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Dissertation Committee:
Jakub Steiner (chair)
Filip Matějka
Sergey Slobodyan
 

Abstract:
 

In the first chapter of this work, I study the sorting of workers to firms, when firm size is explicitly taken into account. I develop a method to non-parametrically identify match production function from data on workers' wages and firms' revenues and posted job vacancies. Under the proposed identification procedure, ordering of workers and firms is identified independently, and can therefore be achieved using potentially different data sets. The model sheds light on the question of exporter wage premium: exporters pay higher wages because they are larger, and higher wages are required to support a larger firm size.

In the second chapter we elaborate on Anas' (2004) impossibility theorem, which states that monopolistic competition or economies of scale alone are insufficient to explain the growth of cities in response to growing population or decreasing trade costs (under constant urban costs); cities shrink. To enhance the realism of assumptions, instead of Anas' normative approach, we introduce migration and developers' equilibria and another sector. Still, “vanishing” remains robust! Ultimately, we argue that the “vanishing” mechanism looks realistic and can have an explanatory power: industries, free of externalities, should locate in small towns. Moreover, the comparative statics shows how such “manufacturing” towns gradually decline, whereas other cities do not.

In the last chapter, to enrich the usual monopolistic competition model, we combine it with a space of product characteristics, i.e., consumers' “ideal varieties.” Unlike Hotelling, in our partially localized competition, zones of service among continuously distributed producers intersect due to love for variety. When the equilibrium density of firms is uniform, it reacts positively to growing market size (population), similarly to non-localized monopolistic competition. However, positive/negative price reaction is now determined by increasing/decreasing elasticity of elementary utility (instead of demand elasticity as in non-localized competition). The firm's range of service is a new notion introduced in this work. When a firm does not serve all the consumers, the range of service decreases with the expansion of the market.

Full Text: “Essays in Economic Theory” by Maxim Goryunov

Terri Kneeland, Ph.D.

University College London, United Kingdom

Authors: Amanda Friedenberg, Willemien Kets, and Terri Kneeland

Abstract: Limited reasoning about rationality is well understood to lead to important behavioral consequences. The literature has typically viewed such limited reasoning as an artifact of cognitive bound - loosely, an inability to reason about how the other player reasons, etc. However, in principle, subjects may not be willing to believe their opponent is “rational, believes rationality, etc. . ." even if the subject is capable of reasoning in this way. In this paper, we allow for the possibility that a subject's rationality bound may be lower than her cognitive bound: so two subjects with the same cognitive bound may have different rationality bounds. We develop an identifcation strategy that allows us to disentangle the cognitive bound from the rationality bound and to investigate the extent to which bounds on rationality are driven by bounds on cognition. Using the experimental data from Kneeland (2015), we show that rationality bounds are tighter than cognitive bounds. Rationality bounds are an important determinant of behavior, especially for subjects with high cognitive bound.

Full Text:  “Bounded Reasoning: Rationality or Cognition?”

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