Competition and Reputation

In this paper we analyze the interaction of two disciplinary mechanisms: competition and reputation. We first study a dynamic model of monopolistic competition with experienced goods (i.e., quality is observed after goods are purchased). When market power is high enough, reputation results in the equilibrium with perfect information being sustainable. If consumers' expectations satisfy a weak regularity condition, then there is a unique sequential equilibrium with quality goods being produced and the price has a mark-up which is either the full information monopolistic mark-up or, if this is not sustainable (e.g., when goods are very close substitutes), the rate of time preference, that acts as a reputation constraint. A variation of the model allows us to study the private provision of currencies. In particular, we inquire whether Bertrand competition between profit maximizing currency issuers would drive inflation rates to the efficient outcome, as suggested prominently by Hayek. We show that, unless firms can commit to future actions, the efficient outcome is never attained. Without full commitment, equilibria with deflation -as implied by the Friedman rule- can not be sustained, however, if currencies are close substitutes (and beliefs regular) the equilibrium inflation rate is zero.

Competition, innovation and growth with limited commitment

We study how barriers to business start-up affect the investment in knowledge capital when contracts are not enforceable. Barriers to business start-up lower the competition for knowledge capital and, in absence of commitment, reduce the incentive to accumulate knowledge. As a result, countries with large barriers experience lower income and growth. Our results are consistent with cross-country evidence showing that the cost of business start-up is negatively correlated with the level and growth of income.Innovation, Knowledge Capital, Enforcement, Growth, Competition, Commitment, Recursive Contracts, Mobility

Competition, Human Capital and Income Inequality with Limited Commitment

We develop a dynamic general equilibrium model with two-sided limited commitment to study how barriers to competition, such as restrictions to business start-up, affect the incentive to accumulate human capital. We show that a lack of contract enforceability amplifies the effect of barriers to competition on human capital accumulation. High barriers reduce the incentive to accumulate human capital by lowering the outside value of ‘skilled workers’, while low barriers can result in over-accumulation of human capital. This over-accumulation can be socially optimal if there are positive knowledge spillovers. A calibration exercise shows that this mechanism can account for significant cross-country income inequality.Limited commitment, limited enforcement, human capital accumulation, income inequality, innovation, barriers to competition.

Recursive Contracts

We obtain a recursive formulation for a general class of contracting problems involving incentive constraints. These constraints make the corresponding maximization (sup) problems non recursive. Our approach consists of studying a recursive Lagrangian. Under standard general conditions, there is a recursive saddle-point (infsup) functional equation (analogous to a Bellman equation) that characterizes the recursive solution to the planner's problem and forward-looking constraints. Our approach has been applied to a large class of dynamic contractual problems, such as contracts with limited enforcement, optimal policy design with implementability constraints, and dynamic political economy models.Transactional relationships, contracts and reputation, recursive formulation,participation constraint

Unemployment vs. Mismatch of Talents: Reconsidering Unemployment Benefits

We develop an equilibrium search-matching model with risk-neutral agents and two-sided ex-ante heterogeneity Unemployment insurance has the standard effect of reducing employment, but also helps workers to get a suitable job. The predictions of our simple model are consistent with the contrasting performance of the labor market in Europe and US in terms of unemployment, productivity growth and wage inequality. To show this, we construct two fictitious economies with calibrated parameters which only differ by the degree of unemployment insurance and assume that they are hit by a common technological shock which enhances the importance of mismatch. This shock reduces the proportion of jobs which workers regard as acceptable in the economy with unemployment insurance (Europe). As a result, unemployment doubles in this economy. In the laissez-faire economy (US), unemployment remains constant, but wage inequality increases more and productivity grows less due to larger mismatch. The model can be used to address a number of normative issues.

Recursive Contracts

We obtain a recursive formulation for a general class of contracting problems involving incentive constraints. These constraints make the corresponding maximization sup problems non-recursive. Our approach consists of studying a recursive Lagrangian. Under standard general conditions, there is a recursive saddle-point (infsup) functional equation (analogous to a Bellman equation) that characterizes the recursive solution to the planner's problem and forward-looking constraints. Our approach has been applied to a large class of dynamic contractual problems, such as contracts with limited enforcement, optimal policy design with implementability constraints, and dynamic political economy models.Recursive methods, dynamic optimization, Ramsey equilibrium, time inconsistency, limited participation, contract default, saddle-points, Lagrangian multipliers.

Una relació prometedora: genètica, intel·ligència artificial i teoria dels jocs

Allò que tenen en comú la tria de la millor oferta en el mercat i el resultat de la competència entre diferents espècies animal