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Pinheiro, De Matos Luis. "Essays on fiscal federalism." Thesis, Cardiff University, 2018. http://orca.cf.ac.uk/119783/.
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This thesis investigates the effects of pressures brought by increasing capital mobility and interjurisdictional fiscal competition to fiscal policy, focusing particularly on the European Union and the analysis of policy reforms that can be adopted in such contexts. Firstly, the relationship between tax competition and economic growth is re-assessed. In a race to attract mobile capital, jurisdictions compete to offer the highest after-tax rates of return. Governments are driven into the provision of higher levels of productive public goods, and shift their tax structures, towards the taxation of the least mobile factors or least distortive tax bases. In an environment of fixed labour supply, this implies a race to the bottom in capital taxes and a race to the top in the taxes falling on labour. Taking into account the potential effects of fiscal competition on fiscal policy, the consequences of different tax harmonization scenarios are also analyzed. The harmonization of capital taxes leads to a race to the top in taxes on immobile factors. Once tax rates on mobile factors are fixed, tax competition shifts towards immobile factors. This implies that the tax burden falls again disproportionately on labour. Only the harmonization of labour income taxes can avoid this outcome, while leaving room for positive capital income taxes. Secondly, extending this argument within a more detailed model of labour supply calibrated to the EU economy, more detailed policy proposals for a European-wide fiscal harmonization agreement are studied. Labour income and consumption tax harmonization yield potentially better results than capital tax harmonization, as the main fiscal competition-driven government investment distortion, resulting in the over-investment on productive public goods at the expense of merit goods, is minimized. In particular, policy simulation results suggest that indirect taxes, such as value-added taxes, should become a priority instrument for European-wide fiscal reforms. Expenditure side reforms are also necessary, in order to address the race to bottom in the provision of merit goods. Even limited reforms that do not require large increases in the EU budget, such as the introduction of a common European unemployment insurance system, can yield interesting results in a context of interjurisdictional fiscal competition. Thirdly, the cyclical behaviour of fiscal policies across OECD countries is investigated. In i so doing, a more complete picture of fiscal policy can be obtained, by identifying both the short term behaviour of discretionary fiscal policies and long term structural fiscal policy trends. Fiscal policy has become pro-cyclical over recent decades, particularly within the European Monetary Union. The average level of structural fiscal balances and the responsiveness of fiscal policy to the level of debt are found persistently weaker beyond the 70 percent debt-to-GDP threshold, pointing to the relevance of fiscal fatigue episodes. Average fiscal balances and a stronger responsiveness to debt conditions are also found higher at higher levels of the potential level of debt service. This is accompanied by a more pro-cyclical response of the fiscal stance. Finally, the role of fiscal decentralization is also assessed. Two issues remain clear. On the one hand, fiscal decentralization does not appear to directly affect fiscal performance. On the other hand, large intergovernmental transfer systems show a persistent negative relationship with the fiscal stance. Considering the level of sub-national fiscal autonomy also uncovers that this negative effect becomes stronger when sub-national governments have a wide policy scope. These results are found particularly worrying as many OECD countries maintain highly decentralized systems of government, under which large intergovernmental grant systems are kept in parallel with a significant policy scope at the regional and local level.
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Ring, Irene. "Economic Instruments for Conservation Policies in Federal Systems." Doctoral thesis, Universitätsbibliothek Leipzig, 2011. http://nbn-resolving.de/urn:nbn:de:bsz:15-qucosa-72649.
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This habilitation thesis consists of seven published journal articles and one published book chapter.
Part I, consisting of chapter 1, introduces the overarching theme of environmental policy instruments and discusses the current use of and prospects for economic instruments in conservation policies. A number of research gaps are identified which are addressed in the subsequent chapters.
Part II, consisting of chapters 2–5, encompasses four papers focused on a single type of policy instrument: intergovernmental fiscal transfers. Although well documented in public finance literature, intergovernmental fiscal transfers remain a somewhat neglected instrument in environmental policy. Despite being well suited to address the spillover benefits that often accrue with conservation policies, there is scant research literature on ecological fiscal transfers compared to other economic instruments such as environmental taxes or tradable permits. In fact, very few countries make practical use of them to achieve conservation objectives. Thus intergovernmental fiscal transfers are an innovative instrument in conservation policies in particular, so that advances in both theory and applied research may prove especially beneficial here.
Part III, consisting of chapters 6–9, combines a number of articles in integrative biodiversity research and applied biodiversity governance, themes that are often neglected in the economic analysis of environmental policy instruments. However, when implementing policy instruments in societal settings, interdisciplinary research bridging the natural and social sciences is as much a prerequisite as policy-relevant research that responds to the needs of decision makers and other stakeholders. Both policy design and policy evaluation yield the best outcomes when they involve ecologists, economists, legal and other social scientists, as this ensures that consideration is given to ecological effectiveness, economic efficiency, administrative feasibility, social acceptance, and perception by stakeholders. Policy-relevant research also responds to current societal developments and prospective changes in legislation which may provide windows of opportunity to propose new instruments. Meanwhile, sound empirical research and case study design are indispensable in making concrete policy recommendations, taking into account existing formal and informal institutions.
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Breuss, Fritz, and Markus Eller. "Efficiency and federalism in the European Union. The optimal assignment of policy tasks to different levels of government." Forschungsinstitut für Europafragen, WU Vienna University of Economics and Business, 2003. http://epub.wu.ac.at/1752/1/document.pdf.
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This paper surveys the theoretical and empirical research on the efficient assignment of policy tasks to different levels of government and applies the results on the delimitation of competences within the European Union. The main results are: (i) A precise derivation of an optimal degree of decentralisation is not possible because of mixed theoretical suggestions. The adequate degree of decentralisation has to be detected case-by-case. (ii) Systematic evidence on direct relationships between economic performance and fiscal decentralisation is ambiguous and scarce. (iii) Comparing the de facto delimitation of EU-competences with the normative recommendations, remarkable discrepancies arise in the fields of agriculture and defence. (iv) The establishment of a flexible assignment-scheme by the European Convention is an undeniable necessity in order to guarantee reversibility and to cope efficiently with changing general conditions. (author's abstract)Series: EI Working Papers / Europainstitut
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Deimann, Sven. "Federalism and the environment : finding the right balance in a free trade context in the European Union and Canada." Thesis, McGill University, 1997. http://digitool.Library.McGill.CA:80/R/?func=dbin-jump-full&object_id=20530.
