Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Rebranding the Ex-convicts Young-Chul Kim (Sangmyung U.)

Glenn Loury (Brown U.)

October 15, 2016

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Contents

1

Introduction

2

Basic Framework

3

Labor Market Analysis Employers’ Wage Offers Ex-cons’ Incentive to ”Go Straight” Equilibrium in the Labor Market for Ex-Cons

4

Rebranding Program

5

Socially Optimal Rebranding

6

Conclusion

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Section 1. Introduction

Socially Optimal Rebranding

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Increasing US Imprisonment Rate since 1980s

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Total Population Under U.S. Adult Correctional Systems in 2000s

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

About 20 percent of All Blacks Imprisoned by early 30s

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Key Concepts Develop a “model” explaining how the problem of poor labor market outcomes for ex-convicts might be alleviated.

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Key Concepts Develop a “model” explaining how the problem of poor labor market outcomes for ex-convicts might be alleviated. An essential feature of the labor market for ex-convicts: the employers wish to avoid associating with those who will end-up returning to crime,

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Key Concepts Develop a “model” explaining how the problem of poor labor market outcomes for ex-convicts might be alleviated. An essential feature of the labor market for ex-convicts: the employers wish to avoid associating with those who will end-up returning to crime, but they cannot be certain from available information: the issue of adverse selection

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Key Concepts Develop a “model” explaining how the problem of poor labor market outcomes for ex-convicts might be alleviated. An essential feature of the labor market for ex-convicts: the employers wish to avoid associating with those who will end-up returning to crime, but they cannot be certain from available information: the issue of adverse selection A government can nevertheless design a costly, though on net socially beneficial, program by means of which some ex-cons can credibly convey their good intentions.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Key Concepts Develop a “model” explaining how the problem of poor labor market outcomes for ex-convicts might be alleviated. An essential feature of the labor market for ex-convicts: the employers wish to avoid associating with those who will end-up returning to crime, but they cannot be certain from available information: the issue of adverse selection A government can nevertheless design a costly, though on net socially beneficial, program by means of which some ex-cons can credibly convey their good intentions. Such a program can facilitate more ex-cons obtaining legitimate work, and fewer electing to return to crime.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Key Concepts Develop a “model” explaining how the problem of poor labor market outcomes for ex-convicts might be alleviated. An essential feature of the labor market for ex-convicts: the employers wish to avoid associating with those who will end-up returning to crime, but they cannot be certain from available information: the issue of adverse selection A government can nevertheless design a costly, though on net socially beneficial, program by means of which some ex-cons can credibly convey their good intentions. Such a program can facilitate more ex-cons obtaining legitimate work, and fewer electing to return to crime. Broader applicability other than the case of ex-cons.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Section 2. Basic Framework

Socially Optimal Rebranding

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Frameworks Ex-convicts make choices about their future participation in criminal activities.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Frameworks Ex-convicts make choices about their future participation in criminal activities. Each individual ex-convict is endowed with a personal benefit from going back to crime, denoted by c.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Frameworks Ex-convicts make choices about their future participation in criminal activities. Each individual ex-convict is endowed with a personal benefit from going back to crime, denoted by c. Employers, when faced with a given ex-con job applicant, cannot know whether he is one who places a “high” or “low” value on criminal activity.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Frameworks Ex-convicts make choices about their future participation in criminal activities. Each individual ex-convict is endowed with a personal benefit from going back to crime, denoted by c. Employers, when faced with a given ex-con job applicant, cannot know whether he is one who places a “high” or “low” value on criminal activity. But, employers have some noisy idiosyncratic information about that individual: “pass or fail test”, denoted by t.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Frameworks Ex-convicts make choices about their future participation in criminal activities. Each individual ex-convict is endowed with a personal benefit from going back to crime, denoted by c. Employers, when faced with a given ex-con job applicant, cannot know whether he is one who places a “high” or “low” value on criminal activity. But, employers have some noisy idiosyncratic information about that individual: “pass or fail test”, denoted by t. Employers make a wage offer to the prospective ex-con workers based on a test-inclusive assessment of the likelihood that this individual will return to crime.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Notations and Assumptions

c ≡ value of criminal activity for an ex-con (c = 0) G(c) ≡ fraction of ex-con population with crime value no greater than c

