2017 April - 2018 March

Abstract

Akifumi Ishihara, “Managing information for project choice and incentives in relational contracts.”

We consider a relational contracting model with project choice and execution effort. The agent's incentive of execution effort depends on his belief on the profitability of the project, which is influenced by allocation of the decision right on project choice. We characterize the optimal pattern of allocation of the decision right on project choice, which depends on the discount factor, and show that the decision right is not necessarily allocated to the party with superior information on the profitability of the project.

Hodaka Morita, “Firm-specificity of asset, managerial capability, and labor market competition.”(co-authored with Cheng-Tao Tang)

Firms let their employees operate their assets to produce and sell goods and services. Specificity of a firm’s asset and capability of its top management are two important sources of profitability. We develop a two-period duopoly model that captures the link between specificity of a firm's asset and capability of the firm’s top management, where the degree of firm-specificity is endogenously determined through firms’ competition in the labor market. In period 1, each firm hires a certain number of workers and determines the degree of asset specificity, and each worker acquires skills and learns firm-specific nature of his/her employer's asset. Each firm's managerial capability realizes and becomes common knowledge, and some workers move from high-capability firm to low-capability firm before period 2 production occurs. We find that, as the importance of managerial capability increases, firms make their asset less firm-specific, making human capital acquisition less firm-specific. Also, firm size becomes smaller and labor mobility increases. Our findings yield empirical implications and predictions, given that the importance of managerial capability differs across industries, countries and time.

Hideshi Itoh, “Image concerns in teams.”

In this paper I analyze theoretically how social image concerns affect motivation problems in team production. One prominent feature of teams is mutual monitoring. Under close teamwork it is likely that team members can observe their behaviors each other, and hence they care about how their reputation about intrinsic motivation toward team performance is evaluated by (some of) the other members.

I first assume that all the agents are identical except for their "types," and derive a condition under which the average team effort per agent is <em>increasing</em> in team size. The condition identifies two positive effects from image concerns. The first,

obvious effect is that the agent cares more about his image concerns in larger teams because "more eyes" are observing his behavior. Second, even if the first effect is absent, the average team effort can still increase with team size because the weaker monetary incentives in larger teams raise the marginal value of reputation.

I next classify the agents into two categories, "insiders" and "outsiders" and show that replacing insiders by outsiders may have positive effects on the average team effect. The results explain why increasing the number of independent directors from zero to one, or 

hiring a new CEO from outside ("new blood") can have significant and positive effect on firm performance.

Shintaro Yamaguchi, “How does early childcare enrollment affect children, parents, and their interactions?”(co-authored with Yukiko Asai and Ryo Kambayashi)

We estimate the effects of childcare enrollment on child outcomes by exploiting a staggered childcare expansion across regions in Japan. We find that childcare improves language development among boys and reduces aggression and the symptoms of ADHD among the children of low-education mothers. Estimates show that the improved child behavior is strongly associated with better parenting quality and maternal wellbeing. Evidence also suggests that promoting positive parenting practices is an important element of an effective childcare program. Our estimates for marginal treatment effects indicate that children who would benefit most from childcare are less likely to attend, implying inefficient allocation.

Daniel Marszalec, “Bounded rationality, expectations and risk aversion in auctions for complements.”(co-authored with Alexander Levkun and Alex Teytelboym)

We evaluate four auctions for complements in an experimental setting with one global and two local bidders. Using between-subject design, we also vary the degree of correlation between local bidders’ values. The experiment covers two standard auctions (Vickrey and fist-price), and two sealed-bid core-selecting designs (Nearest-Bid and Reference Rule). At the auction level, we find the first-price auction revenue-dominant, and most efficient, across for all correlation parameters. At the bidder level, Bayesian-Nash predictions are rejected, and bidders do not account for the effects of correlation. Furthermore, under full correlation, bidders are also not best-responding to their expectations of their rivals’ play. Though a small degree of free-riding is observed between local bidders in the first-price auction, we reject level-K type bounded rationality as likely explanation of bidder behaviour. Using numerically calculated best-response functions, we propose risk aversion as the best fit to the data, which can also explain the strong performance of the first-price auction.

