{"title":"Present bias: Understanding zero leverage policy and unstable capital structure","authors":"Yuan Li , Tak-Yuen Wong , Siqi Zhao","doi":"10.1016/j.jmateco.2025.103148","DOIUrl":"10.1016/j.jmateco.2025.103148","url":null,"abstract":"<div><div>We develop a dynamic capital structure model for a firm controlled by a present-biased entrepreneur without commitment. For sophisticated entrepreneurs, the costs associated with debt issuance act as a de facto commitment device, steering them towards a “zero-leverage strategy” due to the prohibitive costs associated with repeated debt refinancing. In contrast, naive entrepreneur fails to perceive future refinancing, this erroneous belief undermines the commitment value of debt issuance cost and leads to “unstable capital structure”. Borrower naivete provides an opening for financial intermediaries and creditors to impose increased flotation costs and elevated credit spreads. Our analysis further suggests that implementing covenants tied to financial leverage ratios alongside short-term debt obligations can serve as effective strategies to mitigate the impacts of entrepreneurial naivete.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103148"},"PeriodicalIF":1.0,"publicationDate":"2025-06-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144338543","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Critical capital stock in a continuous-time growth model with a convex-concave production function","authors":"Ken-Ichi Akao , Takashi Kamihigashi , Kazuo Nishimura","doi":"10.1016/j.jmateco.2025.103146","DOIUrl":"10.1016/j.jmateco.2025.103146","url":null,"abstract":"<div><div>A nonconcave growth model may exhibit multiple optimal steady states, with a critical capital stock serving as a threshold. Optimal capital paths originating from stock levels below (above) this threshold converge to lower (higher) optimal steady states. The presence of a critical capital stock elucidates the phenomenon of history-dependent development and carries implications for achieving sustainable development. In a continuous-time model featuring a convex-concave production function, we demonstrate that: (a) the critical capital stock is continuous and strictly increasing in the discount rate; (b) its lower bound is the zero capital stock, while the upper bound lies between the stock levels associated with maximum marginal productivity and maximum average productivity; (c) at the upper bound, the critical capital stock coincides with the higher optimal steady state; and (d) the upper bound approaches the capital stock corresponding to maximum average productivity as the intertemporal elasticity of substitution approaches infinity, and converges to that of maximum marginal productivity as the intertemporal elasticity of substitution tends to 0.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103146"},"PeriodicalIF":1.0,"publicationDate":"2025-06-19","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144481068","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Compensated discrete choice and the Slutsky equation","authors":"John K. Dagsvik","doi":"10.1016/j.jmateco.2025.103150","DOIUrl":"10.1016/j.jmateco.2025.103150","url":null,"abstract":"<div><div>This paper analyzes compensated price elasticities and corresponding Slutsky equations for discrete choice models. A remarkable feature of the compensated price elasticities is that they are usually not symmetric, as compensated elasticities with respect to a price increase versus a price decrease may be different. We also clarify how results obtain in this paper and similar results in the literature are related. Finally, selected examples are discussed.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"121 ","pages":"Article 103150"},"PeriodicalIF":0.7,"publicationDate":"2025-06-18","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"145110036","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"On three welfare properties of monopoly in bilateral exchange","authors":"Francesca Busetto , Giulio Codognato , Sayantan Ghosal , Damiano Turchet","doi":"10.1016/j.jmateco.2025.103147","DOIUrl":"10.1016/j.jmateco.2025.103147","url":null,"abstract":"<div><div>We establish three welfare properties of the model of monopoly introduced by Busetto et al. (2023), where one commodity is held only by the monopolist, represented as an atom, and the other is held only by small traders, represented by an atomless part. First, we prove that a monopoly allocation is Pareto optimal if and only if it is an allocation which corresponds to an efficiency equilibrium. Second, we reformulate a paradox, due to Shitovitz (1997), to show that for any monopoly allocation there is another core allocation, distinct from both a monopoly allocation or a Walras allocation, which is, utility-wise, advantageous for the monopolist and nonadvantageous for the small traders. Finally, we prove a theorem which shows that monopoly is advantageous for the monopolist and nonadvantageous for each trader in the atomless part with respect to all Walras allocations which are not monopoly allocations.