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Designing and Pricing Evidence

Abstract

We study how a profit-maximizing platform designs and prices certificates for workers who subsequently enter a competitive labor market. The platform designs a test, which generates a (possibly random) score based on each worker’s productivity, and sets a uniform fee that it charges each worker who wishes to disclose her score to firms. After observing the worker’s disclosure (if any), the labor market pays a wage that equals the worker’s expected productivity given all available information. We show that if the platform can select equilibria, it can extract all of the surplus by using two scores. In contrast, if the workers choose their most preferred equilibrium, then even with binary types the platform optimally uses a continuum of scores and higher scores appear exponentially more than the lower scores.

 

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Consumer Good Search: Theory and Evidence

Dr. Saman Darougheh

Researcher at the Danish Central Bank

Overview

I develop a model of the consumer good market where the individual’s search decision is consistent with balanced-growth preferences. Here, optimal search is independent of income but increases with the time endowment. I characterize the potentially multiple equilibria and test whether the model can replicate differences in observed shopping behavior across employed and unemployed individuals. Using the American Time Use Survey, I show that
unemployed individuals have… MORE>>

Size-Dependent Industrial Policies and Firm Performance: The Case of Iran’s Credit Extension Policy for Small Firms, 2005-2013

Abstract

It has been well documented that small firms often face serious credit constraints that limit their investment and production options (Beck and Demirguc-Kunt, 2006; Banerjee and Duflo, 2014). Policymakers in many countries have taken this stylized fact as implying that extending credit to small firms on easier terms could be an effective means of expanding employment and output. However, such an assessment is not necessarily warranted because the effects of easy credit on small firms depends on the ways and the circumstances under which such policies are implemented.

In this paper, we examine the direct effects of the Plan to Expand Quick-Returns Small Firms (PEQRSF), a size-dependent credit extension policy on small manufacturing firms (with 10-49 workers) in Iran. MORE…

The Impact of Intensified International Sanctions on Iran’s Manufacturing Sector, 2012-2013

Abstract

International sanctions are meant to curb economic activity and induce policy or political change in a target country. However, the effects of sanctions on different parts of the economy are complex and could induce expansion in some parts as they cause contraction in other parts. The channels through which sanctions work could be microeconomic (e.g., trade and supply chain disruption) or macroeconomic (e.g., exchange rate depreciation and finance limitations). Firms and their stakeholders could be negatively affected if their access to imports or export markets become constrained or their domestic output markets shrink. But there may be some benefits for firms that face less competition in their input or output markets or have built up large inventories of goods that become scarce under sanctions. In this paper, we make an attempt to identify some of these channels in the case of Iran’s manufacturing sector during 2012-2013 when Iran faced intensified international sanctions. Our source of data is an annual panel of the Survey of Manufacturing Plants (SMP) carried out by the Statistical Center of Iran since 2003… MORE…

Choosing Economics for Higher Education

Thinking about higher education? Why not consider Economics?
  • An opportunity to learn more about Economics for higher education.
Join us on November 26th, Amirkabir University

Student Seminar #12: Manipulation and the Allocational Role of Prices

DateTimePresenterLocation
Monday, October 14, 2019
(22 Mehr 1398)
12:30 – 13:30
Kourosh Khansary
Khatam University (@ 17 Daneshvar), 7th Floor, Seminar Room

“It is commonly believed that prices in secondary financial markets play an important allocational role because they contain information that facilitates the efficient allocation of resources. This paper identifies a limitation inherent in this role of prices. It shows that the presence of a feedback effect from the financial market to the real value of a firm creates an incentive for an uninformed trader to sell the firm’s stock. When this happens the informativeness of the stock price decreases, and the beneficial allocational role of the financial market weakens. The trader profits from this trading strategy, partly because his trading distorts the firm’s investment. We therefore refer to this strategy as manipulation. We show that trading without information is profitable only with sell orders, driving a wedge between the allocational implications of buyer and seller initiated speculation, and providing justification for restrictions on short sales. “

Required Reading(s)
Manipulation and the Allocational Role of Prices

 

Student Seminar #11: Anticompetitive Effects of Common Ownership

DateTimePresenterLocation
Monday, October 07, 2019
(15 Mehr 1398)
12:30 – 13:30Esmaeil AliabadiKhatam University (@ 17 Daneshvar), 7th Floor, Seminar Room

“Many natural competitors are jointly held by a small set of large institutional investors. In the U.S. airline industry, taking common ownership into account implies increases in market concentration that are 10 times larger than what is “presumed likely to enhance market power” by antitrust authorities.1 Within‐route changes in common ownership concentration robustly correlate with route‐level changes in ticket prices, even when we only use variation in ownership due to the combination of two large asset managers. We conclude that a hidden social cost—reduced product market competition—accompanies the private benefits of diversification and good governance.”

Required Reading(s)
Anticompetitive Effects of Common Ownership

 

Selected Topics in Public Finance “Short Course”

Dr. Ali Shourideh

Assistant Professor of Economics at Tepper School of Business

Carnegie Mellon University

Overview
  • How should governments design their tax policies optimally? What are the determinants of social insurance policies and welfare programs? In this class, we review the basic tools of public finance and optimal taxation with an emphasis on social insurance and redistribution. We apply these methods to study unemployment insurance, universal basic income, etc., both theoretically and quantitatively.
Biography
  • Ali Shourideh is an Assistant Professor of Economics and Frank A. and Helen E. Risch Faculty Development Professor of Business at Carnegie Mellon University, Tepper School of Business. He conducts research in the fields of macroeconomics, public finance, and contract theory. In his research, he has studied optimal taxation of various forms of income and expenditure in presence of international trade and specific knowledge about technology as well as determinants of sovereign debt and government pensions when governments have redistributional motives. He has also studied markets with adverse selection and the role of imperfect competition and learning in such markets. Professor Shourideh received his B.S. in Mechanical Engineering from the Sharif University of Technology in Tehran, Iran, and his Ph.D. in Economics from the University of Minnesota. Previously, he has taught at New York University and Wharton School, University of Pennsylvania.

Student Seminar #9: Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency

DateTimePresenterLocation
Sunday, August 11, 2019
(20 Mordad 1398)
12:30 – 13:30Mohammadreza SalehiKhatam University (@ 17 Daneshvar), 7th Floor, Seminar Room

“This paper documents that strategies which buy stocks that have performed well in the past and sell stocks that have performed poorly in the past generate significant positive returns over 3‐to 12‐month holding periods. We find that the profitability of these strategies are not due to their systematic risk or to delayed stock price reactions to common factors. However, part of the abnormal returns generated in the first year after portfolio formation dissipates in the following two years. A similar pattern of returns around the earnings announcements of past winners and losers is also documented.”

Required Reading(s)Returns to Buying Winners and Selling Losers: Implications for Stock Market Efficiency