1.Toledo, M., "Durable Goods, Financial Frictions, and Business Cycles in Emerging Economies," Journal of Monetary Economics, 6 (2013): 720-736.
This paper presents a model in which a durable goods monopolist sells a product to two buyers. Each buyer is privately informed about his own valuation. Thus all players are imperfectly informed about market demand. We study the monopolist's pricing behavior as players' uncertainty regarding demand vanishes in the limit. In the limit, players are perfectly informed about the downward sloping demand. We show that in all games belonging to a fixed and open neighborhood of the limit game there exists a generically unique equilibrium outcome which exhibits Coasian dynamics and where play lasts for at most two periods. A laboratory experiment shows that, consistent with out theory, outcomes in the Certain and Uncertain Demand treatments are the same. Median opening prices in both treatments are roughly at the level predicted and considerably below the monopoly price. Consistent with Coasian dynamics, these prices are lower for higher discount factors. Demand withholding, however, leads to more trading periods than predicted.
2. Álvarez-Parra, F., Brandao-Marques, L., y Toledo, M., "Durable Goods, Financial Frictions, and Business Cycles in Emerging Economies," Journal of Monetary Economics, 6 (2013): 720-736.
Business cycles in emerging economies display very volatile consumption and strongly countercyclical trade balance. We show that aggregate consumption in these economies is not more volatile than output once durables are accounted for. Then, we present and estimate a real business cycles model for a small open economy that accounts for this empirical observation. Our results show that the role of permanent shocks to aggregate productivity in explaining cyclical fluctuations in emerging economies is considerably lower than previously documented. Moreover, we find that financial frictions are crucial to explain some key business cycle properties of these economies.
3. Foser, A. y Gutierrez, E., The Informational Role of Voluntary Certification: Evidence from the Mexican Clean Industry Program," American Economic Review, 103 (2013): 303-308.
In the presence of imperfect information, voluntary certification can provide an important complement to mandatory inspections as a basis for environmental regulation in low income countries. Using data from Mexico's Clean Industry Program, we show that patterns of compliance and certification by sector are consistent with a model in which selection into the voluntary program permits more efficient targeting of regulator effort. As expected given the informational role played by certification in the model, we also find evidence, for a sample of publicly traded firms, of positive stock price deviations linked to the announcement of certification.
4. Dominguez, D., "Lower Bounds and Recursive Methods for the Problem of Adjudicating Conflicting Claims," Social Choice and Welfare, 3 (2013): 663-678.
For the problem of adjudicating conflicting claims, we propose the following method to extend a lower bound rule: (i) for each problem, assign the amounts recommended by the lower bound rule and revise the problem accordingly; (ii) assign the amounts recommended by the lower bound rule to the revised problem. The “recursive- extension” of a lower bound rule is obtained by recursive application of this procedure. We show that if a lower bound rule satisfies positivity then it’s recursive extension singles out a unique awards rule.We then study the relation between desirable properties satisfied by a lower bound rule and properties satisfied by its recursive extension.
5. Martinelli, C., D. Coady y Parker, S., Information and Participation in Social Programs," World Bank Economic Review, 27-1 (2013): 22.
Participation in social programs, like that in clubs and other social organizations, is the result of a process in which an agent first learns about the requirements, benefits, and the likelihood of acceptance, applies for membership, and finally is accepted or rejected. We propose a model of this participation process, and analyze empirically the process using data from a social program in Mexico. Our analysis shows that decisions at each stage of the process are responsive to expectations about the decisions and outcomes at the following stages, and that knowledge about the program has a large impact on participation outcomes.
6. Herrera, H. y Martinelli, C., "Oligarchy, Democracy, and State Capacity," Economic Theory, 52-1 (2013): 165-186.
We develop a dynamic political economy model in which invest ment in the state capacity to levy taxes and deter crime is a policy variable, and we study the evolution of state capacity when policy is chosen by an elite. We show that democratization in the sense of expansion of the elite leads to an increased investment in state capacity and to a reduction in illegal activities, and has non-monotonic effects on tax rates as it reduces the willingness of the elite to engage in particularistic spending but enhances its willingness to provide public goods. Depending on initial conditions, consensual political changes may lead either to democratization or to the entrenchment of an immovable elite.
7. Ülkü, L., "Optimal Combinatorial Mechanism Design," Economic Theory, 53-2 (2013): 473-498.
We consider an optimal mechanism design problem with several heterogenous objects and interdependent values. We characterize ex post incentives using an appropriate monotonicity condition and reformulate the problem in such a way that the choice of an allocation rule can be separated from the choice of the payment rule. Central to the analysis is the formulation of a regularity condition, which gives a recipe for the optimal mechanism. If the problem is regular, then an optimal mechanism can be obtained by solving a combinatorial allocation problem in which objects are allocated in a way to maximize the sum of virtual valuations. We identify conditions that imply regularity using the techniques of supermodular optimization.