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103147"},"PeriodicalIF":1.0,"publicationDate":"2025-06-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144329593","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Efficient reallocation of indivisible resources: Pair-efficiency versus Pareto-efficiency","authors":"Pinaki Mandal","doi":"10.1016/j.jmateco.2025.103149","DOIUrl":"10.1016/j.jmateco.2025.103149","url":null,"abstract":"<div><div>In the object reallocation problem, achieving Pareto-efficiency is desirable, but may be too demanding for implementation purposes. In contrast, pair-efficiency, which is the minimal efficiency requirement, is more suitable. Despite being a significant relaxation, however, pair-efficiency ensures Pareto-efficiency for any strategy-proof and individually rational rule when agents’ preferences are unrestricted.</div><div>What if agents’ preferences have specific restricted structures, such as <em>single-peakedness</em> or <em>single-dippedness</em>? We often encounter such situations in real-world scenarios. This study aims to investigate whether pair-efficiency is sufficient to ensure Pareto-efficiency in such cases.</div><div>Our main contribution in this paper is establishing the equivalence between pair-efficiency and Pareto-efficiency when dealing with single-peaked or single-dipped preference profiles. This equivalence holds without needing to assume any other properties of the rule. We further show that both the single-peaked domain and the single-dipped domain are the “maximal” domains where this equivalence holds.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103149"},"PeriodicalIF":1.0,"publicationDate":"2025-06-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144322567","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Begoña Subiza , José-Manuel Giménez-Gómez , Josep E. Peris
{"title":"Cooperative TU-games: Dominance, stable sets, and the core revisited","authors":"Begoña Subiza , José-Manuel Giménez-Gómez , Josep E. Peris","doi":"10.1016/j.jmateco.2025.103137","DOIUrl":"10.1016/j.jmateco.2025.103137","url":null,"abstract":"<div><div>Stable sets are introduced by von Neumann and Morgenstern (1944) as “the solution” of a cooperative game. Later on, Gillies (1953) defines the core of the game. Both notions can be established in terms of dominance. It is well known that the core may be an empty set, whereas stable sets may fail to exist, or may produce different proposals. We provide a new dominance relation so that the stable set obtained when applying this notion (the <span><math><mi>δ</mi></math></span>-stable set) always exists, it is unique, and it coincides with the core of the cooperative game, whenever the core is not empty. We apply this concept to some particular classes of <span><math><mrow><mi>T</mi><mi>U</mi></mrow></math></span>-games having typically an empty core: voting (majority) games, minimum cost spanning trees games with revenue, controlled capacitated networks, or <span><math><mi>m</mi></math></span>-sequencing games.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103137"},"PeriodicalIF":1.0,"publicationDate":"2025-06-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144271298","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Aggregation of downside risk and portfolio selection","authors":"Conrad Spanaus, Jan Wenzelburger","doi":"10.1016/j.jmateco.2025.103138","DOIUrl":"10.1016/j.jmateco.2025.103138","url":null,"abstract":"<div><div>This article refines Markowitz’s classical portfolio theory by replacing standard deviation with a below-target deviation measure referred to as <em>downside risk</em>, in which only returns below the safe return of the market contribute to the quantification of risk. Downside risk is economically intuitive but neither a general deviation nor a coherent risk measure. We establish the existence and uniqueness of downside-efficient portfolios that aggregate the downside risks of finitely many assets. The tractability of downside-efficient portfolios allows for a risk analysis that parallels the classical mean–variance analysis. We show that all central tenets carry over if standard deviation is substituted with downside risk. A numerical example illustrates when downside-efficient portfolios outperform mean–variance efficient portfolios.