The K-property for some unique equilibrium states in flows and homeomorphisms

We set out some general criteria to prove the K-property, refining the assumptions used in an earlier paper for the flow case, and introducing the analogous discrete-time result. We also introduce one-sided $\lambda $ -decompositions, as well as multiple techniques for checking the pressure gap required to show the K-property. We apply our results to the family of Mañé diffeomorphisms and the Katok map. Our argument builds on the orbit decomposition theory of Climenhaga and Thompson.

Money Mining and Price Dynamics

We develop a random-matching model to study the price dynamics of monies produced privately according to a time-consuming mining technology. For our leading example, there exists a unique equilibrium where the value of money increases over time and reaches a steady state. There is also a continuum of perfect-foresight equilibria where the price of money inflates and bursts gradually over time. Initially, money is held for a speculative motive, but it acquires a transactional role as it becomes sufficiently abundant. We study fiat, commodity, and crypto monies, endogenous acceptability, and adopt implementation and equilibrium approaches. (JEL E31, E42, E51, N13, N14, N23, N24)

Entry-Proofness and Discriminatory Pricing under Adverse Selection

This paper studies competitive allocations under adverse selection. We first provide a general necessary and sufficient condition for entry on an inactive market to be unprofitable. We then use this result to characterize, for an active market, a unique budget-balanced allocation implemented by a market tariff making additional trades with an entrant unprofitable. Motivated by the recursive structure of this allocation, we finally show that it emerges as the essentially unique equilibrium outcome of a discriminatory ascending auction. These results yield sharp predictions for competitive nonexclusive markets. (JEL D11, D43, D82, D86)

Policy Experimentation in Committees: A Case against Veto Rights under Redistributive Constraints

We study optimal policy experimentation by a committee. We consider a dynamic bargaining game in which committee members choose either a risky reform or a safe alternative each period. When no redistribution is allowed, the unique equilibrium outcome is generically inefficient. When redistribution is allowed (even small amounts), there always exists an equilibrium that supports optimal experimentation for any voting rule without veto players. With veto players, however, optimal policy experimentation is possible only with a sufficient amount of redistribution. We conclude that veto rights are more of an obstacle to optimal policy experimentation than are the constraints on redistribution themselves. (JEL D72, C78, H23, D78, D71)

EXPRESS: First-Price Auctions in Online Display Advertising

We link the rapid and dramatic move from second-price to first-price auction format in the display advertising market to the move from the waterfalling mechanism employed by publishers for soliciting bids in a pre-ordered cascade over exchanges, to an alternate header bidding strategy that broadcasts the request for bid to all exchanges simultaneously. First, we argue that the move by the publishers from waterfalling to header bidding was a revenue improving move for publishers in the old regime when exchanges employed second-price auctions. Given the publisher move to header bidding, we show that exchanges move from second-price to first-price auctions to increase their expected clearing prices. Interestingly, when all exchanges move to first-price auctions, each exchange faces stronger competition from other exchanges and some exchanges may end up with lower revenue than when all exchanges use second-price auctions; yet, all exchanges move to first-price auctions in the unique equilibrium of the game. We show that the new regime hinders the exchanges’ ability to differentiate in equilibrium. Furthermore, it allows the publishers to achieve the revenue of the optimal mechanism despite not having direct access to the advertisers.

Rank Uncertainty in Organizations

A principal incentivizes a team of agents to work by privately offering them bonuses contingent on team success. We study the principal’s optimal incentive scheme that implements work as a unique equilibrium. This scheme leverages rank uncertainty to address strategic uncertainty. Each agent is informed only of a ranking distribution and his own bonus, the latter making work dominant provided that higher-rank agents work. If agents are symmetric, their bonuses are identical. Thus, discrimination is strictly suboptimal, in sharp contrast with the case of public contracts (Winter 2004). We characterize how agents’ ranking and compensation vary with asymmetric effort costs. (JEL D23, D62, D81, D82, D86)

The Reputation Trap

Few want to do business with a partner who has a bad reputation. Consequently, once a bad reputation is established, it can be difficult to get rid of. This leads on the one hand to the intuitive idea that a good reputation is easy to lose and hard to gain. On the other hand, it can lead to a strong form of history dependence in which a single beneficial or adverse event can cast a shadow over a very long period of time. It gives rise to a reputational trap where an agent rationally chooses not to invest in a good reputation because the chances others will find out is too low. Nevertheless, the same agent with a good reputation will make every effort to maintain it. Here, a simple reputational model is constructed and the conditions for there to be a unique equilibrium that constitutes a reputation trap are characterized.

Multiregional Oligopoly with Capacity Constraints

We develop a model of Cournot competition between capacity-constrained firms that sell a single good to multiple regions. We provide a novel characterization for the unique equilibrium allocation of the good across regions and design an algorithm to compute it. We show that a reduction in transportation costs by a firm may negatively impact the profit of all firms and reduce aggregate consumer surplus if such a firm is capacity constrained. Our results imply that policies promoting free trade may have unintended consequences and reduce aggregate welfare in capacity-constrained industries. This paper was accepted by David Simchi-Levi, revenue management and market analytics.

Unique equilibrium states for some intermediate beta transformations

We prove uniqueness of equilibrium states for subshifts corresponding to intermediate beta transformations with [Formula: see text] having the property that the orbit of 0 is bounded away from 1.