We study the problem of evaluating whether the selection from a set is close to the ordering of the set determined by an exogenously given measure. Our main result is that three axioms, two naturally capturing “dominance”, and a stronger one imposing a form of symmetry in the comparison of selections, are sufficient to evaluate how close any selection from any set is to the given ordering of the set. This closeness is given by a very simple index, which is a linear function of the sum of the ranks of the selected elements. The paper ends by relating this index to the existing literature on distance between orderings, and also offers a practical application of the index.

The paper argues that systemic risk must be taken into account when designing optimal bankruptcy procedures in general, and priority rules in particular. Allowing for endogenous formation of links in the interbank market we show that the optimal policy depends on the distribution of shocks and the severity of fire sales.

We analyze the influence of IMF and World Bank programs on political regime transitions. We develop an extended version of Acemoglu and Robinson’s [American Economic Review 91, 2001] model of political transitions to show how the anticipation of new loans from international financial institutions can trigger political transitions which would not otherwise have taken place. We test this unexplored implication of the theory empirically. We find that the anticipation of receiving new loan programs immediately after a political regime transition increases the probability of a transition from autocracy to democracy and reduces the probability of democratic survival.

I study the dynamic mechanism design problem of a monopolist selling a fixed number of service slots to randomly arriving, short-lived buyers with heterogeneous values. The fully optimal mechanism is a non-standard auction in which bidders' payoffs are non-monotone in their opponents' bids. Because its complexity may make the fully optimal mechanism too costly to implement, I also study the optimal mechanisms in restricted classes. The most restrictive are pure calendar mechanisms, which allocate service dates instead of contingent contracts. The optimal pure calendar mechanism is characterized by the opportunity costs of service slots and is implementable with a simple mechanism.

We consider optimal pricing policies for airlines when passengers are uncertain at the time of ticketing of their eventual willingness to pay for air travel. Auctions at the time of departure efficiently allocate space and a profit maximizing airline can capitalize on these gains by overbooking flights and repurchasing excess tickets from those passengers whose realized value is low. Nevertheless profit maximization entails distortions away from the efficient allocation. Under regularity conditions, we show that the optimal mechanism can be implemented by a modified double auction. In order to encourage early booking, passengers who purchase late are disadvantaged. In order to capture the information rents of passengers with high expected values, ticket repurchases at the time of departure are at a subsidized price, sometimes leading to unused capacity. (JEL: D42, D44, D82)

This paper examines the relationship between voting weights and expected equilibrium payoffs in legislative bargaining and provides a necessary and sufficient condition for payoffs to be proportional to weights. This condition has a natural interpretation in terms of the supply and demand for coalition partners. An implication of this condition is that Snyder et al.'s (2005) result, that payoffs are proportional to weights in large replicated games, does not necessarily extend to the smaller games that arise in applications. Departures from proportionality may be substantial and may arise even in well-behaved (homogeneous) games.

This paper presents a tractable model to study the effect of immigration on host countries’ school system and student outcomes. In our model, education quality and student outcomes are determined endogenously by the interaction of parents, schools and policy-makers deciding educational resources. Immigration decisions are based on economic factors, immigration policy, as well as on “parental motivation” (parents’ concerns about their children education achievement). The model yields results that are consistent with central empirical regularities of the school effects of immigration: (1) there is a negative effect of immigrant pupils on native students; (2) the increasing shares of immigrant students are associated with the decline of school resources and quality; (3) the school performance of immigrant children is positively associated with immigration costs; and (4) school achievement increases in parental motivation and those immigrant children with highly motivated parents tend to outperform native children. Importantly, our analysis clarifies under which conditions these empirical regularities take place and emphasizes that the effect of immigration on native pupils is mediated by the way the school system reacts to changes in class composition.

This paper studies a model where student effort and talent interact with parental and teachers' investments, as well as with school system resources. The model is rich, yet sufficiently stylized to provide novel implications. It can show, for example, that an improvement in parental outside options will reduce parental and school effort, which are partially compensated through school resources. In this way, by incorporating the behavioral responses of parents, teachers and policymakers, the paper provides a rationale for the existing ambiguous empirical evidence on the effect of school resources. The paper also provides a novel microfoundation for peer effects, with empirical implications for welfare and different education policies.

This note documents trends of socialization and intergenerational mobility across research networks (fields) in economics. Using data on advisor-advisee pairs, we find that intergenerational field similarity is more prevalent in larger and successful fields. We then show that researchers who do choose different fields than those of their advisors are more likely to switch to highly demanded fields in the job market. These results are consistent with the equilibrium of a model in which advisors' have concerns for their advisees' socialization and production outcomes. We also document a positive relation between field productivity and the median level of co-authorship at the field level, which is consistent with complementaries between socialization and productive efforts.