Economics - Research Publications
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ItemNon-monotone incentives in a model ofcoexisting hidden action and hidden information( 2006-12)In this paper I consider a model of coexisting moral hazard andadverse selection, similar to one considered by Guesnerie, Picard, and Rey(1989). I provide an explicit solution for the optimal incentive scheme in thecase, when the effort is observed with a normally distributed error. The mainobservation is that in this case the optimal incentive scheme often fails tobe monotone. If the monotonicity constraint is imposed on the solution foreconomic reasons there would exist a region of profit realizations, such thatthe optimal compensation will be independent of on performance.Keywords and Phrases: hidden action, hidden information, Fredholmintegral equations of the first type, Hermit polynomials.
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ItemQuality Gaps( 2006-06)In this paper I consider a monopolistic screening model withcontinuum of types when the type set is a disconnected subset of the realline. I prove that the product line remains connected provided that the gapin the type space is sufficiently small. I also use the results to show that theinverse screening problem may be ill-defined.
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ItemSnobs and quality gaps(Walter de Gruyter GmbH, 2006-01-01)
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ItemA general model of coexisting hidden action and hidden information( 2005-12)We consider a general agency model with coexisting hidden actionand hidden information. We prove that, with minor technical qualifications,independence of the production technology from the consumer type isnecessary and sufficient for welfare irrelevance of hidden action. Our resultclarifies and confirms the main conclusion drawn in the existing literatureon mixed models, that if the parties are risk neutral and the productiontechnology is not correlated with private information, then hidden action isirrelevant. However it makes it clear that even under risk neutrality this conclusiondoes not extend to the correlated case, which in practice occurs quitefrequently. We illustrate it with a realistic example where neither hiddenaction nor hidden information on their own lead to welfare losses, while theircombination does.Keywords and Phrases: hidden action, hidden information, Fredholmintegral equations of the first type.
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ItemLie groups of partial differential equations and their application to the multidimensional screening problems(Department of Economics, The University of Melbourne, 2004)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.
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ItemQuantal response equilibrium with non-monotone probabilities: a dynamic approach(Department of Economics, The University of Melbourne, 2003)
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ItemBounded rationality: static versus dynamic approach( 2002-12)Two kinds of theories of the 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 an explicit adjustment mechanism
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ItemA partial characterization of the solution of the multidimensional screening problem with nonlinear preferences( 2002-11)In this paper I apply the Hamiltonian method to solve the relaxed multidimensional screening problem. I also illustrate by some examples that the Hamiltonian technique coupled with implementability criterion developed by Carlier [2002] sometimes allows us to arrive at a complete solution of a screening problem.
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ItemAn evolutionary model of reciprocity( 2001-09)Despite the pervasiveness of reciprocal behavior, it has received little attention in the economic literature. In this paper, I consider an evolutionary model of reciprocity. The main findings of this paper are that evolution can support reciprocal behavior for the fraction of population, which is insensitive to the stakes involved, but is sensitive to the cohesiveness of the relationships. These findings match stylized facts learned from experimental and field studies of reciprocity.
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ItemIncentives for boundedly rational agents(Berkeley Electronic Press, 2003)