guaranty funds and risk taking evidence from the insurance industry abstract this paper examines change in property liability insurers risk taking around enactments of state guaranty fund laws our evidence suggests that the risk of insurers asset portfolios increases following enactments but this increase in risk is significant only for stock insurers our evidence of increased risk taking following guaranty fund adoptions suggests that the way these funds are organized creates counterproductive investment incentives especially for stock companies because these laws were enacted by states over the period 1969 1981 our evidence on changes in risk taking helps resolve statistical problems that have been troublesome for studies of bank deposit insurance

strategic behavior and partial cost sharing abstract the main objects here are games in which players mainly compete but nonetheless collaborate on some subsidiary activities play assumes a two stage nature in that first stage moves presume coordination of some subsequent tasks specifically we consider instances where second stage coordination amounts to partial cost sharing anticipated and sustained as a core solution examples include regional cournot oligopolies with joint transportation we define and characterize equilibria and inquire about their existence

the proportional solution for economies with both private and public ownership abstract we ask how should a planner whose job is to respect public ownership of some productive assets in conjunction with private ownership of some inputs allocate resources we call our proposal the proportional solution it is characterized by the requirement that the final allocation be pareto efficient and by the condition of equal returns to the use of privately owned inputs we discuss this idea in a publicly owned firm a cooperative and a common pool resource our main result is the existence of proportional solutions in general convex economies journal of economic literature classification numbers d50 d51 d62 l32 h23 h82 p13

a new analysis of a simple model of fair allocation in a recent article fragnelli and gagliardo fragnelli v gagliardo s 2012 cooperative models for allocating an object economics letters 117 227 229 propose several procedures to solve a basic problem of fair allocation we scrutinize their proposal and contextualize it into recent developments of the literature on bankruptcy problems our analysis supports two of the procedures they propose namely the shapley and talmud rules

an efficient and almost budget balanced cost sharing method for a convex technology c we characterize cost sharing games where the nash equilibrium demands maximize total surplus budget balance is possible if and only if c is polynomial of degree n 1 or less for general c the residual cost shares are balanced if at least one demand is null a characteristic property if the cost function is totally monotone a null demand receives cash and total payments may exceed actual cost the ratio of excess payment to efficient surplus is at most min 2logn 1 for power cost functions c a ap p 1 the ratio of budget imbalance to efficient surplus vanishes as 1np 1 for analytic cost functions the ratio converges to zero exponentially along a given sequence of users all asymptotic properties are lost if the cost function is not smooth

a progress report on marxian economic theory on the controversies in exploitation theory since okishio 1963 a progress report on marxian economic theory

the determinants of organizational form changes evidence and implications from real estate abstract we study changes in the real estate industry among organizational forms with varying degrees of restrictiveness and document the associated changes in profitability free cash flow debt dividends and investment policies all troubled firms in our sample move to a more flexible organizational structure with subsequent reductions in dividends improvements in performance and increases in asset sales and investments healthy firms that move to a tighter structure have larger free cash flows before the change they increase dividends reduce free cash flows and improve profitability after the change we document evidence of tax considerations in organizational changes

uniform externalities two axioms for fair allocation abstract positive resp negative preference externalities say that an agent always prefers his actual welfare to his virtual welfare should other agents share his preferences resp prefers his virtual to his actual welfare negative group externalities say that an agent never prefers his actual welfare to his virtual welfare should he be the sole user of the resources these two axioms unify several familiar fairness properties and yield some new ideas as well in the division of unproduced commodities and the cooperative production of a private or a public good we also discuss their compatibility with no envy and resource monotonicity

fair allocation of disputed properties we model problems of allocating disputed properties as generalized exchange economies in which agents have preferences and claims over multiple goods and the social endowment of each good may not be sufficient to satisfy all individual claims in this context we investigate procedural and end state principles of fairness their implications and relations to do so we explore procedural allocation rules represented by a composition of a rights assignment mechanism to assign each profile of claims individual property rights over the endowment and walrasian or other individually rational exchange rule using variants of fairness based on no envy as end state principles we provide axiomatic characterizations of the three focal egalitarian mechanisms known in the literature on rationing problems as constrained equal awards constrained equal losses and proportional mechanisms our results are connected to focal contributions in political philosophy and also provide rationale for market based environ mental policy instruments such as cap and trade schemes and personal carbon trading and moral foundation for the three proposals to allocate ghg emission rights known as the equal per capita sharing the polluter pays principle and the equal burden sharing the victims pay principle

