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2014 Erwin Plein Nemmers Prize in Economics

Lecture & ConfERENCE - April 29 - May 1, 2015

"Moving Up a Demand Curve: Dynamic Screening with Positive Selection"

Jean Tirole
Toulouse School of Economics

In many social interactions or markets, players who benefit most from the relationship or trade tend to reach agreement earlier. High willingness-to-pay buyers are impatient to consume and therefore willing to pay a high price to consume early. Owners of low-valued assets rush to dispose of them. Eager traders tend to concede quickly when buyer and sellers engage in bargaining.

If there are still goods and services left to sell after the most motivated individuals have traded with each other, the price declines and concessions are made. This is known as “negative selection.” This is a common feature of traditional models of the selling of durable goods, sequential bargaining between parties, and in the dynamic resolution of markets where buyers are unsure of the quality of the good being sold.

But there are also many interesting environments in which “positive selection” operates to select out over time the least motivated protagonists. This, in effect, means moving “up” rather than “down” the demand curve.

Firms or academic departments retain the most-eager-to-stay employees; societies keep only the most loyal or immobile members of ethnic, religious or occupational minorities that are discriminated against; software platforms when facing technological entry retain only the aficionados or high-switching-cost patrons; and only friends or partners who benefit most from a relationship maintain the relationship.

The lecture will explore the economics of positive selection and compares them with the more familiar ones obtained for negative selection.

Video of the lecture


"Liquidity, Bubbles and Crises"

Thursday, April 30, 2015
9:00 Bengt Holmström (Massachusetts Institute of Technology): Banks as Secret Keepers (joint with Tri Vi Dang – Columbia University, Gary Gorton – Yale University and Guillermo L. Ordoñez – University of Pennsylvania) Supplemental Reading: Understanding the Role of Debt in the Financial System by Bengt Holmstrom, Bank for International Settlements Working Paper 479.Douglas Diamond (University of Chicago) - discussant
10:35 Emmanuel Fahri (Harvard University): Deadly Embrace: Sovereign and Financial Balance Sheets Doom Loops (joint with Jean Tirole – Toulouse School of Economics)Manuel Amador (Federal Reserve Bank of Minneapolis ) - discussant
11:40 John Hardman Moore (University of Edinburgh): Leverage Stacks and the Financial SystemDarrell Duffie (Stanford University) – discussant
2:00 Panel Discussion: Banking and Macroprudential Regulation Moderated by Philippe Aghion (Harvard University) Mathias Dewatripont (National Bank of Belgium) Atif Mian (Princeton University) Jeremy Stein (Harvard University)
3:50 Thomas Philippon (New York University): Runs versus Lemons: Fiscal Capacity and Financial Stability (joint with Miguel de Faria e Castro and Joseba Martinez – both New York University)Alp Simsek (Massachusetts Institute of Technology) – discussant

Nobuhiro Kiyotaki (Princeton University): Wholesale Banking and Bank Runs in Macroeconomic Modelling of Financial Crises (joint with Mark Gertler – New York University and Andrea Prespitino - Board of Governors of the Federal Reserve System)

Ivan Werning (Massachusetts Institute of Technology) – discussant

Friday, May 1, 2015
9:00 Alberto Martin (Universitat Pompeu Fabra): Managing Credit Bubbles (joint with Jaume Ventura - Universitat Pompeu Fabra)François Geerolf (University of California, Los Angeles) - discussant
10:35 Arvind Krishnamurthy (Stanford University): A Model of the Reserve Asset (joint with Zhiguo He – University of Chicago, and Konstantin Milbradt – Northwestern University)Christian Hellwig (Toulouse School of Economics) – discussant
11:40 Xavier Gabaix (New York University): International Liquidity and Exchange Rate Dynamic (joint with Matteo Maggiori – Harvard University)Pierre-Olivier Gourinchas (University of California, Berkeley) – discussant
2:00 Panel Discussion: The European Crisis and Sovereign Debt
Moderated by Jean Tirole (Toulouse School of Economics)
Olivier Blanchard (International Monetary Fund)
Stanley Fischer (Board of Governors of the Federal Reserve System)
Monnet's Error? Luigi Zingales (University of Chicago)
3:55 Andrei Shleifer (Harvard University): Banks as Patient Fixed-Income Investors (joint with Samuel Hanson – Harvard University, Jeremy Stein – Harvard University and Robert W. Vishny – University of Chicago)Gary Gorton (Yale University) – discussant

Short Course

Short course for faculty and graduate students on "Some Social Determinants of Behavior and Institutions." The course was held in September 2016. View the:

Course Announcement