Paris Dauphine University

About: Paris Dauphine University is a education organization based out in Paris, France. It is known for research contribution in the topics: Context (language use) & Population. The organization has 1766 authors who have published 6909 publications receiving 162747 citations. The organization is also known as: Paris Dauphine & Dauphine.

Income and wealth distribution in macroeconomics: a continuous-time approach

Abstract: We recast the Aiyagari-Bewley-Huggett model of income and wealth distribution in continuous time. This workhorse model – as well as heterogeneous agent models more generally – then boils down to a system of partial differential equations, a fact we take advantage of to make two types of contributions. First, a number of new theoretical results: (i) an analytic characterization of the consumption and saving behavior of the poor, particularly their marginal propensities to consume; (ii) a closed-form solution for the wealth distribution in a special case with two income types; (iii) a proof that there is a unique stationary equilibrium if the intertemporal elasticity of substitution is weakly greater than one; (iv) characterization of “soft” borrowing constraints. Second, we develop a simple, efficient and portable algorithm for numerically solving for equilibria in a wide class of heterogeneous agent models, including – but not limited to – the Aiyagari-Bewley-Huggett model.

Quantitative risk assessment from farm to fork and beyond: a global Bayesian approach concerning food-borne diseases.

Abstract: A novel approach to the quantitative assessment of food-borne risks is proposed. The basic idea is to use Bayesian techniques in two distinct steps: first by constructing a stochastic core model via a Bayesian network based on expert knowledge, and second, using the data available to improve this knowledge. Unlike the Monte Carlo simulation approach as commonly used in quantitative assessment of food-borne risks where data sets are used independently in each module, our consistent procedure incorporates information conveyed by data throughout the chain. It allows "back-calculation" in the food chain model, together with the use of data obtained "downstream" in the food chain. Moreover, the expert knowledge is introduced more simply and consistently than with classical statistical methods. Other advantages of this approach include the clear framework of an iterative learning process, considerable flexibility enabling the use of heterogeneous data, and a justified method to explore the effects of variability and uncertainty. As an illustration, we present an estimation of the probability of contracting a campylobacteriosis as a result of broiler contamination, from the standpoint of quantitative risk assessment. Although the model thus constructed is oversimplified, it clarifies the principles and properties of the method proposed, which demonstrates its ability to deal with quite complex situations and provides a useful basis for further discussions with different experts in the food chain.

Moral Hazard in Dynamic Risk Management

Abstract: We consider a contracting problem in which a principal hires an agent to manage a risky project. When the agent chooses volatility components of the output process and the principal observes the output continuously, the principal can compute the quadratic variation of the output, but not the individual components. This leads to moral hazard with respect to the risk choices of the agent. We identify a family of admissible contracts for which the optimal agent's action is explicitly characterized, and, using the recent theory of singular changes of measures for Ito processes, we study how restrictive this family is. In particular, in the special case of the standard Homlstrom-Milgrom model with fixed volatility, the family includes all possible contracts. We solve the principal-agent problem in the case of CARA preferences, and show that the optimal contract is linear in these factors: the contractible sources of risk, including the output, the quadratic variation of the output and the cross-variations between the output and the contractible risk sources. Thus, like sample Sharpe ratios used in practice, path-dependent contracts naturally arise when there is moral hazard with respect to risk management. In a numerical example, we show that the loss of efficiency can be significant if the principal does not use the quadratic variation component of the optimal contract.