surplus sharing with a two stage mechanism in this article we consider environments where agents jointly produce a private output good by contributing privately owned resources an efficient outcome may not be realized due to strategic behavior and conflicting interests of the agents we construct a two stage mechanism building on a varian mechanism the modified mechanism ensures an equilibrium for a large class of preferences and guarantees the feasibility of outcomes

public ownership of the external world and private ownership of self liberal political philosophy represented classically by john locke and today by libertarians defends great inequality of economic outcome on the basis that people own themselves and are entitled to establish private property in the external world by virtue of that self ownership contemporary nonlibertarian political philosophers such as john rawls and ronald dworkin achieve their relatively egalitarian conclusion by effectively denying self ownership as a premise an alternative challenge to liberalism which does not take the radical starting point of denying self ownership is to declare that while certain rights to benefit by virtue of superior skill should be protected a degree of self ownership productive assets in the external world be viewed as publicly owned and not privately appropriable what allocation mechanisms on a space of possible economies satisfy axioms that are necessary to guarantee both private ownership of self and public or joint ownership of the external world we propose a

incentive mechanism design for production economies with both private and public ownerships in this paper we dealwith the probl em of incentive mechanism design which yields efficient allocations for general mixed ownership economies when preferences individual endowments and coalition patterns among individuals are unknown to the planner we do so by doubly implementing the proportional solution for economies with any number of private sector and public sector commodities and any number of individuals as well as the coexistence of privately and publicly owned firms with general convex production possibility sets furthermore the mechanisms work not only for three or more agents but also for two agent economies journal of economic literature classification numbers c72 d61 d71 d82 2000 academic press

the role of insider influence in mutual to stock conversions using a sample of 347 demutualizing thrifts from 1991 to 2004 we show that the level of inside participation is not a traditional signal of firm performance we conclude that unanticipated inside participation reflects the incentives of insiders to reduce the size of the offer to influence the level of expected initial public offer ipo returns we find unanticipated inside participation is related to lower offer size and higher initial returns but we do not find a relationship between inside participation and post ipo performance

regulation capital and the evolution of organizational form in us life insurance this paper studies the association between regulation and the organizational form of new life insurers between 1900 and 1949 the mutual form was popular in states with low initial capital requirements for mutual companies and differentially higher requirements for stock companies but was rarely used elsewhere this suggests that entrepreneurs took a path of least resistance when choosing organizational form and that the mutual s disadvantage in raising capital contributed to its decline a decline that accelerated as states raised requirements and eliminated the aforementioned differentials contrary to previous analysis the paper finds little evidence connecting other regulations to mutual decline jel g21 l51 n21 n22

the tragedy of the commons revisited identifying behavioral principles abstract the theme of hardin s renowned the tragedy of the commons is that the common pool resource is dissipated to the level where the average value of extraction equals the wage rate in the long run when the number of appropriators is unlimited yet experimental results and rapid deforestation in tropical countries follow a contrasting pattern even though the number of appropriators is limited the common pool resource is dissipated more than the nash equilibrium predicts first given these market or experimental observations we identify two behavioral principles share maximization and difference maximization second we characterize these principles at nash equilibrium

the relative tax benefits of alternative call features in corporate debt this paper examines the differential tax treatment of the borrower and lender at the time debt is called as a potential explanation for the widespread existence of call provisions in corporate debt this tax effect alone cannot explain the standard call feature because greater tax benefits may be derived for bonds callable at market prices the equilibrium implications of the model allowing for tax arbitrage opportunities both at the corporate level and the individual level also are considered

implementation of balanced linear cost share equilibrium solution in nash and strong nash equilibria abstract this paper considers the incentive aspect of the balanced linear cost share equilibrium blcse which yields an endogenous theory of profit distribution for public goods economies with convex production technologies we do so by presenting an incentive compatible mechanism which doubly implements the blcse solution in nash and strong nash equilibria so that nash allocations and strong nash allocations coincide with blcse allocations the mechanism presented here allows not only preferences and initial endowments but also coalition patterns to be privately observed in addition it works not only for three or more agents but also for two agent economies

