In this seminar Larry Liu will provide an overview of his recent paper, Global Public Goods and Coalition Formation under Matching Mechanisms. Larry investigates coalition formation under matching mechanisms with multiple players who have the same preference but different incomes. Given income heterogeneity within a certain range, there always exist small matching rates which make all members in the coalition better off. However, players have incentives to take free rides and the matching coalition does not exist. Larry argues that if players value their reputation, they would stay in the coalition when the gain of free riding is lower than the reputation loss. Due to heterogeneity, the matching coalition faces trade-off between matching depth and breadth. Larry concludes that the matching rate can be flexibly set to compromise between cooperation depth and breadth and, more importantly, it may achieve Pareto-improving outcomes while avoiding international side payments.

Larry Liu is a PhD student in Economics at the Centre for Applied Macroeconomic Analysis CAMA. His research focuses on public economics, particularly on public goods, climate policy, economic growth and resource exploitation.

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