Kousuke Hirose, “Reference dependence and product differentiation.” (co-authored with Susumu Sato) 

We analyze the effect of consumer reference dependence on product differentiation a la Hotelling model. When making consumption decision, consumers evaluate a product by comparing it with their reference point which is a particular product. We find that, depending on the relative prominence on the market, one firm engages in mixed strategy which charges a regular price and a sales price with some probability. Furthermore, the principle of maximum differentiation fails under consumer reference dependence. When the prominent firm engages in the mixed strategy in equilibrium, it locates in an interior point, while the less prominent firm locates at the opposite end.

Ruichao Song, “Optimal renewable-energy subsidies in the long run.” (co-authored with Rupayan Pal)

Conventional wisdom is that private supply of products with positive externalities is insufficient and should be supported by intuitive policies, therefore, renewable-energy industry, exhibiting both generation externalities (carbon abatement) and capacity externalities (technology spillovers), has received subsidization world widely. We use a general framework in Cournot competition and show that in the long run, even without any support schemes, industry capacity can be excessive for products with positive externalities, while the total supply hasn’t reached its optimum. Therefore, an entry restriction accompanied with production promotion schemes is more favorable in such a case. On the other hand, when there are strong capacity externalities, instruments that induce entrance to the industry will be useful. Further we compare two main subsidy policies that mostly used to induce entrance to the market in the long run, and we show that lump sum subsidy can induce more entrance while per unit subsidy yields a high level of total output. Therefore, for the renewable-energy industry, when capacity externalities are strong, lump sum subsidy policy is more efficient and when generation externalities and consumer surplus are more important, then per unit subsidy scheme will be a better choice.

Chiaki Moriguchi, “Geopolitics and Asia’s little divergence: State building in China and Japan after 1850.” (co-authored with Mark Koyama, and Tuan-Hwee Sng)

We provide a new framework to account for the diverging paths of political development in China and Japan during the late nineteenth century. The arrival of Western powers not only brought opportunities to adopt new technologies, but also fundamentally threatened the sovereignty of both countries. These threats and opportunities produce an unambiguous impetus toward centralization and modernization for small states, but place conflicting demands on larger states. We use our theory to study why China, which had been centralized for much of its history, experienced gradual disintegration upon the Western arrival, and how Japan rapidly unified and modernized.

Ryota Ogaki, “Optimal monetary and macroprudential policies under risk of sudden stops.”

The risk of sudden arrest of capital inflows, which is called a ``sudden stop,'' is a significant concern in emerging economies. This study examines the benefits of optimal monetary and macroprudential policies in a small open economy with occasionally binding collateral constraint and nominal price rigidity. The movement of a sudden stop is depicted by a combination of endogenous financial frictions and debt deflation through currency depreciation. We focus on a time-consistent policy equilibrium and compare this policy with other policy rules. We have three main findings. First, the characteristics of the optimal monetary policy during crises cause currency appreciation by raising the interest rate to mitigate the collateral constraint. Second, monetary policies during crises affect the movement of an economy in tranquil times. As a monetary authority encourages mitigating the effect of crises, such a policy reaction reduces the precautionary saving motive of domestic agents and increases the frequency of crises. Third, before sudden stops occur, an optimal macroprudential tax reduces the amount of borrowing to lower the frequency of sudden stops, and without the tax, the optimal monetary policy reduces interest rate to restore the output drops caused by precautionary saving motives.

Makoto Nirei, “Interaction origins of aggregate fluctuations.”  

Only a part of aggregate fluctuation in an economy is accounted for by identifiable aggregate shocks. Sudden booms and crashes in financial markets or industries seem often triggered by not so obvious shocks. In this presentation, I explore a hypothesis that interactions of idiosyncratic shocks generate sizable aggregate fluctuations. I start by reviewing that idiosyncratic shocks tend to be canceled out with each other by the law of large numbers, and the law is violated under certain environments. I argue that such environments arise when micro-level behaviors exhibit discreteness and perfect complementarity. A macroeconomy features such environments in three aggregates: (1) asset prices under asymmetric information in which traders play the Keynes’ beauty contest by inferring each other’s private information, (2) aggregate investments when firms’ investments exhibit lumpiness and demand externality, and (3) inflation rates when money is neutral in the long-run but prices are sticky in the short-run.