welfarism in economic domains abstract in economies with public goods and agents with quasi linear preferences we give a characterization of the welfare egalitarian correspondence in terms of three axioms pareto optimality symmetry and solidarity this last property requires that an increase in the willingness to pay for the public goods of some of the agents should not decrease the welfare of any of them journal of economic literature classification numbers d63 h41

reward patterns of fair solutions abstract the solutions proposed in the literature on fair allocations are sensitive to the preference profiles of the agents as a consequence each of them displays a specific distribution pattern which may be interpreted as rewarding certain kinds of preferences at the expense of others in the basic models with private goods and decreasing returns the equal income competitive equilibrium tends to favor the eccentric preferences whereas most egalitarian equivalent solutions tend to reward the agents who like particular resources the identification of the rewarding pattern of each mechanism sheds light on its ethical content and may help select the adequate solution in concrete applications in this analysis a preference monotonicity property turns out to be satisfied by many solutions

the optimality of call provision terms there is substantial variation in fixed price call provision terms call price premium and call protection i investigate determinants of call price call protection and estimated call option value

joint ownership of a convex technology comparison of three solutions a given set of agents jointly own and operate a decreasing returns to scale technology with a single input and a single output they all contribute some input and receive some of the output what first best allocation is equitable we discuss three allocation mechanisms the equal benefits solution gives every agent the same benefit computed at the supporting price the equal returns solution equalizes returns output shares input contributions across agents the constant returns equivalent solution gives every agent his indirect utility level at some common price of output relative to input a lower and an upper bound on individual welfares play a key role in these axiomatic characterisation results

individual rationality and voting in cooperative production abstract suppose that a group of individuals owns collectively a technology which produces a consumption good from an input a sharing rule associates input contributions with a vector of consumption we consider sharing rules that are a convex combination of the proportional the equal share and the equal benefit rules we characterize the subset of sharing rules that satisfy pareto efficiency and individual rationality we also study the outcome of majority voting on this subselection of sharing rules

on the endogenous determination of the degree of meritocracy in large cooperatives abstract we consider a cooperative formed by a large number of workers differentiated by their initial endowment of wealth which is both primary input labor and consumption leisure the cooperative is characterized by its wealth distribution and produces a consumption good from labor which allocates among workers according to a convex combination of the proportional and the egalitarian rule in the first stage workers decide this combination by simple majority in a second stage they choose how much labor to provide to the cooperative we find that when in the cooperative s wealth distribution the median wealth is lower higher than the average the degree of meritocracy chosen by workers is lower higher than that of the optimum and coincides with it when both statistics coincide this choice has similar consequences on the cooperative s labor output since it increases with respect to the degree of meritocracy

meritocracy egalitarianism and the stability of majoritarian organizations we gratefully acknowledge support from the severo ochoa programme for centres of excellence in r d sev 2011 0075 barbera and bevia acknowledge support from grants consolidated group c eco2008 04756 and feder and sgr2014 515 ponsati acknowledges support from grants eco2012 37065 and sgr2009 1142

callable bonds a risk reducing signalling mechanism the theory of financial economics has failed to distinguish advantages of callable bonds from those of short term debt this paper shows that either type of borrowing can signal a firm s better prospects but that short term debt does so at the cost of weakened risk sharing with capital markets by issuing either equity or long term non callable debt a firm with poor investment opportunities will not pool its prospects with those of a better firm but equity produces superior risk sharing perhaps this explains the almr ost complete absence of long term non callable bonds from observed corporate capital structures financial theory has found only moderate success in explaining the routine inclusion of call provisions among the covenants of corporate bonds in the absence of market imperfections or incompleteness the incremental compensation promised to bondholders should exactly offset the value of the call provision retained by equityholders indifference should obtain 1 nevertheless it is hard to accept indifference as an explanation given the near universality of call provisions in corporate bond contracts in this paper we argue that in the presence of asymmetric information about investment quality corporate managers can signal their firm s better prospects by issuing bonds that include call provisions our major result shows that this signalling mechanism can be more attractive to risk averse managers than would be the choice of short term debt which could also serve to signal furthermore we demonstrate that non callable corporate debt is a dominated security that is both it and equity signal bad news but equity provides risk sharing this finding helps to explain the relative absence of long term non callable debt from corporate financial markets previous attempts to explain the prevalence of call provisions in corporate bond contracts fall into four categories two categories involve pure wealth transfers from bondholders to stockholders in these constant sum environments a gain to one group constitutes a loss to the other in the first category managers possess private information with regard to future interest rate movements issuing callable bonds will capture gains for stockholders when anticipated drops

