Lones Smith

Assortative Matching and Search

This paper has pushed Beckers matching insights into a quite plausible search setting. Exploiting the implicit integral equation (10), we gave a thorough characterization of cross-sectional matching patterns in the equilibrium and constrained s ocial optimum of a frictional matching model. In so doing, we have developed important new techniques for establishing existence, as well as extended the reach of the supermodularity research program into a wide new arena.

Matching, Search, and Heterogeneity

This paper explores the efficiency of decentralized search behavior and matching patterns in a model with ex ante heterogeneity and a constant returns to scale search technology. We show that a linear tax or subsidy on search intensity decentralizes the social optimum. In the absence of the tax, high productivity agents are too willing to match, yet they search too little. Low productivity agents have the opposite behavior. As a result, the equilibrium is always inefficient in the absence of taxes, in contrast to known results on the efficiency of decentralized search models with homogeneous agents. We relate the inefficiencies to thick-market and congestion externalities.

Rational Social Learning by Random Sampling

This paper explores rational social learning in which everyone only sees unordered random samples from the action history. In this model, herds need not occur when the distant past can be sampled. If private signal strengths are unbounded and the past is not over-sampled -- not forever affected by any individual -- there is complete learning and a correct proportionate herd. With recursive sampling, welfare almost surely converges under the new proviso that the recent past is not over-sampled. In this case, there is almost surely complete learning with unbounded beliefs and unit sample sizes. The sampling noise in this Polya urn model induces a path-dependent structure, so that re-running the model with identical signals generally produces different outcomes.

Repeated Games with Present-Biased Preferences

We study infinitely repeated games with perfect monitoring, where players have [beta]-[delta] preferences. We compute the continuation payoff set using recursive techniques and then characterize equilibrium payoffs. We then explore the cost of the present-time bias, producing comparative statics. Unless the minimax outcome is a Nash equilibrium of the stage game, the equilibrium payoff set is not monotonic in [beta] or [delta]. Finally, we show how the equilibrium payoff set is contained in that of a repeated game with smaller discount factor.

The Economics of Counterfeiting

We develop a strategic theory of counterfeiting as a multi‐market large game. Bad guys choose whether to counterfeit, and what quality to produce. Opposing them is a continuum of good guys who select a costly verification effort. In equilibrium, counterfeiters produce better quality at higher notes, but verifiers try sufficiently harder that verification still improves. We develop a graphical framework for deducing comparative statics. Passed and counterfeiting rates vanish for low and high notes. Our predictions are consistent with time series and cross‐sectional patterns in a unique data set assembled largely from the Secret Service.

A Portrait of the Artist as a Young, Middle-Aged, and Elderly Man

We explore the age-value and age-quantity productivity proles of fty- three great Western artists whose work has been auctioned in the last decade. In terms of the average value of their paintings, we nd that artists have three distinct phases to their careers: a steep incline, more than doubling their expected value until an age 31 peak; then follows a slower decline until age 47, losing almost half their peak value, and nally a very slow decline. The top quartile of artists distinguish themselves not only by a higher average value, but also in midcareer by losing only a fth of their peak value in 31-47.

Time-Consistent Optimal Stopping

A process and apparatus for packing a stack of loads with synthetic resin films each possessing heat contractility. A plurality of loads are stacked on a pair of synthetic resin films placed in crossed relationship on an elevating table. The elevating table is movable downward from its upper extreme position so that the synthetic resin films are continuously supplied to cover side peripheries of the loads. Adjacent rib portions formed by side edges of the synthetic resin films covering the side peripheries of the loads are joined during downward movement of the elevating table. Upper opposing portions of each of the synthetic resin films are bent toward each other and joined together on the upper surface of the stacked loads on the elevating table. The synthetic resin films covering the loads are heated so that the films shrink.

Do Rational Traders Frenzy

I develop a simple new model of strategic trade with endogenous timing, generalizaing Glosten and Milgrom (1985) : A competitive market maker faces n risk neutral traders with unit demands or suppliers. It is private information whether any given trader is either informed, with a heterogeneous informative signal about the asset payoff, or a pure noise trader planning to make a trade at a random time. The market is open for an exponential length of time.

Ordinal Aggregation Results via Karlin's Variation Diminishing Property

When is the weighted sum of quasi-concave functions quasi-concave? We answer this, extending an analogous preservation of the single-crossing property in QS: Quah and Strulovici (2012). Our approach develops a general preservation of n-crossing properties, applying the variation diminishing property in Karlin (1956). The QS premise is equivalent to Karlins total positivity of order two, while our premise uses total positivity of order three: The weighted sum of quasi-concave functions is quasi-concave if each has an increasing portion more risk averse than any decreasing portion.

Rushes in Large Timing Games

We develop a continuum player timing game that subsumes standard wars of attrition and pre‐emption games, and introduces a new rushes phenomenon. Payoffs are continuous and single‐peaked functions of the stopping time and stopping quantile. We show that if payoffs are hump‐shaped in the quantile, then a sudden “rush” of players stops in any Nash or subgame perfect equilibrium. Fear relaxes the first mover advantage in pre‐emption games, asking that the least quantile beat the average; greed relaxes the last mover advantage in wars of attrition, asking just that the last quantile payoff exceed the average. With greed, play is inefficiently late: an accelerating war of attrition starting at optimal time, followed by a rush. With fear, play is inefficiently early: a slowing pre‐emption game, ending at the optimal time, preceded by a rush. The theory predicts the length, duration, and intensity of stopping, and the size and timing of rushes, and offers insights for many common timing games.