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Notations and Assumptions

c ≡ value of criminal activity for an ex-con (c = 0) G(c) ≡ fraction of ex-con population with crime value no greater than c µ ≡ average value of criminal activity in the ex-con population

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Notations and Assumptions

c ≡ value of criminal activity for an ex-con (c = 0) G(c) ≡ fraction of ex-con population with crime value no greater than c µ ≡ average value of criminal activity in the ex-con population c Assumption (1): G(c) = Min{ 2µ , 1} for some µ > 0, c = 0. (That is, ex-cons’ value of crime is uniformly distributed on the interval [0, 2µ], with mean µ.)

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Notations and Assumptions

c ≡ value of criminal activity for an ex-con (c = 0) G(c) ≡ fraction of ex-con population with crime value no greater than c µ ≡ average value of criminal activity in the ex-con population c Assumption (1): G(c) = Min{ 2µ , 1} for some µ > 0, c = 0. (That is, ex-cons’ value of crime is uniformly distributed on the interval [0, 2µ], with mean µ.)

π ≡ fraction of ex-con population choosing to go straight (0 5 π 5 1)

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Notations and Assumptions

t ≡ information (‘pass/fail’ test outcome) employers get about a particular ex-con

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Notations and Assumptions

t ≡ information (‘pass/fail’ test outcome) employers get about a particular ex-con Assumption (2): Pr{t = pass | straight} = Pr{t = fail | crime} = p > 12 (Those going straight (returning to crime) pass (fail) an employer’s “test” of criminal intentions with the probability p > 21 ).

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Section 3. Labor Market Analysis

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Employers’ Wage Offers

Offered Wages ω ≡ productivity of the labor of an ex-con who goes straight. 0 ≡ productivity of the labor of an ex-con who returns to crime

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Employers’ Wage Offers

Offered Wages ω ≡ productivity of the labor of an ex-con who goes straight. 0 ≡ productivity of the labor of an ex-con who returns to crime Employers offer wages to individual applicants according to expected productivity: W (π, t) = ω · Pr{“straight” | t, π} + 0 · Pr{“crime” | t, π},

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Employers’ Wage Offers

Offered Wages ω ≡ productivity of the labor of an ex-con who goes straight. 0 ≡ productivity of the labor of an ex-con who returns to crime Employers offer wages to individual applicants according to expected productivity: W (π, t) = ω · Pr{“straight” | t, π} + 0 · Pr{“crime” | t, π}, Using Bayes’s Rule to compute conditional probabilities: W (π, pass) = and W (π, fail) =

ωpπ pπ + (1 − p)(1 − π)

ω(1 − p)π . (1 − p)π + p(1 − π)

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Employers’ Wage Offers

Offered Wages

So, we may conclude that: (i) W (π, pass) > W (π, fail), for all π ∈ (0, 1); (ii) W (0, pass) = W (0, fail) = 0; (iii) W (1, pass) = W (1, fail) = ω.

and

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Ex-cons’ Incentive to ”Go Straight”

Expected Wages and Incentive Expected wage paid to an ex-con who “goes straight” is: V1 (π) ≡ pW (π, pass) + (1 − p)W (π, fail), Expected wage paid to an ex-con who “returns to crime” is: V0 (π) ≡ (1 − p)W (π, pass) + pW (π, fail).

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Ex-cons’ Incentive to ”Go Straight”

Expected Wages and Incentive Expected wage paid to an ex-con who “goes straight” is: V1 (π) ≡ pW (π, pass) + (1 − p)W (π, fail), Expected wage paid to an ex-con who “returns to crime” is: V0 (π) ≡ (1 − p)W (π, pass) + pW (π, fail). So V1 (0) = V0 (0) = 0, and V1 (1) = V0 (1) = ω.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Ex-cons’ Incentive to ”Go Straight”

Expected Wages and Incentive Expected wage paid to an ex-con who “goes straight” is: V1 (π) ≡ pW (π, pass) + (1 − p)W (π, fail), Expected wage paid to an ex-con who “returns to crime” is: V0 (π) ≡ (1 − p)W (π, pass) + pW (π, fail). So V1 (0) = V0 (0) = 0, and V1 (1) = V0 (1) = ω. The wage-offer-incentive for an ex-con to “going straight”: R(π) ≡ V1 (π) − V0 (π) = (2p − 1) · [W (π, pass) − W (π, fail)].

