The 115th meeting: Tokyo Conference, Spring 2018
Date Monday to Tuesday, February 19-20, 2018.
Place Institute of Social Science, The University of Tokyo.
Conference Room (Room 549), 5th floor, Akamon General Research Building, Hongo Campus.
Program
Monday, February 19
12:00-12:25 Welcome coffee
12:25-12:30 Opening remarks.
Masaki Nakabayashi, Institute of Social Science, The University of Tokyo.
12:30-16:00 Organizational Economics
chaired by Susumu Cato, Institute of Social Science, The University of Tokyo.
12:30-13:30 Akifumi Ishihara, National Graduate Institute for Policy Studies.
“Managing information for project choice and incentives in relational contracts.” download
13:30-13:45 Coffee break
13:45-14:45 Hodaka Morita, Institute of Economic Research, Hitotsubashi University.
“Firm-specificity of asset, managerial capability, and labor market competition.”(co-authored with Cheng-Tao Tang) download
14:45-15:00 Coffee break
15:00-16:00 Hideshi Itoh, Graduate School of Business and Finance, Waseda University.
“Image concerns in teams.”
16:00-16:15 Coffee break
16:15-18:30 Behavioral Economics
chaired by Ken-ichi Shimomura, Research Institute for Economics and Business Administration, Kobe University.
16:15-17:15 Shintaro Yamaguchi, Graduate School of Economics, The University of Tokyo.
“How does early childcare enrollment affect children, parents, and their interactions?”
(co-authored with Yukiko Asai and Ryo Kambayashi) download
17:15-17:30 Coffee break
17:30-18:30 Daniel Marszalec, Graduate School of Economics, The University of Tokyo.
“Bounded rationality, expectations and risk aversion in auctions for complements.”(co-authored with Alexander Levkun and Alex Teytelboym)
18:45-20:15 Wine and snack
JPY3000 for professors and JPY1000 for students.
Tuesday, February 20
10:00-12:15 Industrial Organization
chaired by Noriaki Matsushima, Institute of Social and Econoimcs Research, Osaka University
10:00-11:00 Kousuke Hirose, Graduate School of Economics, The University of Tokyo.
“Reference dependence and product differentiation.” (co-authored with Susumu Sato)
11:00-11:15 Coffee break
11:15-12:15 Ruichao Song, Institute of Social Science, The University of Tokyo.
“Optimal renewable-energy subsidies in the long run.”
12:15-13:30 Lunch break
13:30-17:00 Growth, Fluctuation, and Stagnation
chaired by Ryoji Ohdoi, Department of Industrial Engineering and Economics, Tokyo Institute of Technology.
13:30-14:30 Chiaki Moriguchi, Institute of Economic Research, Hitotsubashi University.
“Geopolitics and Asia’s little divergence: State building in China and Japan after 1850.”
(co-authored with Mark Koyama, and Tuan-Hwee Sng) download
14:30-14:45 Coffee break
14:45-15:45 Ryota Ogaki, Graduate School of Economics, The University of Tokyo.
“Optimal monetary and macroprudential policies under risk of sudden stops.” download
15:45-16:00 Coffee break
16:00-17:00 Makoto Nirei, Graduate School of Economics, The University of Tokyo.
“Interaction origins of aggregate fluctuations.” download
17:00-17:05 Closing remarks.
Masaki Nakabayashi, Institute of Social Science, The University of Tokyo.
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.”
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.