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The Economic Theory workshop is a weekly seminar taking place on fridays 12-13h at the Maison des Sciences Economiques (106-112 Boulevard de l'Hôpital). This seminar is a venue for theoretical work in Economics and for work drawing on quantitative methods in Economics. Defined by an approach rather than by a specific theme, the topics of the seminar can concern a variety of areas in Economics, such as (non exhaustively), micro economics, game theory, mathematical economics, decisions theory, finance or macro economics. The seminar functions as an internal workshop but also regularly greets speakers from other institutions.

Organizers: Emily Tanimura, Stéphane Zuber, Anna Bogomolnaia and Hervé Moulin,

If you want to be added to the seminar mailing list, or for any other query about the Economic Theory seminar, please feel free to contact Emily Tanimura (emily(dot)tanimura(at)univ-paris1(dot)fr).

It is supported by the Centre d'économie de la Sorbonne, CNRS and Université Paris 1 Panthéon-Sorbonne.

• January 31st  : Georges Zaccour  (GERAD HEC Montréal )

Title : Payment schemes for finitely repeated Prisoner's Dilemma games

Location: Maison des Sciences Économiques, room S17

Summary: 

We consider finitely repeated Prisoner's Dilemma game and propose a method of sustaining cooperation as an ε-equilibrium in limited retaliation behavior strategies. The main feature of this strategy is that the punishment of a deviated player does not necessarily last until the end of the game. The duration of punishment depends on the stage when deviation happens, and it is not uniquely defined. We propose two payment schemes along the cooperative trajectory to sustain cooperation based on these limited retaliation strategies. If the payments in the game are organized following these schemes, when they exist, then players have no incentive to deviate and cooperation is sustainable.

Keywords: Prisoner's Dilemma; Repeated Games; Limited Retaliation; Cooperation; Payment Schemes.

• February 14th   : Franz Dietrich  (CES  )

Title :  The impossibility of non-manipulable probability aggregation

Location: Maison des Sciences Économiques, room S17

Summary:  

A probability aggregation rule assigns to each profile of probability functions across a group of individuals (representing their individual probability assignments to some propositions) a collective probability function (representing the group’s probability assignment). The rule is “non-manipulable” if no group member can manipulate the collective probability for any proposition in the direction of his or her own probability by misrepresenting his or her probability function (“strategic voting”). We show that, except in trivial cases, no probability aggregation rule satisfying two mild conditions (non-dictatorship and consensus preservation) is non-manipulable.

• February 21st  : Ying He (University of Southern Denmark )

Title : Two-Stage Evaluation Model for Decision Making under Ambiguity

Location: Maison des Sciences Économiques, room S17

Summary:  In this paper, a two-stage evaluation (TSE) model for decision making under ambiguity is proposed. Events in state space are classified into risky and ambiguous events, which correspond to different types of uncertainty generated by different sources. In this TSE model, uncertainty of two different types are evaluated by DM in different stages. In the first stage, DM evaluates more uncertain consequences of an act locally by applying local subjective expected utility (SEU) models, which are then embedded into the second stage evaluation based on SEU defined globally over all events. To axiomatize such a model, Kopylov (2007)’s “small” domain SEU over risky acts is extended to both risky and non-risky(ambiguous) acts. When evaluating a risky act, TSE model reduces to Savage’s SEU with one stage. When evaluating an ambiguous act, local SEU with a different uncertainty aversion defined on ambiguous events gives TSE model some flexibility in describing preferences. It can be shown that TSE model can accommodate Ellsberg’s paradoxes and Machina’s paradoxes in the literature (Ellsberg 1961, Machina 2009, 2014). When applied to portfolio selection problem, TSE model enjoys some nice properties other models do not have.

• March 7th  : Simon Finster (CREST)

Title : TBA

Location: Maison des Sciences Économiques, room S17

Summary:  TBA

• March 14th  : Pamela Bombarda (Cergy) - 

Joint seminar with the "Rencontres du CES" series

Title : Rules of Origins Relaxation and Regional Supply Chains: Evidence from Europe (with E. Gamberoni and I. Iodice)

Location: Maison des Sciences Économiques, room S17

Summary:  Free trade agreements (FTAs) incorporate regulations regarding rules of origin (RoO) and cumulation. RoO regulations, by restricting the use of inputs outside the FTA, can affect the flow of intermediates in supply chains. We construct a new database to assess the effects of RoO, enabling us to explore two major events that led to RoO relaxation in the European context: PECS, which provided the possibility of cumulating stages of production across the European Union’s FTA peripheral partners, and EU enlargement, which eliminated RoO altogether. Our results show that the progressive reduction in RoO had a sizeable impact on reshaping regional and international supply chains. Across both episodes, we estimate consistent elasticities, indicating that a 1% increase in the value requirement restriction before relaxation corresponds to an intermediate import increase ranging from 0.3% to 0.7% from countries where RoO restrictions have been lifted.