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This thesis seeks to probe deeper into possible criteria for allocating jurisdiction over environmental policy in a free trade context. The investigation proceeds by examining first recent moves within the European Community to adjust environmental policy to the principle of subsidiarity. The analysis then adopts a comparative approach and discusses various issues for Canadian environmental policy arising from the Canadian division of powers. The Canadian division of powers is shown to operate with much more narrow principles and rules than under the EC-Treaty with the resultant overlap in concurrent policy-making necessitating various forms and techniques for policy-coordination. A final part of the inquiry engages economic theories of federalism, in particular recent prescriptions for greater decentralization of environmental policy that have informed the debate on subsidiarity. These theories are shown to be deficient in furnishing an adequate account of why individuals would accept regulatory competition without assurances as to a guaranteed minimum of environmental quality irrespective of a particular level of material wealth. The study, therefore, concludes that on a redistributive understanding of environmental policy, central agents, corresponding in their territorial span to the geographical reach of 'markets' have an important role to play.
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Besendorfer, Daniel. "Sustainable federalism theory and applications." Hamburg Kovač, 2004. http://d-nb.info/998409685/04.
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Monteiro, Albertino Paulo Vila Maior Guimarães. "Economic and Monetary Union : can this form of federalism survive without 'fiscal federalism'?" Thesis, University of Sussex, 2004. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.408088.
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Could the European Union (EU) be more like other federations where monetary integration works together with fiscal federalism? Assuming that Economic and Monetary Union (EMU) strongly reinforces economic integration, and since national governments were deprived of adjustment mechanisms to accommodate economic shocks, the question seems plausible. Is the Euro-zone economy, and national economies in particular, still shielded against these shocks? The dissertation's purpose is to provide a political-economic answer to these questions, addressing the feasibility of conventional fiscal federalism in the EU. 'Conventional fiscal federalism' refers to systemic aspects of federations, where a constitutional division of powers between different tiers of government is organised as far as fiscal powers are concerned. This division of powers involves a centralisation bias. Recognising that monetarism shadows EMU everywhere, important consequences are found when the prospect of 'conventional fiscal federalism' is at stake. The monetarist influence reflects the prominence devoted to supranational monetary policy for stabilisation purposes. It is implied that fiscal policy has a minor role in providing stabilisation for the Euro-zone. At best, fiscal policy is valuable for each member state adjusting domestic economies to specific developments, as an expression of the diversity that characterises the EU. The discussion about 'conventional fiscal federalism' and the EU brings out the important question of equity being at the mercy of centralisation, to emulate other federations' picture. Nonetheless I find important evidence that centralisation of the redistribution function is not feasible in the EU context. National governments' lack of political willingness to significantly increase EU budget resources, and the clearly absent solidarity among EU member states both prevent the implementation of such centralisation impetus. The dissertation concludes ruling out the feasibility of 'conventional fiscal federalism' in the EU. However this is not the same as rejecting fiscal federalism at all. Considering the existence of different tiers of government endowed with fiscal competences, and a clear assignment of powers between them, this is sufficient to conclude that a different, decentralised, low profile modality of fiscal federalism already exists in the EU
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Garza, Casado Miguel Maria. "The Political Economy of Pre-Electoral Coalitions." The Ohio State University, 2020. http://rave.ohiolink.edu/etdc/view?acc_num=osu1583759580393628.
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Bonvecchi, Alejandro. "Business as usual : political methods and economic normalcy in Argentine fiscal policymaking during structural reforms processes (1983-1999)." Thesis, University of Essex, 2003. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.274321.
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Erk, Can. "A theory of congruence : federalism and institutional change in Belgium and Germany." Thesis, McGill University, 2001. http://digitool.Library.McGill.CA:80/R/?func=dbin-jump-full&object_id=37649.
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The main focus of this study is on the question of why political institutions change. By extension, the study is also about explaining and predicting the direction of change. Put simply, the study postulates that political institutions will change in order to be congruent with the society.Change is analysed within the context of two federal structures, the Federal Republic of Germany and Belgium. During the same time period from 1949 to 1993, one transformed from a unitary state into a loose federation while the decentralised federation consolidated and became central. The puzzle which the research project deals with is about this change: Why did the institutions of 1949 fail to survive?
The prevailing institutionalist logic in comparative politics would suggest that once in place, institutions would have socialised the political actors into the existing structure by providing veto points in such a way that institutions would have been reproduced over time, but this has not been the case. Furthermore, why has change come about in two opposing directions, centralising and decentralising, despite many common characteristics between the two cases?
This study is based on a theory of congruence which argues that political institutions change in order to reflect underlying societal structures. More specifically, the argument is that political institutions in federal structures change to correspond to the ethno-linguistic make-up of the country. Accordingly, the unitary state of Belgium has changed its political institutions in order to accommodate the Flemings, Walloons and Bruxellois; while Federal Germany has centralised many issues despite explicit constitutional clauses against such changes.
According to the theory of congruence, when confronted with an ethno-linguistic structure that does not match the political one, the political structure changes; not automatically, but through the pressure of public policy concerns pursued by political actors. The ethno-linguistic community is the primary collectivity for which public policy decisions are made. The choices available to political actors are constrained by the demarcations of this societal composition. Decision makers might disagree over the substance of the policies, but they share the choice of venue in the form of the ethnolinguistic 'nation'. In case of a discrepancy between the ethno-linguistic societal structure and the political structure, public policy concerns wold exert a pressure towards congruence by demarcating a social collectivity for which policies are made different from the one set up by the political institutions. Thus, if the 'nation' is bigger than the unit that marked off by political institutions, the tendency would be towards amalgamation with the other subunits of the 'nation' and centralisation. If, on the other hand, the 'nation' is smaller than the unit defined by the political institutions, there would be devolutionary pressures on the unitary institutions.
The empirical research was carried out on two policy areas, education and mass media, through a paired comparison of Flanders and Wallonia in Belgium and Baden-Wurttemberg and North Rhine Westphalia in the Federal Republic of Germany.
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Ribó, Ausias. "Essays in Economic Theory." Doctoral thesis, Universitat de Barcelona, 2016. http://hdl.handle.net/10803/404912.
