Economics

Individuals behave with choice probabilities defined by a multinomial logit (MNL) probability distribution over a finite number of alternatives which includes utilities as parameters. The salient feature of the model is that probabilities depend on the choice-set, or domain. Expanding the...

It has been argued that increased life expectancy raises the rate of return on education, causing a rise in the investment in education followed by an increase in lifetime labor supply. Empirical evidence of these relations is rather weak. Building on a lifecycle model with uncertain longevity,...

Individuals can insure themselves perfectly against uncertainty about the length of life by purchasing deferred annuities early in life. In the absence of other uninsurable uncertainties (e.g. income), there will be no residual purchases or sales of annuities later in life, thereby avoiding any...

This paper extends the standard model of optimum commodity taxation (Ramsey (1927)and Diamond-Mirrlees (1971)) to a competitive economy in which markets are inefficient due to asymmetric information. Insurance markets are prime examples: consumers impose varying costs on suppliers but firms...

Regular annuities provide payment for the duration of an owner's life-time. Period-Certain annuities provide additional payment after death to adesignated beneficiary provided the insured dies within a certain period after annuitization. It has been argued that the bequest option offered by the...

This paper presents a model in which government may affect outcomes by manipulating individual choice probabilities through the design of the domain of choice or the use of fiscal instruments. Such manipulations are ineffective when individuals are perfectly rational, provided all alternatives...

With varying aptitudes in different occupations,individuals typically maximize income by specializing in one occupation which promises the highest income. Due to numerous labor market imperfections anduncertainties, the choice of best occupation is accomplished with only partial success. We...

This paper considers how insurance companies choose a price schedule for policies depending on the size of these policies which are determined by households. Under asymmetric information, we analyse the tension between self-selection and the density distribution of household by accident...

We argue that paygo rates are determined by a representative agent and a benevolent government jointly maximizing the expected life-time utility of the agent. The distributions of labor and capital income are calculated from national data on real GDP, real wages and the real return to capital...