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on Economic Design |
| By: | Alireza Fallah; Michael I. Jordan |
| Abstract: | We study the role of regulatory inspections in a contract design problem in which a principal interacts separately with multiple agents. Each agent's hidden action includes a dimension that determines whether they undertake an extra costly step to adhere to safety protocols. The principal's objective is to use payments combined with a limited budget for random inspections to incentivize agents towards safety-compliant actions that maximize the principal's utility. We first focus on the single-agent setting with linear contracts and present an efficient algorithm that characterizes the optimal linear contract, which includes both payment and random inspection. We further investigate how the optimal contract changes as the inspection cost or the cost of adhering to safety protocols vary. Notably, we demonstrate that the agent's compensation increases if either of these costs escalates. However, while the probability of inspection decreases with rising inspection costs, it demonstrates nonmonotonic behavior as a function of the safety action costs. Lastly, we explore the multi-agent setting, where the principal's challenge is to determine the best distribution of inspection budgets among all agents. We propose an efficient approach based on dynamic programming to find an approximately optimal allocation of inspection budget across contracts. We also design a random sequential scheme to determine the inspector's assignments, ensuring each agent is inspected at most once and at the desired probability. Finally, we present a case study illustrating that a mere difference in the cost of inspection across various agents can drive the principal's decision to forego inspecting a significant fraction of them, concentrating its entire budget on those that are less costly to inspect. |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2311.02537&r=des |
| By: | Rachid Elkachradi (National School of Business and Management, Cadi Ayyad University, Morocco); Rim Aitbouziane (Faculty of Legal, Economic and Social Sciences, Cadi Ayyad University, Morocco) |
| Abstract: | Over the past decade, the Moroccan labour market has seen many positive developments according to the World Bank's Morocco's Jobs Landscape report. However, there are some structural problems that deeply hamper the inclusion and dynamics of the labour market in Morocco, namely the slowdown in job creation and the shortage of jobs in the industrial sector. In this respect, Morocco has put in place important economic and legal measures to design a dynamic and inclusive labour market, in order to respond to societal challenges such as the fight against poverty and precariousness, the regularisation of informal economic activities, and the protection of women and youth against social discrimination.Despite the efforts to make the Moroccan market more dynamic and resilient, several structural dysfunctions persist, negatively impacting the pace of change. At this stage, the recurrent crises of recent years, notably the covid pandemic19, have shown the great fragility of the Moroccan labour market, which calls into question all the reforms adopted by Moroccan decision-makers to strengthen the resilience of this market. Restructuring the Moroccan labour market is an urgent, necessary and complex process that requires the coordination of several stakeholders, including governments, businesses and workers. |
| Keywords: | Moroccan labour market, Resilience, Dysfunctions, Structural transformations, Agility |
| Date: | 2023–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:hal-04250127&r=des |
| By: | Odolinski, Kristofer (Swedish National Road & Transport Research Institute (VTI)); Nissen, Arne (Trafikverket (The Swedish Transport Administration)); Ait-Ali, Abderrahman (Swedish National Road & Transport Research Institute (VTI)) |
| Abstract: | Switches and crossings are critical assets in railway systems and their maintenance and renewal costs can be substantial. This paper evaluates the economic impact of cumulative loads on such assets and the effect of different contract designs for railway maintenance. Results from survival analyses are combined with a life cycle costing model to analyse costs for maintenance, train delays, and renewals. The findings provide insights into improving the timing of asset renewal as well as the impact of different reimbursement rules in the design of maintenance contracts. The estimated optimal lifetimes of different types of switches and crossings are similar to their technical lifetimes, yet there a couple of exceptions. The estimated effects of the reimbursement rule provide unique results on the risk premiums allowed in order to achieve a break-even between different maintenance contract designs. |
| Keywords: | Switches and crossings; Maintenance; Renewal; Lifecycle costs; Contract design; Reimbursement rule |
| JEL: | H57 R42 |
| Date: | 2023–11–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:vtiwps:2023_011&r=des |
| By: | Masahiro Kato |
| Abstract: | This study investigates the problem of identifying the best treatment arm, a treatment arm with the highest expected outcome. We aim to identify the best treatment arm with a lower probability of misidentification, which has been explored under various names across numerous research fields, including \emph{best arm identification} (BAI) and ordinal optimization. In our experiments, the number of treatment-allocation rounds is fixed. In each round, a decision-maker allocates a treatment arm to an experimental unit and observes a corresponding outcome, which follows a Gaussian distribution with a variance different among treatment arms. At the end of the experiment, we recommend one of the treatment arms as an estimate of the best treatment arm based on the observations. The objective of the decision-maker is to design an experiment that minimizes the probability of misidentifying the best treatment arm. With this objective in mind, we develop lower bounds for the probability of misidentification under the small-gap regime, where the gaps of the expected outcomes between the best and suboptimal treatment arms approach zero. Then, assuming that the variances are known, we design the Generalized-Neyman-Allocation (GNA)-empirical-best-arm (EBA) strategy, which is an extension of the Neyman allocation proposed by Neyman (1934) and the Uniform-EBA strategy proposed by Bubeck et al. (2011). For the GNA-EBA strategy, we show that the strategy is asymptotically optimal because its probability of misidentification aligns with the lower bounds as the sample size approaches infinity under the small-gap regime. We refer to such optimal strategies as locally asymptotic optimal because their performance aligns with the lower bounds within restricted situations characterized by the small-gap regime. |
| Date: | 2023–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2310.19788&r=des |
| By: | Hernandez, Carlos Ospino (World Bank); Rigolini, Jamele (World Bank); Coll-Black, Sarah (World Bank); Oviedo, Ana Maria (World Bank) |
| Abstract: | The literature on shock-responsive social protection focuses on operational features that improve the speed and reach of the response, but little is known about the optimal design of emergency social protection responses in terms of which programs to use, information about the people affected, and the extent of their losses. This paper studies optimal social protection responses to shocks, using microsimulations of different social assistance responses in Albania, Moldova, and North Macedonia. The paper shows that optimal design depends not only on the magnitude of the shock, but also on how the shock affects welfare rankings and on the parameters of the existing social assistance system, including the generosity of the schemes and how well they cover the poor. For given budgets, a universal transfer remains a suboptimal response. However, the extent to which existing programs should be expanded, as designed, to additional beneficiaries depends on the type of shock. When a shock tends to affect households homogeneously, increasing generosity and expanding the existing targeted social assistance program using established welfare metrics to assess eligibility is an effective response. When shocks affect households heterogeneously and bring some of them into extreme poverty, then pre-shock welfare indicators carry little information and policy makers should provide support through a new program or modified eligibility criteria, according to information on who suffered the shock. This analysis points to the importance of planning in advance for future crises and, within this, considering the optimal design of emergency social protection responses. |
| Keywords: | social protection, adaptive social protection, disaster risk management, COVID-19, targeting |
| JEL: | D6 H5 I3 Q5 |
| Date: | 2023–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izapps:pp205&r=des |