stochastic equilibria existence spanning number and the no expected financial gain from trade hypothesis stochastic equilibria under uncertainty with continuous time security trading and consumption are demonstrated in a general setting a common question is whether the current price of a security is an unbiased predictor of the future price of the security plus intermediate dividends this is the hypothesis of no expected financial gains from trade the relevance of this hypothesis in multi good economies is called into question by the following demonstrated fact for each set of probability assessments there exists a corresponding equilibrium one with the original agents original equilibrium allocations and no expected financial gains from trade under the given probability assessments the spanning number of the economy is defined as the fewest number of security markets required to sustain a complete markets equilibrium in a dynamic sense made precise in the paper the spanning number is linked directly to agent primitives in particular the manner in which new information resolves uncertainty over time the spanning number is shown to be invariant under bounded changes in expectations several examples are given in which the spanning number is finite even though the number of potential states of the world is infinite

survey evidence on the willingness of u s consumers to pay for automotive fuel economy abstract prospect theory holds that human beings faced with a risky bet will tend to value potential losses about twice as much as potential gains previous research has demonstrated that prospect theory could be sufficient to explain an energy paradox in the market for automotive fuel economy this paper analyzes data from questions added to four commercial multi client surveys of 1000 u s households each in 2004 2011 2012 and 2013 households were asked about willingness to pay for future fuel savings as well as the annual fuel savings necessary to justify a given upfront payment payback periods inferred from household responses are generally consistent over time and across different formulations of questions mean calculated payback periods are about 3 years but there is substantial dispersion among individual responses the calculated payback periods do not appear to be correlated with the attributes of respondents respondents were able to quantitatively describe their uncertainty about both vehicle fuel economy and future fuel prices simulation of loss averse behavior based on respondents stated uncertainty illustrates how loss aversion could lead consumers to substantially undervalue future fuel savings relative to their expected value

informational constraints and the overlapping generations model folk and anti folk theorems this paper analyses the sustainability of inter generational transfers in samuelson s consumption loan model when agents are imperfectly informed about past events we find that with mild informational constraints transfers cannot be supported by pure strategy equilibria mixed strategies allow transfers to be sustained even if agents have little information so that a version of the folk theorem holds however these equilibria are not robust if each agent s utility function is subjected to a small random perturbation as in harsanyi 1973 these mixed strategy equilibria unravel and only the zero transfer allocation survives as the unique rationalizable outcome this result is an example of mixed strategy equilibrium of an extensive form game which cannot be purified

information institutions and constitutional arrangements this paper develops a theory of optimal institutional structure for staggered term overlapping generations organizations such as legislative bodies our model is a simple stochastic game of multi principal multi agent dynamic relationships our results emphasize two key features that are determined by legislative founders at the constitutional moment first they will agree to institute a mechanism that endows imperfectly informed legislators with information about the history of play second we provide conditions in which legislative founders will be indifferent to the structure of legislative procedures

california energy efficiency lessons for the rest of the world or not abstract since the 1970s california s residential electricity consumption per capita has stopped increasing while other states electricity use continued to grow steadily what accounts for california s apparent savings some credit the strict energy efficiency standards for buildings and appliances enacted by california in the mid 1970s they argue that the growing gap between california and other states demonstrates that other states and countries could replicate california s gains by adopting california style regulations and that california should build on its own success by tightening its standards further skeptics might point to three long run trends that differentiate california s electricity demand from other states 1 shifting of the u s population toward warmer climates of the south and west 2 relatively small income elasticity of energy demand in california s temperate climate and 3 evolving differences between the demographics of households in california and other states today differences in climate and demographics account for almost 90 percent of the difference between california s and other states residential electricity use that difference thus provides no lessons for other states or countries considering adopting or tightening their own energy efficiency standards

bargaining in legislatures bargaining in legislatures is conducted according to formal rules specifying who may make proposals and how they will be decided legislative outcomes depend on those rules and on the structure of the legislature although the social choice literature provides theories about voting equilibria it does not endogenize the formation of the agenda on which the voting is based and rarely takes into account the institutional structure found in legislatures in our theory members of the legislature act noncooperatively in choosing strategies to serve their own districts explicitly taking into account the strategies members adopt in response to the sequential nature of proposal making and voting the model permits the characterization of a legislative equilibrium reflecting the structure of the legislature and also allows consideration of the choice of elements of that structure in a context in which the standard institution free model of social choice theory yields no equilibrium

