Liquidity Risk, Market Power and the Informational Effects of Policy [New Version ][ Journal of  International Economics 142, 2023, 103732] 

[co-authored with Andreas Tryphonides and Grégory Claeys]

Using a multi-unit uniform auction model, we combine bidding data from open market operations as well as macroeconomic information to recover the latent distribution of liquidity risk across banks and how it is affected by policy in Chile. We find that unanticipated shocks to foreign reserve accumulation and interest rates have significant effects on aggregate beliefs about a liquidity shock in the near future, while news about reserve accumulation are not effective. These results suggest the presence of a novel informational channel for macroeconomic policy, while we demonstrate that accounting for market power is important for uncovering these effects.

Corruption in All Pay Auctions [old draft]

As discussed in recent bibliography, auctions performed by an intermediary between the seller of the good and buyers can be penetrable by corruption. Furthermore, corruption can enter auctions in different forms. In the current paper we compare the effects of pure pecuniary corruption and favouritism on bidding behaviour and the auctioneer's expected revenue, in the context of All-Pay Auctions, used to model lobbying, labour-market tournaments and competition for monopoly power. We provide conditions under which favouritism makes bidders more or less aggressive than in the benchmark model without corruption, and prove that bidders are always more aggressive when faced with a non favouritist corrupt auctioneer. In both cases, the revenue maximizing auctioneer deprives his collaborator of all "surplus of corruption". Finally, we study the auctioneer's choice of corruption type, and find that his expected revenue is not necessarily monotonic in the probability that he chooses one type of corruption or the other.

Philanthrocapitalism [draft coming soon]

[co-authored with Agustin Casas]

Whether philanthropy is an effective way to correct for market (as well as political) failures has been held under scrutiny. Yet, when the wealthiest citizens or corporations create foundations with their names and donate millions in order to provide public goods, the society welcomes their behaviour with enthusiasm. In this paper, we investigate the conditions under which philanthropists improve on the social welfare by providing alternative public goods. On one hand, if donations are deducted from the income tax --as with CSR-- the state's loss of fiscal resources may result in a decrease in the provision of public goods or an increase in taxes. While the median-voter's wealth does not change under the presence of philanthropy, her relative wealth does: even keeping the same tax rate, she would be financing a larger share of the public good. Hence, she may vote for a lower tax and diminish the provision of state public goods. Simultaneously, there are incentives to choose a larger tax: if the philanthropists donate the amount they would have paid to the state, a larger tax implies larger donations. This incentive would dominate if the alternative public goods' social return is large enough. In that case, social welfare may increase. We find that, beyond the magnitude of the donations and the relative social return of the alternative public good, the median-voter's solution to the trade-off depends on the technology of provision of public goods. In a nutshell, under increasing returns to scale, the social welfare may decrease dramatically, even if public goods are provided both by the state and by the philanthrocapitalists. Furthermore our results indicate that when wealth inequality is very large and the philanthropist has a strong preference for providing her own public good, voters are willing to fund a wasteful state in order to enjoy at least one public good -the philanthropist's preferred one. 

Optimal Auctions with Naive bidders [preliminary work]

[co-authored with Antonio Miralles and Toshihiro Tsuchihashi]

The literature has long studied optimal mechanisms for profit-maximizing sellers. Although most of the existing research considers market environments where all buyers are rational, we focus on markets where some naive agents might exist, in the sense that instead of acting strategically, their actions always match their true preferences. More specifically, we focus on optimal reserve price setting in first and second price auctions in which some bidders are naive in the sense that they always truthfully submit their valuations. Within an FPA, the existence of naive bidders disturbs bidding equilibria, and might create discontinuities of the bidding functions if reserve prices are imposed. In an second price auction, the existence of naive bidders is irrelevant, as sophisticated bidders are also truthful bidders.  Although the existence of naive players does not affect bidding equilibria and welfare in a SPA, introducing a buyout option, this no longer holds. 

Strategic Complementarities and Corruption [very preliminary work]

In an environment where agents compete against each other for the acquisition of a public good procurement project, assigned by the government and handled by a possibly corrupt inspector, we find that there exists multiplicity of equilibria, and in specific both "good" equilibria without corruption, and "bad" equilibria where corruption arises. The multiplicity of equilibria arising in our simple one-shot model is very useful for us to interpret why countries that are quite similar in all other characteristics, can differ a lot in the level of corruption in their economy, like Chile and Argentina or the Italian North and South. An important feature of the multiplicity of equilibria in our simple model is that they don't depend on any strong assumptions on either the agents' or the inspectors' preferences. In our effort to confirm the multiplicity of equilibria also in the repeated game, we find that inspectors might consider it profitable to suffer negative payoffs in the first period of the game, in order to create more fuzziness as to how much corruption there is in the economy, and thus decrease the probability of getting caught, guaranteeing themselves bigger positive payoffs in their last period in the game. Our result provides an alternative explanation to already existing literature on the persistence of corruption. Unlike research that attributes persistence to the perception of one's environment as corrupt, or to group dynamics and reputation, our simple model explains persistence as a self induced situation aiming to personal gains, which in turn creates (positive and negative) externalities to the rest of the actors in the economy, both agents and (other) inspectors.