The 114th meeting

              co-organized by Search Theory Workshop

              https://sites.google.com/view/searchtheoryworkshop

  Date    Friday, January 19, 2018.

  Place  Graduate School of Economics, Osaka University (Meeting room 701,

              the main meeting room on the 7th floor of Graduate School of Law and

              Graduate School of Economics Building, Toyonaka Campus).

  Presenters

  14:40-16:10 Akiko Maruyama, Faculty of Economics, University of Marketing and Distribution Sciences.

              Title:“One-sided learning about one's own type in a two-sided search.”

              Abstract:

              This study analyzes a two-sided search model in which agents are vertically 

              heterogeneous and agents on one side do not know their own type. Agents 

              with imperfect self-knowledge update their beliefs based on the offers or rejections 

              they receive from others. In the learning process, an agent with imperfect self-knowledge 

              frequently rejects (accepts) a person of the opposite sex whom he or she would accept 

              (reject) when he or she knows his or her own type. In this paper, we show that this 

              optimistic (pessimistic) behavior influences both the agent's and other agents' matching 

              behaviors. We show, specifically, that the optimism of some agents prevents the lowest-type 

              agents from matching. However, the pessimism of some agents does not affect the matching 

              of the lowest-type agents.

  16:20-17:50 Makoto Hanazono, Graduate School of Economics, Nagoya University.

             Title:“Market structure and price dispersion: Asymmetric oligopoly with sequential 

             consumer search.”(co-authored with Noritaka Kudoh)

             Abstract:

             This paper presents a new theory of price dispersion. We build a model of oligopolistic price 

             competition among n firms with sequential consumer search, in which each firm consists of 

             a mass of sellers. Since search is random, consumers are more likely to meet sellers from 

             a larger firm. This reduces the consumer's outside option of rejecting a trade with a seller

             from a larger firm, generating a greater market power for a larger firm. We show that price 

             dispersion disappears as search frictions disappear. Interestingly, there is a non-monotonic 

             relationship between search frictions and price dispersion.

The 113th meeting

  Date    Friday, December 15, 2017.

  Place  Graduate School of Economics, Osaka University (Meeting room 701,

              the main meeting room on the 7th floor of Graduate School of Law and

             Graduate School of Economics Building, Toyonaka Campus).

   14:40-16:10 Hitoshi Sadakane, Institute of Economic Research, Kyoto University.

             Title:“Complementarity between communication and investigation.”

             Abstract:

             I analyze a sender-receiver game where the receiver can conduct a costly 

             investigation after receiving a cheap talk message from the sender. In a phase 

             of investigation, the receiver searches for the true state based on the information 

             transmitted by the sender. If the sender misrepresents the truth in the communication 

             stage, then the receiver’s investigation ends up in vain. However, the receiver has no 

             way of  knowing that her investigation was in vain. In such a situation, the quality of 

             the receiver’s decision-making could decrease significantly since she makes a decision 

             upon the quite wrong information. This diminishes the sender’s incentive to exaggerate. 

             In this paper, it is shown that the receiver’s investigation can enhance the amount of 

             information conveyed via cheap talk communication. As a result, welfare can be raised 

             for every bias level. Furthermore, it is also shown that the degree of uncertainty has little 

             effect on the players’ payoffs under the receiver’s optimal equilibrium. 

  16:20-17:50 Yusuke Kasuya, Graduate School of Economics, Kobe University.

             Title:“Exploring how a “wrong” theory makes for a “good” society.”

             Abstract:

             By examining the history of economics attempting to design institutions, I trace out and 

             stretch a methodology characterized by its anti-realistic, rhetorical, and paternalistic 

             view on theory. Two by-products are in order: (i) An anti-bullying teacher evaluation 

             system is presented which also makes a case for modeling “unmodelable" phenomena 

             in economics; (ii) The persuasion criterion for evaluating an institution is presented which 

             accommodates incoherent preferences of agents.