substituting the end for the whole why voters respond primarily to the election year economy according to numerous studies the election year economy influences presidential election results far more than cumulative growth throughout the term here we describe a series of surveys and experiments that point to an intriguing explanation for this pattern that runs contrary to standard political science explanations but one that accords with a large psychological literature voters we find actually intend to judge presidents on cumulative growth however since that characteristic is not readily available to them voters inadvertently substitute election year performance because it is more easily accessible this end heuristic explanation for voters election year emphasis reflects a general tendency for people to simplify retrospective assessments by substituting conditions at the end for the whole the end heuristic explanation also suggests a remedy a way to align voters actions with their intentions providing people with the attribute they are seeking cumulative growth eliminates the election year emphasis

energy efficiency of residential buildings in the european union an exploratory analysis of cross country consumption patterns abstract despite a common eu directive on energy efficiency in residential buildings levels of energy efficiency differ across european countries this article analyses these differences and investigates the effectiveness of different energy efficiency policies in place in those countries we firstly use panel data methods to explain average yearly energy consumption per dwelling and country by observable characteristics such as climatic conditions energy prices income and floor area we then use the unexplained variation by sorting between country differences as well as plotting within country changes over time to identify better performing countries these countries are analysed qualitatively in a second step we conduct expert interviews and examine the legal rules regarding building energy efficiency based on our exploratory analysis we draw a number of preliminary conclusions first we suggest that regulatory standards in conjunction with increased construction activity can be effective in the long run second the results suggest that carbon taxation represents an effective means for energy efficiency in this regard the scope of the carbon tax plays a crucial role we find evidence that a tax of 30 and a tax of 120 per ton of co2 cause markedly different reductions in energy consumption

dynamic equilibrium with liquidity constraints this article studies an intertemporal economy with liquidity constrained and unconstrained individuals we use a stopping time approach to solve the finite horizonconstrained consumption portfolio problem with constant relative risk aversion and to examine the structure of equilibrium the impact of the constraint on the optimal consumption and the financing portfolio is assessed the equilibrium state price density is related to the exercise boundary of an american style contingent claim with nonlinear payoff this stopping time characterization enables us to prove the existence of an equilibrium and can be implemented numerically properties of equilibrium bond and stock returns are examined copyright 2003 oxford university press

the role of portfolio constraints in the international propagation of shocks we study the comovement among stock prices and exchange rates in a three good three country centre periphery dynamic equilibrium model in which the centre s agents face portfolio constraints we characterize equilibrium in closed form for a broad class of portfolio constraints solving for stock prices terms of trade and portfolio holdings we show that portfolio constraints generate wealth transfers between the periphery countries and the centre which increase the comovement of the stock prices across the periphery we associate this excess comovement caused by portfolio constraints with the phenomenon known as contagion the model generates predictions consistent with other important empirical results such as amplification and flight to quality effects copyright 2008 wiley blackwell

the effect of carbon tax on per capita co2 emissions new huadu business school 09zd050 national social science foundation of china 09zd050 08ajy022 research foundation of ministry of education of china 10jzd0018 fundamental research funds for the central universities 2010221051

political accountability and sequential policymaking abstract we develop a model of political accountability with sequential policymaking when a bureaucrat s actions are transparent his overseer faces a political time inconsistency problem she is tempted to revise her retention rule in the middle of the policymaking process as a result the bureaucrat s equilibrium behavior overemphasizes later tasks if the overseer knows the technology by which policies translate into outcomes then she can eliminate these distortions using task specific budget caps however if the overseer is uncertain about this technology such budget caps introduce ex post inefficiency when uncertainty is sufficiently large and consequential the overseer prefers an institutional environment with a fungible budget and no transparency such an environment allows the overseer to exploit the bureaucrat s expertise though at the cost of weaker overall incentives

an asset pricing view of external adjustment abstract recent literature has argued that conventional measures of external sustainability the trade balance and current account are misleading because they omit capital gains on net foreign asset positions we adjust the definition of the current account to include the capital gains and discuss how this may affect our thinking about external adjustment and sustainability we do so in the context of a two country macro finance model of pavlova and rigobon 2008a that allows exploration of the interconnections between equilibrium portfolios and external accounts dynamics we calibrate the model and find that it generates several testable implications some of which have already been validated empirically first we establish dynamic properties of the capital gains adjusted current account and show that they are fundamentally different from those of the conventional current account second we find that capital gains have a stabilizing effect on the trade balance and the current account finally we demonstrate that in response to a shock the conventional and the capital gains adjusted current accounts may move in opposite directions

