduced. Unlike most previous literature, our model can justify affirmative action since it eliminates asymmetric equilibria without distorting incentives.

We propose an equilibrium interaction model of occupational segregation and labor market inequality between two social groups, generated exclusively through the documented tendency to refer informal job seekers of identical "social color". The expected social color homophily in job referrals strategically induces distinct career choices for individuals from different social groups, which further translates into stable partial occupational segregation equilibria with sustained wage and employment inequality -- in line with observed patterns of racial or gender labor market disparities. Supporting the qualitative analysis with a calibration and simulation exercise, we furthermore show that both first and second best utilitarian social optima entail segregation, any integration policy requiring explicit distributional concerns. Our framework highlights that the mere social interaction through homophilous contact networks can be a pivotal channel for the propagation and persistence of gender and racial labor market gaps, complementary to long studied mechanisms such as taste or statistical discrimination.

Data are invaluable. How can we assess the value of data objectively, systematically and quantitatively? Pricing data, or information goods in general, has been studied and practiced in dispersed areas and principles, such as economics, marketing, electronic commerce, data management, data mining and machine learning. In this article, we present a unified, interdisciplinary and comprehensive overview of this important direction. We examine various motivations behind data pricing, understand the economics of data pricing and review the development and evolution of pricing models according to a series of fundamental principles. We discuss both digital products and data products. We also consider a series of challenges and directions for future work.