MLSE Seminar

Author: Kristof Bosmans (UM, MPE) (joint work with Koen Decancq (Universitity of Antwerp), Erwin Ooghe (KU Leuven))
Date and time: Oct 15th, 2024 (13:00-14:00), TS53 C.1-05
Title: Multidimensional welfare and inequality: we need to talk about efficiency
Abstract: We strengthen the theory of multidimensional welfare and inequality measurement by explicitly acknowledging considerations of allocative efficiency.  Our approach combines the axiomatic rigor of more recent studies (Tsui, 1995, 1999, Gajdos and Weymark, 2005, Weymark, 2006, Seth, 2013) with the utility-based foundations of earlier studies (Kolm, 1977, Atkinson and Bourguignon, 1982, 1987, Maasoumi, 1986).  Our axioms sharply distinguish efficiency considerations, captured by the standard Pareto axiom, from inequality considerations, represented by a new transfer axiom that only considers commodity transfers neutral in their effect on efficiency.  These axioms reappear, suitably adapted, in our characterizations of welfare, inequality, and efficiency criteria.  The analysis yields new characterizations of a well-established class of welfare criteria, a “dissident” class of inequality criteria, and new efficiency criteria.

Author: Jana Gieselmann (Duesseldorf Institute for Competition Economics)
Date and time: Nov 12th, 2024 (13:00-14:00), TS53 A0.24
Title: (Mis-)Matchmaker
Abstract: On matching platforms, users (implicitly) pay for the platform's services, but the platform makes money as long as it does not match them. This paper analyzes the matching rule of a profit-maximizing monopoly platform when the incentives between users and the platform are misaligned --- search is costly for users, but the platform either commits to display advertisements or charges a search fee each period. I demonstrate that frequently studied matching rules, such as random matching, are strictly suboptimal for the platform. Instead, the platform strategically lowers match quality to prolong search time and increase revenue, leading to unnecessary delay and potentially inefficient matches. Finally, I provide two explanations for why platforms adopt business models with misaligned incentives: targeted advertising and the presence of overconfident users.

Author: Elias Tsakas (UM, MPE) (with Pavel Ilinov, Andrei Matveenko, Salil Sharma and Mark Voorneveld)
Date and time: Nov 19th, 2024 (11:00-12:00), TS53 A0.24
Title: Sequential Search with Flexible Information
Abstract: We consider a model of sequential search in which an agent (the employer) has to choose one alternative (a candidate) from a finite set. A key feature of our model is that the employer is not restricted to specific forms of information acquisition, i.e., she is free to endogenously choose any interview for each candidate that arrives. Our main characterization result shows that the employer’s unique optimal strategy is to offer a gradually easier interview to later candidates. Remarkably, even if the number of candidates grows arbitrarily large, the probability of hiring a good candidate is bounded away from 1. Then, we show that only in some extreme pathological cases the candidates are treated equally in terms of the total probability of being hired; in fact, generically, the first candidate seems to be favored. Finally, when the candidates are not ex ante identical, we characterize a wide range of cases where the employer prefers to start by interviewing ex ante worse candidates.

Author: Rastislav Rehák (joint with Maxim Senkov)
Date and time: Nov 26th, 2024 (13:00-14:00), TS53 A1.23
Title: Persuasive Pooling 
Abstract: We analyze a quadratic Bayesian persuasion model in which the sender and receiver have arbitrary misalignment regarding their bliss actions as functions of the state. Our focus is on the structure of the optimal signal, particularly how states are pooled in the supports of the induced posterior distributions. We apply our findings to settings where the sender and receiver share a common preference over the ordering of bliss actions but differ in the sensitivity of their responses to state changes. This framework captures scenarios such as an advisor and a CEO with aligned priorities but divergent risk attitudes.

Author: Hannes Rusch (UM, MPE) (with Maximilian Schmitt, Gewei Cao and Thomas Meissner)
Date and time: Dec 10th, 2024 (13:15-14:15), TS53 A1.23
Title: On the Microeconomics of Exploitation
Abstract: According to the WalkFree Foundation, 50 million people are currently victims of modern slavery, the ILO estimates that the annual profit from forced labor is $236 billion, and two of the UN's Sustainable Development Goals directly address the need to end exploitation. Surprisingly, despite the fact that exploitation has existed across time and space, the incentive structures and strategic logic of exploitative interactions remain poorly understood. Our research uses a simple principal-agent approach to examine exploitation from a microeconomic perspective. Comparing exploitative interactions to a ‘free labor’ benchmark, we show that exploitation is harmful for victims and society at large, while being beneficial for the exploiter. Contrary to the (sparse) existing literature, comparative statics with respect to victims’ outside options imply that victims with better alternatives will be coercived more. Correspondingly, the exploiter's profits decrease in victims’ outside options, making it more profitable to exploit poor victims. Against the backdrop of our model, finally, we examine some preliminary evidence drawn from accounts of trafficking victims in the United States and around the world.