Economics

We study interactions with uncertainty about demand sensitivity. In our solution concept (1) firms choose seemingly-optimal strategies given the level of sophistication of their data analytics, and (2) the levels of sophistication form best responses to one another. Under the ensuing equilibrium firms underestimate price elasticities and overestimate advertising effectiveness, as observed empirically. The misestimates cause firms to set prices too high and to over-advertise. In games with strategic complements (substitutes), profits Pareto dominate (are dominated by) those of the Nash equilibrium. Applying the model to team production games explains the prevalence of overconfidence among entrepreneurs and salespeople.

This paper develops a Nash-equilibrium extension of the classic SIR model of infectious-disease epidemiology ("Nash SIR"), endogenizing people's decisions whether to engage in economic activity during a viral epidemic and allowing for complementarity in social-economic activity. An equilibrium epidemic is one in which Nash equilibrium behavior during the epidemic generates the epidemic. There may be multiple equilibrium epidemics, in which case the epidemic trajectory can be shaped through the coordination of expectations, in addition to other sorts of interventions such as stay-at-home orders and accelerated vaccine development. An algorithm is provided to compute all equilibrium epidemics.

We study a model of vendors competing to sell a homogeneous product to customers spread evenly along a linear city. This model is based on Hotelling's celebrated paper in 1929. Our aim in this paper is to present a necessary and sufficient condition for the equilibrium. This yields a representation for the equilibrium. To achieve this, we first formulate the model mathematically. Next, we prove that the condition holds if and only if vendors are equilibrium.

We study a model of vendors competing to sell a homogeneous product to customers spread evenly along a circular city. This model is based on Hotelling's celebrated paper in 1929. Our aim in this paper is to present a necessary and sufficient condition for the equilibrium. This yields a representation for the equilibrium. To achieve this, we first formulate the model mathematically. Next, we prove that the condition holds if and only if vendors are equilibrium.

Carroll and Kimball (1996) have shown that, in the class of utility functions that are strictly increasing, strictly concave, and have nonnegative third derivatives, hyperbolic absolute risk aversion (HARA) is sufficient for the concavity of consumption functions in general consumption-saving problems. This paper shows that HARA is necessary, implying the concavity of consumption is not a robust prediction outside the HARA class.

This paper studies the set of stable allocations in college admissions markets where students can attend the same college under different financial terms. The stable deferred acceptance mechanism implicitly allocates funding based on merit. In Hungary, where the centralized mechanism is based on deferred acceptance, an alternate stable algorithm would change the assignment of 9.3 percent of the applicants, and increase the number of assigned applicants by 2 percent. Low socioeconomic status applicants and colleges in the periphery benefit disproportionately from moving to this non-merit-based algorithm. These findings stand in sharp contrast to findings from the matching (without contracts) literature.

The controversies around the 2020 US presidential elections certainly casts serious concerns on the efficiency of the current voting system in representing the people's will. Is the naive Plurality voting suitable in an extremely polarized political environment? Alternate voting schemes are gradually gaining public support, wherein the voters rank their choices instead of just voting for their first preference. However they do not capture certain crucial aspects of voter preferences like disapprovals and negativities against candidates. I argue that these unexpressed negativities are the predominant source of polarization in politics. I propose a voting scheme with an explicit expression of these negative preferences, so that we can simultaneously decipher the popularity as well as the polarity of each candidate. The winner is picked by an optimal tradeoff between the most popular and the least polarizing candidate. By penalizing the candidates for their polarization, we can discourage the divisive campaign rhetorics and pave way for potential third party candidates.

This paper considers incentives to provide goods that are partially excludable along social links. Individuals face a capacity constraint in that, conditional upon providing, they may nominate only a subset of neighbours as co-beneficiaries. Our model has two typically incompatible ingredients: (i) a graphical game (individuals decide how much of the good to provide), and (ii) graph formation (individuals decide which subset of neighbours to nominate as co-beneficiaries). For any capacity constraints and any graph, we show the existence of specialised pure strategy Nash equilibria - those in which some individuals (the Drivers, D) contribute while the remaining individuals (the Passengers, P) free ride. The proof is constructive and corresponds to showing, for a given capacity, the existence of a new kind of spanning bipartite subgraph, a DP-subgraph, with partite sets D and P. We consider how the number of Drivers in equilibrium changes as the capacity constraints are relaxed and show a weak monotonicity result. Finally, we introduce dynamics and show that only specialised equilibria are stable against individuals unilaterally changing their provision level.

Crowdfunding is gradually becoming a modern marketing pattern. By noting that the success of crowdfunding depends on network externalities, our research aims to utilize them to provide an applicable referral mechanism in a crowdfunding-based marketing pattern. In the context of network externalities, measuring the value of leading customers is chosen as the key to coping with the research problem by considering that leading customers take a critical stance in forming a referral network. Accordingly, two sequential-move game models (i.e., basic model and extended model) were established to measure the value of leading customers, and a skill of matrix transformation was adopted to solve the model by transforming a complicated multi-sequence game into a simple simultaneous-move game. Based on the defined value of leading customers, a network-based referral mechanism was proposed by exploring exactly how many awards are allocated along the customer sequence to encourage the leading customers' actions of successful recommendation and by demonstrating two general rules of awarding the referrals in our model setting. Moreover, the proposed solution approach helps deepen an understanding of the effect of the leading position, which is meaningful for designing more numerous referral approaches.

I introduce novel preference formulations which capture aversion to ambiguity about unknown and potentially time-varying volatility. I compare these preferences with Gilboa and Schmeidler's maxmin expected utility as well as variational formulations of ambiguity aversion. The impact of ambiguity aversion is illustrated in a simple static model of portfolio choice, as well as a dynamic model of optimal contracting under repeated moral hazard. Implications for investor beliefs, optimal design of corporate securities, and asset pricing are explored.