Forgive or Buy Back: An Experimental Study of Debt Relief

A large share of the debt claims owed by the world’s poorest countries has been cancelled through the HIPC (highly indebted poor countries) debt relief initiative. It is believed that, with less debt burden, the HIPC will be able to devote more resources to investment and thus promote their own growth and benefit their creditors in the long run. But does debt forgiveness really provide the best incentive for those countries who suffers from debt overhang? In this paper, we adopt experimental methods to study the impact of two different schemes for relieving debt. The two schemes we consider here are debt forgiveness and debt buyback, with the latter being more market-based since it allows indebted countries to repurchase their own debt on the secondary market at a discount. We find that creditors tend to reduce more debt when the relief takes the form of debt forgiveness than that of buyback. Debtors under the scheme of forgiveness are not significantly more reciprocal than those of buyback. After controlling for the amount of debt relief, creditors are significantly worse off under forgiveness whereas debtors are indifferent between the two schemes. Overall, debt forgiveness yields less desirable outcomes than debt buybacks.Laboratory Experiments

On Market Activity and the Value of Money

In a random-matching monetary economy, efficient and inefficient sellers choose between home or market production. Since inefficient sellers bargain up their prices, two equilibria may exist– with high or low market participation–depending on extent of heterogeneity and frictions. In equilibrium, the presence of inefficient sellers on the market has two opposing effects. It raises trading frequencies, so it lowers consumption risk, but it lowers the value of money, raising prices. This may reduce trading efficiency. Equilibria with full and limited participation can coexist; when average efficiency is high and agents are patient, limited participation is socially preferable

Trading Horizons and the Value of Money

This paper shows that flat money can be feasible and essential even if the trading horizon is finite and deterministic. The result hinges on two features of our model. First, individual actions can affect the future availability of productive resources. So, agents may be willing to sell for money, even if on that date they have no reason to accept it. This makes monetary trade feasible in all preceding dates. Second, agents are anonymous and direct their search for partners. So, gift-giving arrangements may be prevented because agents can misrepresent their consumption needs. This makes money essential in exploiting any gains from specialization and trade

Trading Horizons and the Value of Money

We develop an anonymous trading framework where specialization and trade are beneficial to society and trading arrangements are endogenous. Its key features are that individual actions can have long-lasting aggregate consequences and the current allocation of consumption can affect the future availability of productive resources. We study equilibrium patterns of exchange when the trading sequences are finite and deterministic, demonstrating that fiat money does not necessarily loose its beneficial allocative role. The reason is that individual actions that reduce the agent’s current payoff–such as selling for money on its final trading date–can be incentive-compatible when this prevents others from making choices carrying adverse long-lasting aggregate consequences

Competition vs. communication: An experimental study on restoring trust

International audienc

Optimization of Nonuniform Linear Antenna Array Topology

This paper deals with the use of a Nonuniform Linear Antenna array (NLA) for determining the Directions of Arrival (DOA) of a signal in 2450MHz frequency band. First, the principle of the DOA estimation method is described for the case of the MUSIC method. This paper also discusses the possibilities of optimizing the position of antenna elements in the NLA configuration, which are performed in analytical solutions and simulations. The simulation results are compared to the analytical results to obtain optimal NLA configurations for determining the signal DOA. Simulation results show that the probability of resolution and accuracy in determining the signal DOA are dependent on the antenna array aperture essentially. Furthermore, the realized NLA configuration was verified by an experimental measurement. The obtained experiment results demonstrate that the applied MUSIC method for NLA configuration is suitable and also highly accurate in determining the signal DOA, which was verified

Essays on monetary theory

This thesis includes three essays on monetary theory analyzing monetized trading arrangements in three separate environments: (1) transient economy, (2) economy with two competing imperfect record-keeping technologies, and (3) economy where agents are subject to productivity shocks. In Essay 1 we study whether autarchy is the only incentive-feasible trading arrangement if the economy or money are transient. In the absence of commitment and memory, agents can choose autarchy or specialize and trade bilaterally exploiting an imperfect record-keeping technology, perishable tokens. Trading arrangements are endogenous and individual market participation creates a positive externality to others. We construct equilibria where tokens are valued until their demise or, in a finite-horizon economy, some date prior to the last. As the size of the market increases, individual participation confers smaller benefits to others and the equilibria cease to exist. Essay 2 extends the work of Kocherlakota and Wallace (1998) that generalizes search-theoretic model of money to permit a mix of transactions: monetized trade and reciprocal exchange of gifts. We develop conditions under which people should only trade, only engage in reciprocal exchanges, or employ both record-keeping technologies side by side, respectively. We show that in a monetary equilibrium with reciprocal exchange, presence of gift-giving decreases the optimal value of money, since money-less consumers get to consume free gifts from producers. On the other hand, the impact of introduction of money on the optimal size of a gift is ambiguous. Finally, in Essay 3 we study the allocations achieved in a prototypical search-theoretic model of money where prices are endogenously formed and agents are subject to productivity shocks. We find that on some segments of the parameter space Pareto-ranked symmetric stationary equilibria can be constructed. The best equilibrium is the one in which prices are low but, surprisingly, market activity is also low. In this equilibrium money is only used to facilitate trades with the most efficient sellers, and never used to trade with the most inefficient agents. This equilibrium is unique and welfare is higher, if the money supply is reduced

In-Group versus Out-Group Trust: The Impact of Income Inequality

In this article, we adopt a variant of the trust game by Berg, Dickhaut, and McCabe (1995) and the dictator game by Cox (2004) to determine if income inequality can activate in-group favoritism and, if so, whether such a bias is strong enough to survive the removal of income inequality. We find evidence of in-group favoritism only on the part of rich first movers. Rich first movers trust their in-group members significantly more in the presence of income inequality not only before but also after they gain enough experience. Poor first movers, in contrast, do not exhibit such in-group bias. They do not discriminate between in-group and out-group at the very outset of the experiment, and once they become experienced, they behave with significantly more trust toward the rich than toward the poor. We also find that in-group and out-group favoritism established in the past can be alleviated, but not completely removed, by an equal income distribution

On Market Activity and the Value of Money

In a random-matching monetary economy, efficient and inefficient sellers choose between home or market production. Since inefficient sellers bargain up their prices, two equilibria may exist-with high or low market participation-depending on extent of heterogeneity and frictions. In equilibrium, the presence of inefficient sellers in the market has two opposing effects. It raises trading frequencies, so it lowers consumption risk, but it lowers the value of money, raising prices. This may reduce trading efficiency. Equilibria with full and limited participation can coexist; when average efficiency is high and agents are patient, limited participation is socially preferable.