Existence of Equilibria in Matching Models of Money: A New Technique

This paper develops a new technique for proving the existence and indeterminacy of monetary equilibria in money search models with divisible money. Our technique is substantially simpler than standard constructive proofs in the literature. This paper is based on the second half of Kamiya and Shimizu (2002). We are very grateful to the associate editor and an anonymous referee of this journal for their very detailed suggestions and comments. This research is financially supported by Grant-in-Aid for Scientific Research from JSPS and MEXT. The second author also acknowledges the financial support by Zengin Foundation for studies on Economics and Finance.     

ON THE ROLE OF TAX SUBSIDY SCHEME IN MONEY SEARCH MODELS*

This article investigates the roles of policy in search models with divisible money. Recently, real indeterminacy of stationary equilibria has been found in both specific and general search models with divisible money. Thus if we assume the divisibility of money, it would be quite difficult to make accurate predictions of the effects of simple monetary policies. Therefore, in this article, we introduce a certain tax subsidy scheme and show that this is effective in selecting a determinate efficient equilibrium. In other words, for a given efficient equilibrium and for any real number δ > 0 , a certain tax subsidy scheme induces a locally determinate equilibrium within the δ‐neighborhood of the given equilibrium. Moreover, the size of the tax subsidy can be arbitrarily small.     

A Theory of the Demand for Underwriting

We examine the demand for underwriting and its effect on equilibrium in an insurance market in which insureds know their risk type, but insurers do not. Our analysis indicates that a set of policies including one that requires buyers to take an underwriting test can constitute a full coverage Nash equilibrium when perfect classification is possible. We also find that underwriting equilibria, in which low risks obtain greater coverage than they would without underwriting, widely exist in a Wilsonian market with nonmyopic insurers. Our findings provide a potential explanation for why empirical evidence on adverse selection is mixed.     

Nonlinear Pricing in General Equilibrium Models with Joint Production

This paper considers general equilibrium models of public utilities which produce either public goods or private goods. In the models, cases of increasing returns are not a priori excluded. The products of the public utilities and their costs are allocated to the consumers according to a rule that is dependent on information communicated to the public utilities. We show that if the public utilities follow a nonlinear pricing rule, the equilibrium allocations are always Pareto-optimal. Moreover, the message space is of finite dimensions.
JEL Classification Numbers: D51, D60, H41, H42.     

Risk management,firm reputation,and the impact of successful cyberattacks on target firms

We develop a model where a firm has an optimal exposure to cyber risk. With rational, fully informed agents and with no hysteresis, a successful cyberattack should have no impact on a financially unconstrained target's reputation and post-attack policies. In contrast, when a successful attack involves the loss of personal financial information, there is a significant shareholder wealth loss, which is much larger than the attack's out-of-pocket costs. This excess loss is higher when the attack decreases sales growth more and lower when the board pays more attention to risk management before the attack. Further, an attack decreases a firm's risk appetite, as it beefs up its risk management and information technology and decreases the risk-taking incentives of management. Finally, successful cyberattacks adversely affect the stock price of firms in the target's industry. These results imply that successful attacks with personal financial information loss provide adverse information about cyber risk to target firms, their stakeholders, and their competitors.     

Modeling urban commercial vehicle daily tour chaining

This paper presents a tour-chain-based approach to modeling urban commercial vehicle daily activity patterns. A daily tour chain refers to a sequence of daily tours made by a vehicle. Multinomial logit model results demonstrate that urban daily tour-chain choice is a result of collective decisions based on cost and shipment characteristics. This research has significant contributions to the current literature in filling the gap of understanding such critical logistics decisions as distribution channel and factors affecting tour chaining. Furthermore, the paper presents an innovative use of commercial vehicle travel survey data, and points to the urgent need for better quality data.     

Real Indeterminacy of Stationary Monetary Equilibria in Centralized Economies

We show that real indeterminacy of stationary equilibria, by which the set of stationary equilibria is a continuum and the real allocation varies among equilibria, may arise in some general equilibrium models with fiat money. The conditions under which such equilibria arise are: (i) each household optimally saves a constant amount of money; and (ii) at least two households face different budget constraints. We present various models, including a decentralized money search model and a centralized model with a monopoly firm, to explain how these conditions lead to real indeterminacy. Finally, we present a policy that uniquely implements any desirable outcome.     

Lexicographic expected utility with a subjective state space

This paper provides a model that allows for a criterion of admissibility based on a subjective state space. For this purpose, we build a non-Archimedean model of preference with subjective states, generalizing Blume et al. (Econometrica 59:61–79, 1991), who present a non-Archimedean model with exogenous states; and Dekel et al. (Econometrica 69:891–934, 2001), who present an Archimedean model with an endogenous state space. We interpret the representation as modeling an agent who has several “hypotheses” about her state space, and who views some as “infinitely less relevant” than others.     

Matching models with a conservation law: The existence and global structure of the set of stationary equilibria

We study random matching models where there is a set of infinitely lived agents, and in each period agents are pairwise matched to each other and play a stage game. We investigate the basic structure of equilibria in such models: the existence of equilibria and the global structure of the set of equilibria. Specifically, we focus on models with a conservation law, which typically holds in economies having some assets, such as money. In such models, under certain regularity conditions the set of equilibria is one-dimensional and each connected component of it is a piecewise smooth one-dimensional manifold being homeomorphic to either the unit circle or the unit interval. Moreover, in an endpoint of an interval all agents have the same amount of assets.