The 112th meeting

  Date    Friday, November 17, 2017.

  Place  Graduate School of Economics, Osaka University (Meeting room 701,

              the main meeting room on the 7th floor of Graduate School of Law and

             Graduate School of Economics Building, Toyonaka Campus).

  14:40-16:10 Junichi Yamasaki, Graduate School of Economics, Kobe University.

             Title:“Time horizon of government and public goods investment: Evidence from Japan.”

             Abstract:

             The political economy literature recognizes that a longer time horizon of government is 

             one of the key determinants of local public goods investment and the origin of states. 

             I use a unique event in Japanese history during this Edo period (1615–1868) to identify 

             the effect. In 1651, the sudden death of the third Shogun, the executive leader of the 

             Tokyo government, gave rise to a political crisis and reduced the transfer risk of local lords, 

             especially for insiders, who supported the Tokyo government during the war of 1600. 

             To exploit this regime change to identify the causal impact of tenure risk on public goods 

             provision, I digitize various data sources, such as the records of public investment in 

             irrigation and other agricultural infrastructure. By a difference-in-differences strategy, 

             I find that after 1651, regions owned by insiders increased the number of public projects 

             financed by local lords more than regions owned by the other lords. I discuss other possible 

             policies that might induce bias in this reduced-form effect, such as in-kind intergovernmental 

             transfers and other possible ways to interpret the effect of tenure risk. However, I find no 

             strong support for these alternative channels and conclude that the results support a longer 

             time-horizon effect.

  16:20-17:50 Noriaki Matsushima, Institute of Social and Economic Research, Osaka University.

             Title:Supplier encroachment and retailer effort. (co-authored with Tomomichi Mizuno 

                     (GSE, Kobe University)) 

             Abstract:

             We provide simple dual-channel models in which an upstream manufacturer, which trades 

             with a downstream retailer that is able to engage in cost-reducing activities, encroaches into 

             the downstream market after observing the retailer's effort level. We consider two contract 

             styles: (i) linear wholesale price contract and (ii) two-part tariff contract under Nash bargaining. 

             We show that, under both of the contract styles, the threat of manufacturer encroachment can 

             work as a disciplinary device to induce the retailer to engage in cost reduction more, and then 

             the manufacturer refrains from encroaching into the downstream market. We also show that the 

             manufacturer encroaches into the downstream market under the case of two-part tariff contract 

             if it does not have strong bargaining power over the retailer. We also discuss the welfare implication 

             of our model.

The 111th meeting

  Date    Friday, October 20, 2017.

  Place  Graduate School of Economics, Osaka University (Meeting room 701,

              the main meeting room on the 7th floor of Graduate School of Law and

             Graduate School of Economics Building, Toyonaka Campus).

  Presenters

  14:40-16:10 Shuhei Kitamura, Osaka School of International Public Policy, Osaka University.

             Title:“Geography and state fragmentation.” (coauthored with Nils-Petter Lagerlöf)

             Abstract:

             Some of the richest places in the world have very high historical border presence, 

             and are often located in particular geographic environments. Here we compile 

             grid-cell level data on borders between sovereign states in Europe and surrounding 

             areas from 1500 until today. We find that state borders tend to be located in rugged 

             and mountainous terrain, by rivers, and where it rains a lot. Moreover, modern 

             development, as measured by night lights and population density, shows positive 

             correlation with border presence, even when controlling for geography. However, 

             cells that have more borders than immediate neighbors are less developed than those 

             neighbors. These patterns are consistent with a theory in which state competition benefits 

             long-run development, but these benefits accrue more to the center than the periphery 

             of countries.

  16:20-17:50 Ken-Ichi Shimomura, Research Institute for Economics and Business Administration, Kobe University.