an equilibrium analysis of debt financing under costly tax arbitrage and agency problems in his recent paper merton miller 12 extends the notion of tax induced differential returns on securities into a general equilibrium framework in which firms make adjustments in the supply of corporate debt in an environment of progressive personal taxation the interest rates on taxable corporate bonds are greater than rates on tax exempt securities so as to compensate investors for the associated tax burden on the supply side value maximizing firms have an incentive to issue additional debt so long as the personal tax induced compensation is less than the tax savings from interest payment deductions at the corporate level miller argues that in the final equilibrium the interest rate differential between taxable and tax exempt bonds exactly reflects the tax advantage of debt financing at the corporate level thus the tax subsidy disappears in its entirety and we are back to an environment in which corporate leverage is inconsequential to the value of any particular firm what emerges in equilibrium is merely an optimal debt equity ratio for the corporate sector as a whole 1 miller derives this invariance proposition under the following assumptions 1 progressive personal tax rates reach a maximum at a level beyond the corporate tax rate 2 no tax arbitrage by individuals and firms is allowed 3 there is a personal tax rate differential in favor of income from stocks and 4 the opportunity for riskless borrowing and lending exists 2 indeed miller s equilibrium analysis is based on a zero effective personal tax rate on income from stocks but

kantian optimization a microfoundation for cooperation abstract although evidence accrues in biology anthropology and experimental economics that homo sapiens is a cooperative species the reigning assumption in economic theory is that individuals optimize in an autarkic manner as in nash and walrasian equilibrium i here postulate a cooperative kind of optimizing behavior called kantian it is shown that in simple economic models when there are negative externalities such as congestion effects from use of a commonly owned resource or positive externalities such as a social ethos reflected in individuals preferences kantian equilibria dominate the nash walras equilibria in terms of efficiency while economists schooled in nash equilibrium may view the kantian behavior as utopian there is some perhaps much evidence that it exists if cultures evolve through group selection the hypothesis that kantian behavior is more prevalent than we may think is supported by the efficiency results here demonstrated

the replacement principle in economies with single peaked preferences abstract our objective is to investigate the implications of the replacement principle for the fair allocation of an infinitely divisible commodity among agents with single peaked preferences the principle says that when one of the components of the data entering the description of the problem to be solved changes all of the relevant agents should be affected in the same direction they all gain or they all lose we apply it to situations in which the preferences of one of the agents may change under the name ofwelfare domination under preference replacement we show that there is no selection from the no envy and pareto solution satisfying it then we weaken it by limiting its application to situations in which the change is not so disruptive that it turns the economy from one in which there is too little of the commodity to one in which there is too much or conversely we show that there is only one selection from the no envy and pareto solution satisfying this property andreplication invariance it is the uniform rule a solution that has played a central role in previous analyses of the problem journal of economic literatureclassification numbers d51 d63 d70

the demise of the mutual organizational form an investigation of the life insurance industry we investigate the role of organizational structure in financial services markets by examining the u s life insurance industry traditionally stock and mutual life insurers were equally represented but now the industry is mainly composed of stock firms we find operational efficiency access to capital and tax savings are important determinants for this shift the incentive to demutualize differs by the type of conversion full demutualization is chosen for efficiency and access to capital reasons and partial conversion using a mutual holding company is chosen for tax savings firm operational efficiency improves after conversion we also find the efficiency of the stock organizational form dominates that of the mutual structure during our sample period 1995 to 2004

