Paan Jindapon-Research

Published Articles

Higher-Order Generalizations of Arrow-Pratt and Ross Risk Aversion: A Comparative Statics Approach, with W.S. Neilson, Journal of Economic Theory 136 (2007), 719-728.

Abstract: We analyze comparative risk aversion in a new way, through a comparative statics problem in which, for a cost, agents can shift from an initial probability distribution toward a preferred distribution. The Ross characterization arises when the original distribution is riskier than the preferred distribution and the cost is monetary, and the Arrow-Pratt characterization arises when the original distribution differs from the preferred distribution by a simple mean-preserving spread and the cost is a utility cost. Higher-order increases in risk lead to higher-order generalizations, and the comparative statics method yields a unified approach to the problem of comparative risk attitudes.

Option Price without Expected Utility, with W.D. Shaw, Economics Letters 100 (2008), 408-410.

Abstract: The option price (OP) is commonly acknowledged as the preferred ex ante welfare measure, and is derived in the context of the expected utility (EU) model. We consider the meaning of this ex ante welfare measure in the rank-dependent expected utility (RDEU) framework, finding key differences with the EU-OP. The importance of this pertains to doing benefit-cost analysis when RDEU maximizers are prevalent in society.

The Impact of Societal Risk Attitudes on Terrorism and Counterterrorism, with W.S. Neilson, Economics & Politics 21 (2009), 433-451.

Abstract: We analyze decisions made by a group of terrorists and a target government in a zero-sum game in which the terrorists minimize, and the government maximizes, the expected utility of the median voter in the target country. The terrorists' strategy balances the probability and the severity of the attack while the government chooses the level of investment reducing the probability and/or mitigating the severity of attacks. We find that risk aversion affects the strategies of both the government and the terrorists, leading to more severe, less frequent attacks but not necessarily more counterterrorism expenditures.

Network Externalities and Terrorist Network Structure, with W. Enders, Journal of Conflict Resolution 54 (2010), 262-280.

Abstract: We analyze the optimal network structure of two types of terrorist organizations. In the hierarchical network, the leadership selects the level of individual effort and the level of group connectivity so as to maximize the expected net welfare of the organizations membership. In such networks, information can readily flow from one member to another and the group can perform logistically complex actions. However, connectivity acts to compromise security so that the optimal level of connectivity will depend on the behavior of the counterterrorism authority. Leaders in loosely-connected networks will also seek to balance the trade-off between security can communication. However, with decentralized decision making, the individual nodes may not make optimal decisions from the group's perspective. We show that the decentralized decision making process is suboptimal from the overall perspective of the network. In particular, the leadership in a hierarchical network is able to coordinate the activities of all network members and to take advantage of important network externalities.

Prudence Probability Premium, Economics Letters 109 (2010), 34-37.

Abstract: Prudence probability premium is defined in the risk apportionment model (Eeckhoudt and Schlesinger, 2006). For an increase in downside risk, if the apportioned risk is small, an individual who is more risk-averse and more prudent will have a larger prudence probability premium. If the risk is large, an individual who is more risk-averse and has higher pain elasticity will have a larger prudence probability premium.

On the Economics of Interrogation: The Big 4 Versus the Little Fish Game, with W. Enders, Journal of Peace Research 48 (2011) 287-301.

Abstract: While military protocol requires that POWs provide only Name, rank, serial number, and date of birth (the so-called Big 4), it is naive to think that all detainees, including terrorists, behave in this fashion. We model two different types of games between the interrogator and the detainee. In particular, we compare the Big 4 game to a two-stage game (the Little Fish game) in which the detainee is permitted to reveal low-level information to the interrogator. We also compare the optimal interrogation levels resulting from the two games.

Working Papers

Price Discrimination through Refund Contracts in Airlines, with D. Escobari, September 2011, revised and resubmitted to International Journal of Industrial Organization.

Abstract: This paper shows how an airline monopoly uses refundable and non-refundable tickets to screen consumers who are uncertain about their travel. Our theoretical model predicts that the difference between these two fares diminishes as individual demand uncertainty is resolved. Using an original data set from U.S. airline markets, we find strong evidence supporting our model. Price discrimination opportunities through refund contracts decline as the departure date nears and individuals learn about their demand.

Persuasive Talk: Delegation, Competition, and Announcements, with C. Oyarzun, June 2011, under review.

Abstract: We study persuasion in a modified Crawford-Sobel sender-receiver game in which the receiver makes a binary decision to accept or reject a good recommended by the sender.  The good's quality and the sender's type (neutral or biased) are not observable to the receiver. These slight alterations yield a simple model with a unique equilibrium in which neutral senders fully separate.  The neutral sender can only communicate low quality levels with precision and the biased sender adopts a mixed strategy that on average can successfully persuade the receiver to accept the good.  This strategy is robust under competition between multiple senders.  We provide a sufficient condition for the receiver to prefer this equilibrium to delegating decision-making authority to a sender of unknown type.  Several less-informative equilibria exist; however, only announcement-proof equilibria are outcome-equivalent to the truth-telling equilibrium.

Agglomeration and Matching Frictions in Airline Markets, with D. Escobari, August 2011, under review.

Abstract:Despite the remarkable agglomeration of economic activities, relatively little has been empirical documented on its benefits. In this paper we take advantage of a previously unexploited dimension of airlines markets data and analyze one of the key explanations behind agglomeration economies---the matching of buyers and sellers. We use U.S. airline data to estimate a matching function and the positive and negative externalities on sellers and buyers that arise from a thicker market. The results confirm two theoretical predictions in [Burdett et al.(2001)], the matching function exhibits decreasing returns, but converges to constant returns as the market size increases. Moreover, the supply side has a larger positive externality than the demand side.

Works in Progress

Information Acquisition and Competing Market Makers: Bertrand Versus Cournot, with Hae-shin Hwang.

Abstract: We investigate equilibrium properties of trading mechanisms for a single asset under imperfect competition between market makers. We compare Bertrand and Cournot frameworks proposed by Glosten (1989) and Kyle (1989) respectively. Given a finite number of market makers and fixed proportions of informed and uninformed traders, the Bertrand competition provides not only greater market depth and robustness to asymmetric information, but also more stable and informative equilibrium price than the Cournot competition. When costly information about the asset return is available and each trader's decision to become informed is endogenous, the two mechanisms yield different information equilibria, but the same market depth and robustness to asymmetric information. More interestingly, both informed and uninformed traders are indifferent between the two mechanisms. These results highlight important roles of endogenous information acquisition in market price formation.