Research
PUBLICATIONS:
Designing Rotation Programs: Limits and Possibilities [Games and Economic Behavior]
(with Michele Lombardi and Ville Korpela)
Rotation programs are widely used in our society. For instance, a job rotation program is an HR strategy where employees rotate between two or more jobs in the same business. We study rotation programs within the standard implementation framework under complete information. When the designer would like to attain a Pareto efficient goal, we provide sufficient conditions for its implementation in a rotation program. However, when, for instance, every employee transitions through all different lateral jobs before rotating back to his original one, the conditions fully characterize the class of Pareto efficient goals that are implementable in rotation programs.
Myopic Oligopoly Pricing [accepted at Games and Economic Behavior]
(with Iwan Bos and Marco Marini)
This paper examines capacity-constrained oligopoly pricing with sellers who seek myopic improvements. We employ the Myopic Stable Set stability concept and establish the existence of a unique pure-strategy price solution for any given level of capacity. This solution is shown to coincide with the set of pure-strategy Nash equilibria when capacities are large or small. For an intermediate range of capacities, it predicts a price interval that includes the mixed-strategy support. This stability concept thus encompasses all Nash equilibria and offers a pure-strategy solution when there is none in Nash terms. In particular, it provides a behavioral rationale for different types of pricing dynamics, including real-world economic phenomena such as Edgeworth-like price cycles, price dispersion and supply shortages.
The Myopic Stable Set for Social Environments [Econometrica]
(with T. Demuynck, J.J. Herings and C. Seel)
We introduce a new solution concept for models of coalition formation, called the myopic stable set. The myopic stable set is defined for a very general class of social environments and allows for an infinite state space. We show that the myopic stable set exists and is non-empty. Under minor continuity conditions, we also demonstrate uniqueness. Furthermore, the myopic stable set is a superset of the core and of the set of pure strategy Nash equilibria in noncooperative games. Additionally, the myopic stable set generalizes and unifies various results from more specific environments. In particular, the myopic stable set coincides with the coalition structure core in coalition function form games if the coalition structure core is non-empty; with the set of stable matchings in the standard one-to-one matching model; with the set of pairwise stable networks and closed cycles in models of network formation; and with the set of pure strategy Nash equilibria in finite supermodular games, finite potential games, and aggregative games.
Bertrand Competition with Asymmetric Costs: a Solution in Pure Strategies [Theory and Decision]
( with T. Demuynck, J.J. Herings and C. Seel)
We consider two versions of a Bertrand duopoly with asymmetric costs and homogeneous goods. They differs in whatever predatory prices are allowed. For each version we derive the Myopic Stable Set in pure strategies . We contrast our prediction to the prediction of Nash Equilibrium in mixed strategies.
Cartel Formation with Quality Differentiation [Mathematical Social Sciences--Special Issue on Strategic Behaviour and Market Structure]
(with Iwan Bos and Marco Marini)
Research on collusion in vertically differentiated markets is conducted under one or two potentially restrictive assumptions. Either there is a single industry-wide cartel or costs are assumed to be independent of quality or quantity. We explore the extent to which these assumptions are indeed restrictive by relaxing both. For a wide range of coalition structures, profit-maximizing cartels of any size price most of their lower quality products out of the market as long as production costs do not increase too much with quality. If these costs rise sufficiently, however, then market share is maintained for all product variants. All cartel sizes may emerge in equilibrium when exclusively considering individual deviations, but the industry-wide cartel is the only one immune to deviations by coalitions of members. Overall, our findings suggest that firms have a strong incentive to coordinate prices when the products involved are vertically differentiated.
The Last will be the First and the First Last: Segregation in Societies with Positional Concerns [The Economic Journal]
(with J.J. Herings and C. Seel)
This paper studies coalition formation among individuals who differ in productivity. The output of a coalition is determined by the sum of productivities if the coalition exceeds a minimal threshold of members. We consider competitive societies in which the surplus of a coalition is split according to productivity and egalitarian societies in which coalitions split their surplus equally. Preferences of coalition members depend on their material payoffs, but are also influenced by positional concerns, which relate their material payoffs to the average material payoff in the coalition. Our analysis uses two stability notions, the Core and the Myopic Stable Set. Both competitive and egalitarian societies lead to segregated partition structures. For competitive societies, all stable allocations are based on bottom-up segregation, i.e., individuals with adjacent productivities form coalitions and if some individuals are not part of a productive coalition, then these are the most productive ones. For egalitarian societies, we obtain top-down segregation in all stable allocations. Again it holds that individuals with adjacent productivities form coalitions, but now the least productive individuals may not be part of any productive coalition. If all individuals have different productivity levels, then the material efficiency of competitive societies is below that of egalitarian societies.
WORKING PAPERS:
(with Antonio Nicolò and Pietro Salmaso)
We introduce a solution concept for one-sided dynamic matching models, called the Dynamic Core. The Dynamic Core is defined for a general class of dynamic markets where agents and objects arrive over time, and objects can be privately or collectively owned. We prove that the Dynamic Core is not empty and discuss the relation with the static notions of Core and Strong Core. We show that the output of a dynamic extension of the Top Trading Cycle algorithm, the Intertemporal Top Trading Cycle (ITTC), is in the Dynamic Core and the mechanism induced by the ITTC is efficient and group strategy-proof. In private economies the output of the ITTC can be supported as a dynamic competitive equilibrium.
Implementation in vNM Stable Set
(with Michele Lombardi and Ville Korpela)
We fully identify the class of social choice functions that are implementable in von Neumann Morgenstern (vNM) stable set (von Neumann and Morgenstern, 1944) by a rights structure. A rights structure formalizes the idea of power distribution in a society. Following Harsanyi’critique (Harsanyi, 1974), we also study implementation problems in vNM stable set that are robust to farsighted reasoning.
Decreasing Incomes Increase Selfishness
(with Nickolas Gagnon and Henrik W. Zaunbrecher )
We use a controlled laboratory experiment to study the causal impact of income decreases within a time period on redistribution decisions at the end of that period, in anenvironment where we keep fixed the sum of incomes over the period. First, we investigate the effect of a negative income trend (intra-personal decrease), which means a decreasing income compared to one’s recent past. Second, we investigate the effect ofa negative income trend relative to the income trend of another person (inter-personaldecrease). If intra-personal or inter-personal decreases create dissatisfaction for an individual, that person may become more selfish to obtain compensation. We formalize both effects in a multi-period model augmenting a standard model of inequality aversion. Overall, conditional on exhibiting sufficiently-strong social preferences, wefind that individuals indeed behave more selfishly when they experience decreasing in-comes. While many studies examine the effect of income inequality on redistribution decisions, we delve into the history behind one’s income to isolate the effect of income changes
OTHER PUBLICATIONS:
1. The capability approach: an introduction to the Sen’s view based on the contribution by Ingrid Robeyns [Oikonomia, Journal of Ethics and Social Sciences]
2. The tuition of the CSR in the italian university system [Oikonomia, Journal of Ethics and Social Sciences]
3. The stakeholder theory: managerial approach and normative foundation [Dirigenza Bancaria]