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103138"},"PeriodicalIF":1.0,"publicationDate":"2025-06-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144243605","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"A scalable Bayesian persuasion framework for epidemic containment on heterogeneous networks","authors":"Shraddha Pathak , Ankur A. Kulkarni","doi":"10.1016/j.jmateco.2025.103134","DOIUrl":"10.1016/j.jmateco.2025.103134","url":null,"abstract":"<div><div>During an epidemic, the information available to individuals in the society deeply influences their belief of the true infectiousness of the disease, and thereby the preventive measures they take to stay safe from the infection. In this paper, we develop a scalable framework for ascertaining the optimal choice of the test for determining the infectiousness of the disease whose results must be truthfully communicated to individuals for the purpose of epidemic containment. We use a networked public goods model to capture the underlying societal structure and the individuals’ incentives during an epidemic, and the Bayesian persuasion framework for modelling the choice of the test. Our first main result is a structural decomposition of the government’s objectives into two independent components – a component dependent on the utility function of individuals, and another dependent on properties of the underlying network. Since the network dependent term in this decomposition is unaffected by the testing strategies adopted by the government, this characterization simplifies the problem of finding the optimal testing methodology. We find explicit conditions, in terms of certain concavity measures, under which perfectly accurate tests, uninformative tests, tests which exaggerate the infectiousness, and ones which downplay it are optimal. Furthermore, we explicitly evaluate these optimal tests for exponential and quadratic benefit functions and study their dependence on underlying parameter values. The structural decomposition results are also helpful in studying other forms of interventions like incentive design and network design.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103134"},"PeriodicalIF":1.0,"publicationDate":"2025-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144205172","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Efficiency in multiple-type housing markets","authors":"Di Feng","doi":"10.1016/j.jmateco.2025.103136","DOIUrl":"10.1016/j.jmateco.2025.103136","url":null,"abstract":"<div><div>We consider multiple-type housing markets (Moulin, 1995), which extend Shapley and Scarf (1974)’s housing markets from one dimension to higher dimensions. In this model, <em>Pareto efficiency</em> is incompatible with <em>individual rationality</em> and <em>strategy-proofness</em> (Konishi et al., 2001). Therefore, we consider two weaker efficiency properties: <em>coordinatewise efficiency</em> and <em>pairwise efficiency</em>.</div><div>We show that these two properties both (i) are compatible with <em>individual rationality</em> and <em>strategy-proofness</em>, and (ii) help us to identify two specific mechanisms. Put precisely, on various preference domains, together with other well-studied properties (<em>individual rationality</em>, <em>strategy-proofness</em>, and <em>non-bossiness</em>), <em>coordinatewise efficiency</em> and <em>pairwise efficiency</em> respectively characterize two extensions of the top trading cycles mechanism (TTC): the coordinatewise TTC (cTTC) and the bundle TTC (bTTC). For multiple-type housing markets with strict preferences, our bTTC characterization constitutes the first characterization of a TTC extension.</div><div>Our proof is nonstandard and its novelty has independent methodological interest. Specifically, the absence of <em>non-bossiness</em> in the cTTC characterization and its presence in the bTTC characterization highlight both the uniqueness of our proof approach and the differences between our results and those in the existing literature.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103136"},"PeriodicalIF":1.0,"publicationDate":"2025-05-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144147983","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
{"title":"Potentials in quadratic Cournot cross-holding games","authors":"Zhigang Cao , Guopeng Li , Sixian Shen , Feng Zhu","doi":"10.1016/j.jmateco.2025.103135","DOIUrl":"10.1016/j.jmateco.2025.103135","url":null,"abstract":"<div><div>Do firms in an oligopoly market behave “as if” they were maximizing a common fictitious objective function, as in perfect competition and monopoly? The answer is yes under certain mild technical conditions (Slade, 1994). That is, in terms of Monderer and Shapley (1996), the Cournot competition is a potential game. In this paper, we ask the same question for Cournot competition with quadratic payoff functions and cross-holdings, an important variant of the oligopoly market. We find that, for various potential functions, the question can be more easily understood from the structure of the influence network, which is constructed from the cross-holding network. Roughly, we find that the Cournot competition with cross-holdings is a potential game if and only if the influence network is symmetric in certain generalized sense. Extending the model to Cournot competition with both overlapping ownership and product differentiation, we find that the previous results still hold. We also provide two applications of our results.</div></div>","PeriodicalId":50145,"journal":{"name":"Journal of Mathematical Economics","volume":"119 ","pages":"Article 103135"},"PeriodicalIF":1.0,"publicationDate":"2025-05-22","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"144170260","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":4,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}