Research Interests

• Public Finance and Political Economy

• Game Theory

• Applied Micro Theory

• Monetary Theory

Fixed Cost Queues and Price Controls (Dissertation)

• Abstract:  When a government imposes price controls, markets may be unable to clear in the traditional sense, leaving some would-be participants unable to make a transaction. This gives buyers (or sellers) an incentive to arrive early, forming a queue to determine who will make a purchase (or sale). For instance, rationing by queues commonly occurs when prices are controlled after natural disasters, such as hurricanes.

  This dissertation argues in favor of an intuitive model for rationing by queues. Nearly all literature on the subject has used an assumption that time spent in the queue increases proportionately with the quantity of good purchased; yet one would typically expect the queue time to be a fixed cost. For instance, a consumer who must wait in a line to buy gasoline will wait the same amount of time regardless of how many gallons he intends to buy. This latter approach is investigated here in several general equilibrium models, presented in three essays.

  The first essay provides a benchmark model similar to those in the literature, and offers new insight regarding inefficiencies that arise in a proportional cost model. The second chapter presents a fixed cost setting, highlighting the key differences in efficiency. The third explicitly models the strategic interactions of agents competing in a fixed cost queue, producing outcomes similar to those of the second model.

  In all three essays, queue times are endogenously determined, adjusting to compensate for any market imbalance caused by price controls. With each model, existence of equilibrium is established for a broad class of preferences and price controls. This is particularly significant in the fixed cost specification, since these technical issues are largely to blame for its lack of use. Fixed cost queues are shown to cause a remarkably different type of inefficiency than proportional queues. There is no marginal wedge between seller’s and buyer’s price; hence, there are fewer opportunities for Pareto-improving redistribution on the resulting equilibrium allocation. Even so, fixed cost queues can result in much larger total queue time. In some cases, all agents are worse off under a price control regime than under market-clearing prices.

   

Queue-Rationed Equilibria with Fixed Costs of Waiting (Job Market Paper)

• Abstract:  The welfare impact of price controls is examined here in an exchange economy. Time spent in the queue is an endogenously-determined transaction cost, which agents take as given and which adjusts so as to clear markets when prices are prevented from performing this function. When queuing is required, it enters the household’s decision as a fixed cost, rather than increasing in proportion to the amount of good exchanged, as in previous literature.  Existence of competitive equilibrium is established for this general equilibrium model. Price controls are shown to cause notable inefficiencies. Even if the government decrees Walrasian prices, the Walrasian outcome may not be the only Queue-Rationed Equilibrium; some agents may end up waiting in queues. Moreover, for certain utility forms, any price control will unambiguously harm all individuals.

A Lesson from Implementing the Core

• Abstract:  This paper investigates noncooperative implementation of the core, using an extensive form game which tells an intuitive story of coalition formation. Under the core solution concept, if a blocking coalition exists, those agents abandon the current allocation without regard for the consequences to players outside the blocking coalition. Yet in certain circumstances, these players have an incentive to prevent formation of any blocking coalition. An implementation analyzed in Lagunoff (1994) is vulnerable to such circumstances, thus failing to fully implement the core. To achieve full implementation, the mechanism is modified here by perturbing payoffs with a small cost when a coalition is proposed and by allowing those agents excluded from a newly formed coalition to retain their original allocations. The required alterations illustrate the core’s nonchalance towards agents not in blocking coalitions.