Israel Luski

All-Pay Auctions with Variable Rewards

We study all-pay auctions with variable rewards under incomplete information. In standard models, a reward depends on a bidders privately known type; however, in our model it is also a function of his bid. We show that in such models there is a potential for paradoxical behavior where a reduction in the rewards or an increase in costs may increase the expected sum of bids or alternatively the expected highest bid. Copyright 2002 by Blackwell Publishing Ltd

Duopoly pricing and waiting lines

Abstract The paper deals with a model of duopoly pricing in the context of firms providing services to consumers. Each of the firms has a waiting line of customers arriving randomly. The service provided by both firms is identical and the service time of both firms is assumed to obey the same distribution. Different consumers have different time costs and have to decide whether or not to join one of the lines. It is shown that the Cournot-Nash equilibrium is such that the two firms charge in general different prices. One of the firms specializes in servicing individuals with high cost of time (and the other the rest). Moreover, some examples of non-existence of Cournot-Nash equilibrium and permanent oscillations of prices are shown.

Innovative Activity and Sunk Cost

We analyze a patent race where the first innovator receives a time-dependent reward while all firms incur costs. When firms are identical, there is a unique, symmetric, mixed-strategy equilibrium that yields zero expected profits for all firms. Furthermore, the expected innovation time is an increasing function of the number of firms and a decreasing function of the size of the reward. When one firm has a higher reward than another, it is more likely to win. Although similar to an all-pay auction, our approach may yield both similar and qualitatively different behavior.

On Partial Equilibrium in a Queuing System with Two Servers

This paper will deal with the following question: what happens in a service system where the service is supplied by two competitive firms? By a service system we mean any system where customers have to wait in lines before they are served. As we will show, we cannot apply the usual results of economic theory to service systems. For example, in ordinary economic theory two firms supplying the same good will always sell it at the same price. This result is not always true for the case of service and waiting lines. We will discuss the conditions under which two service firms selling at the same price are not in equilibrium. A discussion of queuing systems with single server (that is, a monopoly) are found in the works of Edelson [1], Naor [3], Knudsen [2] and others. However, there is no mention in the literature of a general equilibrium in a queuing system with more than one server. Between these two extreme cases, the general equilibrium and the determinate single-firm model, lie the partial equilibrium cases, and this paper deals with one of these.

The Optimal Policy Combination of the Minimum Wage and the Earned Income Tax Credit

Abstract This paper evaluates the consequences of minimum wage (MW) and earned income tax credit (EITC) in a model with heterogeneous costs of investment in human capital. Our model studies the effects of a MW and an EITC on employment, productivity, and total output for two types of groups: those with a low cost of acquiring human capital and a long horizon of earnings (Type Ys); and those with a high cost of acquiring human capital and a short horizon of earnings (Type Os). We assume that Type Ys consider investing in human capital while Type Os have a certain predetermined level of human capital and do not consider changing it. Our model suggests that a government might consider imposing a MW exclusively for Type Y individuals and an EITC exclusively for Type O individuals. Some of the best effects of each policy would therefore be obtained and some of the worst consequences would be avoided.

A dynamic analysis of fiscal pressure and demographic transition

In this paper, the effects of demographic changes, particularly in the age structure of population, on government social expenditure is estimated. The results indicate that income elasticity of government social services is unitary in high income countries and above that level in low income countries, especially in education and welfare. The paper attempts also to forecast the pressure of these government outlays in four distinct countries characterized by different demographic parameters.

The effects of a back-loaded compensation policy on the recruiting of older workers

The goal of this article is to investigate the impact of back loading on the hiring of older workers. We argue that the impact of back loading on the motivation of a worker to put effort into work depends, among other variables, on the probability of being able to find another job. The less likely it is that one can find another job the more likely one is to exert a greater effort at work. Given that older workers are less likely to be able to find another job if they are dismissed from their current position, they are also less likely to shirk their obligations at work. Therefore, firms have to expend fewer resources monitoring their work. In addition, we demonstrate that the probability of employee misconduct declines with the number of years on the job even when the probability of detection remains constant.

Concentration and the inter-industry wage structure: the Israeli manufacturing sector

The paper analysis the inter-industry wage differentials in the Israeli manufacturing sector in conjunction with differences in the degree of competition in the various industries. Unlike some other studies (carried out with US date) that did not produce conclusive results, this study shows a clear-cut positive relationship between wages and the degree of monopolization. This result is found both for unskilled and highly skilled workers.

Innovative Activity with Sunk Cost

We analyze a patent race where the first innovator receives a time-dependent reward while all firms incur costs. When firms are identical, there is a unique, symmetric, mixed-strategy equilibrium that yields zero expected profits for all firms. Furthermore, the expected innovation time is an increasing function of the number of firms and a decreasing function of the size of the reward. When one firm has a higher reward than another, it is more likely to win. Although similar to an all-pay auction, our approach may yield both similar and qualitatively different behavior.

The effect of minimum wage on employment and wages in Israeli industry

Estimates the effect of a minimum wage on the level of employment and on wages in Israeli industry. The findings surprisingly suggest that both labour demand and supply decrease after the institution of a minimum wage. Thus, employment is reduced while wages remain practically unchanged.