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This thesis is composed of 3 independent essays on economic theory. Each essay is meant to be read separately, including footnotes and appendices. In particular, essays 2 and 3 include specific bibliography. The general bibliography is included at the end of the thesis. The first essay reviews some well known conceptual and empirical problems that appear when economic theorists deal with preferences and choice theory, in general. While assessing those problems, the essay lays the ground for a detailed discussion of the possibility of preference learning, formation and change. The essay concludes proposing a theoretical framework to study these phenomena. The second essay, although independent from the first, is also devoted to the issue of preference change. In particular, it studies the possibility that cultural preferences evolve as a result of the combination of technological innovation and cultural transmission mechanisms. At the same time, it allows for the possibility that those cultural preferences determine the short term outcome of economic variables. In addition, it builds a framework where the combination of technological innovation, cultural transmission and economic structure lead to a process of endogenous preference heterogeneity and clustering. Hence it provides a model to understand how culture and the economic structure interact and coevolve. The third essay presents some theoretical problems that arise when using the concept of a matching function as a modelling device for the labor market. In particular, necessary conditions for the ratio of the number of matches per job searcher to be interpreted as the average job finding probability are established.
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Weinstein, Jonathan. "Essays on economic theory." Thesis, Massachusetts Institute of Technology, 2005. http://hdl.handle.net/1721.1/33830.
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Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2005.Includes bibliographical references.
These four essays concern the theory of games and its application to economic theory. The first two, closely linked, chapters are an investigation into the foundational question of the sensitivity of the predictions of game theory to higher-order beliefs. Impact of Higher-Order Uncertainty with Muhamet Yildiz In some games, the impact of higher-order uncertainty is very large, implying that present economic theories may be misleading as these theories assume common knowledge of the type structure after specifying the first or the second orders of beliefs. Focusing on normal-form games in which the players' strategy spaces are compact metric spaces, we show that our key condition, called "global stability under uncertainty," implies a variety of results to the effect that the impact of higher-order uncertainty is small. Our central result states that, under global stability, the maximum change in equilibrium strategies due to changes in players' beliefs at orders higher than k is exponentially decreasing in k. Therefore, given any need for precision, we can approximate equilibrium strategies by specifying only finitely many orders of beliefs. Finite-Order Implications of Any Equilibrium with Muhamet Yildiz Present economic theories make a common-knowledge assumption that implies that the first or second-order beliefs determine all higher-order beliefs.
(cont.) We analyze the role of such a closing assumption at any finite order by instead allowing higher orders to vary arbitrarily. Assuming that the space of underlying uncertainty is sufficiently rich, we show that, under an arbitrary fixed equilibrium, the resulting set of possible outcomes must include all outcomes that survive iterated elimination of strategies that are never a strict best reply. For many games, this implies that, unless the game is dominance-solvable, every equilibrium will be highly sensitive to higher-order beliefs, and thus economic theories based on such equilibria may be misleading. Moreover, every equilibrium is discontinuous at each type for which two or more actions survive our elimination process. Conversely, the resulting set of possible outcomes must be contained in rationalizable strategy profiles. This yields a precise characterization in generic instances. Price Dispersion and Loss Leaders Dispersion in retail prices of identical goods is inconsistent with the standard model of price competition among identical firms, which predicts that all prices will be driven down to cost. One common explanation for such dispersion is the use of a loss-leader strategy, in which a firm prices one good below cost in order to attract a higher customer volume for profitable goods.
(cont.) By assuming high transportation costs which indeed force each consumer to buy all desired goods at a single firm, we create the possibility of an effective loss-leader strategy. We find, however, that such a strategy cannot be effective in equilibrium, so that additional assumptions limiting price search or rationality must be introduced to explain price dispersion or loss leaders. Two Notes on the Blotto Game We exhibit a new equilibrium of the classic Blotto game in which players allocate one unit of resources among three coordinates and try to defeat their opponent in two out of three. It is well known that a mixed strategy will be an equilibrium strategy if the marginal distribution on each coordinate is U [0, 2]. All known examples of such distributions have two-dimensional support. Here we exhibit a distribution which has one-dimensional support and is simpler to describe than previous examples. The construction generalizes to give one-dimensional distributions with the same property in higher-dimensional simplexes as well. As our second note, we give some results on the equilibrium payoffs when the game is modified so that one player has greater available resources. Our results suggest a criterion for equilibrium selection in the original symmetric game, in terms of robustness with respect to a small asymmetry in resources.
by Jonathan Weinstein.
Ph.D.
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Baetz, Oliver. "Essays in economic theory." Thesis, University of Cambridge, 2013. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.648139.
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Kuzmics, Christoph Alexander. "Essays on economic theory." Thesis, University of Cambridge, 2004. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.615814.
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He, Wei. "Essays in economic theory." Diss., University of Iowa, 2016. https://ir.uiowa.edu/etd/3098.
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This thesis is composed of three chapters. Chapter 1 considers the existence of equilibria in games with complete information, where players may have non-ordered and discontinuous preferences. Chapter 2 studies the issues on the existence of pure and behavioral strategy equilibria in games with incomplete information and discontinuous payoffs. We consider the standard setting with Bayesian preferences as well as the case in which players may face ambiguity. Chapter 3 extends the classical results on the Walras-core existence and equivalence to an ambiguous asymmetric information economy, where agents maximize maximin expected utilities (MEU). These results are based on the papers He and Yannelis (2014, 2015a,b,c, 2016a,b).
In the first chapter, we propose the condition of "continuous inclusion property" to handle the difficulty of discontinuous payoffs in various general equilibrium and game theory models. Such discontinuities arise naturally in economic situations, including auction, price competition of firms and also patent races. Based on the continuous inclusion property, we establish the equilibrium existence result in a very general framework with discontinuous payoffs. On one hand, this condition is sufficiently general from the methodological point of view, as it unifies almost all special conditions proposed in the literature. On the other hand, our condition is also potentially useful from the realistic point of view, as it could be applied to deal with many economic models which cannot be studied before because of the presence of the discontinuity.
In the second chapter, I study the existence problem of pure and behavioral strategy equilibria in discontinuous games with incomplete information. The framework of games with incomplete information is standard as in the literature, except for that we allow players' payoffs to be discontinuous. We illustrate by examples that the Bayesian equilibria may not exist in such games and the previous results are not applicable to handle this problem. We propose some general conditions to retain the existence of both pure strategy and behavioral strategy Bayesian equilibrium, and show that our condition is tight. In addition, we study the equilibrium existence problem in discontinuous games under incomplete information and ambiguity, and show that the maximin framework solves the equilibrium existence issue without introducing any additional condition.
