Optimal insurance under rank‐dependent utility and incentive compatibility

Bernard, He, Yan, and Zhou (Mathematical Finance, 25(1), 154–186) studied an optimal insurance design problem where an individual's preference is of the rank‐dependent utility (RDU) type, and show that in general an optimal contract covers both large and small losses. However, their results suffer from the unrealistic assumption that the random loss has no atom, as well as a problem of moral hazard that provides incentives for the insured to falsely report the actual loss. This paper addresses these setbacks by removing the nonatomic assumption, and by exogenously imposing the “incentive compatibility” constraint that both indemnity function and insured's retention function are increasing with respect to the loss. We characterize the optimal solutions via calculus of variations, and then apply the result to obtain explicitly expressed contracts for problems with Yaari's dual criterion and general RDU. Finally, we use numerical examples to compare the results between ours and Bernard et al.     

Input use under cost-of-production crop insurance: Theory and evidence

There have been a number of previous studies that examined the effects of yield- or revenue-based crop insurance products on input use of farmers. However, no study has specifically investigated the input use impacts of a cost-of-production (COP) crop insurance policy, even though this type of crop insurance is the predominant one used in several other countries outside of the United States (such as the Philippines and China). This article aims to theoretically and empirically examine the effect of a COP crop insurance product on farmers’ chemical input use. Our theoretical model suggests that the effect of COP insurance on input use can either be positive or negative, with the resulting impact depending on the strengths of (a) the traditional moral hazard effect of insurance (i.e., an input use decreasing effect); versus (b) the marginal incentives to apply more inputs due to input levels being the main determinant for expected indemnity amounts in this type of insurance (i.e., an input use increasing effect). A survey data set from corn farmers in the Philippines is then used to empirically illustrate how a particular COP insurance product influences input use in a real-life context. In this case, we find that COP insurance increases the use of chemical inputs (e.g., fertilizers and total chemical expenditure), implying that the positive marginal incentive to apply more inputs dominates the negative moral hazard effect.     

Advertising a second-price auction

This study examines a symmetric private-value second-price auction model in which the seller solicits bidders at a cost, sets a reserve price, and receives a payoff which is a convex combination of revenue and welfare. The bidder’s valuations are drawn from a distribution with a decreasing hazard rate and non-decreasing virtual valuations. We find that at equilibrium the seller adopts an advertising policy which minimizes the uncertainty over the number of participants, and sets a reserve price which only depends on the distribution of valuations and the weight on revenue in the objective function. A welfare-maximizing seller is shown to advertise more than a revenue-maximizing seller, and a ceteris paribus increase in the advertising level is proved to increase the expected winner’s rent.     

试论立德树人视野下的高校辅导员与学生关系——深入学习贯彻习近平总书记关于教育的重要论述

高等教育的根本任务是“立德树人”,辅导员是高等院校从事思想政治教育的中坚力量,是“立德”教育任务的重要执行者,大学生是思想不断发展的未完成个体,具有基本价值判断能力和较强的时代特征.“立德树人”教育任务的完成,需要高校认清辅导员和大学生的应然关系和实然关系的基础上和谐师生关系,才能从根本上完成德育任务.     

教师职业道德在教育中的作用研究

教师职业道德是教师在从事教育活动中所应当遵循的道德规范和准则。加强教师职业道德建设,是实施素质教育的关键。本文就教师职业道德的特点、作用及提高教师职业道德的措施提出了一些建议。     

Dynamic market for lemons with endogenous quality choice by the seller

We analyze a dynamic market for lemons in which the quality of the good is endogenously determined by the seller. Potential buyers sequentially submit offers to one seller. The seller can make an investment that determines the quality of the item at the beginning of the game, which is unobservable to buyers. At the interim stage of the game, the information and payoff structures are the same as in the market for lemons. Our main result is that the possibility of trade does not create any efficiency gain if (i) the common discounting is low, and (ii) the static incentive constraints preclude the mutually agreeable ex-ante contract under which the trade happens with probability one. Our result does not depend on whether the offers by buyers are private or public.     

Signaling quality with increased incentives

Previous work on informed-principal problems with moral hazard suggested that the principal should signal project quality by retaining a larger share of the project and hence lowering incentives for the agent. We show that this view is incomplete. If project quality and effort are complements and effort is more valuable for high-quality projects, a principal with a high-quality project may separate from a principal with a low-quality project by increasing incentives for the agent. This holds with a risk-neutral agent who is protected by limited liability as well as with a risk-averse agent and unlimited liability. A dynamic version of our model in which the agent learns project quality in later periods provides an explanation for the use of initially reduced royalty rates in business-format franchising contracts.     

Wealth effects and agency costs

We analyze how the agent's initial wealth affects the principal's expected profits in the standard principal–agent model with moral hazard.We show that if the principal prefers a poorer agent for all specifications of action sets, probability distributions, and disutility of effort, then the agent's utility of income must exhibit a coefficient of absolute prudence less than three times the coefficient of absolute risk aversion for all levels of income, thus strengthening the sufficiency result of Thiele and Wambach (1999). Also, we prove that there is no condition on the agent's utility of income alone that will make the principal prefer richer agents. Moreover, we show that, for an interesting class of problems, the principal prefers a relatively poorer agent if agent's wealth is sufficiently large. Finally, we discuss how alternative ways of modeling the agent's outside option affects the principal's preferences for agent's wealth.     

On discrimination in the optimal management of teams

We study the optimal management of teams in which agents’ effort decisions are mapped (via a production technology) into the probability of the team’s success. Optimal wage schemes in such context are largely discriminatory, but we show that the extent of the discrimination crucially depends on the existence of moral hazard. More precisely, for teams with a flat structure, the domain of production technologies giving rise to discrimination is broader when agents’ actions are observable and contractible. For teams with a sequential structure, the result reverses and the domain of production technologies giving rise to discrimination is broader when there exists moral hazard. Finally, in more cooperative environments in which agents are allowed to collude, optimality does not entail discrimination, with or without moral hazard.     

Informal Caregiving and the Retirement Decision

The probability of providing informal care grows with one's own age. While labor market effects due to caregiving are moderate, they could be concentrated in the years close to retirement. Therefore, I investigate whether care in the previous year leads to retirement in the year after by using German Socio‐Economic Panel data from 2001 to 2009 and discrete‐time hazard models. The effect of care on the retirement decision is indeed much higher than its effect on the labor or working hours of middle‐aged individuals. Women are affected to a larger extent but the retirement decision of men also reacts to their caregiving obligations.