Games

This paper introduces a novel framework for designing fair and sustainable unemployment benefits, grounded in cooperative game theory and real-time fiscal policy. The labor market is modeled as a coalitional game, where a random subset of participants is employed, generating stochastic economic output. To ensure fairness, we adopt equal employment opportunity as a normative benchmark and propose a dichotomous valuation rule that assigns value to both employed and unemployed participants. Within a continuous-time, balanced budget framework, we derive a closed-form payroll tax rate that is fair, debt-free, and asymptotically risk-free. This tax rule is robust across alternative objectives and promotes employment, productivity, and equality of outcome. The framework naturally extends to other domains involving random bipartitions and shared payoffs, such as voting rights, health insurance, road tolling, and feature selection in machine learning. Our approach offers a transparent, theoretically grounded policy tool for reducing poverty and economic inequality while maintaining fiscal discipline.

This paper develops a formal model to analyze how foreign interventions—via resource transfers towards mobilization, technological upgrades of the mobilization technology, and various forms of conditional aid—reshape identity choices and conflict dynamics in divided societies. After a foreign intervention occurred, individuals simultaneously decided how many resources to allocate to conflict and whether to identify as ethnic or national. The utility derived from identity decreases with the perceived social distance from the chosen group and increases with the group’s status. Foreign interventions can modify identity choices by affecting perceived social distance or group status. Our results reveal that inclusive aid and material support for mobilization are likely to induce national identification. Conversely, exclusive or ethnically targeted aid and technological upgrades of mobilization technology are likely to result in ethnic identification. We show that for all types of interventions analyzed, conflict mobilization is lower and the intervened nation’s material payoff is higher when individuals identify nationally than ethnically.

This paper studies the influence of moral emotions and beliefs on understanding charitable giving. While specific moral emotions such as empathy, guilt, and shame have been associated with prosocial behavior, how they impact giving behavior may depend on beliefs about the giving of others. Using a laboratory experiment, individuals participated in a dictator game with charity and completed measures of beliefs, empathy, guilt, and shame. Results show that while individual variation in empathy, guilt, and shame is important in explaining charitable giving, these effects depend crucially on individual beliefs.