Welfare State in the 21th Century
Welfare State is at the core of the Scandinavian societal model. As we move into a new century (well in the grand scheme of things), how should we adjust our understanding and implementation of the Welfare State? Microeconomic research has a lot to contribute on the question. Here are some of the issues (and associated sub fields of microeconomics) that microeconomic research can address.
Institution Building
Economics, in popular imagination, is about free markets. Since the collapse of communism, however, Economics shifted much of its focus to institution building. This has seen economists changing the way that radio frequencies are distributed to firms—including the frequencies of cellular phones—how doctors are allocated to their first position, how millions of students get assigned to a public school, and even the way that human organs get from donor to recipient.
Market Design is the study of building better institutions. It melds behavioral economics, game theory, computer science, mathematics, and an engineering mindset to build a formal model of an interaction of interest—like assigning students to schools or radio spectrum to firms—and design a set of rules and procedures for participants to abide by, which will lead to a socially beneficial and fair result.
The Microeconomics Research Group studies (among others): school choice allocation, environmental resource allocation, and theoretical aspects at the base of the process of optimal allocation of scarce resources.
Decision under Uncertainty
No one foresaw the coming of COVID-19 and its consequences on life and economics. The stock market can enjoy a boom that makes people rich, while it can also suffer a crash that evaporates wealth. No one can say for sure that they will not run into a car accident during the next year, and many people purchase a lottery in order to get a chance of becoming rich overnight. In strategic alliances, firms can never be sure how their partners will act in various situations because they are likely to have diverging interests and expectations, and a majority of these expectations either cannot be put into a contract or cannot be verified at court.
All the above-mentioned events have something in common – they are all plagued by uncertainty. Indeed, the turbulent world makes our life full of uncertainty: hardly any big decision in our life leads to a sure outcome, neither does the strategy set by a firm or the policy set by the government. Because uncertainty is so prevalent in our social and economic lives, it is important to understand how to cope with them.
Using decision theory, game theory, human subject experiments, as well as empirical analysis, our group aims to understand how economic agents act in the presence of uncertainty.
More on our research on this topic: DecisionUnderUncertainty
More about our research
On top of the group focus research topics, the individual researchers work on different fields within microeconomic theory.