logo   Christopher Stapenhurst

Microeconomic theory, incentive design, statistics, corruption, inequality.

Research statement

Job market paper

Lemons by Design (with Andrew Clausen)

We study a problem in which a firm can bribe an inspector to conceal evidence of illegal pollution. We find that the cheapest way to deter bribes is (i) to secretly select either the firm or the inspector to `win' a reward whenever evidence is reported; and (ii) to give both the firm and the inspector a secret clue about who will win. If the the inspector conceals the evidence, then the winner forgoes their reward --- i.e. they `get a lemon'. The distribution of clues is carefully constructed to engineer the worst possible lemons problem in the market for concealment: player i only enters the market if her clue is strong enough to make her believe that player j is the winner, despite knowing that player j only enters if his clue indicates that player i is the winner. But then higher order reasoning leads neither players to enter the market, no matter what clue they receive. Hence, bribery never takes place in equilibrium. As well as deterring bribes cheaply and robustly, this result demonstrates the full extent of contagious adverse selection in bilateral trades.

Slides.

Publications

Asymptotic Versus Bootstrap Inference for Inequality Indices of the Cumulative Distribution Function (with Ramses Abul Naga and Gaston Yalonetzky) in Econometrics, 2020.

We examine the performance of asymptotic inference as well as bootstrap tests for the Alphabeta and Kobus–Miłoś family of inequality indices for ordered response data. We use Monte Carlo experiments to compare the empirical size and statistical power of asymptotic inference and the Studentized bootstrap test. In a broad variety of settings, both tests are found to have similar rejection probabilities of true null hypotheses, and similar power. Nonetheless, the asymptotic test remains correctly sized in the presence of certain types of severe class imbalances exhibiting very low or very high levels of inequality, whereas the bootstrap test becomes somewhat oversized in these extreme settings.

Estimation of inequality indices of the cumulative distribution function (with Ramses Abul Naga) in Economics Letters, 2015.

Inequality indices for self-assessed health and life satisfaction are typically constructed as functions of the cumulative distribution function. We present a unified methodology for the estimation of the resulting inequality indices. We also obtain explicit standard error formulas in the context of two popular families of inequality indices that have emerged from this literature.

Distributions used when estimating Capital Consumption (with Craig McLaren) ONS Working Paper Series 3, 2015.

This is a technical reference paper which describes distributions used when calculating estimates of capital consumption. We focus on distributions used that can be used within the Perpetual Inventory Method. In practice, the choice of retirement distributions for capital consumption calculations can be somewhat arbitrary, so this paper describes properties of distributions to help understand the relative merits of different approaches used in that context.

Working papers

Inferring Inequality: Testing for Median-Preserving Spreads in Ordinal Data (with Ramses Abul Naga and Gaston Yalonetzky )

The median-preserving spread (MPS) ordering for ordinal variables (Allison and Foster, 2004) has become ubiquitous in the inequality literature. However, the literature lacks an explicit frequentist method for inferring whether an ordered multinomial distribution G is more unequal than F according to the MPS criterion. We devise formal statistical tests of the hypothesis that G is not an MPS of F. Rejection of this hypothesis enables the conclusion that G is robustly more unequal than F. Using Monte Carlo simulations and novel graphical techniques, we find that the choice between Z and Likelihood Ratio test statistics does not have a large impact on the properties of the tests, but that the method of inference does: bootstrap inference has generally better size and power properties than asymptotic inference. We illustrate the usefulness of our tests with three applications: (i) happiness inequality in the United States, (ii) self-assessed health in Europe and (iii) sanitation ladders in Pakistan.

Code: MPS functions toolbox Monte Carlo simulations

Two Corruptible Monitors

Is it harder to bribe a large team of investigators? I study incentive design with a principal, an agent, and two monitors, in an environment where the players can write side-contracts to destroy evidence about the agent’s behaviour. Contrary to expectation, I find no ``cross-checking'' benefit to hiring both monitors –-- the principal’s payoff improves when a single monitor can observe all of the evidence. But if an omniscient monitor is unavailable, it may be optimal to hire either one or both monitors, depending on the likelihood ratio of their most incriminating evidence. If both monitors are hired then the agent is punished if and only if they agree unanimously. I discuss the extent to which these theoretical findings explain real-world institutions and the implications for policy.

Forecasting inflation and interest rates with a Bayesian Vector Error Correction Model

I develop a Bayesian Vector Error Correction (BVEC) model which incorporates Stochastic Search Variable Selection (SSVS) priors for the short run parameters and a Random Walk Chain Metropolis-Hastings (MH) algorithm for simulating the posterior distribution of the long run parameters in the cointegrating equation. I use this model to forecast inflation and the return on short term treasury bills in the UK. I find that this model outperforms competing models in terms of the root mean squared forecast error over a range of forecasting horizons.

Product Information Design with Private Information Acquisition (with Alfonso Montes)

The value that a consumer assigns to a product depends on the quality of their match. For search goods, the consumer can learn the quality through information about the product. For experience goods, the quality of the match can only be discovered after trying the item. In this project, we study a model in which the product has both an experience and search component. We assume that the consumer can acquire costly information about the first while the firm can provide information about the second. In this framework, we study the firm's optimal information disclosure and pricing strategy.

Policy briefings

Reintroducing wolves to Scotland

The British government aims to halt biodiversity loss by 2020 and article 22 of the EU Habitats and Species Directive of 1992 requires the government to consider the reintroduction of native species. Some conservationists claim that reintroducing wolves to the Scottish Highlands could be especially beneficial for biodiversity and ecological systems due to their capacity to control deer populations. This briefing examines potential ecological and economical impacts, practical implementation issues and stakeholder attitudes towards the reintroduction of wolves to Scotland.