Mich Tvede

Endowments, stability, and fluctuations in OG models

Abstract In the present paper we consider a stationary overlapping-generations model with many commodities and many different consumers and investigate how the distribution of endowments influences the dynamical properties of the model such as stability of steady states and existence of cycles. Our main results are: 1. 1) Preferences place no restrictions on stability properties of steady states; 2. 2) cycles exist for all aggregate savings (real or nominal); and 3. 3) equilibria of economies with equilibria close to a no-trade equilibrium with constant prices are either steady states or equilibria which converge to a steady state in backward time and another steady state in forward time. These results are obtained generically in utility functions and do not depend on whether the utility functions are of the discounted form or not.

Benchmark Selection: An Axiomatic Approach

Within a production theoretic framework, this paper considers an axiomatic approach to benchmark selection. It is shown that two simple and weak axioms: efficiency and comprehensive monotonicity characterize a natural family of benchmarks which typically becomes unique. Further axioms are added in order to obtain a unique selection.

Optimal policy in OG models

In the present paper general stationary overlapping generations economies with many commodities in every period and many different consumers in every generation are considered. A government maximizes an utilitarian social welfare function, that is the sum of weighted averages of utilities for generations, through fiscal policy, i.e. monetary transfers and taxes. Both situations with and without time discounting are considered. It is shown that if the discount factor is sufficiently close to one then the optimal policy stabilizes the economy, i.e. the equilibrium path has the turnpike property. Moreover the fiscal policy is shown to be time-consistent.

No-trade and uniqueness of steady states

Abstract In the present paper a stationary overlapping-generations model with many commodities and many different consumers is considered. The main result is that economies with endowments near no-trade equilibria with constant prices have a unique balanced steady state and a unique golden-rule steady state. These results are obtained generically in utility functions and do not depend on whether the utility functions are of the discounted form or not.

Minimum cost connection networks: Truth-telling and implementation

In the present paper we consider the allocation of costs in connection networks. Agents have connection demands in form of pairs of locations they want to have connected. Connections between locations are costly to build. The problem is to allocate costs of networks satisfying all connection demands. We use a few axioms to characterize allocation rules that truthfully implement cost minimizing networks satisfying all connection demands in a game where: (1) a central planner announces an allocation rule and a cost estimation rule; (2) every agent reports her own connection demand as well as all connection costs; (3) the central planner selects a cost minimizing network satisfying reported connection demands based on the estimated costs; and, (4) the planner allocates the true costs of the selected network. It turns out that an allocation rule satisfies the axioms if and only if relative cost shares are fixed.

Dynamics in OG Economies

In the present paper we consider a class of dynamic economic models with 𝓁 goods at every date. Equilibrium price systems ( p t ), where are obtained as solutions to an autonomous difference equation of the form where is the lifespan of the consumers and is obtained by maximizing individual felicity. We study both properties of the set of stationary solutions as well as the local dynamics of stationary solutions.

Externalities, Internalization and Fluctuations

In this paper, the authors introduce consumption externalities as developed by K. Arrow in overlapping-generations economies. They show how the internalization of externalities--through exchanges at markets for externalities--may give rise to new phenomena such as altered stability properties and fluctuations, even though it restores optimality. Copyright 1997 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Sharing the proceeds from a hierarchical venture

We consider the problem of distributing the proceeds generated from a joint venture in which the participating agents are hierarchically organized. We introduce and characterize a family of allocation rules where revenue ‘bubbles up’ in the hierarchy. The family is flexible enough to accommodate a no-transfer rule (where no revenue bubbles up) and a full-transfer rule (where all the revenues bubble up to the top of the hierarchy). Intermediate rules within the family are reminiscent of popular incentive mechanisms for social mobilization. Our benchmark model refers to the case of linear hierarchies, but we also extend the analysis to the case in which hierarchies may convey a general tree structure and include joint ownerships.

Production in incomplete markets: Expectations matter for political stability

In the present paper we study voting-based corporate control in a general equilibrium model with incomplete financial markets. Since voting takes place in a multi-dimensional setting, super-majority rules are needed to ensure existence of equilibrium. In a linear-quadratic setup we show that the endogenization of voting weights (given by portfolio holdings) can give rise to - through self-fulfilling expectations - dramatical political instability, i.e. Condorcet cycles of length two even for very high majority rules.

Revenue Sharing in European Football Leagues: A Theoretical Analysis

In the present chapter, a general model of competition between clubs in sports leagues with flexible supply of inputs is studied. There are externalities between clubs because it takes more than one club to produce games and tournaments. It is assumed that the externalities take the form of complementarities. Firstly, it is shown that revenue sharing leads to lower overall quality of sports leagues. Secondly, it is shown that the optimal quality for the league is lower (higher) than the quality in a league without revenue sharing in case of negative (positive) externalities between clubs. Thirdly an example is used to illustrate the findings.