In the last chapter, I study a general equilibrium model with incomplete information by adopting the maximin expected utilities. The model is powerful enough to describe the behaviors of risk averse agents that cannot be explained by the standard assumption of subjective expected utilities. I use this new formulation to extend many classical results in general equilibrium theory by incorporating ambiguity into the model. In addition, the desirable incentive compatibility property is shown in our model with maximin expected utilities, while this property will typically fail in the traditional setup. Specifically, the existence results are shown for various equilibrium notions in a general equilibrium model, and the incentives can be guaranteed when all agents use the maximin expected utilities.
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Dai, Tianjiao Ph D. Massachusetts Institute of Technology. "Essays on economic theory." Thesis, Massachusetts Institute of Technology, 2019. https://hdl.handle.net/1721.1/122240.
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Thesis: Ph. D., Massachusetts Institute of Technology, Department of Economics, 2019Cataloged from PDF version of thesis.
Includes bibliographical references (pages 165-168).
The first chapter considers team incentive schemes that are robust to nonquantifiable uncertainty about the game played by the agents. A principal designs a contract for a team of agents, each taking an unobservable action that jointly determine a stochastic contractible outcome. The game is common knowledge among the agents, but the principal only knows some of the available action profiles. Realizing that the game may be bigger than he thinks, the principal evaluates contracts based on their guaranteed performance across all games consistent with his knowledge. All parties are risk neutral and the agents are protected by limited liability. A contract is said to align the agents' interests if each agent's compensation covaries positively and linearly with the other agents' compensation.
It is shown that contracts that fail to do so are dominated by those that do, both in terms of the surplus guarantee under budget balance, and in terms of the principal's profit guarantee when he is the residual claimant. It thus suffices to base compensation on a one-dimensional aggregate even if richer outcome measures are available. The best guarantee for either objective is achieved by a contract linear in the monetary value of the outcome. This provides a foundation for practices such as team-based pay and profit-sharing in partnership. The second chapter models a ride-sharing market in a traffic network with stochastic ride demands. A monopolistic ride-sharing platform in this traffic network faces a dynamic optimization problem to maximize its per period average payoff in the long run, by choosing policies of setting trip prices, matching ride requests and relocating idle drivers to meet future potential demands.
Directly solving the dynamic optimization problem for the ridesharing platform is computationally prohibitively expensive for a traffic network with reasonably large number of locations and vehicles due to its intrinsic complexity. I provide an theoretical upper bound on the performance of dynamic policies by analyzing a related deterministic problem. Based on the optimal solution to the deterministic problem, I propose implementable heuristic policies for the original stochastic problem that yield average payoffs converging to the theoretical upper bound asymptotically. I also discuss the relative value function iteration method to solve the optimization problem for small-scale markets numerically. The third chapter examines several discrete-time versions of a dynamic moral hazard in teams problem, a continuous-time model of which has been extensively studied in the previous literature.
The way to transform the continuous-time game into a discrete-time one is not unique, and different discrete-time assumptions with the same continuous-time technology limit lead to different discrete-time equilibria. Regardless of the technology assumption, I find that two-period models can give equilibrium results quite different from that in a continuous-time model: while the continuous-time model predicts existence and uniqueness of symmetric equilibrium, its two-period versions can either have multiple symmetric equilibria or none. Also, not all equilibria in the discrete-time models share features similar to the one predicted by the continuous-time model. The subsequent study of multiple-period models with no learning sheds some light on how the equilibria evolve as the discrete-time model better approximates the continuous-time one.
by Tianjiao Dai.
Ph. D.
Ph.D. Massachusetts Institute of Technology, Department of Economics
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Yi, Hyun Chang. "Essays in economic theory." Thesis, University of Exeter, 2014. http://hdl.handle.net/10871/15246.
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This dissertation consists of three research papers on cheap talk game and satisficing behaviour. The first chapter examines the potential for communication via cheap talk between an expert and a decision maker whose type (preferences) is uncertain. The expert privately observes states for each type of the decision maker and wants to persuade the decision maker to choose an action in his favour by informing her of the states. The decision maker privately observes her type and chooses an action. An optimal action for the decision maker depends upon both her type and type-specific states. In equilibrium the expert can always inform the decision maker in the form of comparative statements and the decision maker also can partially reveal her type to the expert or public. The second and third chapters build a dynamic model of satisficing behaviour in which an agent’s “expected” payoff is explicitly introduced, where this expectation is adaptively formed. If the agent receives a payoff above her satisficing level she continues with the current action, updating her valuation of the action. If she receives a payoff below her satisficing level and her valuation falls below her satisficing level she updates both her action and satisficing level. In the second chapter, we find that in the long run, all players satisfice. In individual decision problems, satisficing behaviour results in cautious, maximin choice and in normal form games like the Prisoner’s Dilemma and Stag Hunt, they in the long run play either cooperative or defective outcomes conditional on past plays. In coordination games like the Battle of the Sexes, Choosing Sides and Common Interest, they in the long run coordinate on Pareto optimal outcomes. In the third chapter, we find that satisficing players in the long run play subgame dominant paths, which is a refinement of subgame perfection, and identify conditions with which they ‘always cooperate’ or ‘fairly coordinate’ in repeated Prisoner’s Dilemma and Battle of the Sexes games, respectively, and truthfully communicate in sender-receiver games. Proofs and simulations are provided in appendices.
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Rashid, M. "Essays in economic theory." Thesis, University College London (University of London), 2015. http://discovery.ucl.ac.uk/1425119/.
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This thesis has two major themes. The first theme (Chapters 1 – 3) focuses on search theory and industrial organisation. I build a novel model of costly search where firms choose price distributions, draws are then taken from these distributions and the collection of draws is presented to consumers. Consumers are aware of the set of prices that firms charge but do not know which price is associated with which firm. As they search, they learn and update their beliefs about the prices offered by the other firms. I extend the model by introducing a price comparison website as well as informed and uninformed consumers. Equilibrium in the model has certain desirable properties. The second theme (Chapters 4 – 6) focuses on game theory, and in particular, games with forgetful players. One of the 'conclusions' of the Games and Economics Behaviour collection of papers on imperfect recall is that there is no one way to model imperfect recall in games; in particular, modelling issues which are of little or no consequence in games of perfect recall suddenly become substantive in games of imperfect recall. Furthermore, there is little consensus on how to proceed. I introduce a class of decision problems where, if we think of forgetting in a novel but intuitive way, we can transform the game into a game of perfect recall – thus resolving the modelling ambiguities. I extend the model to show that an agent with self-control problems may in certain cases be better off having a bad memory. I consider whether a firm can offer different contracts to discriminate between different types of consumer with varying degrees of memory and sophistication. Finally, I consider the consumption behaviour of a forgetful consumer.
