Incentivizing the Dynamic Workforce: Learning Contracts in the Gig-Economy

In principal-agent models, a principal offers a contract to an agent to perform a certain task. The agent exerts a level of effort that maximizes her utility. The principal is oblivious to the agent's chosen level of effort, and conditions her wage only on possible outcomes. In this work, we consider a model in which the principal is unaware of the agent's utility and action space. She sequentially offers contracts to identical agents, and observes the resulting outcomes. We present an algorithm for learning the optimal contract under mild assumptions. We bound the number of samples needed for the principal obtain a contract that is within $\epsilon$ of her optimal net profit for every $\epsilon>0$

The Threshold Requirement in Asymmetric Conflicts: A Game Theory Analysis

In recent years, ad bellum rules have been interpreted more leniently so as to permit forcible responses to terrorism. Yet the threshold level for an “armed attack” that legitimizes full-scale war in response has remained relatively high. This observation is especially puzzling insofar as customary international law reflects the practice of (strong) states, which, as we show, can benefit from credibly committing to lowering their tolerance towards terror attacks. Why is the threshold requirement relatively tolerant? What would be the critical mass of terror beyond which a full-scale war is legitimate? Under what circumstances are states expected to violate the ad bellum threshold requirement? This Article seeks compelling answers to these questions using game theory. We argue that a low ad bellum threshold requirement (an “intolerant strategy”) is a futile measure to fight terrorism, since normally it cannot underlie a renegotiation-proof equilibrium. Namely, were a strong state to seriously consider waging a full-scale war in response to repeated, low-level terror attacks sponsored by a weak state, both parties would be better off renegotiating their way back to the status quo ante. On the other hand, renegotiation may fail if transaction costs are high enough, which ultimately makes the intolerant strategy sustainable and the equilibrium level of terror lower. The overall conclusion is thus counterintuitive: an effective intolerant strategy in the War on Terror is beneficial for victim states, but implausible unless the barriers towards a nonviolent arrangement are sufficiently high

The Skill Composition of Immigrants and the Generosity of the Welfare State: Free vs. Policy-Controlled Migration

The paper analyzes the effect of the generosity of the welfare state on the skill composition of immigrants. We develop a parsimonious model in which the effect of an increase in the generosity (and taxes) of the welfare state on the skill composition of immigrants under free migration is negative. The reason is that welfare state benefits attract unskilled migrants because they contribute to tax revenues less than what they gain from benefits; and this generosity works to deter skilled immigrants, because they contribute in taxes more than in benefits. In sharp contrast, the effect of an increase in the generosity (and taxes) of the welfare state on the skill composition of migrants is positive if migration is controlled by policy. Being net contributors to the welfare state, skilled migrants can help finance a more generous welfare-state system; thus, they are preferred by the policy maker over unskilled migrants. We take the prediction of the model to cross-sectional data on source-host, OECD-EU country pairs in the year 2000. The identification strategy is to use the decomposition the source-host country pairs into two groups: one group, a "free migration" group, source-host country pairs within the EU, and another group, "policy-controlled migration" group, the pairs from non-EU countries into the EU. We find evidence in support of the predictions of the parsimonious model, that the generosity of the welfare state adversely affects the skill-composition of migrants under free migration; but it exerts a more positive effect under controlled migration, relative to the free migration regime.

Understanding entanglement as resource: locally distinguishing unextendible product bases

It is known that the states in an unextendible product basis (UPB) cannot be distinguished perfectly when the parties are restricted to local operations and classical communication (LOCC). Previous discussions of such bases have left open the following question: What entanglement resources are necessary and/or sufficient for this task to be possible with LOCC? In this paper, I present protocols which use entanglement more efficiently than teleportation to distinguish certain classes of UPB's. The ideas underlying my approach to this problem offer rather general insight into why entanglement is useful for such tasks.Comment: Final, published version. Many revisions following very useful suggestions of the referee have been added. In particular, Appendix A has been completely rewritte