In this seminar Larry Liu will provide an overview of his recent paper, Pareto improvements under matching mechanisms: general preferences and an example. The paper investigates Pareto-improving equilibria under various matching schemes. Given that two players have the same preference of any standard function form, there is always a neutrality zone within which any endowment distribution would reach the same interior equilibrium, and within the neutrality zone there always exist small matching rates to generate Pareto-improving outcomes. Larry’s paper further examines the chance of reaching Pareto-improving outcomes given different information sets of preferences. First, with no knowledge of preferences, (1) The more the players value the public good, the more likely they reach Pareto-improving equilibria; (2) The less ambitious the matching scheme, the more likely they reach Pareto-improving equilibria; (3) Even if the matching rates are very small, the chance is in general far away from one. Second, with local knowledge of preferences, the chance approaches one if the matching rates become very small. And third, with full knowledge of preferences, if the endowment distribution is in a certain range, players are definitely better off under matching. Otherwise, one player is worse off and the chance is zero.

Larry Liu is a PhD candidate in Economics in CAMA. His research focuses on public economics and macroeconomics, particularly on climate change, economic growth and resource exploitation, game theory on public goods.

The CAMA Macroeconomics Brown Bag Seminars offer CAMA speakers, in particular PhD students, an opportunity to present their work in progress in front of their peers, and reputable visitors to showcase their work.