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Bruno Strulovici
[Contact] [Curriculum Vitae] [Research] [Teaching]
HOW
TO CONTACT ME
Mailing address:
Department of Economics
Northwestern University
2001 Sheridan Road
Evanston, Illinois
60208, USA
My office is Room 3221 in Arthur
Andersen Hall
Telephone: 847-491-8233
Facsimile: 847-491-7001
e-mail: b-strulovici@northwestern.edu
CURRICULUM VITAE
RESEARCH
Recent projects:
“Discounting and Patience in Optimal Stopping and
Control Problems” with John Quah
This paper
establishes that the optimal stopping time of any unrestricted optimal stopping problem is increasing in
“patience,” understood as a particular partial order on
discount rate functions. An unrestricted problem is one in which there
are no exogenous constraints on the stopping time, i.e., the decision
maker can interrupt cash-flows at any moment that he likes. With Markov
dynamics, the result holds in a continuation-domain sense even if
stopping is combined with an optimal control problem. Under intuitive
additional assumptions, we obtain comparative statics on both the
optimal control and optimal stopping time for one-dimensional
diffusions. We provide a simple example where, without these
assumptions, increased patience can precipitate stopping. We also show
that, with optimal stopping and control, a project's expected value is
decreasing in the interest rate, generalizing analogous results in a
deterministic context. All of our results are robust to the presence of
a salvage value. As an application, we show that the internal rate of
return of any endogenously-interrupted project is essentially unique,
even if the project also involves a management problem until its
interruption. We also apply our results to the theory of optimal growth
and capital deepening, and to optimal bankruptcy decisions.
“Capital
Mobility and Asset Pricing” with
Darrell Duffie
We present
a model for the equilibrium movement of capital between asset markets that
are distinguished only by the levels of capital invested in each.
Investment in that market with the greatest amount of capital earns the
lowest risk premium. Intermediaries optimally trade off the costs of
intermediation against fees that depend on the gain they can offer to
investors for
moving
their capital to the market with the higher mean return. Those fees
also depend on the bargaining power of the investor, in light of
potential alternative intermediaries. In equilibrium, the speeds of
adjustment of mean returns and of capital between the two markets are
increasing in the degree to which capital is imbalanced between the two
markets.
“Learning
While Voting: Determinants of Collective Experimentation” accepted, Econometrica
This paper
combines dynamic social choice and strategic experimentation to study
the following question: how does a society, a committee, or, more
generally, a group of individuals with potentially heterogeneous
preferences, experiment with new opportunities? Each voter recognizes
that, during experimentation, other voters also learn about their
preferences. As a result, pivotal voters today are biased against
experimentation because it reduces their likelihood of remaining
pivotal. This phenomenon reduces equilibrium experimentation below the
socially efficient level, and may even result in a negative option
value of experimentation. However, one can restore efficiency by
designing a voting rule that depends deterministically on time. Another
main result is that, even when payoffs of a reform are independently
distributed across the population, good news about any
individual’s payoff increases other individuals’ incentives
to experiment with that reform, due to a positive voting externality.
"Comparative
Statics, Informativeness, and the Interval Dominance Order” with John Quah, Econometrica, 2009
We identify a natural way of ordering
functions, which we call the
interval dominance
order and develop a theory of monotone comparative
statics based on this order. This way of ordering functions is weaker
than the standard one based on the single crossing property (Milgrom
and Shannon, 1994) and so our results apply in some settings where the
single crossing property does not hold. For example, they are useful
when examining the comparative statics of optimal stopping time
problems. We also show that certain basic results in statistical
decision theory which are important in economics - specifically, the
complete class theorem of Karlin and Rubin (1956) and the results
connected with Lehmann’s (1988) concept of informativeness -
generalize to payoff functions obeying the interval dominance order.
“Performance
Sensitive Debt”
with Gustavo Manso and Alexei Tchistyi, forthcoming, Review
of Financial Studies
This paper
studies performance-sensitive debt (PSD), the class of debt obligations
whose interest payments depend on some measure of the borrowers
performance. We demonstrate that the existence of PSD obligations
cannot be explained by the trade-off theory of capital structure, as
PSD leads to earlier default and lower equity value compared to
fixed-rate debt of the same market value. We show that, consistent with
the pecking order theory, PSD can be used as an inexpensive screening
device and find empirically that firms choosing PSD loans are more
likely to improve their credit ratings than firms choosing
fixed-interest loans. We also develop a method to value PSD obligations
allowing for general payment profiles and obtain closed-form pricing
formulas for step-up bonds and linear PSD.
“Substitute goods, auctions, and
equilibrium” with
Paul Milgrom, Journal of Economic
Theory, 2009
This paper
identifies two notions of substitutes for auction and equilibrium
analysis. Weak substitutes, the usual price-theory notion, guarantees
monotonicity of tātonnement processes and convergence of clock auctions
to a pseudo-equilibrium, but only strong substitutes, which treats each
unit traded as a distinct good with its own price, guarantees that
every pseudo-equilibrium is a Walrasian equilibrium, that the Vickrey
outcome is in the core, and that the “law of aggregate
demand” is satisfied. When goods are divisible, weak substitutes
along with concavity guarantees all of the above properties, except for
the law of aggregate demand.
“Generalized
Monotonicity Analysis” with
Thomas Weber, Economic Theory,
2009
Complex economic
models often lack the structure for the application of standard
techniques in monotone comparative statics. Generalized Monotonicity
Analysis (GMA) extends the available methods in several directions.
First, it provides a way of finding parameter moves that yield
monotonicity of model solutions. Second, it allows studying the
monotonicity of functions or subsets of variables. Third, GMA naturally
provides bounds on the sensitivity of variables to parameter changes.
Fourth, GMA may be used to derive conditions under which monotonicity
obtains with respect to functions of parameters, corresponding to
imposed parameter moves. Fifth, GMA contributes insights into the
theory of comparative statics, for example, with respect to dealing
with constraints or exploiting additional information about the model
structure. Several applications of GMA are presented, including
constrained optimization, non-supermodular games, aggregation, robust
inference, and monotone comparative dynamics.
TEACHING
Econ 335 Syllabus
Econ 412-2 Syllabus
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