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Dundas, Guy Alexander. "Federalism : a territorial phenomenon? : exploring theory through case studies of Cyprus and Belgium /." Title page, contents and introduction only, 2002. http://web4.library.adelaide.edu.au/theses/09AR/09ard914.pdf.
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Sahm, Marco. "Essays in Public Economic Theory." Diss., lmu, 2006. http://nbn-resolving.de/urn:nbn:de:bvb:19-56335.
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Todorova, Zdravka K. Lee Frederic S. "Reconsidering households in economic theory." Diss., UMK access, 2007.
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Thesis (Ph. D.)--Dept. of Economics. University of Missouri--Kansas City, 2007."A dissertation in economics and social science consortium." Advisor: Frederic S. Lee. Typescript. Vita. Title from "catalog record" of the print edition Description based on contents viewed Dec. 19, 2007. Includes bibliographical references (leaves 216-240). Online version of the print edition.
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Moreno, de Barreda Ines. "Essays in applied economic theory." Thesis, London School of Economics and Political Science (University of London), 2011. http://etheses.lse.ac.uk/158/.
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This thesis consists of three essays, all of which use the tools of economic theory to analyze specific situations in which multiple strategic agents interact with each other. The first chapter studies the strategic transmission of information between an informed expert and a decision maker when the latter has access to imperfect private information relevant to the decision. The main insight of the paper is that the access to private information of the decision maker hampers the incentives of the expert to communicate. Surprisingly, in a wide range of environments, the decision maker's information cannot make up for the loss of communication and the welfare of both agents diminishes. The second chapter presents a model of electoral competition between an in- cumbent and a challenger in which the voters receive more information about the quality of the incumbent. If the incumbent can manipulate the information received by the voters through costly effort, the model predicts an incumbency advantage, even though the two candidates are drawn from identical symmetric distributions, and the voters have rational expectations. It is also shown that a supermajority re-election rule improves welfare, mainly through discouraging low-quality politicians from manipulating the information. Finally the third chapter uses a mechanism design approach to characterize the class of social choice functions which cannot be profitably manipulated, when the individuals have symmetric single-peaked preferences. Our result allows for the design of social choice functions to deal with feasibility constraints.
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Lombardi, Michele. "Essays on behavioural economic theory." Thesis, Queen Mary, University of London, 2007. http://qmro.qmul.ac.uk/xmlui/handle/123456789/1537.
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The chapters of this work lie at the intersection between classical choice theory and experimental data on decision making. In chapter 21 study necessary and sufficient conditions for a choice function to be rationalized in the following sense: there exists a complete asymmetric relation T (a tournament) such that, for each feasible (finite) set, the choice set coincides with the uncovered set of T restricted to that feasible set. This notion of 'maximization' may offer testable restrictions on observable choice behavior. In chapter 3 Mariotti and I give a group revealed preference interpretation to the concept of uncovered set, and we provide a characterization of uncovered bargaining solutions of a Pareto-consistent tournament. In chapter 41 study the rationalizability of reason-based choice correspondences axiomatically. A reason-based choice correspondence rationalizes choice behaviour in terms of a two stage choice procedure. Given a feasible set S, the individual eliminates in the first step all of the dominated alternatives according to her fixed (not necessarily complete) strict preference relation. In the second step, she first constructs for each maximal alternative identified in the first step its lower contour set, and then she eliminates from the maximal set all of those alternatives so that the following justification holds: there exists another maximal alternative whose lower contour set strictly contains that of another maximal alternative. This procedural model captures the basic idea behind the experimental finding known as "attraction effect". Finally, in chapter 51 build a connection between the behavioral property expressed by the weak axiom of revealed non-inferiority and a new weak notion of rationality. This notion is weaker than that characterized by the weak axiom of revealed preference (WARP).
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Pires, Cesaltina Maria Pacheco. "Three essays in economic theory." Thesis, Massachusetts Institute of Technology, 1994. http://hdl.handle.net/1721.1/11936.
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Vela, Ramón G. (Ramón Geraldo Vela Córdova) 1969. "A theory of economic democracy." Thesis, Massachusetts Institute of Technology, 2000. http://hdl.handle.net/1721.1/8958.
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Thesis (Ph.D.)--Massachusetts Institute of Technology, Dept. of Political Science, 2000."June 2000."
Includes bibliographical references (p. 189-194).
What is economic democracy? What, if anything, justifies it? This thesis argues that liberal theories of justice are objectionable insofar as they emphasize the distribution of resources, having little to say about how production is governed. The commitments central to liberal democracy call for some degree of workplace democracy as well as distributive justice. Many liberals begin from a set of fundamental values, derive principles of distribution, and propose to organize economic institutions so as to realize these principles. I call this the 'Fabian logic of contemporary liberalism'. And I argue that it cannot be sustained. The values and ideas central to liberal democracy have implications for economic governance that are independent of distributive justice. They call for some degree of workplace democracy. The thesis defends this claim against three objections: that workplace democracy would be unnecessary in a just society; that there are non-employees -- e.g., community residents -- with a claim to govern the firm; and that workplace democracy is incompatible with liberal neutrality. The liberal conception of democracy underlying this argument has implications beyond the employment relationship. It suggests, most generally, that liberalism has a stronger connection to democratic institutions than its proponents, and many of its critics, have recognized.
by Ramón G. Vela.
Ph.D.
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Mulberg, Jonathan David. "Social limits to economic theory." Thesis, University of Warwick, 1991. http://wrap.warwick.ac.uk/109304/.
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This dissertation effects a complete re-orientation of economic theory. It shows how the economic cannot be analysed separately from the political and the social, and lays the foundation for an integrated political economy. The work examines the philosophical difficulties faced by economists, and re-draws the history of economic thought as a response to methodological dilemmas. The traditional History of Economics textbooks re-write the history in terms of the contemporary paradigm. This dissertation, by contrast, shows how the philosophical debates have shaped the trajectory of economics, and how the orientations of the schools undergo major changes so as to attempt to deal with the fundamental dilemmas of a 'policy science’. It brings out the 'hidden history’ of economics, and shows both how laissez-faire can only be defended by dropping any notion of economic 'science', and how economic theory has an implied political theory. It then considers the debate over political economic theory and the consequences for economic organisation and for environmental disruption.
