|
on Contract Theory and Applications |
| By: | Philippe de Donder (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement); Marie-Louise Leroux (UQAM - Université du Québec à Montréal = University of Québec in Montréal); François Salanié (TSE - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement) |
| Abstract: | Advantageous (or propitious) selection occurs when an increase in the premium of an in- surance contract induces high-cost agents to quit, thereby reducing the average cost among remaining buyers. Hemenway (1990) and many subsequent contributions motivate its ad- vent by differences in risk-aversion among agents, implying different prevention efforts. We argue that it may also appear in the absence of moral hazard, when agents only differ in riskiness and not in (risk) preferences. We first show that profit-maximization implies that advantageous selection is more likely when markup rates and the elasticity of insurance demand are high. We then move to standard settings satisfying the single-crossing prop- erty and show that advantageous selection may occur when several contracts are offered, when agents also face a non-insurable background risk, or when agents face two mutually exclusive risks that are bundled together in a single insurance contract. We exemplify this last case with life care annuities, a product which bundles long-term care insurance and annuities, and we use Canadian survey data to provide an example of a contract facing advantageous selection. |
| Keywords: | Propitious selection,Positive or negative correlation property,Contract bundling,Long-term care insurance,Annuity |
| Date: | 2022–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03711744&r= |
| By: | Ghafelebash, Ali; Razaviyayn, Meisam; Dessouky, Maged |
| Abstract: | With rapid population growth and urban development, traffic congestion has become an inescapable issue in large metropolitan regions. Research studies have proposed different strategies to control traffic, ranging from roadway expansion to transportation demand management programs. Among these strategies, congestion pricing and incentive offering schemes have been widely studied as reinforcements for traffic control in traditional traffic networks where each driver is a “player” in the network. In such a network, the “selfish” behavior of individual drivers prevents the entire network to reach a socially optimal operation point. In future mobility services, on the other hand, a large portion of drivers/vehicles may be controlled by a small number of companies/organizations. In such a system, offering incentives to organizations can potentially be much more effective in reducing traffic congestion rather than offering incentives directly to drivers. This research project studies the problem of offering incentives to organizations to change the behavior of their individual drivers (or individuals using their organization’s services). The incentives are offered to each organization based on their aggregated travel time loss across all their drivers. This step requires solving a large-scale optimization problem to minimize the system-level travel time. We propose an efficient algorithm for solving this optimization problem. To evaluate the performance of the proposed algorithm, multiple experiments are conducted by Los Angeles traffic data. Our experiments show that the proposed algorithm can decrease the system-level travel time by up to 6.9%. Moreover, our experiments demonstrate that incentivizing organizations can be up to 8 times more efficient than incentivizing individual drivers in terms of incentivization monetary cost. View the NCST Project Webpage |
| Keywords: | Engineering, Social and Behavioral Sciences, New Mobility Services, Congestion Reduction, Incentive, Behavior Change, Travel Demand Management. |
| Date: | 2022–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:itsdav:qt7x58z00c&r= |
| By: | Anton Kolotilin; Roberto Corrao; Alexander Wolitzky |
| Abstract: | In persuasion problems where the receiver's action is one-dimensional and his utility is single-peaked, optimal signals are characterized by duality, based on a first-order approach to the receiver's problem. A signal is optimal if and only if the induced joint distribution over states and actions is supported on a compact set (the contact set) where the dual constraint binds. A signal that pools at most two states in each realization is always optimal, and such pairwise signals are the only solutions under a non-singularity condition on utilities (the twist condition). We provide conditions under which higher actions are induced at more or less extreme pairs of states. Finally, we provide conditions for the optimality of either full disclosure or negative assortative disclosure, where signal realizations can be ordered from least to most extreme. Optimal negative assortative disclosure is characterized as the solution to a pair of ordinary differential equations. |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2206.09164&r= |
| By: | Ghosh, Meenakshi |
| Abstract: | Two sellers trade vertically and horizontally differentiated goods on a platform which charges them a commission fee. Some consumers are naive and do not observe, or consider, add-on prices until after they commit to buying the base good from a seller. We address the following questions. First, how do consumer naivete and costs asymmetries (arising from differences in fees) influence pricing strategies. Second, we examine the welfare loss arising from sub-optimal decisions made by naive consumers who buy the bundle, but fail to factor in its total price at the outset. Third, how does naivete affect seller and platform payoffs. |
| Keywords: | add-on pricing, consumer naivete, cost asymmetry, horizontal differentiation, vertical differentiation, platform fee, cost pass-through |
| JEL: | L1 L11 |
| Date: | 2022–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:113548&r= |
| By: | Agustín G. Bonifacio (Universidad Nacional de San Luis/CONICET); Nadia Guiñazú (Universidad Nacional de San Luis/CONICET); Noelia Juarez (Universidad Nacional de San Luis/CONICET); Pablo Neme (Universidad Nacional de San Luis/CONICET); Jorge Oviedo (Universidad Nacional de San Luis/CONICET) |
| Abstract: | We study envy-free allocations in a many-to-many matching model with contracts in which agents on one side of the market (doctors) are endowed with substitutable choice functions and agents on the other side of the market (hospitals) are endowed with responsive preferences. Envy-freeness is a weakening of stability that allows blocking contracts involving a hospital with a vacant position and a doctor that does not envy any of the doctors that the hospital currently employs. We show that the set of envy-free allocations has a lattice structure. Furthermore, we define a Tarski operator on this lattice and use it to model a vacancy chain dynamic process by which, starting from any envy-free allocation, a stable one is reached. |
| Keywords: | Matching, envy-freeness, lattice, Tarski operator, re-equilibration process, vacancy chain. |
| JEL: | C78 D47 |
| Date: | 2022–06 |
| URL: | http://d.repec.org/n?u=RePEc:aoz:wpaper:155&r= |