inefficiency in legislative policymaking a dynamic analysis this paper develops an infinite horizon model of public spending and taxation in which policy decisions are determined by legislative bargaining the policy space incorporates both productive and distributive public spending and distortionary taxation the productive spending is investing in a public good that benefits all citizens e g national defense and the distributive spending is district specific transfers e g pork barrel spending investment in the public good creates a dynamic linkage across policymaking periods the analysis explores the dynamics of legislative policy choices focusing on the efficiency of the steady state level of

a foundation for markov equilibria in sequential games with finite social memory we study stochastic games with an infinite horizon and sequential moves played by an arbitrary number of players we assume that social memory is finite every player except possibly one is finitely lived and cannot observe events that are sufficiently far back in the past this class of games includes games between a long run player and a sequence of short run players and games with overlapping generations of players an equilibrium is purifiable if some close by behaviour is consistent with equilibrium when agents payoffs in each period are perturbed additively and independently we show that only markov equilibria are purifiable when social memory is finite thus if a game has at most one long run player all purifiable equilibria are markov

optimal consumption portfolio choices and retirement planning abstract we examine consumption and investment decisions in a life cycle model with habit formation stochastic opportunity set stochastic wages and labor supply flexibility retirement is taken into account by specifying an age at which labor earnings stop but consumption spending continues explicit solutions are obtained for optimal consumption labor supply and the financing portfolio we examine the structure and determinants of the optimal portfolio we also study the effects of the retirement date and of habits on optimal decisions finally we conduct a preliminary analysis to assess the effects of a liquidity constraint on optimal consumption leisure choices

saving and liquidity constraints this paper is concerned with the theory of saving when consumers are not permitted to borrow and with the ability of such a theory to account for some of the stylized facts of saving behavior the models presented in the paper seem to account for important aspects of reality that are not explained by traditional life cycle models copyright 1991 by the econometric society

equilibrium political budget cycles political business cycle theories generally rely on nominal rigidities and voter myopia this paper offers an equilibrium theory that preserves some basic insights from earlier models though with significant refinements the political budget cycle emphasized here is in fiscal policy rather than output and inflation it arises via a multidimensional signal process one can consider the welfare implications of proposals to mitigate the cycle and the effects of altering the electoral structure copyright 1990 by american economic association

multiplicity in general financial equilibrium with portfolio constraints abstract this paper explores the role of portfolio constraints in generating multiplicity of equilibrium we present a simple financial market economy with two goods and two households households who face constraints on their ability to take unbounded positions in risky stocks absent such constraints equilibrium allocation is unique and is pareto efficient with one portfolio constraint in place the efficient equilibrium is still possible however additional inefficient equilibria in which the constraint is binding may emerge we show further that with portfolio constraints cum incomplete markets there may be a continuum of equilibria adding incomplete markets may lead to real indeterminacy

the consumption based capital asset pricing model the paper provides conditions on the primitives of a continuous time economy under which there exist equilibria obeying the consumption based capital asset pricing model ccapm the paper also extends the equilibrium characterization of interest rates of cox ingersoll and ross 1985 to multi agent economies we do not use a markovian state assumption this work provides sufficient conditions on agents primitives for the validity of the consumption based capital asset pricing model ccapm of breeden 1979 as a necessary condition breeden showed that in a continuous time equilibrium satisfying certain regularity conditions one can characterize returns on securities as follows the expected instantaneous rate of return on any security in excess of the riskless interest rate the security s expected excess rate of return is a multiple common to all securities of the instantaneous covariance of this excess return with aggregate consumption increments this common multiple is the arrow pratt measure of risk aversion of a representative agent rubinstein 1976 published a discrete time precursor of this result the exis tence of equilibria satisfying breeden s regularity conditions had been an open issue we also show that the validity of the ccapm does not depend on breeden s assumption of markov state information and present a general asset pricing model extending the results of cox ingersoll and ross 1985 as well as the discrete time results of rubinstein 1976 and lucas 1978 to a multi agent environment since the ccapm was first proposed much effort has been directed at finding sufficient conditions on the model primitives the given assets the agents preferences the agents consumption endowments and in a production econ omy the feasible production sets conditions sufficient for the existence of continuous time equilibria were shown in duffie 1986 but the equilibria demonstrated were not shown to satisfy the additional regularity required for the ccapm in particular breeden assumed that all agents choose pointwise interior consumption rates in order to characterize asset prices via the first order conditions of the bellman equation interiority was also assumed by huang 1987 in demonstrating a representative agent characterization of equilibrium an approach exploited here the use of dynamic programming and the bellman equation aside from the difficulty it imposes in verifying the existence of interior 1 financial support from the national science foundation is gratefully acknowledged we thank