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Komai, Mana. "An Economic Theory of Leadership." Diss., Virginia Tech, 2003. http://hdl.handle.net/10919/11194.
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This dissertation develops an economic theory of leadership based on assignment of information. Common theories assume that organizations exist to reduce transaction costs by replacing imperfect markets with incomplete long term contracts that give managers the power to command subordinates. This view reverses all of these premises: I study an organization in which it is costless to transmit and process information, contracts exist in the backgound if at all, and agents are not bound to the organization. The organization is held together by economies of scale in generating information and by the advantages of controlling access to that information. The minimalist model of organizations produces a minimalist theory of leadership: leaders have no special talent but are leaders simply because they are given exclusive access to certain information. A single leader induces a first best outcome if his incentives are aligned with his subordinates. If a single leader is not credible, then diluting the power of leadership by appointing multiple informed leaders can ensure credibility and improve e.ciency but can not produce the first best. If agents are di.erentiated by their costs of cooperation the most cooperative player is not necessarily the best leader. In this scenario, the ability of the group to sustain fully cooperative outcomes may depend on the player with the least propensity to cooperate. Therefore, to maximize e.ciency (i.e., to maximize the range of circumstances in which e.cient cooperation is sustainable), the group should sometimes promote less cooperative people. Here, "less cooperative" means lazy or busy rather than disagreeable. This dissertation also applies the idea of leadership (endorsement) to voluntary provision of public goods. I show that when the leader is unable to fully reveal his information expected contributions, ex-ante, are unambigeously higher in the leader-follower setting. That is partial revelation of information induces more contribution compared to full revelation or complete information. I also show that if the utility functions are linear then ex-ante welfare is unambigeously higher in the presence of an informed endorser.Ph. D.
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Liang, Annie. "Economic Theory and Statistical Learning." Thesis, Harvard University, 2016. http://nrs.harvard.edu/urn-3:HUL.InstRepos:33493561.
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This dissertation presents three independent essays in microeconomic theory. Chapter 1 suggests an alternative to the common prior assumption, in which agents form beliefs by learning from data, possibly interpreting the data in different ways. In the limit as agents observe increasing quantities of data, the model returns strict solutions of a limiting complete information game, but predictions may diverge substantially for small quantities of data. Chapter 2 (with Jon Kleinberg and Sendhil Mullainathan) proposes use of machine learning algorithms to construct benchmarks for “achievable" predictive accuracy. The paper illustrates this approach for the problem of predicting human-generated random sequences. We find that leading models explain approximately 10-15% of predictable variation in the problem. Chapter 3 considers the problem of how to interpret inconsistent choice data, when the observed departures from the standard model (perfect maximization of a single preference) may emerge either from context-dependencies in preference or from stochastic choice error. I show that if preferences are “simple" in the sense that they consist only of a small number of context-dependencies, then the analyst can use a proposed optimization problem to recover the true number of underlying context-dependent preferences.Economics
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Büttner, Bettina. "Five essays in public economic theory /." [S.l. : s.n.], 2005. http://bvbr.bib-bvb.de:8991/F?func=service&doc_library=BVB01&doc_number=014735840&line_number=0001&func_code=DB_RECORDS&service_type=MEDIA.
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Qizilbash, M. "Corruption, political systems and economic theory." Thesis, University of Oxford, 1992. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.358574.
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Schickner, Benjamin [Verfasser]. "Essays in Economic Theory / Benjamin Schickner." Bonn : Universitäts- und Landesbibliothek Bonn, 2017. http://d-nb.info/112763951X/34.
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Kleiner, Andreas [Verfasser]. "Essays in Economic Theory / Andreas Kleiner." Bonn : Universitäts- und Landesbibliothek Bonn, 2016. http://d-nb.info/1109879717/34.
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Speit, Andre [Verfasser]. "Essays in Economic Theory / Andre Speit." Bonn : Universitäts- und Landesbibliothek Bonn, 2021. http://d-nb.info/1227990529/34.
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Rampal, Jeevant. "Behavioral Economic Theory and Experimental Investigation." The Ohio State University, 2017. http://rave.ohiolink.edu/etdc/view?acc_num=osu1491972688590258.
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Gilliland, Anthony C. "Federalism and the creation of new states : justifying internal secession." Doctoral thesis, Universitat Pompeu Fabra, 2014. http://hdl.handle.net/10803/145769.
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This thesis addresses the creation of new states within federal arrangements – particularly
federations - and their justification in liberal democratic contexts. It is presented as a set of
three cumulative articles. The first article argues that existing liberal approaches to justifying
secession have important shortcomings if they are to provide moral guidance to when internal
secession is justified. In order to address this shortfall, the second article examines the
process followed in three existing cases (the creation of Jura in Switzerland, Nunavut in
Canada and Jharkhand in India) and how they were justified. Based on the process identified,
the third article develops a procedural account of the grounds that may justify internal
secessions. Overall the thesis argues that internal secessions should be negotiated between the
secessionists, the existing unit they belong to, and the federation as a whole, delimited by the
specific federal context in which they take place.La present tesi doctoral tracta la creació de nous estats en el marc de les federacions i la seva justificació en contextos de democràcies liberals. Es presenta com un conjunt de tres articles cumulatius. El primer argumenta que les teories liberals sobre la secessió presenten mancances com a guia moral quan una secessió interna és justificable. Per abordar dites mancances, el segon article examina el procés que s’ha seguit en tres casos (la creació de Jura, Suissa; Nunavut, Canada i Jharkhand, India) i les justificacions que s'hi van donar. A partir d’aquests casos, el tercer article desenvolupa una teoria normativa procedimental que considera quins són els fonaments que justifiquen les secessions internes. En conjunt, la tesi defensa que les secessions internes s’haurien de negociar entre la part seccionista, la unitat existent a la qual pertanyen, i la federació; tenint en compte el context federal específic en el qual te lloc.
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Drexl, Moritz [Verfasser]. "Five Essays in Economic Theory / Moritz Drexl." Bonn : Universitäts- und Landesbibliothek Bonn, 2014. http://d-nb.info/107726674X/34.
