<p> This dissertation addresses the question of strategic behavior with respect to unsecured credit, in the presence of vast asymmetry of information between lender and borrower. The theoretical exercise presented below differs from the existing literature on precautionary savings models in a number of ways. Firstly, it analyzes the credit scores from the perspective of a non-transferable asset and determines the effect of exogenous shocks to its value on consumer behavior. Secondly, it introduces a greater degree of asymmetry of information in the form of privately known health shocks. Thirdly, it moves away from the deterministic end of life model by introducing a stochastic shock for end of life, which also serves as an additional layer of information asymmetry between players in the market. </p><p> Finally, it modifies discounting through a dynamic discount factor. The simulations presented show significant effects from exogenous shocks to the credit allocation dynamics. These effects, however, are diminished with the passage of time, suggesting that strategic behavior is influenced more prominently in the short to medium term. </p><p> Following the establishment of economic value in the credit score, the dissertation addresses the question of asymmetric information in greater detail. By analyzing the effects of privately held stochastic health shocks in the presence of credit scores, it adds further insight into strategic behavior. Overall, the analysis focuses on the effects of exogenous changes to health that affect the incidence of such negative shocks, the magnitude of the shock, and finally the costs associated with the shock. Key findings show that the interplay between the insurance motif in borrowing and the strategic default motif are correlated with the credit scoring process and the credit allocation decision. Additionally, the dissertation also tests some of the theoretical predictions via a number of simple, stylized empirical models. Specifically, it presents models using data from the Survey of Consumer Finances that supports the hypothesis that, given a pessimistic outlook on life and health, individuals are likely to rely more on unsecured credit. </p><p> Finally, the dissertation will present extensions of the model under considerations. By expanding the current literature on precautionary savings models via the introduction of heterogeneous and dynamic risk profiles, it explores the implications of such profiles on strategic behavior. The model is estimated for various levels of static risk aversion, as well as a dynamic formulation. The results again show strong correlation between the credit scoring process and strategic behavior; however the impact is mitigated somewhat by the risk profile. To complete the picture of the effects of credit scoring on strategic behavior, an alternative credit allocation process is introduced. This process, which is a quasi-collateralized form of unsecured lending, reduces the incidence of strategic default. The implication is that credit scores have a significant impact on behavior, however, their impact also interacts with other components of the market (such as risk profiles and health shocks). These interactions modify the magnitude of the impact of the credit score on individual behavior, though largely the direction of the impact remains the same.</p>

Many economic decisions rely on information that is privately owned by the agents, who may have incentives to misreport this information. The strategic possibilities of the agents may take different forms, depending on the economic environment. The first chapter studies the scheduling problem, and considers coalitional maneuvers in the form of splitting and transferring jobs. The second chapter explores strategic behavior in the form of merging by users in the minimum cost spanning tree problem. The third chapter is about decision making under uncertainty, where we give an alternative characterization of individual preferences that are based on beliefs.

A mechanism elicits the monetary valuations from the agents for getting a unit of good (or service), allocates some goods to some agents and charge some money only to the agents who are served. We study welfare and incentive compatibility properties of these mechanisms. We compare two familiar mechanisms in an economy with increasing marginal cost, random priority (RP) and average cost (AC). We find that RP unambiguously performs better than AC using the worst-absolute surplus loss measure. In similar economies, we characterize the mechanisms that, are immune to coordinated misreports of any group of agents and provide optimal mechanisms for different shapes of cost functions using the worst absolute surplus loss.

Heckman and Singer (1984) argued that in typical longitudinal analyses, standard treatments of heterogeneity components result in incorrect parameterization of the duration model. As a consequence, estimation bias is not limited to duration dependence, but extends to the structural parameters as well. They show that a nonparametric mass point approach to marginal likelihood estimation is possible due to Lindsay's characterization of the mixture density. However, their method makes the strong assumption that observed variables are uncorrelated with unobserved heterogeneity and that a small number of mass points can represent the sample distribution of unobservables. In their Monte Carlo study, the mass point method failed to estimate the underlying heterogeneity distribution even though a simple unimodal distribution was used for contamination. I propose two competing methods to deal with this issue. Maximum Penalized Likelihood Estimation (MPLE) and Simulation Based Estimation (SIMEST). MPLE is an estimator which is based on likelihood inference conditional on unobserved heterogeneity. In order to estimate conditional densities from the mixture joint density, heterogeneity is smoothed out while maximizing goodness of fit. MPLE is an application of spline function. On the other hand, SIMEST is based on axioms which presumably govern the stochastic process. Therefore noises which could not be explained by the axioms are regarded as heterogeneity. SIMEST is computationally efficient for the large panel data analysis because it can avoid closed-form expressions for the density function. Monte Carlo experimental results indicate that these methods are quite attractive vis-a-vis the Heckman and Singer estimator.

The first part of the thesis addresses the effect of rules of origin regulations on the use of domestic factors of production in the country of origin. In the case of a firm that is a perfect competitor in the final product market these regulations have two effects: first there is a direct substitution effect due to the regulation that will increase the use of the domestic factor and second, there is an indirect output effect due to the increased cost that will reduce the demand for the domestic factor. In the case of a firm that has a monopoly power in the final product market, the declining marginal revenue curve faced by the firm causes the reallocation of output between domestic and foreign plants. This reallocation may further decrease the demand for the domestic factor of production. The second part of the thesis addresses the problem of a government trying to maximize welfare through use of rules of origin regulations when there is conflict among various domestic interests. Numerical computations using this model showed that the optimal rule of origin was very sensitive to the technical parameters of the model which suggests that policy decisions with respect to rules of origin should be made at the greatest level of disaggregation that is feasible.

