Project description
Moving to an imperfectly transferable utility framework
The EU-funded EQUIPRICE project seeks to build an innovative economic toolbox for the study of pricing and allocation problems on a network, with applications such as dynamic pricing, matching and trade flow predictions. To investigate this class of models, one builds a general framework embedding all the models described above, the 'equilibrium flow problem'. The underlying mathematical structure under consideration is 'gross substitutes,' which allows for a range of efficient computational methods and has singular properties (existence of an equilibrium, uniqueness, lattice structure). The econometrics of the problem is addressed (estimation, inference, model selection). Applications to various fields such as labor economics, family economics, international trade, urban economics, industrial organization, etc. are investigated.
Objective
This project seeks to build an innovative economic toolbox (ranging from modelling, computation, inference, and empirical applications) for the study of equilibrium models with gross substitutes, with applications to models of matching with or without transfers, trade flows on networks, multinomial choice models, as well as hedonic and dynamic pricing models. While under-emphasized in general equilibrium theory, equilibrium models with gross substitutes are very relevant to these problems as each of these problems can be recast as such.
Thus far, almost any tractable empirical model of these problems typically required making the strong assumption of quasilinear utilities, leading to a predominance of models with transferable utility in applied work. The current project seeks to develop a new paradigm to move beyond the transferable utility framework to the imperfectly transferable utility one, where the agent’s utilities are no longer quasi-linear. The mathematical structure of gross substitutes will replace the structure of convexity underlying in models with transferable utility.
To investigate this class of models, one builds a general framework embedding all the models described above, the “equilibrium flow problem.” The gross substitute property is properly generalized and properties (existence of an equilibrium, uniqueness, lattice structure) are derived. Computational algorithms that rely on gross substitutability are designed and implemented. The econometrics of the problem is addressed (estimation, inference, model selection). Applications to various fields such as labor economics, family economics, international trade, urban economics, industrial organization, etc. are investigated.
The project touches upon other disciplines. It will propose new ideas in applied mathematics, offer new algorithms of interest in computer science and machine learning, and provide new methods in other social sciences (like sociology, demography and geography).
Fields of science
Keywords
Programme(s)
Funding Scheme
ERC-COG - Consolidator GrantHost institution
75341 Paris
France