Month: November 2024

Luca Sandrini will present “Endogenous Peer Based Discrimination” (with Roberto Rozzi) on November 29th, 2024, at 11:00 AM, in room QA323.

Abstract:   

The paper presented in this ZEW Research Seminar considers a dynamic labor market where employers can either be conformist or rational. There are two types of workers. Employers only observe each worker’s type and each type’s expected productivity. The authors examine how employers’ behavioral rules evolve across steps based on static equilibrium outcomes. Behavioral rules evolve according to a fitness depending on the number of conformists and conformists pay a cognitive cost for considering additional information. They find that the two evolutionary stable states are such that either all employers are rational or all of them are conformist: only the second kind of state produces inequalities. External social pressure, the number of jobs, and the magnitude of the conformity cognitive cost influence the likelihood of a society with only conformist employers. Initially, the authors assume equal remuneration among employers and later demonstrate that their results hold even when worker remuneration differs across employers.

Christopher Stapenhurst (QSMS) will present “Red and Gold (with Andrew Clausen and John Moore)” on November 15th, 2024, at 10:30 AM, in room QA406.

Abstract:   

Clausen and Stapenhurst (2024) obtain a lower bound on the cost of the optimal static, bribe-proof mechanism. But what about dynamic mechanisms? We propose a mechanism called “Red and Gold” that uses a nuisance action to deter bribes at arbitrarily small cost. The agent receives either a red or a gold ticket. If the monitor reports shirking then she is asked to guess the colour of the agent’s ticket. If the monitor’s guess is correct, then she receives an arbitrarily small reward, and the agent receives a large fine. Otherwise, the agent gets no fine. It follows that any equilibrium belief of the monitor leaves exactly one of the agent’s types better off rejecting bribes. But then the monitor can perfectly infer the agent’s type, so the type that rejects bribes would be better off accepting them. Hence there can be no bribes in equilibrium.

Noé Ciet (QSMS) will present “Bailout Policies when Banks Compete with Switching Costs (with Marianne Verdier)” on November 22nd, 2024, at 10:30 AM, in room QA406.

Abstract:   

We analyze the effects of bailout policies on borrower surplus in a two-period Hotelling model of competition with switching costs and poaching. Before the second period of competition, banks may sometimes fail or face capacity constraints because of random shocks and uncertain bailouts. If borrowers are myopic, banks reduce the first-period interest rates according to their bailout expectations. We show that banks may reduce the first-period interest rates even more when borrowers anticipate a bank failure in the second period, whereas they may sometimes add a mark-up to the first-period interest rates if borrowers expect the market to remain stable. Higher bailout expectations have a different impact on the interest rates in markets with high and low switching costs. We derive the bailout policy that maximizes borrower surplus and show that it may sometimes be time-inconsistent.