some properties of egalitarian economies abstract it is argued that in strictly egalitarian economies there is an equilibrium in which social well being is maximized and that this is so whatever the nature of returns to scale and whether or not the economy is characterized by elements of monopoly externalities of consumption or production commodity taxes or subsidies or the private provision of public goods as a corollary the implications of distortions and increasing returns can be effectively studied only in a context of inequality

equality of resources implies equality of welfare if one is an egalitarian should one try to equalize resources available to agents or to equalize their welfares with a suitably general conception of what resources are these two conceptions cannot be distinguished an allocation mechanism is defined on a space of economies and is required to satisfy various axioms that are necessary conditions for equalizing resources among a population the unique mechanism satisfying these axioms on a large domain of economies is the one that allocates commodities so as to equalize utilities of the agents methodologically the theorem is a generalization of bargaining theory because the mechanisms are defined on commodity space

characterizations of bargaining solutions in production economies with unequal skills in production economies with unequal skills this paper characterizes bargaining solutions by using axioms on allocation rules rather than axioms on classical bargaining solutions we introduce a new axiom consistency w r t technological innovations so that the non welfaristic characterizations of bargaining solutions in the production economies are provided by the characterizations we can classify the three bargaining solutions the nash the kalai smorodinsky and the egalitarian solutions from the viewpoint of responsibility and compensation discussed by dworkin

welfare bounds in the fair division problem to any anonymous division method corresponds a lower and an upper bound function they measure the impact on a given agent s utility of the other agents preferences the highest lower bound is the equal split utility the lowest upper bound is the indirect utility from equal split at a canonical price these two bounds are compatible yet any method with the elqual split lower bound exhibits the growth paradox and any method with the lowest upper bound generates envy we criticize competitive equilibrium from equal split because it puts no finite upper bound on any agent s welfare

egalitarian equivalent cost sharing of a public good in an economy with one public and one private good egalitarian equivalent cost sharing consists of finding the highest public good level x such that consuming x for free yields a feasible utility distribution the corresponding feasible allocation typically unique called egalitarian equivalent is in the core of the economy conversely any cost sharing method satisfying pareto optimality cost monotonicity nobody suffers a utility loss if the production technology improves upon ceteris paribus and individual rationality no single agent coalition objects or no private transfers no agent receives a positive amount of private good must select an egalitarian equivalent allocation in every economy copyright 1987 by the econometric society

the conditional auction mechanism for sharing a surplus a first bid auction to allocate the leadership role is used to choose a public decision and a balanced set of transfers the mechanism is shown to implement an equal sharing of the surplus above the average utility level at the equilibrium an agent s message reveals the other agent s utility when only two players are involved and the exact value of the joint surplus a variety of other contexts allow for the construction of similar auction like mechanisms displaying the same mirror image effect

allocation rules for a commonly owned technology the average cost lower bound assume that a set of individuals commonly own a one input one output technology at an average cost pricing equilibrium allocation the consumption contribution ratio is identical among agents and each agent maximizes her welfare given this ratio the following requirement is introduced every agent must be as well off at a selected allocation as at the average cost equilibrium that all agents prefer the paper establishes compatibilities and incompatibilities between this requirement and some traditional requirements finally the new lower bound is combined with properties such as technological monotonicity or contraction independence to characterize mas colell s constant returns equivalent allocation rule

the call sinking fund and term to maturity features of corporate bonds an empirical investigation do bond issuing firms attempt to choose the call sinking fund and term to maturity features of bonds to improve shareholder wealth this paper develops and tests two hypotheses about the determinants of bond features using a conditional logistic model the model is estimated on a sample of bonds issued between 1982 and 1986 model estimates show that a bond s call sinking fund and term to maturity features are statistically related to the issuing firm s retention ratio ratio of convertible to long term debt two year change in net operating income and whether the firm is listed on the nyse and included in the s p400 these findings support the view that firms financing highquality projects but facing information asymmetries choose shorter term medium term callable bonds with and without the sinking fund feature

