Indivisible Asset Research Articles

Mechanical ventilator as a shared resource for the COVID-19 pandemic

COVID-19, the causative agent of which is a new type of coronavirus called SARS-CoV-2, has caused the most severe pan-demic in the last 100 years. The condition is mainly respiratory, and up to 5 % of patients develop critical illness, a situation that has put enormous pressure on the health systems of affected countries. A high demand for care has mainly been observed in intensive care units and critical care resources, which is why the need to redistribute resources in critical medicine emerged, with an emphasis on distributive justice, which establishes the provision of care to the largest number of people and saving the largest number of lives. One principle lies in allocating resources to patients with higher life expectancy. Mechanical ven-tilator has been assumed to be an indivisible asset; however, simultaneous mechanical ventilation to more than one patient with COVID-19 is technically possible. Ventilator sharing is not without risks, but the principles of beneficence, non-maleficence and justice prevail. According to distributive justice, being a divisible resource, mechanical ventilator can be shared; however, we should ask ourselves if this action is ethically correct.

Optimal equity auction with interdependent valuations

This study considers a seller using an equity auction to sell an indivisible asset for which bidders have interdependent valuations. First, we introduce bidders’ conditional virtual valuations for this setting, and identify sufficient conditions for conditional virtual valuations’ monotonicity and single-crossing property. Then, we characterize the optimal equity mechanism, which is ex post incentive compatible and individually rational. In general symmetric case, English equity auction or two-round sealed bid equity auction with an endogenous take-it-or-leave-it contract can implement the optimal ex post equity auction; in asymmetric case, English auction with an endogenous discriminatory equity contract could be constructed for the implementation of the optimal ex post equity auction under certain conditions.

Mechanical ventilator as a shared resource for the COVID-19 pandemic.

COVID-19, the causative agent of which is a new type of coronavirus called SARS-CoV-2, has caused the most severe pandemic in the last 100 years. The condition is mainly respiratory, and up to 5% of patients develop critical illness, a situation that has put enormous pressure on the health systems of affected countries. A high demand for care has mainly been observed in intensive care units and critical care resources, which is why the need to redistribute resources in critical medicine emerged, with an emphasis on distributive justice, which establishes the provision of care to the largest number of people and saving the largest number of lives. One principle lies in allocating resources to patients with higher life expectancy. Mechanical ventilator has been assumed to be an indivisible asset; however, simultaneous mechanical ventilation to more than one patient with COVID-19 is technically possible. Ventilator sharing is not without risks, but the principles of beneficence, non-maleficence and justice prevail. According to distributive justice, being a divisible resource, mechanical ventilator can be shared; however, we should ask ourselves if this action is ethically correct.

Stability and Efficiency in a Model of Production and Pillage

A collective choice model of an environment where a society must allocate but cannot legally enforce property rights over a single indivisible productive asset is studied. There are both production and pillage opportunities for coalitions. A variety of cooperative stability theories (including ones based on farsighted dominance relation) support efficiency in the model. Thus implicit enforcement of property rights through expectations may be sufficient to secure efficiency. Explicit legal enforcement is not necessary.

LIQUIDATION OF AN INDIVISIBLE ASSET WITH INDEPENDENT INVESTMENT

AbstractWe provide an extension of the explicit solution of a mixed optimal stopping–optimal stochastic control problem introduced by Henderson and Hobson. The problem examines whether the optimal investment problem on a local martingale financial market is affected by the optimal liquidation of an independent indivisible asset. The indivisible asset process is defined by a homogeneous scalar stochastic differential equation, and the investor's preferences are defined by a general expected utility function. The value function is obtained in explicit form, and we prove the existence of an optimal stopping–investment strategy characterized as the limit of an explicit maximizing strategy. Our approach is based on the standard dynamic programming approach.

Optimal Timing For The Sale Of An Indivisible Asset With Jumps: A Numerical Approach

This paper examines the situation in which a utility maximizing agent holds a portfolio composed of a Real Asset and a proportion of a market portfolio. The Real Asset is indivisible, and its sale is irreversible and results in a one-time payment. The question this paper attempts to answer is, When is the optimal time the agent should sell this Real Asset?. In other words, at what proportion of the agents wealth should the Real Asset be sold. This paper extends the work of Evans et al. (2008) through adding a jump process to the stochastic process of the Real Asset to better capture its idiosyncratic risks. The results can be summarized into three strategies: i) sell immediately, ii) sell at a certain proportion of wealth, and iii) never sell the asset. Furthermore, we have found evidence showing the significance of the addition of the jump process. This addition affects the agents optimal path by pushing him to hold on to the Real Asset at smaller fractions of his wealth when compared to the original version of no jumps.

Risk Aversion, Indivisible Timing Options, and Gambling

In this paper we model the behavior of a risk-averse agent who seeks to maximize expected utility and who has an indivisible asset and a timing option over when to sell this asset. Our main contribution is to show that, contrary to intuition, optimal behavior for such a risk-averse agent can include risk-increasing gambles. For example, a manager with a choice over when to disinvest from a project, a private homeowner with a property to sell, or an employee with a grant of American-style stock options may be better off taking positions in other assets with zero Sharpe ratio that are uncorrelated with the underlying project, house, or stock price risk. The results have wider implications for the modeling and interpretation of portfolio optimization problems involving American-style timing decisions.