how much energy do building energy codes save evidence from california houses regulations governing the energy efficiency of new buildings have become a cornerstone of us environmental policy california enacted the first such codes in 1978 and has tightened them every few years since i evaluate the resulting energy savings three ways comparing energy used by houses constructed under different standards controlling for building and occupant characteristics examining how energy use varies with outdoor temperatures and comparing energy used by houses of different vintages in california to that same difference in other states all three approaches yield estimated energy savings significantly short of those projected when the regulations were enacted

characterization of a risk sharing contract with one sided commitment in this paper i provide a stopping time based solution to a long term contracting problem between a risk neutral principal and a risk averse agent the agent faces a stochastic income stream and cannot commit to the long term contracting relationship to compute the optimal contract i also design an algorithm that is more efficient than value function iteration

incumbent performance and electoral control in the pure theory of electoral competition citizens compare the platforms of the candidates and vote for the one whose platform is preferred candidate strategies are identified with promises about future performance in office models of this sort have been developed in both static mckelvey 1975 and dynamic kramer 1977 i settings and all appear to have the property that if the set of alternatives is large enough in some sense equilibrium platforms rarely exist but these models have another feature that is quite as disturbing as their instability in the static setting discussed by mckelvey little attention is paid to the possibility that once in office the politician s preferences may diverge from those of his constituents and that he may therefore choose policies at variance from his platform instead it is simply assumed that promises will be kept whether or not such behavior is congruent with the interest of the officeholder it is sometimes argued that an enforcement mechanism may exist to discipline politicians for failing to keep promises but without a specification of the mechanism it is not obvious that it would be in the interests of the

optimal consumption and portfolio policies when asset prices follow a diffusion process abstract we consider a consumption portfolio problem in continuous time under uncertainty a martingale technique is employed to characterize optimal consumption portfolio policies when there exist nonnegativity constraints on consumption and on final wealth we also provide a way to compute and verify optimal policies our verification theorem for optimal policies involves a linear partial differential equation unlike the nonlinear partial differential equation of dynamic programming the relationship between our approach and dynamic programming is discussed we demonstrate our technique by explicitly computing optimal policies in a series of examples in particular we solve the optimal consumption portfolio problem for hyperbolic absolute risk aversion utility functions when the asset prices follow a geometric brownian motion the optimal policies in this case are no longer linear when nonnegativity constraints on consumption and on final wealth are included by these examples one can see that our approach is much easier than the dynamic programming approach

optimal consumption and investment under time varying liquidity constraints we study consumption and investment decisions given realistic time varying constraints on borrowing we first consider the case where borrowing is constrained by a maximum debt to income ratio we then consider collateral borrowing with a maximum loan to value ratio the resulting implications for optimal policies differ considerably from those obtained in the existing literature based on fixed borrowing limits but are consistent with those documented in the empirical literature

the dynamics of political compromise we characterize efficient self enforcing divisions of political or economic surplus between two parties that interact repeatedly the party in power can decide the allocation and the parties political strength changes according to a markov process we find that the share of the party currently in power depends not only on its current strength but also on whether it had previously been even stronger since it last came to power we find that the constitutional supermajority requirements that attempt to constrain the use of power can counterproductively create less compromise

optimal retention in agency problems this paper studies the interaction between a single long lived principal and a series of short lived agents in the presence of both moral hazard and adverse selection we assume that the principal can influence the agents behavior only through her choice of a retention rule this rule is further required to be sequentially rational i e no precommitment is allowed we provide general conditions under which equilibria exist where a the principal adopts a cut off rule under which agents are retained only when the reward they generate exceeds a critical bound and b agents separate according to type with better agents taking superior actions we show that in equilibrium a retained agent s productivity is necessarily declining over time but that retained agents are also more productive on average than untried agents due to selection effects finally we show that for each given type agents of that type are more productive in the presence of adverse selection than when there is pure moral hazard i e when that type is the sole type of agent in the model nonetheless adding uncertainty about agent types cannot benefit the principal except in uninteresting cases

