{"id":{"repo_id":"cambridge","oai_identifier":"oai:www.repository.cam.ac.uk:1810/371546"},"canonical_url":"https://search.dev.ndltd.org/etd/cambridge/oai:www.repository.cam.ac.uk:1810/371546","repository":{"repo_id":"cambridge","name":"Cambridge University","base_url":"https://api.repository.cam.ac.uk/server/oai/request"},"display":{"title":"Essays in Microeconomic Theory","abstract":"This thesis provides a series of essays on network theory and political economy. The work on networks is largely focused on social interactions within communities, and how they impact consumption of status goods, and provision of public goods. The two chapters on political economy provide novel mechanisms for explaining lobbying behaviour and extensions of property rights, respectively. The first chapter examines how social networks affect the provision of public goods within a community. Here, networks spread information about whether people contribute to a public good. This mechanism can generate incentives for cooperative behaviour without repeated interactions. It finds a critical threshold in network connectivity at which the level of public good provision changes sharply. This threshold is common to everyone, even though people are heterogeneous in terms of how costly they find it to provide public goods and in their network position. The second chapter examines a model of reference dependent choice where reference points are determined by social comparisons. An increase in the strength of social comparisons, even by only a few agents, increases consumption and decreases welfare for everyone. Strikingly, a higher marginal cost of consumption can increase welfare. In a labour market, social comparisons with co-workers create a big fish in a small pond effect, inducing incomplete labour market sorting. Further, it is the skilled workers with the weakest social networks who are induced to give up income to become the big fish. The third chapter also studies social comparisons. It adapts ideas from social identity theory to set out a new framework for modelling conspicuous consumption. Notably, this approach can explain two stylised facts about conspicuous consumption that initially seem at odds with one another, and to date have required different families of models to explain each: (1) people consume more visible goods when their neighbours’ incomes rise, but (2) consume less visible goods when incomes of those with the same race in a wider geographic area rise. The first fact is typically explained by ‘Keeping up with the Joneses’ models, and the second by signalling models. The fourth chapter views lobbying as a contest between the government and many different special interest groups. The government fights lobbying by interest groups with its own political capital. In this world, a government wants to `sell protection' -- give favourable treatment in exchange for contributions -- to certain interest groups. It does this in order to build its own `war chest' of political capital, which improves its position in fights with other interest groups. And it does so until it wins all remaining contests with certainty. This stands in contrast to existing models that often view lobbying as driven by information or agency problems. The fifth chapter presents a new rationale for a self-interested economic elite voluntarily extending property rights. When agents make endogenous investment decisions, there is a commitment problem. Ex post, the elite face strong incentives to expropriate investments from the non-elite (who don’t have property rights), which dissuades investment. Extending property rights to new groups can resolve this problem, even for those not given property rights, by making public good provision more attractive to the elite. Unlike other models of franchise extensions, extending property rights in my model does not involve the elite ceding control to others. Rather, it changes the incentives they face. Chapter three is joint work with Christian Ghiglino (we both contributed equally). The rest are my own work. A version of chapter two is published under the same title as Langtry, A., 2023. American Economic Journal: Microeconomics, 15(3), pp.474-500. A version of chapter four is published under the same title as Langtry, A., 2024. Journal of Public Economics, 231, p.105068.","abstract_html":"This thesis provides a series of essays on network theory and political economy. The work on networks is largely focused on social interactions within communities, and how they impact consumption of status goods, and provision of public goods. The two chapters on political economy provide novel mechanisms for explaining lobbying behaviour and extensions of property rights, respectively. The first chapter examines how social networks affect the provision of public goods within a community. Here, networks spread information about whether people contribute to a public good. This mechanism can generate incentives for cooperative behaviour without repeated interactions. It finds a critical threshold in network connectivity at which the level of public good provision changes sharply. This threshold is common to everyone, even though people are heterogeneous in terms of how costly they find it to provide public goods and in their network position. The second chapter examines a model of reference dependent choice where reference points are determined by social comparisons. An increase in the strength of social comparisons, even by only a few agents, increases consumption and decreases welfare for everyone. Strikingly, a higher marginal cost of consumption can increase welfare. In a labour market, social comparisons with co-workers create a big fish in a small pond effect, inducing incomplete labour market sorting. Further, it is the skilled workers with the weakest social networks who are induced to give up income to become the big fish. The third chapter also studies social comparisons. It adapts ideas from social identity theory to set out a new framework for modelling conspicuous consumption. Notably, this approach can explain two stylised facts about conspicuous consumption that initially seem at odds with one another, and to date have required different families of models to explain each: (1) people consume more visible goods when their neighbours’ incomes rise, but (2) consume less visible goods when incomes of those with the same race in a wider geographic area rise. The first fact is typically explained by ‘Keeping up with the Joneses’ models, and the second by signalling models. The fourth chapter views lobbying as a contest between the government and many different special interest groups. The government fights lobbying by interest groups with its own political capital. In this world, a government wants to `sell protection' -- give favourable treatment in exchange for contributions -- to certain interest groups. It does this in order to build its own `war chest' of political capital, which improves its position in fights with other interest groups. And it does so until it wins all remaining contests with certainty. This