VIENNA JOINT ECONOMICS SEMINAR	INVITATION
REMINDER: The University of Vienna and the Institute for Advanced Studies cordially invite you to the following Vienna Joint Economics Seminar Thursday, November 17, 2016 University of Vienna, Oskar-Morgenstern-Platz 1, 1090 Vienna, Skylounge, 12th floor 4:00 pm Martin Gonzales Eiras and John Duffy University of Copenhagen                                         University of California, Irvine Why Might the Old Want to Honor Sovereign Debt? (Martin Gonzales Eiras) Survey evidence from Argentina, Iceland and Greece, indicates that, in times of high default risk, the old might be relatively in favor of sovereign debt repayment. I develop a dynamic optimal contracting model to account for these life-cycle preferences. Efficient allocations under political constraints provide incentives not to default by promising higher future consumption to the current young. Thus, even if exclusion from international capital markets is less costly to the elderly, they might be the ones that lose most from a default. In production economies this leads positive shocks to increase investment. The model helps rationalize the observed weak correlations between default and output and between default and outstanding debt. Regression analysis with data from Iceland regarding the “Icesave" 2011 referendum shows that age is a significant determinant of repayment preferences.   and Adoption of a new payment method: Theory and experimental evidence (John Duffy) We model the introduction of a new payment method, e.g., e-money, that competes with an existing payment method, e.g., cash. The new payment method involves relatively lower per-transaction costs for both buyers and sellers but sellers must pay a one-time fixed fee to accept the new payment method. Due to network effects, our model admits two symmetric pure strategy Nash equilibria. In one equilibrium, the new payment method is not adopted and all transactions continue to be carried out using the existing payment method. In the other equilibrium, the new payment method is adopted and completely replaces the existing payment method. The equilibrium involving only the new payment method is socially optimal as it minimizes total transaction costs. Using this model, we study the question of equilibrium selection by conducting a laboratory experiment. We find that, depending on the fixed fee charged for adoption of the new payment method and on the choices made by participants on both sides of the market, either equilibrium can be selected. More precisely, a lower fixed fee for sellers favors very quick adoption of the new payment method by all participants while for a sufficiently high fee, sellers gradually learn to refuse to accept the new payment method and transactions are largely conducted using the existing payment method. paper jointly Jasmina Arifovic and Janet Hua Jiang We are looking forward to seeing you! Institute for Advanced Studies Josefstädter Straße 39, 1080 Vienna, Austria Tel.: +43 1 599 91 232 e-Mail: economics@ihs.ac.at http://www.ihs.ac.at		LINKS DIRECTIONS TO UNIVERSITY OF VIENNA on Google maps VIENNA JOINT ECONOMICS SEMINAR on Google calendar ECONOMICS SEMINARS IN VIENNA on Google calendar Institute for Advanced Studies @IHS_Vienna
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