welfare bounds in the cooperative production problem a general model of lower bound individual rationality and upper bound axioms for fair allocation is proposed the unanimity welfare function associates to each individual utility function the highest equal utility feasibile when all agents share this utility if this function is a feasible lower bound resp upper bound then it is the highest lower bound of all resp the lower upper bound applying this to cooperative production of private goods we characterize when the unanimity welfare is a lower upper bound function and when the stand alone welfare is an upper or lower bound our approach unifies several familiar fairness properties

a ricardian model of the tragedy of the commons abstract this paper revisits the tragedy of the commons when agents have different capabilities in both production and encroachment activities and can allocate their time between them under fairly general assumptions on production and encroachment technologies an individual s expected income is convex with respect to his actions so that individuals specialize consequently in equilibrium the economy is divided into at most two homogenous groups encroachers and producers the partition obeys a relative advantage criterion several equilibria may exist the tragedy of the commons equilibrium without production always does the pareto optimal allocation of activities may not be an equilibrium we show that minute changes in property right enforcement may lead to drastic improvements for society we argue that in convex games such as this paper s role choice game bounded rationality is a natural assumption and the concept of local nash equilibrium is the natural analytical tool to handle it

a progress report on marxian economic theory on the controversies in exploitation theory since okishio 1963 this report explores the development of exploitation theory in mathematical marxian economics by reviewing the main controversies surrounding the proper definition of exploitation since the contribution of okishio the report first examines the debates on the fundamental marxian theorem and class exploitation correspondence principle developed mainly in the 1970s and 1980s followed by the property relation theory of exploitation by roemer then the more recent exploitation theory proposed by vrousalis and wright is introduced finally the report introduces and comments on recent axiomatic studies of exploitation by focusing on the work of veneziani and yoshihara

a proposal to unify some concepts in the theory of fairness so far the theory of distributive justice has tried to single out a unique criterion of justice in our opinion we live in a world in which different people hold conflicting ideas about justice we propose a procedure for representing these individual opinions by means of what we call aspiration functions and we present in this paper three different ways of aggregating such opposing opinions into a socially acceptable judgement furthermore we show that many well known concepts are special cases of our approach we study under a restriction on the form of the aspiration functions the conditions that are necessary and sufficient for a social choice correspondence to be generated from any of our concepts

the dynamics of inequalities and unequal exchange of labor in intertemporal linear economies abstract introducing a concept of fairness of economic allocations namely exploitation as the unequal exchange of labor henceforth ue exploitation by generalizing roemer s 1981 1982a seminal models this paper aims to answer the following two questions in the context of an intertemporal economy with linear technology how is income and wealth inequality related or unrelated to the existence and persistence of ue exploitation what are the mechanisms driving the persistent existence of ue exploitation in growing economies agents are ue exploited resp exploiters if the amount of labor that they contribute to the economy is bigger resp smaller than the amount of labor received by them via their income it is proved first that ue exploitation is monotonically correlated to functional income inequality second it is shown that unless agents discount the future asset inequalities are necessary but not sufficient for the persistence of ue exploitation and capital accumulation leading to the disappearance of ue exploitation cannot be ruled out in equilibrium third it is shown that regardless of whether agents discount the future labor saving technical progress may yield sustained growth with persistent ue exploitation by keeping labor abundant relative to capital which restrains wages from rising unlike in models with differentiable production functions this mechanism does not rely on changes in the marginal productivity of inputs and it is entirely driven by the interaction between innovation and labor markets

testing for expense preference behavior mutual versus stock savings and loans this article investigates expense preference behavior in the savings and loan industry previous studies used an intercept test and in general concluded that managers of mutual s ls exhibit expense preference behavior i derive the necessary and sufficient conditions on cost functions for the intercept test to be valid these restrictions are rejected for the savings and loan industry stock and mutual s ls have different cost structures and both have non cobb douglas production technologies i derive a new more general test for expense preference behavior that does not require the restrictive assumptions of the intercept test the results of this test do not support earlier conclusions of managerial expense preferences

cooperative production a comparison of welfare bounds in the production model with a one input one output technology we study welfare lower bounds that give a guarantee of welfare to each agent independent of the others preferences we obtain characterizations of egalitarian equivalent allocation rules on the basis of two weak lower bounds in striking contrast with moulin s characterization of the equal budget walrasian solution on a slightly smaller domain with a more demanding lower bound