Research

ABSTRACT: We use microeconomic theory to describe the inner workings of Constant Function Market Makers (CFMMs). We show that standard results from consumer theory apply in this new context, endowing us with powerful tools to characterize the optimal design of CFMMs. We employ them to analyze the externalities that traders and liquidity providers exert on each other when interacting through a CFMM. Liquidity providers reduce the execution costs by flattening the bonding curve on which trades are executed. Arbitrageurs impose an adverse selection cost on liquidity providers by unfavorably rebalancing their portfolio. We show that the strengths of these two externalities are pinned down by the curvature of the bonding curve and are inversely related to each other, thereby identifying the fundamental economic tradeo that market designers have to address.

ABSTRACT: We propose a framework for the fundamental valuation of utility tokens. Our model endogenizes the velocity of circulation of tokens and yields a pricing formula that is fully microfounded. According to our model, tokens are valuable because they have to be immediately accessible when the services are needed, a requirement that is reminiscent of the cash-in-advance constraint. The equilibrium price paths of successful projects go through two successive phases: A speculative phase where marginal holders are investors that do not intend to use the services and, later on, a user phase where all tokens are held by clients. Calibrating the model, we find that it helps rationalizing the extreme volatility and significant valuation of tokens early on during the adoption stage.

ABSTRACT: According to French law, employers have to pay at least six months salary to employees whose seniority exceeds two years in case of unfair dismissal. We show, relying on data, that this regulation entails a hike in severance payments at two-year seniority which induces a significant rise in the job separation rate before the two-year threshold and a drop just after. The layoff costs and its procedural component are evaluated thanks to the estimation of a search and matching model which reproduces the shape of the job separation rate. We find that total layoff costs increase with seniority and are about four times higher than the expected severance payments at two years of seniority. Counterfactual exercises show that the fragility of low-seniority jobs implies that layoff costs reduce the average job duration and increase unemployment for a wide set of empirically relevant parameters. 

Contagion in Decentralized Lending Protocols: A Case Study of Compound

with Myriam Kassoul, Natkamon Tovanich and Simon Weidenholze

Proceedings of the 2023 Workshop on Decentralized Finance and Security

The Economics of Constant Function Market Makers  

with Michele Fabi

Fundamental Pricing of Utility Tokens 

with Vincent Danos and Stefania Marcassa 

SoK: Constant Function Market Makers

with Myriam Kassoul and Michele Fabi

Forthcoming in "A Companion to  Decentralized Finance, Digital Assets and Blockchain Technologies" Edited by Eward Elgar Publishing Ltd

Enjeux et Promesses des Stablecoins Décentralisés

with Louis Bertucci and Sébastien Choukroun

Revue d'Economie Financière, 2023, Vol. 149, No.1

An Equilibrium Model of the Market for Bitcoin Mining

with Benjamin Walter

Journal of Political Economy, 2021, Vol. 129(8), pp. 2415-2452 

Tokens and ICOs: A review of the Economic Literature

with Andrea Canidio, Vincent Danos and Stefania Marcassa

Principles of Blockchain Systems, Synthesis Lectures on Computer Science, 2021, Vol. 9, No. 2

Global Order Routing on Exchange Networks 

with Vincent Danos and Hamza El Khalloufi

FInancial Cryptography and Data Security. FC 2021 International Workshops. FC 2021. Lecture Notes in Computer Science, vol 12676

Revisiting the Liquidity/Risk Trade-Off with Smart Contracts (Short Paper)

with Vincent Danos and Jean Krivine

2nd International Conference on Blockchain Economics, Security and Protocols (Tokenomics 2020) 

Reversible and Composable Financial Contracts (full-length paper)

Reputation and Earnings Dynamics 

with Boyan Jovanovic

Journal of Economic Theory, Vol.191, January 2021

Previous version "Reputation Cycles"

Human Capital and Optimal Redistribution

with Winfried Koeniger

Review of Economic Dynamics, 2018, Vol. 27, pp. 1-26

Technical Appendix

Dynamic Contracts and Learning by Doing

Mathematics and Financial Economics, 2015, Vol. 9(3), pp. 169-193

Dynamic Contracts when Agent's Quality is Unknown

with Boyan Jovanovic

Theoretical Economics, 2014, Vol. 9, pp. 865-914

Job Market Signaling and Employer Learning

with Carlos Alos-Ferrer

Journal of Economic Theory, 2012, Vol. 147(5), pp. 1787-1817

Working Paper

Increasing Optimism and Demand Uncertainty

Economics Bulletin, 2005, Vol. 12: No. 10, pp. 1-8

The Detrimental Effect of Job Protection on Employment: Evidence from France

with Pierre Cahuc and Franck Malherbet

Reputation and Earnings Dynamics 

with Boyan Jovanovic

Journal of Economic Theory, Vol.191, January 2021

Previous version "Reputation Cycles"

Firm Dynamics and Residual Inequality in Open Economies

with Gabriel Felbermayr and Giammario Impullitti

Journal of the European Economic Association, 2018, Vol. 16(5), pp. 1476-1539

Job Market Signaling and Employer Learning

with Carlos Alos-Ferrer

Journal of Economic Theory, 2012, Vol. 147(5), pp. 1787-1817

Working Paper

Trade and Unemployment: What Do the Data Say?

with Gabriel Felbermayr and Hans-Jorg Schmerer

European Economic Review, 2011, Vol. 55(6), pp. 741-758

Globalization and Labor Market Outcomes: Wage Bargaining, Search Frictions, and Firm Heterogeneity

with Gabriel Felbermayr and Hans-Jorg Schmerer

Journal of Economic Theory, 2011, Vol. 146(1), pp. 39-73

Working Paper 

Product Market Regulation, Firm Selection and Unemployment

with Gabriel Felbermayr

Journal of the European Economic Association, 2011, Vol. 9(2), pp. 278-317

Working Paper 

The Rate of Learning-by-doing: Estimates from a Search-Matching Model

Journal of Applied Econometrics, 2010, Vol. 25(6), pp. 929-962

2012 Richard Stone Prize in Applied Econometrics

Employment Protection, Product Market Regulation and Firm Selection

with Winfried Koeniger

Economic Journal, 2007, Vol. 117 (June), F302–F332

The Impact of Disembodied Technological Progress on Unemployment

Review of Economic Dynamics, 2007, Vol. 10 (1), pp. 106-125

Job Selection under Uncertainty and the Wage Distribution

The B.E. Journal of Macroeconomics (Contributions), 2006, Vol. 6 (1), Article 2