In This Issue

In This Issue

OPTIMAL TIMING FOR AN INDIVISIBLE ASSET SALE

In this paper, we investigate the pricing via utility indifference of the right to sell a non‐traded asset. Consider an agent with power utility who owns a single unit of an indivisible, non‐traded asset, and who wishes to choose the optimum time to sell this asset. Suppose that this right to sell forms just part of the wealth of the agent, and that other wealth may be invested in a complete frictionless market. We formulate the problem as a mixed stochastic control/optimal stopping problem, which we then solve. We determine the optimal behavior of the agent, including the optimal criteria for the timing of the sale. It turns out that the optimal strategy is to sell the non‐traded asset the first time that its value exceeds a certain proportion of the agent's trading wealth. Further, it is possible to characterize this proportion as the solution to a transcendental equation.

Horizon-unbiased utility functions

In this paper we consider a class of mixed optimal control/optimal stopping problems related to the choice of the best time to sell a single unit of an indivisible asset. We assume that in addition to the indivisible asset, the agent has access to a financial market. Investments in the financial market can be used for hedging, but the financial assets are only partially correlated with the indivisible asset, so that the agent faces an incomplete markets problem. We show how, even in the infinite horizon case, it is possible to express the problem as a maximisation problem with respect to an inter-temporal utility function evaluated at the sale time, but that this objective function must satisfy consistency conditions over time.

Dynamic bilateral bargaining under private information with a sequence of potential buyers

A seller owning a single, indivisible asset faces the random arrival of privately informed buyers, with whom he can bargain sequentially. Our key result is that despite the arrival of alternative buyers the Coase conjecture continues to hold under stationary strategies if the distribution of buyer valuations has convex support: Negotiations end almost immediately and the asset is sold almost at the minimum of the seller's own reservation value and the lowest possible valuation of a buyer. We also show existence of multiple stationary equilibria, though, in the special case where the support of buyers' valuations exhibits a sufficiently large “interior gap”. Taken together, our findings thus also point to a potential pitfall when analyzing only two-type distributions in more applied work.

Aspects of International Fragmentation

AbstractThe paper uses a specific‐factors framework to address efficiency and distributional implications of international fragmentation which is driven by a low foreign wage rate. Focusing on the cost‐savings linkage between fragmentation and labor demand in the remaining domestic activities, the author establishes a fragmentation surplus. If capital is an indivisible asset specific to the fragment produced abroad, then fragmentation may cause a domestic welfare loss, because outsourcing takes place in discrete steps where it affords firms “quasi‐market‐power” on the domestic labor market. The regime shift from domestic production to fragmentation is modeled as a two‐stage game. In stage one, firms locate indivisible assets at home or abroad; in stage two they choose optimal employment. The share of fragmented firms is endogenously determined. The paper explores conditions under which outsourcing is beneficial for the domestic economy.

The World Development Report: concepts, content and a Chapter 12*

AbstractThe World Development Report (WDR) process set new standards for openness and consultation. Its concepts and content are a major advance on its 1990 predecessor. The intention that its concepts and content should be influenced by voices of the poor was partly fulfilled. Conceptually, the VOP findings support the multidimensional view of poverty as ‘pronounced deprivation of wellbeing’, and the use of income‐poverty to describe what is only one dimension of poverty (though this welcome usage is not consistent throughout in the WDR). Two concepts or analytical orientations were not adopted: powerlessness and disadvantage seen as a multidimensional interlinked web; and livelihoods. On content, three areas where the influence fell short were: how the police persecute and impoverish poor people; the diversity of the poorest people; and the significance of the body as the main but vulnerable and indivisible asset of many poor people.A weakness of the WDR is its lack of critical self‐awareness. Chapter 11 is self‐serving for the International Financial Institutions: it lumps loans with grants as concessional finance; it makes liberal use of the term donor, but never lender; and it does not consider debt avoidance as a strategy. The Report ends abruptly, a body without a head. Its multidimensional view of poverty is not matched by a multidimensional view of power and responsibility. A Chapter 12 is crying out to be written. This would confront issues of professional, institutional and personal commitment and change. It would stress critical reflection as a professional norm, disempowerment for democratic diversity as institutional practice, and personal values, attitudes and courageous behaviour as primary and crucial if development is to be change that is good for poor people. A new conclusion is suggested for the WDR, and a title for the World Development Report 2010. Copyright © 2001 John Wiley & Sons, Ltd.

FIXED CHARGES ON BOOK DEBTS—THE STORY CONTINUES

FOR the purposes of creating consensual security interests, are a debt and its proceeds a single indivisible asset or can they be separated? Is a security on book debts and proceeds a single indivisible charge or two charges? If it is a single indivisible charge, can it be a convertible charge, that is a charge which is fixed so long as it attaches to unrealised debts but floating in respect of proceeds of the debts? Recent decisions of the English courts have shrouded these questions in confusion. The appeal from the New Zealand Court of Appeal’s decision in Re Brumark Investments Ltd. [2000] 1 B.C.L.C. 353 gives the Privy Council an opportunity to provide much-needed clarification.

A Matching Model with Bounded Holdings of Indivisible Money

Recent versions of pairwise random matching models of money with divisible and perishable goods are amended to allow individuals to hold more than one unit of an indivisible asset. The asset resembles a fiat asset, except that nominal holdings of it yield a small amount of utility. There is a general upper bound on the number of units of the asset that individuals can hold. A steady state with trade is shown to exist. The model is applied to study numerically the effect on welfare of the degree to which the asset is divisible.