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Frommeyer, Tim Julius [Verfasser]. "Essay in Economic Theory / Tim Julius Frommeyer." Bonn : Universitäts- und Landesbibliothek Bonn, 2017. http://d-nb.info/1124540008/34.
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Strack, Philipp [Verfasser]. "Five Essays in Economic Theory / Philipp Strack." Bonn : Universitäts- und Landesbibliothek Bonn, 2013. http://d-nb.info/1043020047/34.
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Dizdar, Deniz [Verfasser]. "Four Essays in Economic Theory / Deniz Dizdar." Bonn : Universitäts- und Landesbibliothek Bonn, 2013. http://d-nb.info/1043019928/34.
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Belcourt, Tracey L. "Three essays in applied micro-economic theory." Thesis, National Library of Canada = Bibliothèque nationale du Canada, 1997. http://www.collectionscanada.ca/obj/s4/f2/dsk3/ftp04/nq20552.pdf.
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Winkelmann, Justus Hans [Verfasser]. "Essays in Economic Theory / Justus Hans Winkelmann." Bonn : Universitäts- und Landesbibliothek Bonn, 2019. http://d-nb.info/1185575448/34.
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Bethmann, Dirk [Verfasser]. "Essays on Quantitative Economic Theory / Dirk Bethmann." Aachen : Shaker, 2006. http://d-nb.info/1186587881/34.
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Barde, Sylvain. "A comparative economic analysis of agglomeration theory." Thesis, University of Kent, 2007. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.445715.
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Lester, Ashley. "Essays in the theory of economic growth." Thesis, Massachusetts Institute of Technology, 2005. http://hdl.handle.net/1721.1/32412.
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Thesis (Ph. D.)--Massachusetts Institute of Technology, Dept. of Economics, 2005."June 2005."
Includes bibliographical references.
This thesis is a collection of three theoretical essays on institutions and economic growth. Chapter 1 considers a particular institution: ethnicity. Ethnic, religious and tribal divisions are empirically associated with economic underdevelopment. I construct a model in which groups form endogenously to enable cooperation between their members in a prisoner's dilemma. Groups sustain trust through monitoring, whereas only the Nash equilibrium, trade, is possible in an anonymous market. Optimal group size trades off the benefits of increased scale and the costs of reduced ability to detect cheating. Inter-group hostility can enable each group to enforce more trusting behavior between its own members. Even if groups may form optimally, in equilibrium they may persist inefficiently. Chapters 2 and 3 consider some distributional implications of technical change in a model with human capital. Both chapters distinguish between general skills, that are equally useful with any vintage of technology, and specific skills, that are associated with a particular vintage. In Chapter 2, I construct a model of slow technology diffusion. In developing countries, diffusion takes the form of a "dual economy", in which a gradually increasing fraction of workers use modern technology, while the remainder use traditional technology. Intermediate technologies are never used. During the transition, wages of specific-skill workers fall, as workers with general skills disproportionately join the modern sector. The model can also be applied to technology diffusion in developed countries. Chapter 3 asks why, early in the modern era, technical change was primarily deskilling, while in the modern era it is skill-biased.
(cont.) Whereas previous explanations have focused on changes in technology, this paper suggests that changes in skills themselves were important. High-skill workers invest in specific skills if technical change is slow, and in general skills if it is rapid. This generates a U-shaped relationship between the rate of technical change and the skill-premium. Moreover, with low rates of technical change the modern sector is unskill-intensive, whereas the reverse is true when technical change is faster. The predictions of the model are compared with the historical experience.
by Ashley Lester.
Ph.D.
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Kojima, Naoki. "Essays on economic theory in asymmetric information." Toulouse 1, 2001. http://www.theses.fr/2001TOU10093.
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Cette thèse traite trois sujets différents de l'aspect de l'asymétrie de l'information, plus particulièrement de la sélection adverse : étude de la "relationship banking" dans le cadre de concurrence entre banques ; introduction des actions d'une entreprise en bourse (conflits d'intérêt entre la firme émettrice, l'entreprise financière chargée de la mise en vente et les investisseurs) ; mécanisme de la tarification optimale d'un monopole avec des consommateurs contraints en budget et proposition d'une nouvelle approche de ce problème de l'asymétrie d'information bidimensionnelleThis thesis deals with three different subject matters from the aspect of asymmetric information, especially adverse selection: relationship banking in the framework of competition amongst banks ; initial public offering (conflicts of interests between the issuer, the underwriter and investors) ; mechanism of optimal pricing by a monopolistic seller in the presence of budget constraints on the part of buyers and proposition of new approach to this bi-dimensional asymmetric information problem
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Charpin, Ariane. "Essays on decision theory and economic efficiency." Thesis, Paris 1, 2019. http://www.theses.fr/2019PA01E009/document.
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Cette thèse de doctorat s’intéresse à deux thèmes distincts : la prise de décision en situation de risque et l’efficacité économique. Ces deux questions sont traitées dans un cadre empirique en utilisant des bases de données uniques. Le premier chapitre teste les modèles théoriques de décision en situation de risque sur des données réelles de paris hippiques pour identifier la théorie qui permet la meilleure description des choix des individus. Ce chapitre montre que les théories comportementales de la décision en situation de risque (théorie des perspectives cumulées et modèle de l’utilité dépendante du rang) sont mieux adaptées pour expliquer le comportement des parieurs observé dans les données que la théorie de l’utilité espérée. Le second chapitre estime l’effet d’une concentration entre deux grandes entreprises du secteur des transports urbains en France sur leurs coûts. Les résultats obtenus mettent en évidence que la fusion n’a pas entraîné de gains d’efficacité pour les parties à la fusion. Ce résultat s’explique notamment par le contexte dans lequel la fusion a été menée, en particulier les raisons du choix de la cible, la perception des clients et des employés de la fusion, les différences de culture entre les entreprises et la préparation opérationnelle de l’opération. Le troisième chapitre examine l’impact d’une plus grande discrétion dans les procédures d’appels d’offres sur la sélection des opérateurs, en particulier leur productivité. Le résultat principal est que la procédure qui accroît potentiellement le pouvoir discrétionnaire des acheteurs publics conduit à la sélection d’entreprises moins efficaces qu’une procédure n’impliquant pas ou peu de discrétion. Nos analyses complémentaires suggèrent que le résultat s’explique par l’effet d’une plus grande discrétion à l’étape de sélection des entreprisesThis doctoral thesis focuses on two distinct themes: decision-making in situations of risk and economic efficiency. These two questions are treated in an empirical framework using unique databases. The first chapter tests the theoretical models of decision under risk on bets on horseraces to identify the theory that allows the best description of individuals’ choices. This chapter shows that behavioral theories of decision under risk (cumulative prospect theory and rank-dependent utility) are better suited to explain the behavior of bettors observed in the data than the expected utility theory. The second chapter estimates the effect of a merger between two large companies in the urban transport sector in France on their costs. The results show that the merger did not result in efficiency gains for the merging parties. This result can be understood in light of the context in which the merger was conducted, in particular the reasons for the choice of the target, the perception of customers and employees of the merger, the differences in culture between the companies and the operational preparation of the merger. The third chapter examines the impact of greater discretion in tendering procedures on the selection of operators, particularly their productivity. The main result is that the procedure that potentially increases the discretion of public purchasers leads to the selection of less efficient companies than a procedure involving little or no discretion. Further analyzes suggest that the result is due to the effect of greater discretion at the screening stage
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Hartell, Ann. "Path dependence in economic theory and research." WU Vienna University of Economics and Business, 2013. http://epub.wu.ac.at/6097/1/sre%2Ddisc%2D2013_03.pdf.
