Papers by Yusufcan Masatlioglu
We present a model in which banks trade toxic assets to raise funds for investment. The toxic ass... more We present a model in which banks trade toxic assets to raise funds for investment. The toxic assets generate an adverse selection problem and, as a consequence, the interbank asset market provides insufficient liquidity to finance investment. While the best investments are fully funded, socially efficient projects with modest payoffs are not. Investment is inefficiently low because acquiring funding requires
We provide a descriptive model of choice by elimination that includes for its foundation. The bas... more We provide a descriptive model of choice by elimination that includes for its foundation. The basis of the model involves a decision procedure based on elimination rather than selecting an alternative. In this model, the alternative that cannot be eliminated by any of its comparables ends up being chosen. The necessary and sucient condition for the model, which we call
We derive, by using the revealed preference method, an individual decision making model that allo... more We derive, by using the revealed preference method, an individual decision making model that allows for an agent not only to exhibit status quo bias, but also to make use of her default option as a reference point. The resulting model contains elements of the classical rational choice model — indeed it reduces to that model in the case of
This paper explores how a reference point aects individual preferences. While reference-dependenc... more This paper explores how a reference point aects individual preferences. While reference-dependence is extensively studied, very little is known regarding the impact of reference points on individual choice behavior when the reference point itself is abandoned. We show that reference-dependence is not limited to the endowment eect and status quo bias | choices appear to be inuenced by reference points,
This paper compares two groups of reference-dependent models, loss aversion and status quo constr... more This paper compares two groups of reference-dependent models, loss aversion and status quo constraint, which dier not only in methodology but also in nature - while loss aversion models assume changing preferences, in status quo constraint models, the underlying utility function does not change with the reference point. The,rst part of the paper is devoted to the construction of
We present a model in which banks trade toxic assets to raise funds for investment. The toxic ass... more We present a model in which banks trade toxic assets to raise funds for investment. The toxic assets generate an adverse selection problem and, as a consequence, the interbank asset market provides insufficient liquidity to finance investment. While the best investments are fully funded, socially efficient projects with modest payoffs are not. Investment is inefficiently low because acquiring funding requires banks to sell high-quality assets for less than their "fair" value. We then consider whether equity injections and asset purchases can improve market outcomes. Equity injections do not improve liquidity and may be counterproductive as a policy for increasing investment. By allowing banks to fund investments without having to sell high-quality assets, equity injections reduce the number of high-quality assets traded and further contaminate the interbank market. Paradoxically, if equity injections are directed to firms with the greatest liquidity needs, the contamination effect causes investment to fall. In contrast, asset purchase programs, like the Public-Private Investment Program, often have favorable impacts on liquidity, investment and welfare.
Games and Economic Behavior, 2014
We offer complete characterizations of the equilibrium outcomes of two prominent agenda voting in... more We offer complete characterizations of the equilibrium outcomes of two prominent agenda voting institutions that are widely used in the democratic world: the amendment, also known as the Anglo-American procedure, and the successive, or equivalently the Euro-Latin procedure. Our axiomatic approach provides a proper understanding of these voting institutions, and allows comparisons between them, and with other voting procedures.
Discrete Applied Mathematics, 2003
The aim of this article is to study two distinct cases of utility representations where the error... more The aim of this article is to study two distinct cases of utility representations where the error functions are assumed to display characteristics different than usual. These characteristics depend respectively on the feasible set and the two alternatives compared. Thus, in the first case the error functions are additive and in the second they are multiplicative.Our study of additive error
We provide a descriptive model of choice by elimination that includes for its foundation. The bas... more We provide a descriptive model of choice by elimination that includes for its foundation. The basis of the model involves a decision procedure based on elimination rather than selecting an alternative. In this model, the alternative that cannot be eliminated by any of its comparables ends up being chosen. The necessary and sucient condition for the model, which we call "axiom of choice by elimination" (ACE), reflects the idea of "bounded rationality." This condition is also normatively appealing since it is immune to "money pump" type of arguments despite the fact that it is weaker than the independent of ir- relevant alternative (IIA). Our framework makes it possible not only to provide two characterizations for IIA and Simon's satisficing but also to accommodate endogenous reference-dependent choice.
The Review of Economic Studies, 2014
We derive, by using the revealed preference method, an individual decision making model that allo... more We derive, by using the revealed preference method, an individual decision making model that allows an agent not only to exhibit status quo bias, but also to make use of her initial endowment as a reference point. The resulting model contains elements of the classical rational choice model. While the latter views choice as a consequence of "utility maximization," the model proposed here views choice as arising from "mentally constrained utility maximization," where the constraints are induced by one's initial endowment. (This model is more general than the classical one, but it reduces to that model in the case of choice problems without initial endowments.) Another important feature of the model is that it applies to choice problems in which one's initial endowment ceases to be feasible. JEL Classification: D11, D81.
American Economic Review, 2012
Review of Economic Design, 2012
... We also thank Alberto Bisin, Yan Chen, Benjamin Chiao, Syngjoo Choi, James C. Cox, Matthew Em... more ... We also thank Alberto Bisin, Yan Chen, Benjamin Chiao, Syngjoo Choi, James C. Cox, Matthew Embrey, Guillaume R. Frechette, Basak Gunes, Charles Holt, Eric S. Maskin, Daisuke Nakajima, Erkut Ozbay, Charles R. Plott, Debraj Ray, Alejandro ... E-mail: [email protected]. ...
Journal of Economic Theory, 2005
Motivated by the empirical findings concerning the importance of one's current situation on her c... more Motivated by the empirical findings concerning the importance of one's current situation on her choice behavior, the main objective of this paper is to propose a rational choice theory that allows for the presence of a status quo bias, and that incorporates the standard choice theory as a special case. We follow a revealed preference approach, and obtain two nested models of rational choice that allow phenomena like the status quo bias and the endowment effect, and that are applicable in any choice situation to which the standard (static) choice model applies.
Games and Economic Behavior, 2013
... We also thank to Wolf Ehrblatt, Guillaume Frechette, Basak Gunes, Chris House, Dan Silverman,... more ... We also thank to Wolf Ehrblatt, Guillaume Frechette, Basak Gunes, Chris House, Dan Silverman, Andrew Schotter, Nejat Seyhun, and Erkut Ozbay for their helpful comments. ... Research Center for Group Dynamics, Institute for Social Research, E-mail: [email protected]. 1 ...
Electronic Notes in Discrete Mathematics, 1999
The Choice functions rationalizable via utility functions and supermodular error functions depend... more The Choice functions rationalizable via utility functions and supermodular error functions depending on feasible set of alternatives are considered. It is shown that a very narrow class of choice functions can be represented in this form. To characterize that class of functions, a new class of binary relations - simple semiorders - is introduced. Binary relations which have numerical representation
Discrete Applied Mathematics, 2003
The aim of this article is to study two distinct cases of utility representations where the error... more The aim of this article is to study two distinct cases of utility representations where the error functions are assumed to display characteristics di erent than usual. These characteristics depend respectively on the feasible set and the two alternatives compared. Thus, in the ÿrst case the error functions are additive and in the second they are multiplicative.
Uploads
Papers by Yusufcan Masatlioglu