collateral constraints and asset prices abstract we study the effects of collateral constraints in an economy populated by investors with nonpledgeable labor incomes and heterogeneous preferences and beliefs we show that these constraints inflate stock prices and generate spikes and crashes in price dividend ratios and volatilities clustering of volatilities and leverage cycles they also lead to substantial decreases in interest rates and increases in sharpe ratios when investors are anxious about hitting constraints due to production crises in the economy furthermore stock prices have large collateral premiums over nonpledgeable incomes we derive asset prices and stationary distributions of the investors consumption shares in closed form

heterogeneous preferences and equilibrium trading volume abstract the representative agent lucas model stresses aggregate risk and hence does not allow us to study the impact of agents heterogeneity on the dynamics of equilibrium trading volume in this paper we investigate under what conditions non informational heterogeneity i e differences in preferences and endowments leads to nontrivial trading volume in equilibrium we present a non informational no trade theorem that provides necessary and sufficient conditions for zero equilibrium trading volume in a continuous time lucas market model with heterogeneous agents multiple goods and multiple securities we explain in detail how no trade equilibria are related to autarky equilibria portfolio autarky equilibria and peculiar financial market equilibria which play an important role in the literature on international risk sharing

differences of opinion endogenous liquidity and asset prices this paper studies how investors differences of opinion affect liquidity and asset prices in our economy excessively optimistic investors are subject to an endogenous funding constraint that prevents default due to ex ante limited commitment when the funding constraint binds optimists use their savings to increase their consumption share deterring default this allows them to place speculative trades increasing market liquidity their losses on these trades make them prone to default leading to a renewed binding of the funding constraint this feedback between funding illiquidity disagreement and market liquidity is consistent with several empirical features of liquidity and financial asset prices

equilibrium asset prices with undiversifiable labor income risk abstract in a two period lucas tree economy in which ex ante identical but ex post dissimilar agents face undiversifiable labor income risk calibrating a wrong representative agent model results in overstating the equilibrium riskfree rate and in understating the equilibrium equity premium if the utility function exhibits decreasing absolute risk aversion and decreasing absolute prudence these behavioral assumptions provide as a consequence a theoretical rationale for the often advanced conjecture that nontraded risk contributes to the solution of the riskfree rate and equity premium puzzles

impact of energy policy instruments on the estimated level of underlying energy efficiency in the eu residential sector the promotion of energy efficiency is seen as one of the top priorities of eu energy policy ec 2010 in order to design and implement effective energy policy instruments it is necessary to have information on energy demand price and income elasticities in addition to sound indicators of energy efficiency this research combines the approaches taken in energy demand modelling and frontier analysis in order to econometrically estimate the level of energy efficiency for the residential sector in the eu 27 member states for the period 1996 to 2009 the estimates for the energy efficiency confirm that the eu residential sector indeed holds a relatively high potential for energy savings from reduced inefficiency therefore despite the common objective to decrease wasteful energy consumption considerable variation in energy efficiency between the eu member states is established furthermore an attempt is made to evaluate the impact of energy efficiency measures undertaken in the eu residential sector by introducing an additional set of variables into the model and the results suggest that financial incentives and energy performance standards play an important role in promoting energy efficiency improvements whereas informative measures do not have a significant impact

demand competition and policy compromise in legislative bargaining i propose a new majoritarian bargaining model in which more than one implicit proposal can be on the table at the same time institutional differences from system to system affect the order of play the equilibrium majorities and the policy outcome the ex post distribution of payoffs within a winning coalition is however invariant to fundamental institutional differences and it is always proportional to the distribution of relative ex ante bargaining power the bargaining process is modeled as a sequential demand game in which players are called to propose a policy and to specify their desired share of the private benefits related to being in office the order of play is endogenous and the distribution of payoffs within an equilibrium majority usually does not depend on who is the proposal maker the role of the head of state and the advantages to center parties are also studied

