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Topics in Economic Theory I

Paper Session

Friday, Jan. 4, 2019 8:00 AM - 10:00 AM

Atlanta Marriott Marquis, A701
Hosted By: American Economic Association & Committee on the Status of Women in the Economics Profession
  • Chair: Ayca Kaya, University of Miami

Neutral Bargaining in Financial Over-The-Counter Markets

Jin Yeub Kim
,
University of Nebraska-Lincoln

Abstract

I study bargaining over prices between two investors in financial over-the-counter markets with asymmetric information. I focus on environments in which an asset owner has private information about both her liquidity state and asset quality, and so a buyer is uncertain about the owner’s true motive for selling--whether it is because of a liquidity need or because of a low asset valuation. I apply the concept of neutral bargaining solution to characterize the prices at which the investors trade with each other. I illustrate the implications for asset prices in over-the-counter markets where private information may be prevalent.

Credibility of Crime Allegations

Frances Xu Lee
,
Loyola University
Wing Suen
,
University of Hong Kong

Abstract

The lack of hard evidence in allegations about sexual misconduct makes it difficult to separate true allegations from false ones. We provide a model in which victims and potential libelers face the same costs and benefits from making an allegation, but the tendency for perpetrators of sexual misconduct to engage in repeat offenses allows semi-separation to occur, where a true victim reports with a higher probability than a libeler does. Our model also explains why reports about sexual misconduct are often delayed, and why the public rationally assigns less credibility to these delayed reports than to those that are delayed.

Don’t Sweat the Small Stuff: Intra-household Earning Distribution and Marriage Durability

Chiara Margaria
,
Boston University
Andrew F. Newman
,
Boston University

Abstract

We consider a dynamic intra-household bargaining model without commitment, with a view to determining how the mean duration of the partnership depends on the distribution of the partners’ labor market earnings. Each partner’s utility is derived from private consumption and from a local public good (LPG). Every period, the partners’ valuations of the LPG evolve according to Markov processes, and the partners have the opportunity to choose to continue the relationship and renegotiate the allocation of private consumption, or to part ways and permanently collect their autarky (private consumption) payoffs.
Utility is partially transferable: private consumption can be transferred most efficiently with money, but the extent of such transfers is limited by the size of the partners’ earnings; other means of transfer, such as favors or household produced goods, entail an aggregate utility loss.
We characterize equilibria of the infinite dynamic game with a fixed discount factor. The main result is that the maximum expected duration of the partnership is decreasing in the inequality of monetary earnings—provided that the partners’ valuations of the LPG are governed by identical and independent Markov chains.
Discussant(s)
Alexander Wolitzky
,
Massachusetts Institute of Technology
Piotr Dworczak
,
University of Chicago
Mariagiovanna Baccara
,
Washington University-St. Louis
Matthias Doepke
,
Northwestern University
JEL Classifications
  • D8 - Information, Knowledge, and Uncertainty
  • D1 - Household Behavior and Family Economics