             Title:“What can experiments tell us about strategic behaviour in two-person, 

                     non-zero-sum games?”(so-authored with Simon McNair, Alan Pearman and Barbara Summers) 

             Abstract:

             Game theory has provided a rich source of insights for seeking to 

             understand how individuals should and, to some extent, how they do 

             behave in a variety of competitive situations. Although the immediate 

             settings may be quite simplified or abstract, they are close enough 

             to real life to offer worthwhile additions to complementary 

             alternative perspectives, such as those from decision research or 

             from other models of competition in economics. In this paper, we 

             further develop a continuing series of computer-based experimental 

             investigations into how a subject identifies a strategy for competing 

             against an opponent in a series of two-person non-zero-sum games. The 

             primary focus is descriptive - what people actually do   as opposed 

             to prescriptive   what they should do if acting rationally. We 

             explore whether and how their strategies evolve over time, how 

             effective they are, and how participants’ behaviour correlates with 

             verbal reports from the players describing what thought processes 

             they were implementing at the time in order to decide on their 

             strategic approach. We use measures of individual psychological 

             difference to elaborate our descriptive account. We consider the 

             influence of the complexity of the game on their exhibited behaviour 

             and, unusually, investigate how behaviour patterns respond to sudden 

             and unexpected changes in the game itself, a possibility not 

             uncommonly met in real-life competitive s

The 110th meeting: Tokyo Conference,  Summer 2017

  Date    Thursday-Friday, August 17-18, 2017.

  Place  Institute of Social Science, The University of Tokyo.

              Conference Room (Room 549), 5th floor, Akamon General Research Building, 

              Hongo Campus.

Program

Thursday, August 17

12:30-12:55 Welcome coffee

12:55-13:00 Opening Remarks

Masaki Nakabayashi, Institute of Social Science, The University of Tokyo.

13:00-15:35 Development

chaired by Keisuke Kawata, Institute of Social Science, The University of Tokyo.

13:00-14:10 Stacey Chen, National Graduate Institute for Policy Studies.

Title: “Measuring remoteness using a data-driven approach.”(co-authored with Yu-Kuan Chen, 

         and Huey-Min Wu)  

14:10-14:25 coffee break

14:25-15:35 Mari Tanaka, Graduate School of Economics, Hitotsubashi University.

Title: “Scarce trustworthy workforce? Evidence from Lao textile industry.”(co-authored with 

         Yasuyuki Sawada)

15:35-15:50 coffee break

15:50-18:25 Structure of Financial Markets

chaired by Kosuke Aoki, Graduate School of Economics, The University of Tokyo.

15:50-17:00 Atsushi Yamagishi, Graduate School of Economics, The University of Tokyo.

Title: “Transboundary pollution, tax competition, and the efficiency of uncoordinated 

        environmental regulation.” 

17:00-17:15 coffee break

17:15-18:25 Asako Chiba, Graduate School of Economics, The University of Tokyo.

Title: “Financial contagion in core-periphery networks and real economy.” 

Wine and snack

18:30-20:00

Friday, August 18

10:00-12:35 Social Development and Sustainability

chaired by Hirokazu Ishise, Graduate School of International Public Policy, Osaka University.

10:00-11:10 Ayako Kondo, Institute of Social Science, The University of Tokyo.

Title: “The effect of raising Long-term Care Insurance payments on employment and wages in 

         nursing industry.” 

11:10-11:25 coffee break

11:25-12:35 Mai Seki, Japan International Cooperation Agency Research Institute.

Title: “Individualized self-learning program to improve primary education: Evidence from a randomized field experiment 

        in Bangladesh.”(co-authored with Yasuyuki Sawada, An Le, Minhaj Mahmud, and Hikaru Kawarazaki) 

12:35-13:35 lunch

13:35-17:35 Industrial Organization

chaired by Toshihiro Matsumura, Institute of Social Science, The University of Tokyo.

13:35-14:45 Susumu Sato, Graduate School of Economics, The University of Tokyo.

Title: “Dynamic privatization policy.” 

14:45-15:00 coffee break

15:00-16:10 Junichi Haraguchi, Faculty of Economics, Gakushuin University.

Title: “Firms' costs, profits, entries, and innovation under the optimal privatization policy.”

        (co-authored with Toshihiro Matsumura). 

16:10-16:25 coffee break

16:25-17:35 Naoki Wakamori, Graduate School of Economics, The University of Tokyo.

