Related papers: The Demand Externality of Automation
Stochastic production planning problems were studied in several works; the model with one production good was discussed in [3]. The extension to several economic goods is not a trivial issue as one can see from the recent works [4], [5] and…
Nowadays, automation not only permeates industry but also becomes a substantial part of our private, everyday lives. Driven by the idea of increased convenience and more time for the "important things in life," automation relieves us from…
We develop a theoretical framework to investigate the link between rising scale economies and stagnating productivity. Our model features heterogeneous firms, imperfect competition, and firm selection. We demonstrate that scale economies…
Derivatives play a critical role in computational statistics, examples being Bayesian inference using Hamiltonian Monte Carlo sampling and the training of neural networks. Automatic differentiation is a powerful tool to automate the…
In the pursuit of ever increasing efficiency and growth, our economies have evolved to remarkable degrees of complexity, with nested production processes feeding each other in order to create products of greater sophistication from less…
We provide an explicit characterization of the optimal market making strategy in a discrete-time Limit Order Book (LOB). In our model, the number of filled orders during each period depends linearly on the distance between the fundamental…
Economic complexity methods, and in particular relatedness measures, lack a systematic evaluation and comparison framework. We argue that out-of-sample forecast exercises should play this role, and we compare various machine learning models…
The distribution of wealth among the members of a society is herein assumed to result from two fundamental mechanisms, trade and investment. An empirical distribution of wealth shows an abrupt change between the low-medium range, that may…
We consider the mechanism design problem of a principal allocating a single good to one of several agents without monetary transfers. Each agent desires the good and uses it to create value for the principal. We designate this value as the…
We propose a simple model that describes the dynamics of efficiencies of competing agents. Agents communicate leading to increase of efficiencies of underachievers, and an efficiency of each agent can increase or decrease irrespectively of…
Market makers provide liquidity to other market participants: they propose prices at which they stand ready to buy and sell a wide variety of assets. They face a complex optimization problem with both static and dynamic components. They…
What will likely be the effect of the emergence of ChatGPT and other forms of artificial intelligence (AI) on the skill premium? To address this question, we develop a nested constant elasticity of substitution production function that…
This paper models firm-to-firm trade in a production network as a set of double auctions. Firms have multilateral market power, namely, can affect prices in both input and output markets. The size and division of surplus are endogenous and…
Is the large influence that mutual funds assert on the U.S. financial system spread across many funds, or is it is concentrated in only a few? We argue that the dominant economic factor that determines this is market efficiency, which…
I study the optimal allocation of positional goods in the presence of externalities arising from consumers' concerns about relative consumption. Applications include luxury goods, priority services, education, and organizational…
We argue that an important contributing factor into market inefficiency is the lack of a robust mechanism for the stock price to rise if a company has good earnings, e.g., via buybacks/dividends. Instead, the stock price is prone to…
City road infrastructure is a public good, and over-consumption by self-interested, rational individuals leads to traffic jams. Congestion pricing is effective in reducing demand to sustainable levels, but also controversial, as it…
We develop a theory of demand economics for an era of material abundance. The binding constraint on growth has shifted from insufficient aggregate demand to inadequate demand-tier upgrading. Our result is that, the new engine of growth lies…
Traditional notions of production function do not consider the time dimension, appearing thus timeless and instantaneous. We propose an agent-based model accounting for the whole production side of the economy to unfold the production…
The problem of designing a profit-maximizing, Bayesian incentive compatible and individually rational mechanism with flexible consumers and costly heterogeneous supply is considered. In our setup, each consumer is associated with a…