We analyze how public debt evolves when successive policymakers have different policy goals and cannot make credible commitments about their future policies. We consider several cases to be able to quantify the effects of imperfect commitment, political disagreement and political turnover. Imperfect commitment drives the long-run level of debt to zero. With political disagreement debt is a size...

The paper studies a repeated contest when contestants are uncertain about their true relative abilities. When ability and effort are complements, a favorable belief about one’s own ability stimulates effort and increases the likelihood of success. Success, in turn, reinforces favorable beliefs. We show that this implies that with positive probability players fail to learn their true relative ab...

The purpose of this paper is to analyse the impacts of adaptation to a falling health state on the demand for health and medical care. This is done by integrating adaptation processes in the pure consumption model of Grossman. We also modify the model in another direction by introducing an uncertain lifetime. Model simulations show that adaptation affects the health variables by lowering the in...

Increased public awareness of resource management issues and new attitudes toward resource conservation have led to great interest in the subject of the apposite use and management of natural and environmental resources in the American West. This paper analyzes this subject from an interdisciplinary ecological-economic perspective. Four salient issues concerning the study of the West’s ecologic...

This paper studies a discrete-time financial model with or without transaction costs, in which only partial information can be observed. Partial information model means that the investors in the market can observe no more information except the stock prices. This model has been investigated in Karatzas and Xue (1991), Lakner (1995, 1998), and Cheng (2004), etc. Applying stochastic filtering the...

The framework of a general equilibrium heterogeneous agent model is used to study the optimal design of an unemployment insurance (UI) scheme and preferences for unemployment policy reforms. In a first step, the optimal defined benefit and defined replacement ratio UI systems are obtained in simulations. Then, the question whether switching to such an optimal system from the status quo would be...

We consider portfolio allocation in which the underlying investment instruments are hedge funds. We consider a family of utility functions involving the probability of outperforming a benchmark and expected regret relative to another benchmark. Non-normal return vectors with prescribed marginal distributions and correlation structure are modeled and simulated using the normal-to-anything method...

Decisions in a shareholder meeting or a legislative committee are often modeled as a weighted game. Influence of a member is then measured by a power index. A large variety of different indices has been introduced in the literature. This paper analyzes how power indices differ with respect to the largest possible power of a non-dictatorial player. It turns out that the considered set of power i...

Based on the recursive preference approach, the dynamic and global properties of the two-country open economy are examined with one good and inputs of labor and capital, with capital being freely traded internationally. First by showing that the world’s consumption increases (resp. decreases) with an increase (resp. decrease) in the world’s capital, the global stability of the economy is obtain...

Retirement flexibility and inability to borrow against future labor income can significantly affect optimal consumption and investment. With voluntary retirement, there exists an optimal wealth-to-wage ratio threshold for retirement and human capital correlates negatively with the stock market even when wages have zero or slightly positive market risk exposure. Consequently, investors optimally...