how do senators vote disentangling the role of voter preferences party affiliation and senate ideology this paper develops a methodology for consistently estimating the relative weights in senator utility functions despite the fact that senator ideologies are unobserved the empirical results suggest that voter preferences are assigned only one quarter of the weight in senator utility functions the national party line also has some influence but the senator s own ideology is the primary determinant of roll call voting patterns these results cast doubt on the empirical relevance of the median voter theorem estimation of the model requires only roll call voting data making it widely applicable copyright 1996 by american economic association

deconstructing the energy efficiency gap conceptual frameworks and evidence abstract energy efficient technologies offer considerable promise for reducing the financial costs and environmental damages associated with energy use but these technologies appear not to be adopted to the degree that appears justified even on a purely private basis we present two complementary frameworks for understanding this so called energy paradox or energy efficiency gap first we build upon previous literature by dividing potential explanations for the energy efficiency gap into three categories market failures behavioral anomalies and model and measurement errors second we examine the elements of cost minimizing energy efficiency decisions the typical benchmark used in assessing the gap s magnitude

an explicit bound on individual assets deviations from apt pricing in a finite economy abstract ross s arbitrage pricing theory apt is a tractible and reasonable alternative to the mean variance model nonetheless understanding of the theory has been obscured by the complexity of the sequence economy models used for motivation by contrast we give a simple and direct derivation of the apt in a finite economy using an explicit bound on the deviations from apt prices across assets a coarse calculation shows that theoretical deviations from apt pricing are negligible in our economy

what have you done for me lately release of information and strategic manipulation of memories how should a rational agent politician employee advertiser release information in order to manipulate the memory imperfections of his forgetful assessor electorate supervisor consumer this article attempts to answer this question using a memory model based on the principles of recency similarity and repetition i show that the problem of a rational agent who releases information to a forgetful assessor can be modelled as a standard dynamic optimisation problem and we describe the properties of the optimal profile for releasing information the theoretical results are applicable in a wide range of social and economic contexts such as political campaigns employee performance evaluations and advertising strategies

endogenous completeness of diffusion driven equilibrium markets we study the existence of dynamic equilibria with endogenously complete markets in continuous time heterogenous agents economies driven by diffusion processes our main results show that under appropriate conditions on the transition density of the state variables market completeness can be deduced from the primitives of the economy in particular we prove that a sufficient condition for market completeness is that the volatility of dividends be invertible and provide higher order conditions that apply when this condition fails as is the case in the presence of fixed income securities in contrast to previous research our formulation does not require that securities pay terminal dividends and thus allows for both finite and infinite horizon economies

automobile externalities and policies this paper discusses the nature and magnitude of externalities associated with automobile use including local and global pollution oil dependence traffic congestion and traffic accidents it then discusses current federal policies affecting these externalities including fuel taxes fuel economy and emissions standards and alternative fuel policies summarizing insofar as possible the welfare effects of those policies finally we discuss emerging pricing policies including congestion tolls and insurance reform and summarize the appropriate combination of policies to address automobile externalities

the energy efficiency gap what does it mean abstract as renewed attention has been given by policy makers to energy conservation issues it has frequently been asserted that an energy efficiency gap exists between actual and optimal energy use the critical questions is how to define the optimal level of energy efficiency this paper seeks to disentangle some confusing strands of argument that are frequently brought to bear on this question by identifying the major conceptual issues that determine the set of feasible answers we identify five separate and distinct notions of optimality the economists economic potential the technologists economic potential hypothetical potential the narrow social optimum and the true social optimum each of these has associated with it a corresponding definition of the energy efficiency gap our analysis demonstrates that necessary preconditions for identifying the right measure of the energy efficiency gap include understanding and disentangling market failure and non market failure explanations for the gradual diffusion of energy efficient technologies

consumption and portfolio policies with incomplete markets and short sale constraints the infinite dimensional case abstract we employ a martingale approach to study a dynamic consumption portfolio problem in continuous time with incomplete markets and short sale constraints we introduce a notion of minimax local martingale and transform the dynamic problem into a static problem of maximizing expected utility over the consumption bundles that satisfy a single budget constraint formed using that measure we establish the existence of and characterize the minimax local measure provide sufficient conditions for the dynamic consumption portfolio problem to have a solution and relate the optimal policies to the solution of quasi linear partial differential equation

