Oliver Pardo

Assistant Professor

Latest research:

A note on “Evolution of Preferences”

Journal of Mathematical Economics, August 2017.

A surprising result in Dekel et al. (2007) states that strict Nash equilibria might cease to be evolutionary stable when agents are able to observe a signal that fully reveals the opponent’s preferences, even if the frequency of the signal is very low. I show that when the signal a player receives on her opponent’s preferences is almost uninformative, all strict Nash equilibria are evolutionary stable, no matter the frequency of the signal.

with Thiemo Fetzer and Amar Shanghavi. Forthcoming, Journal of Population Economics.

This paper exploits an extensive period of power rationing in Colombia, lasting for most of 1992, to shed light on three interrelated questions. First, we show that temporary shocks can induce changes in fertility, causing mini baby booms.      Second, we show that the temporary shock has a persistent effect on overall fertility. Third, we present evidence suggesting that the temporary shock to fertility cause worse socioeconomic outcomes for mothers 12 years later. Taken together, the results suggest that there are large indirect social costs to poor public infrastructure.

This paper studies the effect of securitization on asset pricing when agents have heterogeneous beliefs about the stochastic process on dividends, prices and interest rates. For this purpose, the asset pricing model of Harrison and Kreps (1978) is modified to account for the possibility for agents to issue asset backed securities. The securities are constrained to belong to tranches of different payment priority, mimicking collateralized debt obligations (CDO). Securitization weakly increases the gap between the price of an underlying asset and any perceived present value of its dividends. A necessary condition for this increase to be strict is the absence of beliefs regarding the next-period price of the underlying asset which first-order stochastically dominate all others beliefs. In states of the world where investors with divergent beliefs buy securities from different tranches, the underlying asset is traded at a price higher than what anyone thinks it is worth. Since securities with a return below the market interest rate may be traded across agents, securitization has mixed effects on portfolio returns. In cases where there is a type of agent more sophisticated than all others, securitization can weakly decrease the returns all agents receive.