Séminaires LEMMA

"Information Aggregation by Council"

NIKOLAS TSAKAS (University of Cyprus) with Dimitrios Xefteris

Mardi 10 juin 2025, 11h-12h

Lemma - 4 rue Blaise Desgoffe, 75006 Paris. Salle Maurice Desplas

Abstract : We compare the information aggregation efficiency of a small deliberative council to that of a large majority-based electorate in a society of truth-seeking individuals facing a binary collective decision. While the electorate possesses more information than the council, the latter proves to be substantially more effective than the former when information aggregation is a complex task, and only slightly less so when it is a simple/additive endeavour. Moreover, in contrast to the typical emergence of strategic/non-truthful voting in large elections, truth-telling is essentially the only viable equilibrium behavior in councils. Our findings offer a novel rationale for the prevalence of representative democracies, favoring small deliberative bodies over large electorates.

"Consumer Search, Market Power, and the Distributional Effects of Inflation"

ZACH BETHUNE (Rice University) with Shihan Shen

Mardi 3 juin 2025, 11h-12h

Lemma - 4 rue Blaise Desgoffe, 75006 Paris. Salle Maurice Desplas

Zach is Associate Professor at Rice University. His primary fields of research are Macroeconomics, Financial Economics, Monetary, Labor, Search and Matching. 

Abstract : This paper studies the effect of inflation on consumers’ search behavior and firms’ pricing strategies and market power in goods markets, in order to quantify the welfare effects of inflation. In the model, households face uninsurable, idiosyncratic income and expenditure risk and smooth consumption by accumulating liquid wealth. Search in the goods market is random and households choose ex-ante search effort to find low price offers, as in Burdett and Judd (1983). In addition, given a set of offers, households have the outside option to continue searching ex-post. In equilibrium, households with heterogeneous wealth and income choose different search strategies. Heterogeneity in ex-ante search effort implies the composition of households differs along the price distribution. Heterogeneity in ex-post search decisions, along with heterogeneity in the marginal value of wealth, gives rise to heterogeneity in the elasticity of demand at a given price – an in turn firm’s market power. Anticipated inflation af- fects market power according to three primary channels. First, inflation lowers the real return on wealth that increases all households’ price sensitivity, lowering market power. Second, a lower return on wealth increases the costs of ex-post search that reduces consumers’ outside option, increasing market power. Third, inflation affects price dispersion and households’ incentive to search ex-ante. We quantify how these channels affect households unevenly across the wealth and income distribution, and in turn, characterize welfare cost and redistributive effects of inflation.