Improving Welfare in One-Sided Matchings using Simple Threshold Queries

We study one-sided matching problems where each agent must be assigned at most one object. In this classic problem it is often assumed that agents specify only ordinal preferences over objects and the goal is to return a matching that satisfies some desirable property such as Pareto optimality or rank-maximality. However, agents may have cardinal utilities describing their preference intensities and ignoring this can result in welfare loss. We investigate how to elicit additional cardinal information from agents using simple threshold queries and use it in turn to design algorithms that return a matching satisfying a desirable matching property, while also achieving a good approximation to the optimal welfare among all matchings satisfying that property. Overall, our results show how one can improve welfare by even non-adaptively asking agents for just one bit of extra information per object.

A Scheme for Jointly Trading off Costs and Risks of Solar Radiation Management and Mitigation Under Long-Tailed Climate Sensitivity Probability Density Distributions

Side effects of “solar-radiation management” (SRM) might be perceived as an important metric when society decides on implementing SRM as a climate policy option to alleviate anthropogenic global warming. We generalize cost-risk analysis that originally trades off expected welfare loss from climate policy costs and risks from transgressing climate targets to also include risks from applying SRM. In a first step of acknowledging SRM risks, we represent global precipitation mismatch as a prominent side effect of SRM under long-tailed probabilistic knowledge about climate sensitivity. We maximize a social welfare function for the following three scenarios, considering alternative relative weights of risks: temperature-risk-only, precipitation-risk-only, and equally-weighted both-risks. Our analysis shows that in the temperature-risk-only scenario, perfect compliance with the 2 °C-temperature target is attained for all numerically represented climate sensitivities, a unique feature of SRM, but the 2 °C-compatible precipitation corridor is violated. The precipitation-risk-only scenario exhibits an approximate mirror-image of this result. In addition, under the both-risks scenario, almost 90% and perfect compliance can be achieved for the temperature and precipitation targets, respectively. Moreover, in a mitigation-only analysis, the welfare loss from mitigation cost plus residual climate risks, compared to the no-climate-policy option, is approximately 4.3% (in terms of balanced growth equivalent), while being reduced more than 90% under a joint-mitigation-SRM analysis.

Impact of alternative regional trade arrangements on the Ethiopian economy

The Common Market for Eastern and Southern Africa (COMESA) is a Free Trade Area (FTA) regional trade agreement in Africa. Currently, Ethiopia is negotiating to join COMESA FTA. This study assesses the impact of three regional trade arrangements, COMESA FTA, customs unions, and the European Partnership Agreement (EPA) on the economy of Ethiopia. The analysis is based on a static Global Trade Analysis Project (GTAP) model, version 9 database. Unlike previous studies, the customs union scenarios are designed at the detailed Harmonized System (HS) level. COMESA FTA (scenario 1) with standard GTAP model results in a welfare loss for Ethiopia due to negative terms of trade and investment-saving effect, but with unemployment closure (scenario 2); Ethiopia enjoys a welfare gain mainly due to endowment effect. In scenario 3 (COMESA customs union) and scenario 4 (European Partnership Agreement), Ethiopia loses due to negative terms of trade and investment-saving effect. There is a large increase in demand for unskilled labor force in Ethiopia by around US$23 million, US$112 million, and US$43 million for scenario 2, 3, and 4 respectively. Moreover, there is a positive output effect for oilseeds, leather, and basic metals across all scenarios. The world, as a whole, enjoys welfare gains with COMESA FTA (scenario 1 and 2). However, with scenario 3 and 4, there is an overall welfare loss. There is no strong reason for Ethiopia to move to the customs union, and the EPA in the short run. Therefore, a transition period is necessary, but it is recommended for Ethiopia to join COMESA FTA.

Long‐Term Contracting With Time‐Inconsistent Agents

We study contracts between naive present‐biased consumers and risk‐neutral firms. We show that the welfare loss from present bias vanishes as the contracting horizon grows. This is true both when bargaining power is on the consumers' and on the firms' side, when consumers cannot commit to long‐term contracts, and when firms do not know the consumers' naiveté. However, the welfare loss from present bias does not vanish when firms do not know the consumers' present bias or when they cannot offer exclusive contracts.

Using Compensating Variation to Measure the Costs of Taxing Cigarette in Iran

Background: The impact of pricing strategies on different socioeconomic groups is not uniform. There is urgency in addressing of characteristics of household demand to make a policy choice in line with development goals. Objectives: This study was done to assess the effect of welfare loss from counterfactual tax-induced cigarette price increases on representative smokers by different expenditure quintiles in Iran. Methods: This analytical study was conducted using pooling cross-sections and compensating variation (CV) to evaluate the costs of taxing cigarettes. The data source used in our study was the Household Income and Expenditure survey (HIES) from 2001 - 2017. We did an almost ideal demand system (AIDS) analysis to estimate elasticities for cigarette demand and compute welfare losses from simulated cigarette price increases by socioeconomic groups. We used STATA version 15.1 (StataCorp, College Station, TX, USA), and Microsoft Excel 2016 to undertake the relevant analyses and estimates. Results: The highest loss was suffered by households of the poorest quintile, who should afford 1.41%, 2.47 %, and 3.20% more budget in the long-run, respectively, as the result of three simulated price increases to stay at the same well-being as before. Conclusions: Concerning direct welfare loss from the cigarette taxation reform in Iran, and focusing on low-income groups, such a policy can be considered as regressive. However, this regressivity can be reduced by informing strategies to redirect sin tax revenues that benefit the poor.