Seminar 4: Emel Ozturk, Ph.D., and Matthew Robinson

6th of May, 2016


We were happy to welcome Emel Ozturk, Ph.D., and Matthew Robinson as speakers. Their talks touched on the issues of inequality and signalling, respectively.

Emel's Talk: Measurement of equality of opportunity: A normative approach

“This paper introduces new measures of inequality of opportunity derived from social welfare functions. Each measure computes the inequality of opportunity in an income distribution by its distance from the fair distribution. The fair income of an individual is determined by his individual characteristics and the conception of fairness adopted. There are two main conceptions of fairness. The first, the principle of compensation, says that inequalities due to characteristics that individuals cannot be held responsible for should be eliminated. The second, the principle of reward, says that there should be an appropriate amount of inequality due to differences in responsibility characteristics.”

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Matthew's Talk: Effort Signalling in a Supermodular Securitization Game

“Hitherto, in signalling models of securitization, the value of the underlying asset that is to be signalled is drawn from a probability distribution and is therefore out of the sender’s control. This paper proposes a model in which an originator explicitly affects the value of the asset through a costly effort choice, which she will subsequently signal via a retention strategy. It is shown that the imposition of a positive lower bound on an originators choice of retention, akin to the ‘Skin in the Game’ rule, both increases signalling costs and, simultaneously, improves incentives for originators, in that it makes a choice of high underwriting effort relatively more likely. Whilst similar results have been obtained in exclusive models of moral hazard or adverse selection, they have not yet been shown to hold in a model that incorporates both aspects of the asymmetric information present in asset securitization.”

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