This paper addresses the question of how the government should elicit cost information from a high or low domestic industry to determine socially optimal levels of imports. The results are shown to depend on whether firms in the domestic industry are represented by a trade organization. When firms act independently the optimal contract is costless for the government and two different types of incentive constraints are used to determine it. One of these applies when the costs announced by firms coincide. The other applies when one firm reveals a cost structure and its competitor reveals the opposite cost structure. If a contract to elicit cost information is used and trade organizations are the channel of communication between industry and government only one type of incentive constraint is necessary.

We first analyze a pure bargaining problem where n players can split a pie on a unanimous agreement. All players have the same utility function of the form $\delta s$ where $s$ is the share of a player and $\delta$ the discount factor. We present four simple bargaining processes where a player's acceptance leads to a reduced game. Three propose-response processes yield a unique perfect equilibrium. One demand-response process yields a unique perfect equilibrium when $\delta$ is below a certain critical level and multiple perfect equilibria otherwise. We then generalize the environment so that players may have different preferences over share-delay pairs which satisfy certain axioms. We specify the contracts among the players as the reduction evolves in a simple bargaining process. The bargaining game yields a unique perfect equilibrium outcome. As the time lapse between bargaining rounds goes to zero, the unique perfect equilibrium outcome approaches the Nash bargaining solution. Finally, we analyze a general bargaining problem where a characteristic function prescribes potential worths among n players. We assume the same general environment. When the core of a game is not empty, a Nash-Core solution of the game is uniquely characterized by certain properties.

This study provides an overview of the Neoclassical theory of production as well as topics on market structure. It analyzes transportation costs, pricing, and economies of scale that determine production concentration and emphasizes the need of studies that would analyze possible effects if a North American Free Trade Area is implemented among the U.S., Canada and Mexico. The Mexican cement industry is used as an example of a sector with diverse industrial organization schemes, where the production process results in a trade-off between energy-saving technologies and pollution wreckage. Labor, capital and materials inputs are considered in the case study where various policy simulations signal some distortions that controlled input markets have on output, efficiency, and productivity during the 1963-1983 period on the cement industry of Mexico.

We study incentive compatible profit-sharing rules when output (or profit) is obtained via the joint use of a technology exhibiting decreasing marginal returns. The incentives compatibility criterion we adopt is that of strategy-proofness (SP), arguably the most robust and the most demanding incentives requirement. We first show that no strategy-proof mechanism is efficient. We then characterize the class of strategy-proof mechanisms in the two-agent case, and show that it is the union of the serial and reverse serial families of sharing rules. Moreover, SP and the requirement that no individual benefits from the presence of others (the familiar stand-alone test) characterize the class of rules known as fixed path methods (FPMs), which is a subset of the serial family. FPMs share marginal increments of input, and the corresponding increments of output, along a predetermined path. Finally, we consider a situation where a number of individuals form a partnership and contribute capital and labor to the enterprise. We propose a strategy-proof mechanism which improves upon autarky: the inverse marginal product proportions (IMPP) mechanism. At the margin, capital that would be left idle in autarky, but not under the efficient use of the total capital, is assigned to the agents with relatively low disutility of effort in proportion to the relative productivity of their own capital. The IMPP mechanism is effectively an FPM whose path is uniquely determined by the capital contributions of the partners. Thus, we establish a correspondence between the class of FPMs to manage a common property technology and the family of partnership problems. We discuss the appeal of the IMPP mechanism as an alternative to existing profit-sharing schemes in professional partnerships.

Export-share requirements have emerged as one of the most contentious issues in recent international trade policy debate between industrial and developing countries. This dissertation attempts to shed light on this debate by examining whether export-share requirements facilitate technology diffusion and entry promotion in developing countries. To that end, I utilize two dynamic models of duopoly to capture the effects of the policy imposed at different stage of competition. The first model portrays the case when the host country government imposes an export-share requirement on the foreign multinational after the firm has already installed certain production technology at its subsidiary's plant. The second model describes the case in which the foreign multinational knows about export-share requirement before choosing its production technology. In both models, I find that the effectiveness of an export-share requirement varies with its intensity. Stringent export-share requirement is shown to promote technology diffusion while a rather weak one results in the opposite. On the contrary, for the purpose of entry facilitation, stringent export-share requirement cannot completely eliminate entry deterrence options of the foreign multinational whereas the weak one succeeds in doing so. Thus, export-share requirement is not effective in serving the purposes of facilitating technology diffusion and entry promotion for developing countries hosting foreign direct investment. Another interesting result that emerged from my analysis is that the foreign multinational may benefit from export-share requirement. This is rather counterintuitive since it contradicts the existing finding that the foreign firm is worse off as the policy shifts rent toward the local firm. For a country wishing to speed up the level of technology diffusion and encourage entry of a local firm, my study shows that an export-share requirement is inferior to giving R&D subsidy to a local firm. My result supports Wang and Blomstrom (European Economic Journal 36, 1992, 137--155) policy recommendation which recognizes the importance of measures that aim to increase the absorptive ability of host countries rather than using performance requirements to do the job of encouraging technology transfer.