stands in contrast to existing models that often view lobbying as driven by information or agency problems. The fifth chapter presents a new rationale for a self-interested economic elite voluntarily extending property rights. When agents make endogenous investment decisions, there is a commitment problem. Ex post, the elite face strong incentives to expropriate investments from the non-elite (who don’t have property rights), which dissuades investment. Extending property rights to new groups can resolve this problem, even for those not given property rights, by making public good provision more attractive to the elite. Unlike other models of franchise extensions, extending property rights in my model does not involve the elite ceding control to others. Rather, it changes the incentives they face. Chapter three is joint work with Christian Ghiglino (we both contributed equally). The rest are my own work. A version of chapter two is published under the same title as Langtry, A., 2023. American Economic Journal: Microeconomics, 15(3), pp.474-500. A version of chapter four is published under the same title as Langtry, A., 2024. 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The second chapter examines a model of reference dependent choice where reference points are determined by social comparisons. An increase in the strength of social comparisons, even by only a few agents, increases consumption and decreases welfare for everyone. Strikingly, a higher marginal cost of consumption can increase welfare. In a labour market, social comparisons with co-workers create a big fish in a small pond effect, inducing incomplete labour market sorting. Further, it is the skilled workers with the weakest social networks who are induced to give up income to become the big fish. The third chapter also studies social comparisons. It adapts ideas from social identity theory to set out a new framework for modelling conspicuous consumption. Notably, this approach can explain two stylised facts about conspicuous consumption that initially seem at odds with one another, and to date have required different families of models to explain each: (1) people consume more visible goods when their neighbours’ incomes rise, but (2) consume less visible goods when incomes of those with the same race in a wider geographic area rise. The first fact is typically explained by ‘Keeping up with the Joneses’ models, and the second by signalling models. The fourth chapter views lobbying as a contest between the government and many different special interest groups. The government fights lobbying by interest groups with its own political capital. In this world, a government wants to `sell protection' -- give favourable treatment in exchange for contributions -- to certain interest groups. It does this in order to build its own `war chest' of political capital, which improves its position in fights with other interest groups. And it does so until it wins all remaining contests with certainty. This stands in contrast to existing models that often view lobbying as driven by information or agency problems. The fifth chapter presents a new rationale for a self-interested economic elite voluntarily extending property rights. When agents make endogenous investment decisions, there is a commitment problem. Ex post, the elite face strong incentives to expropriate investments from the non-elite (who don’t have property rights), which dissuades investment. Extending property rights to new groups can resolve this problem, even for those not given property rights, by making public good provision more attractive to the elite. Unlike other models of franchise extensions, extending property rights in my model does not involve the elite ceding control to others. Rather, it changes the incentives they face. Chapter three is joint work with Christian Ghiglino (we both contributed equally). The rest are my own work. A version of chapter two is published under the same title as Langtry, A., 2023. American Economic Journal: Microeconomics, 15(3), pp.474-500. A version of chapter four is published under the same title as Langtry, A., 2024. Journal of Public Economics, 231, p.105068."]},{"key":"dc:format.checksum.md5","label":"Dc Format Checksum Md5","values":["96b74b0d87bbccbe0874c75ef5b61eb3","87eda9de84448d1f82354d60eee3eb5f"]},{"key":"dc:title","label":"Title","values":["Essays in Microeconomic Theory"]}]}],"canonical_facts":{"dc:contributor.advisor":["Elliott, Matthew"],"dc:contributor.sponsor":["Economic and Social Research Council [award reference ES/P000738/1], Keynes Fund"],"dc:creator":["Langtry, Alastair"],"dc:creator.authoridentifier":["0000000317099265"],"dc:date.issued":["2024-05-22"],"dc:description.abstract":["This thesis provides a series of essays on network theory and political economy. 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Notably, this approach can explain two stylised facts about conspicuous consumption that initially seem at odds with one another, and to date have required different families of models to explain each: (1) people consume more visible goods when their neighbours’ incomes rise, but (2) consume less visible goods when incomes of those with the same race in a wider geographic area rise. The first fact is typically explained by ‘Keeping up with the Joneses’ models, and the second by signalling models. The fourth chapter views lobbying as a contest between the government and many different special interest groups. The government fights lobbying by interest groups with its own political capital. In this world, a government wants to `sell protection' -- give favourable treatment in exchange for contributions -- to certain interest groups. It does this in order to build its own `war chest' of political capital, which improves its position in fights with other interest groups. And it does so until it wins all remaining contests with certainty. This stands in contrast to existing models that often view lobbying as driven by information or agency problems. The fifth chapter presents a new rationale for a self-interested economic elite voluntarily extending property rights. When agents make endogenous investment decisions, there is a commitment problem. Ex post, the elite face strong incentives to expropriate investments from the non-elite (who don’t have property rights), which dissuades investment. Extending property rights to new groups can resolve this problem, even for those not given property rights, by making public good provision more attractive to the elite. Unlike other models of franchise extensions, extending property rights in my model does not involve the elite ceding control to others. Rather, it changes the incentives they face. Chapter three is joint work with Christian Ghiglino (we both contributed equally). The rest are my own work. A version of chapter two is published under the same title as Langtry, A., 2023. American Economic Journal: Microeconomics, 15(3), pp.474-500. A version of chapter four is published under the same title as Langtry, A., 2024. 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