Volatility and Resilience of Democratic Public-Good Provision (with Hans Gersbach and Fikri Pitsuwan) (2nd Round R&R at International Economic Review)
We examine democratic public-good provision with heterogeneous legislators. Decisions are taken by majority rule and an agenda-setter proposes a level of the public good, taxes, and subsidies. Members are heterogeneous with respect to their benefits from the public good. We find that, depending on the status quo public-good level, the agenda-setter will form a coalition with the agents who most desire, or least desire, the public good, and we may observe `strange bedfellow' coalitions. Moreover, public-good provision is a non-monotonic function of the status quo public-good level. In the dynamic setting, public-good provision fluctuates endogenously, even if the agenda-setter stays the same over time. Moreover, the more polarized the legislature is, the higher is the volatility of public-good provision and the longer it may take for a society to recover from negative shocks to public-good provision. We illustrate these findings for a two-party system with polarized parties.
A set of agents has to make a decision about the provision of a public good and its financing. Agents have heterogeneous values for the public good and each agent's value is private information. An agenda-setter has the right to make a proposal about a public-good level and a vector of contributions. For the proposal to be approved, only the favourable votes of a majority of agents are needed. If the proposal is not approved, a type-dependent outside option is implemented. I characterize the optimal public-good provision and the coalition-formation for any outside option in dominant strategies. Optimal public-good provision might be a non-monotonic function of the outside option public-good level. Moreover, the optimal coalition might be a non-convex set of types. Importantly, majority voting creates endogenously countervailing incentives among agents.
This paper seeks to explore the potential trade-off arising between the theories of Equality of Opportunity and Opportunity Pluralism. Whereas the first theory has received much attention in the literature on Welfare Economics, the second one has only recently been introduced with the publication of the book by Joseph Fishkin, Bottlenecks: A New Theory of Equal Opportunity. After arguing extensively that any notion of human flourishing is incompatible with traditional theories of Equality of Opportunity, the author proposes an alternative theory squarely based on a broad notion of human development. This paper seeks to formalize the argument made in this book through the lens of economic theory. My analysis suggests that traditional theories of Equality of Opportunity are not incompatible with Opportunity Pluralism.
Optimal Large-Contest Design (major revision to appear soon)
In this paper, we provide a theoretical framework to analyze the optimal design of large contests, such as university admissions and research funding. Under a broad class of distributional preferences, the optimal allocation rules are step functions with at most two steps, thus rationalizing several real-world examples. From a methodological perspective, we leverage the mathematics of extreme points to characterize optimal allocation rules in environments where the distribution of efforts can be endogenous. When the designer wants to maximize aggregate effort, the optimal allocation rule sets a performance threshold and it awards prizes at random above it, provided noise is sufficiently small. When noise is larger, awarding prizes to the best performers becomes optimal.
Multidimensional Screening with CES Preferences (with Friedemann Krannich and Robert J. McCann)
Platform Design and Product Quality (with Berno Büchel and Enrico Maria Fenoaltea) (submitted)
Product quality is essential for consumer surplus and social welfare. We study how incentives for product quality are shaped by platform fees and quality-based steering. A profit-maximizing platform rewards quality and charges a commission rather than using a transaction fee. Steering partly offsets the commissions’ adverse quality incentives, but quality remains inefficiently low. Reducing quality rewards can nevertheless improve welfare by expanding quantity. Commission caps have a non-monotonic effect on welfare: moderate caps increase quality and welfare, while tighter caps reduce welfare despite efficient quality. The results show why neither stronger quality incentives nor stricter commission regulation necessarily improves welfare.
Optimal Course Design in the Age of AI