• March 21st  : Laurent Simula (ENS Lyon)

Joint seminar with the "Rencontres du CES" series

Title : Productivity schocks, optimal income taxation and inequality (with A. Trannoy)

Location: Maison des Sciences Économiques, room S17

Summary:  In the literature on inequality and risk, changing distribution densities at the margin has been popularized as mean-preserving spreads by Rothschild and Stiglitz (1970). We import this idea into the optimal nonlinear income tax framework to study the impact of a positive shock on productivity, taking place on a given interval I, on the optimal allocation and optimal marginal tax rates. Under a maximin social objective and when the elasticity of taxable income only depends on productivity, we show that optimal marginal tax rates are unaltered at all productivity levels outside of I and decrease on an interval which includes the first half of I. We then derive a general result for the class of rank-dependent social welfare functions consistent with Lorenz-ordering (Simula and Trannoy, 2022a,b), including the maximin as limit case, with no condition on the elasticity of taxable income. Specifically, we show that the change in optimal

marginal tax rates is non-monotonic on I. The optimal marginal tax rate first increases on a sub-interval which does not entirely correspond to the region where the density decreases; it

then decreases on a sub-interval which includes the end point of I. The changes in taxable income are symmetric. Optimal income tax rates and taxable incomes are unaltered outside of I. When the productivity shock affects the top of the distribution, this leads to a reduction in marginal tax progressivity. The previous results have consequences regarding the inequality of various distributions. We establish that the Lorenz curves of the gross optimal income distributions before and after the productivity changes intersect. This means that if we stick to inequality indices which agree with the Lorenz criterion, they can disagree about the question whether inequality has increased or decreased. In fact, if the productivity change affects the middle of the productivity distribution, the share of the poor and the rich will lower; moreover, the national income will be higher than before the change.

• March 28th  : Dinko Dimitrov (Saarland University)

Title : Incomplete Information and Matching of Likes: A Mechanism Design Approach

Location: Maison des Sciences Économiques, room S17

Summary: 

We employ a mechanism design approach and study the implementability of stable matchings in a two sided market model with one sided incomplete information. Firms' types are assumed to be publicly known, while workers' types are private information. A mechanism generates a matching and a public announcement at each reported profile of workers' types. We show that, when agents' preferences are increasing in the types of their matched partner, the assortative matching mechanism publicly announcing the set of reported types is incentive compatible. This mechanism fails to be incentive compatible when we allow for either private verification of types or incompleteness of information on both sides of the market.

• April 11th  : Antonin Macé (PSE)

Title : Repeated Majority Voting

Location: Maison des Sciences Économiques, room S17

Summary:  We propose a general model of repeated voting in committees and study equilibrium behavior under alternative majority rules. We find that repetition may significantly increase the efficiency of majority voting through a mechanism of intertemporal logrolling, agents sometimes voting against their immediate preference to benefit the group’s long-term interest. In turn, this affects the comparison of majority rules, which may differ significantly relative to the static setting. The model provides a rationale for the use of super-majority rules, while accounting for the prevalence of consensus in committee voting.

• April 25th  : Michael Mandler (Royal Holloway University of London)

Title : Randomization in experiments and the merging of recommendations

Location: Maison des Sciences Économiques, room S17

Summary:  A random assignment of treatments to experimental subjects allows researchers with diverse priors to come to near agreement on which treatments are optimal. The result assumes that priors on data observations are mutually absolutely continuous and ratios of beliefs are bounded. Existing work shows that researchers can commit ex ante to the recommendations of randomized control trials but not that researchers will interim agree once data arrive. A probability dilation thus appears: researchers will agree ex ante and ex post but not always ex interim. Agreement is even more difficult with deterministic experiments: researchers can then fail to nearly agree on recommendations even when they agree on the probabilities of experimental results. Finally, if a maxmin rather than a unanimity rationale for randomization is used then rankings can be dynamically inconsistent.

• May 9th   : Luca Nenna  ((LMO, Université Paris-Saclay et ParMA, Inria-Saclay)

Title : Risk management via multi-marginal optimal transport

Location: Maison des Sciences Économiques, room S17

Summary:  We study the problem of maximizing a spectral risk measure of a given output function which depends on several underlying variables, whose individual distributions are known but whose joint distribution is not. We establish and exploit an equivalence between this problem and a multi-marginal optimal transport problem. By using this reformulation we can establish explicit, closed form solutions for a large class of output functions.

• May 16th   : Guillaume Vigeral (Université Paris-Dauphine )

Title :  Structure of the sets of Nash equilibria of finite games; applications to the complexity of some decision problems in game theory

Location: Maison des Sciences Économiques, room S17

Summary: The set of Nash equilibrium payoffs of a finite game is always non 

empty, compact and semialgebraic. We show that, for 3 players or more, 

the reverse also holds: given E a subset of R^N that is non empty, 

compact and semialgebraic, one constructs a finite N player game such 

that E is its set of equilibrium payoffs. 

We apply this result to understand the complexity class of some natural 

decision problems on finite games.