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Articles 1 - 11 of 11
Full-Text Articles in Social and Behavioral Sciences
Match Stability With A Costly And Flexible Number Of Positions, James Gilmore
Match Stability With A Costly And Flexible Number Of Positions, James Gilmore
Behavioral and Computational Economics (MS) Theses
One of the objectives of two-sided matching mechanisms is to pair two groups of agents such that there is no incentive for pair deviation. The outcome of a match can significantly impact participants. While much of the existing research in this field addresses the matching with fixed quotas, this is not always applicable. We introduce the concept of slot stability, recognizing the potential motivation for organizations to modify their quotas after the match. We propose an algorithm designed to create stable and slot stable matches by employing flexible, endogenous quotas to address this issue.
Monetary Equilibrium And The Cost Of Banking Activity, Paola Boel, Gabriele Camera
Monetary Equilibrium And The Cost Of Banking Activity, Paola Boel, Gabriele Camera
ESI Working Papers
We investigate the effects of banks’ operating costs on allocations and welfare in a low interest rate environment. We introduce an explicit production function for banks in a microfounded model where banks employ labor resources, hired on a competitive market, to run their operations. In equilibrium, this generates a spread between interest rates on loans and deposits, which naturally reflects the underlying monetary policy and the efficiency of financial intermediation. In a deflation or low inflation environment, equilibrium deposits yield zero returns. Hence, banks end up soaking up labor resources to offer deposits that do not outperform idle balances, thus …
Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss
Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss
ESI Working Papers
The theory of money assumes decentralized bilateral exchange and excludes centralized multilateral exchange. However, endogenizing the exchange process is critical for understanding the conditions that support the use of money. We develop a “travelling game” to study the emergence of decentralized and centralized exchange, theoretically and experimentally. Players located on separate islands can either trade locally, or pay a cost to trade elsewhere, so decentralized and centralized markets can both emerge in equilibrium. The former minimize trade costs through monetary exchange; the latter maximizes overall surplus through non-monetary exchange. Monetary trade emerges when coordination is problematic, while centralized trade emerges …
Equilibrium Wage Rigidity In Directed Search, Gabriele Camera, Jaehong Kim
Equilibrium Wage Rigidity In Directed Search, Gabriele Camera, Jaehong Kim
ESI Working Papers
Matching frictions and downward wage rigidity emerge as equilibrium phenomena in a twosided labor market where firms sustain variable wage adjustment costs. Firms post wages to attract workers and matches are endogenous. Reducing the wage relative to the wage previously posted is costly to the firm, where the cost is proportional to the size of the proposed cut. Shocks to the firm’s profitability may yield an equilibrium wage above what the firm would offer absent proportional adjustment costs. Wage cuts can be partial or full, immediate or delayed, and are non-linear in the shock size. Importantly, wages are sticky even …
Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss
Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss
ESI Working Papers
The theory of money assumes decentralized bilateral exchange and excludes centralized multilateral exchange. However, endogenizing the exchange process is critical for understanding the conditions that support the use of money. We develop a “travelling game” to study the spontaneous emergence of decentralized and centralized exchange, theoretically and experimentally. Players located on separate “islands” can either trade locally, or pay a cost to trade elsewhere, so decentralized and centralized markets can both emerge in equilibrium. The latter maximize trade meetings and are socially efficient; the former minimize trade costs through the use of money. In the laboratory, centralized exchange more frequently …
Dynamic Directed Search, Gabriele Camera, Jaehong Kim
Dynamic Directed Search, Gabriele Camera, Jaehong Kim
ESI Working Papers
The directed search model (Peters, 1984) is static; its dynamic extensions typically restrict strategies, often assuming price or match commitments. We lift such restrictions to study equilibrium when search can be directed over time, without constraints and at no cost. In equilibrium trade frictions arise endogenously, and price commitments, if they do exist, are self-enforcing. In contrast to the typical model, there exists a continuum of equilibria that exhibit trade frictions. These equilibria support any price above the static price, including monopoly pricing in arbitrarily large markets. Dispersion in posted prices can naturally arise as temporary or permanent phenomenon despite …
Uniqueness Of Equilibrium In Directed Search Models, Jaehong Kim, Gabriele Camera
Uniqueness Of Equilibrium In Directed Search Models, Jaehong Kim, Gabriele Camera
Economics Faculty Articles and Research
We study a decentralized trading model as in [7], where a finite number of heterogeneous capacity-constrained sellers compete for a finite number of homogeneous buyers, by posting prices. This "directed search" model is known to admit symmetric equilibria; yet, uniqueness has proved elusive. This study makes two contributions: a substantive contribution is to establish uniqueness of symmetric equilibrium; a methodological contribution is to develop a tool based on directional derivatives to characterize equilibrium.
Buyer's Equilibrium With Capacity Constraints And Restricted Mobility: A Recursive Approach, Gabriele Camera, Jaehong Kim
Buyer's Equilibrium With Capacity Constraints And Restricted Mobility: A Recursive Approach, Gabriele Camera, Jaehong Kim
Economics Faculty Articles and Research
We study a decentralized trading model as in Peters (1984), where heterogeneous market participants face a trade-off between price and trade probability. We present a novel proof of existence of a unique demand vector in Nash equilibrium, based on a recursive approach that exploits the monotonicity of matching functions.
Buyer's Equilibrium With Capacity Constraints And Restricted Mobility: A Recursive Approach, Gabriele Camera, Jaehong Kim
Buyer's Equilibrium With Capacity Constraints And Restricted Mobility: A Recursive Approach, Gabriele Camera, Jaehong Kim
ESI Working Papers
We study a decentralized trading model as in Peters (1984), where heterogeneous market participants face a trade-o between price and trade probability. We present a novel proof of existence of a unique demand vector in Nash equilibrium, based on a recursive approach that exploits the monotonicity of matching functions.
Anonymous Markets And Monetary Trading, C. D. Aliprantis, Gabriele Camera, D. Puzzello
Anonymous Markets And Monetary Trading, C. D. Aliprantis, Gabriele Camera, D. Puzzello
Economics Faculty Articles and Research
We study infinite-horizon monetary economies characterized by trading frictions that originate from random pairwise meetings, and commitment and enforcement limitations. We prove that introducing occasional trade in 'centralized markets' opens the door to an informal enforcement scheme that sustains a non-monetary efficient allocation. All is required is that trading partners be patient and their actions be observable. We then present a matching environment in which trade may occur in large markets and yet agents' trading paths cross at most once. This allows the construction of models in which infinitely lived agents trade in competitive markets where money plays an essential …
Contagion Equilibria In A Monetary Model, C. D. Aliprantis, Gabriele Camera, D. Puzzello
Contagion Equilibria In A Monetary Model, C. D. Aliprantis, Gabriele Camera, D. Puzzello
Economics Faculty Articles and Research
This article explores the Monetary Models.