Heterogenous Human Capital: Life Cycle Investment in Health and Education

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Bounded Rationality:Static Versus Dynamic Approaches

Two kinds of theories of boundedly rational behavior are possible. Static theories focus on stationary behavior and do not include any explicit mechanism for temporal change. Dynamic theories, on the other hand, explicitly model the fine-grain adjustments made by the subjects in response to their recent experiences. The main contribution of this paper is to argue that the restrictions usually imposed on the distribution of choices in the static approach are generically not supported by a dynamic adjustment mechanism. The genericity here is understood both in the measure theoretic and in the topological sense.

Lie Groups of Partial Differential Equations and Their Application to the Multidimensional Screening Problems

In this paper I describe group theoretic methods that can be used for analyzing the boundary problems, which arise when the Hamiltonian method is applied to solve the relaxed problem for the multidimensional screening problem. This technique can provide some useful insights into the structure of solutions and some times may help to arrive at particular solutionsLie group, multidimensional screening

Why Do Social Skills Matter?

In this paper I propose a model where social skills of a manager signal the workers that their e¤ort is productive. In this model …rms with a high productivity of e¤ort hire a socially skilled manager and pay higher wages, and workers hired by these …rms exert higher e¤ort. In a broader context, the paper argues the employees are compensated with a higher wage and better working conditions for higher levels of effort.

Quality Gaps

In this paper I consider a monopolistic screening model with continuum of types when the type set is a disconnected subset of the real line. I prove that the product line remains connected provided that the gap in the type space is sufficiently small. I also use the results to show that the inverse screening problem may be ill-defined.screening, product line, quality gap

Equilibrium selection in coordination games: Why do dominated strategies matter?

In this paper I illustrate by an example that strictly dominated strategies may affect the process of the equilibrium selection in coordination games. The strategy profile that gets selected may be both Pareto and risk dominated. This distinguishes it from the examples provided in Ellison (2000) and Maruta (1997).

Non-monotone Incentives in a Model of Coexisting Hidden Action and Hidden Information

In this paper I consider a model of coexisting moral hazard and adverse selection, similar to one considered by Guesnerie, Picard, and Rey (1989). I provide an explicit solution for the optimal incentive scheme in the case, when the effort is observed with a normally distributed error. The main observation is that in this case the optimal incentive scheme often fails to be monotone. If the monotonicity constraint is imposed on the solution for economic reasons there would exist a region of profit realizations, such that the optimal compensation will be independent of on performance.hidden action, hidden information, Fredholmintegral equations of the first type, Hermit polynomials.

Lie Groups of Partial Differential Equations and Their Application to theMultidimensional Screening Problems

In this paper I described group theoretic methods that can be used for analyzing the boundary problems, which arise when the Hamiltonian method is applied to solve the relaxed problem for the multidimensional screening problem. This technique can provide some useful insights into the structure of solutions and some times may help to arrive at particular solutions.Multidimensional screening, Lie groups

Evolution of Social Behavior in the Global Economy: The Replicator Dynamics with Migration

In this paper I consider the e¤ects of migration on the spread and the speed of the propagation of new conventions, technologies, etc. I show that the speed of the propagation increases with the openness of the economy. The application of the model to the equilibrium selection in 2 £ 2 coordination games is also discussed.

Snobs and Quality Gaps

In this paper I revisit the Mussa and Rosen (1978) model. However, unlike Mussa and Rosen, I assume that there is a positive mass of the consumers of the highest possible type. I call them snobs. I prove that snobs consumers are served efficiently and the product line decreases in the mass of the serious consumers. Moreover, if the mass of the serious consumers is more than some critical level then they are the only consumers who are served at equilibrium.screening, product line, efficiency