Pardo Reinoso, Oliver
(2015)
Essays on microeconomics.
PhD thesis, London School of Economics and Political Science.
Abstract
This thesis consists of three chapters. Using economic theory, they analyze the effect of certain changes in the environment on some variables of economic interest.
The first chapter studies the effect of securitization on asset pricing when agents have heterogeneous beliefs about future dividends, prices and interest rates. The securities are constrained to belong to tranches of different payment priority, mimicking collateralized debt obligations (CDO). Securitization weakly increases the gap between the price of an underlying asset and any perceived present value of its dividends. The necessary and sufficient conditions for this increase to be strict are identified. In cases where there is a type of agent more sophisticated than all others, securitization can decrease the rate of return some agents receive without increasing the rate of return of none.
The second chapter checks the robustness of a surprising result in Dekel et al. (2007). The result states that strict Nash equilibria might cease to be evolutionary stable when agents are able to observe the opponent’s preferences with a very low probability. The chapter shows that the result is driven by the assumption that there is no risk for the observed preferences to be mistaken. In particular, when a player may observe a signal correlated with the opponent’s preferences, but the signal is noisy enough, it is shown that all strict Nash equilibria are evolutionary stable.
The third chapter studies one dimension of the social cost of bad public infrastructure in developing countries. It uses an extensive period of power rationing in Colombia throughout 1992 as a natural experiment and exploit exogenous spatial variation in the intensity of power rationing as an instrumental variable. It is estimated that power rationing increased the probability that a mother had a baby nine months later by five percent. Women who were exposed to the shock and had an additional child tend to be in worse socio-economic conditions more than a decade later.
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