CER-ETH Research Seminar, Fall Term 2012

The CER-ETH Research Seminar takes place on Mondays during term time from 5:15 pm to 6:45 pm at ETH Zurich, Room ZUE G1 (Zürichbergstr. 18). Per term we invite 6 to 7 internationally known speakers to present and discuss their work.

Programme

Everyone who is interested is cordially invited!

If you would like to receive our weekly invitation via e-mail, or if you have any other question, please contact Jean-Philippe Nicolai

Speakers

Elyès Jouini

We study comparative statics of Nth-degree risk increases within a large class of problems that involve bidimensional payoffs and additive or multiplicative risks. We establish necessary and sufficient conditions for unambiguous impact of Nth-degree risk increases on optimal decision making. We develop a simple and intuitive approach to interpret these conditions : novel notions of directional Nth-degree risk aversion that are characterized via preferences over lotteries

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Karine Nyborg

In social dilemmas, there is tension between cooperation that promotes the common good and the pursuit of individual interests. International negotiations over policies directed at climate change provide one example: although abatement costs are borne by individual countries, the benefits are shared globally. We study a repeated threshold public goods game with unequally endowed participants and communication in which the decision variable is framed in three seemingly inconsequential ways: as absolute contributions, contributions relative to endowments and in terms of the effects of contributions on final payoffs. We find considerable agreement that “rich” (or high endowed) subjects contribute at high levels that are invariant across frames and that are significantly greater than those of the “poor” (or low endowed). Frames do, however, significantly affect views of fairness and both proposed and actual contributions of the poor: they contribute significantly less when the effects on final payoffs are salient than when contributions are framed in absolute terms. Contributions are explained mostly by self-interest, justice preferences, a history of failed negotiations, and socio-economic class, viz., subjects from upper class families act more selfishly, but we find no significant effects from past contributions of others or the suggestions of others about one’s contributions.

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Alfred Galichon

We revisit Machina's local utility as a tool to analyze attitudes to multivariate risks. Using martingale embedding techniques, we show that for non-expected utility maximizers choosing between multivariate prospects, aversion to multivariate mean preserving increases in risk is equivalent to the concavity of the local utility functions, thereby generalizing Machina's result in Machina (1982). To analyze comparative risk attitudes within the multivariate extension of rank dependent expected utility of Galichon and Henry (2011), we extend Quiggin's monotone mean and utility preserving increases in risk and show that the useful characterization given in Landsberger and Meilijson (1994) still holds in the multivariate case.d

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Rick van der Ploeg

Our theory of optimal asset management of oil-rich economies suggests that three funds are necessary to manage the revenues from an oil windfall: intergenerational funds to smooth the benefits across generations; liquidity funds to cope with oil price volatility; investment funds to manage domestic investment in case of capital scarcity and absorption constraints. The optimal size of the liquidity fund is bigger if the windfall lasts longer and oil price volatility, prudence and the GDP share of oil rents are high; productivity growth curbs the size of this fund. We apply our policy framework to the oil windfalls of three different countries: Norway, Iraq and Ghana. The optimal size of Ghana’s liquidity fund is tiny relative to its intergenerational fund even with very high degrees of prudence. Norway’s liquidity fund is bigger than that of Ghana and a significant part of its intergenerational fund. Iraq’s liquidity fund is colossal relative to its intergenerational fund as its windfall lasts much longer. Only with capital scarcity and inefficient adjustment of public capital, part of the windfall should be used for investing to invest. We illustrate how this can speed up the process of development in Ghana, albeit that domestic absorption constraints imply a decline in the efficiency of public investment.