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This paper gives an overview of the concept of path dependence and explores its relevancy for sustainability-related research. The importance of path dependency for evolutionary economics is discussed, along with some important criticisms of the concept. The framework of path dependency is then applied to a case study of a regional rail transport plan with implications for sustainable transportation systems.
Traditional economic theory emphasizes a set of assumed initial conditions, a series of decisions guided by rationality and perfect information which deliver a market to a state of predictable equilibrium where efficiency reigns. The orthodox idea of equilibrium holds that any and all pathways lead to a state of stability; in effect a market equilibrium outcome is predetermined and inescapable.Yet this approach leaves much unconsidered. It does not account for much of the dynamic behavior of markets and economies. It cannot explain why markets fail to efficiently allocate resources or select suboptimal technologies for widespread use. Or why policy interventions so often fail to shape market outcomes in predictable ways. For practitioners or researchers interested in applied questions such as how to foster innovation, how R&D investments can deliver greater economic returns, how to promote the diffusion of technological improvements, or how regions can align policies and programs to launch and sustain development, traditional analyses offer "thin" explanations. These voids suggest a need for alternative frameworks that better fit what is observed in actual economies, rather than theoretical ones (Simmie, 2012). This paper examines an alternative conceptual framework that addresses some of these gaps: Path dependence. The paper provides an overview of the concept of path dependence and an exploration of its relevancy for sustainability-related research. In structure, the first section is an introduction to path dependence and its relationship to evolutionary economics, followed by some important criticisms. The next section outlines how a path dependence approach has been used in studies of change in the transport sector. The final section offers a brief case study of a sustainable transport project from the path dependence perspective.Series: SRE - Discussion Papers
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Penczynski, Stefan Peter. "Strategic thinking : experimental investigation and economic theory." Thesis, London School of Economics and Political Science (University of London), 2009. http://etheses.lse.ac.uk/2547/.
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Strategic interaction has traditionally been modelled in economics with game theoretic equilibrium models. In these models, strategies constitute best responses to beliefs that are consistent with other players' strategies. While this consistency is realistic in settings familiar to the players, it is less appropriate in situations that are encountered for the first time. This shortcoming has led to the conception of models of bounded rationality, in particular the level-k model of levels of reasoning. While experimental studies usually employ only action data to test the level-k model, in this thesis, a team setup with electronic communication between participants allows for a qualitatively richer insight in actual reasoning processes. Two different games are played to investigate different notions of strategic thinking. The first study uses a dominance-solvable 'beauty contest' game in which 6-8 teams compete for a prize. This game lends itself naturally to the observation of levels of reasoning. In addition, the communication allows to analyse the anchoring level-0 belief and the population belief of individual players. The second study uses a zero-sum 'hide and seek' game that two teams play against each other. Both the influence of non-neutral framing on the level-0 belief and the task-dependence of the level of reasoning can be brought to light in this study. The third and final chapter considers an application of the equilibrium concept in the theory of implicit incentives, a situation of complex strategic interaction. The method and results of the study are viewed against the background of the limitations of equilibrium models to reflect a situation of inherent one-shot nature.
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Muthoo, Abhinay. "Bargaining theory." Thesis, University of Cambridge, 1988. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.257214.
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Theodoulou, Stella. "Construing economic behaviour." Thesis, London Metropolitan University, 1996. http://ethos.bl.uk/OrderDetails.do?uin=uk.bl.ethos.297586.
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Tokis, Konstantinos. "Essays on microeconomic theory." Thesis, London School of Economics and Political Science (University of London), 2018. http://etheses.lse.ac.uk/3761/.
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This thesis contains three essays in Microeconomic Theory. Chapter 1 studies the incentives of a seller to voluntarily disclose or sell information about a buyer to a third party. While there are obvious benefits to sharing information with other sellers, there is also an incentive cost which is due to her learning about the buyer through her own trade with him. To study this trade-off we analyse a model in which a buyer interacts sequentially with two sellers, each of whom makes a take-it-or-leave-it offer. The buyer learns his valuation for the good of each seller sequentially but these might be correlated. We model information disclosure using Bayesian persuasion. Chapter 2 provides various extensions of the model presented in Chapter 1. Chapter 3 provides empirical evidences that demonstrate that the investors of a fund update their opinion on the fund manager’s ability faster during bear markets. We build a theoretical model to demonstrate a channel which would result on this empirical observation. We consider a continuum of potential investors who allocate funds in two consecutive periods between a manager and a market index. The manager’s alpha, defined as her ability to generate idiosyncratic returns, is her private information and it is either high or low. In each period, the manager receives a private signal on the potential performance of her alpha, and she also obtains some public news on the market’s condition. In Chapter 4 we demonstrate that the relative job security that CEOs enjoy can be partly attributed to the high sophistication of the managerial labour market. To do this we build a theoretical model in which a representative investor proposes a contract to a manager, which also specifies the conditions of his termination. Production is a function of the manager’s effort and ability, both of which are his private information. The former is a choice variable, whereas the latter follows a Geometric Brownian motion. The manager’s post-termination payoff is generated by an exogenous managerial labour market, and it is equal to his expected ability. The market learns his ability with some given probability, which we interpret as its sophistication. Otherwise, it forms its posterior based on his termination time.