Title: “Excess capacity and effectiveness of policy interventions: Evidence from the cement industry.”

        (co-authored with Tetsuji Okazaki and Ken Onishi)

17:35-17:40 Closing remarks

Masaki Nakabayashi, Institute of Social Science, The University of Tokyo.

The 109th meeting

  Date    Friday, July 21, 2017.

  Place  Graduate School of Economics, Osaka University (Meeting room 701,

              the main meeting room on the 7th floor of Graduate School of Law and

             Graduate School of Economics Building, Toyonaka Campus).

  14:40-16:10 Hirokazu Ishise, Osaka School of International Public Policy, Osaka University.

           Title:“Sex preference, religious ethic, and missing women: the Japanese fire-horse years 

                    and the Jodo-shin-shu sect in 1846 and 1906.”

           Abstract:

           Japanese population data shows strange patterns once in every 60 years, known as 

           hinoe-uma (fire-horse) of Chinese zodiac of sexagenary cycle. Due to a superstition that 

           girls born in fire-horse years are inauspicious or even leading the family tragedy, the 

           statistics shows sharp drops of the female-to-male ratio of the cohort in 1846 and 1906, 

           and of the population growth rate in 1846, 1906, and 1966. Literature (e.g., Kaku, 1972, 

           Rohlfs et al., 2009) considers these drops are caused by sex-blind abortion, infanticide, 

           and false reporting of the birth year in 1846 and 1906, and by contraception in 1966. 

           What is not examined in the literature is inter-prefectural variations. I first document there 

           are substantial inter-prefectural variations of the drops in 1846 and 1906 episodes. I then 

           show that prefectures where Jodo-shin-shu (True-pure-land),  a sect of Japanese Buddhism, 

           was dominant experienced significantly less drops. Based on several historical documents, 

           literature in history, historical demography, ethnography and sociology has been suggesting 

           that the Jodo-shin-shu sect strictly implemented anti-homicide ethic, along with other special 

           role played by this sect for economic development analogous to Protestantism in European 

           development, but the roles played by Jodo-shin-shu sect have never been statistically 

           confirmed. I show the prevalence of the Jodo-shin-shu sect significantly mitigates the drops 

           after controlling for other observable  factors, and hence give the first econometric evidence 

           of the special role of the sect.

  16:20-17:50 Tomoko Hashino, Graduate School of Economics, Kobe University.

            Title:“The rise and fall of industrialization and changing labor intensity: the case of an 

                    export-oriented silk weaving district in modern Japan.”(co-authored with Keijiro Otsuka)

            Abstract:

            The production of habutae, a simple silk fabric, expanded rapidly between 1890 and 1918 in 

            Japan’s Fukui Prefecture, with large exports to Europe and the United States. The production of habutae, 

            initially woven by hand, was labor intensive, but it gradually became capital-intensive after the introduction 

            of power looms. Production and export of this fabric declined precipitously from 1918. In this paper, we 

            attribute the rise and then fall of Japan’s production and export of habutae to its changing comparative 

            advantage, which is associated with shifts from labor-using to capital-using production technology initiated 

            in the United States.

The 108th meeting

  Date    Friday, June 21, 2017.

  Place  Graduate School of Economics, Osaka University (Meeting room 701,

             the main meeting room on the 7th floor of Graduate School of Law and

            Graduate School of Economics Building, Toyonaka Campus).

  Presenters

  14:40-16:10 Cong Pan, Graguate School of Economics, Osaka University.

          Title:“Supplier Encroachment and Consumer Welfare: Upstream Firm's 

                  Opportunism and Multichannel Distribution.”

  16:20-17:50 Takeshi Murooka, Osaka School of International Public Policy, Osaka University.

          Title:“The Provision of High-Powered Incentives under Multitasking.”

                  (co-authored with Kohei Daido)

The 107th meeting

  Date    Friday, May 19, 2017.

  Place  Graduate School of Economics, Osaka University (Meeting room 701,

             the main meeting room on the 7th floor of Graduate School of Law and

            Graduate School of Economics Building, Toyonaka Campus).

  Presenters