the wrong kind of transparency in a model of career concerns for experts when is a principal hurt from observing more information about her agent this paper introduces a distinction between information on the consequence of the agent s action and information directly on the agent s action when the latter kind of information is available the agent faces an incentive to disregard useful private signals and act according to how an able agent is expected to act a priori this conformist behavior hurts the principal in two ways the decision made by the agent is less likely to be the right one discipline and ex post it is more difficult to evaluate the agent s ability sorting the paper identifies a necessary and sufficient condition on the agent signal structure under which the principal bene ts from committing not to observe the agent s action the paper also shows the existence of strategic complementarities between information on action and information on consequence the results on the distinction between action and consequence are then used to interpret existing disclosure policies in delegated portfolio management in particular they are consistent with hitherto puzzling evidence that mutual funds systematically overperform pension funds

are consumers myopic evidence from new and used car purchases abstract we investigate whether car buyers are myopic about future fuel costs we estimate the effect of gasoline prices on short run equilibrium prices of cars of different fuel economies we then compare the implied changes in willingness to pay to the associated changes in expected future gasoline costs for cars of different fuel economies in order to calculate implicit discount rates using different assumptions about annual mileage survival rates and demand elasticities we calculate a range of implicit discount rates similar to the range of interest rates paid by car buyers who borrow we interpret this as showing little evidence of consumer myopia jel d12 h25 l11 l62 l71 l81

debt constrained asset markets we develop a theory of general equilibrium with endogenous debt limits in the form of individual rationality constraints similar to those in the dynamic consistency literature if an agent defaults on a contract he can be excluded from future contingent claims markets trading and can have his assets seized he cannot be excluded from spot markets trading however and he has some private endowments that cannot be seized all information is publicly held and common knowledge and there is a complete set of contingent claims markets since there is complete information an agent cannot enter into a contract in which he would have an incentive to default in some state in general there is only partial insurance variations in consumption may be imperfectly correlated across agents interest rates may be lower than they would be without constraints and equilibria may be pareto ranked

dosis facit effectum why the size of the carbon tax matters evidence from the swedish residential sector abstract after 25 years of gradually increasing its carbon tax sweden now imposes the world s highest tax on carbon dioxide emissions this paper examines the effect of the swedish carbon tax on residential carbon emissions by using european panel data we employ synthetic control methods scms and perform difference in difference did regressions to evaluate the causal impact of carbon taxation on carbon emissions in the residential sector we provide evidence that early 2000s carbon tax augmentation had a causal effect on residential carbon emissions we find that the reduction of residential carbon emissions stemming from the carbon tax augmentation ranges from 200 kg when compared with other countries with a carbon tax of more than 20 euro to 800 kg when compared with countries without a carbon tax of co2 per capita per year hence the evidence suggests that carbon taxation is an effective tool for reducing residential co2 emissions and in turn mitigating climate change

optimal consumption and equilibrium prices with portfolio constraints and stochastic income abstract this paper examines the intertemporal optimal consumption and investment problem in the presence of a stochastic endowment and constraints on the portfolio choices short sale and borrowing constraints as well as incomplete markets can be modeled as special cases of the class of constraints we consider existence of optimal policies is established under fairly general assumptions on the security price coefficients and the individual s utility function this result is obtained by using martingale techniques to reformulate the individual s dynamic optimization problem as an equivalent static one an explicit characterization of equilibrium risk premia in the presence of portfolio constraints is also provided in the unconstrained case this characterization reduces to consumption based capital asset pricing model journal of economic literatureclassification numbers g11 g12 c61 d52 d91

seniority in legislatures we construct a stochastic game model of a legislature with an endogenously determined seniority system we model the behavior of the legislators as well as their constituents in an infinitely repeated divide the dollar game each legislative session must make a decision on redistributional issues modeled as a divide the dollar game however each session begins with a vote in which the legislators decide by majority rule whether or not to impose on themselves a seniority system legislative decisions on the redistributional issues are made by the baron ferejohn rule an agenda setter is selected by a random recognition rule which in our model is a function of the seniority system selected the agenda setter makes a proposal on redistributional issues and the legislature then votes whether to accept or reject the agenda setters proposal if the legislature rejects the proposal another agenda setter is randomly selected and the process is repeated if the legislature accepts the proposal the legislative session ends and the voters in each legislative district vote whether to retain their legislator or throw it out of office the voters verdict determines the seniority structure of the next period legislature we find a stationary equilibrium to the game having the property that the legislature imposes on itself a non trivial seniority system and that legislators are always reelected