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Ex-cons’ Incentive to ”Go Straight”

Expected Wages and Incentive Expected wage paid to an ex-con who “goes straight” is: V1 (π) ≡ pW (π, pass) + (1 − p)W (π, fail), Expected wage paid to an ex-con who “returns to crime” is: V0 (π) ≡ (1 − p)W (π, pass) + pW (π, fail). So V1 (0) = V0 (0) = 0, and V1 (1) = V0 (1) = ω. The wage-offer-incentive for an ex-con to “going straight”: R(π) ≡ V1 (π) − V0 (π) = (2p − 1) · [W (π, pass) − W (π, fail)]. R(π) is a concave function of π, and that R(0) = 0 = R(1), and that 1 R( ) = ω(2p − 1)2 = R(π), for all π ∈ [0, 1]. 2

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Ex-cons’ Incentive to ”Go Straight”

Ex-cons’ Expected Wages and Incentive An ex-convict’ decision calculus: “return to crime” is the rational choice if c > R(π), while “go straight” is the rational choice if c < R(π). Panel A. Expected Wages

Panel B. Incentive to “Go Straight”

V1(π)

V(π)

R(π) V0(π)

0

0.5

1

π

0

0.5

1

π

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Equilibrium in the Labor Market for Ex-Cons

Self-confirming Employer’s Belief An “equilibrium employer belief” is any number π ∗ ∈ [0, 1] that solves the equation: π ∗ = G(R(π ∗ ))

Employer’s belief about  fraction of ex‐cons who  “go straight” = π

Wage offered to  individual ex‐cons, given  test  = W(π,t)

Employer belief confirmed  whenever π = π’ = G(R(π)) Fraction of ex‐cons  “going straight” π’,  where  π’ = G(R(π))

Incentives for any ex‐con  to “go straight” = R(π)

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Equilibrium in the Labor Market for Ex-Cons

Self-confirming Employer’s Belief There exists multiple equilibria without the following assumption:

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Equilibrium in the Labor Market for Ex-Cons

Self-confirming Employer’s Belief There exists multiple equilibria without the following assumption: (That is, employers’ Assumption (3): ωµ 5 2p(1−p) (2p−1)2 information is not “too accurate.” Specifically, we are 1 µ assuming: p 5 ( 12 )[1 + ( µ+2ω ) 2 ].) G(R(π)) 45 degree line

Π*=?

●

Π*=0 ●

0

0.5

1

π

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Equilibrium in the Labor Market for Ex-Cons

Labor Market Collapse When π ∗ = 0 is the only value of π which solves π ∗ = G(R(π ∗ )), we will say: “labor market for ex-convicts collapses due to the problem of adverse selection.” (by Assumption (3))

G(R(π)) 45 degree line

Π*=0 ●

0

0.5

1

π

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Section 4. Rebranding Program for the Ex-convicts

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Rebranding Program

A certifiable and costly activity (hereafter “the program”) with no productive content (i.e., an ex-cons’ participation neither raises ω nor lowers c)

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Rebranding Program

A certifiable and costly activity (hereafter “the program”) with no productive content (i.e., an ex-cons’ participation neither raises ω nor lowers c) Before going into the labor market, ex-convicts choose whether to join this program or not.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Rebranding Program

A certifiable and costly activity (hereafter “the program”) with no productive content (i.e., an ex-cons’ participation neither raises ω nor lowers c) Before going into the labor market, ex-convicts choose whether to join this program or not. Let K denote the cost to an ex-convict for participating in this program: the program’s designers can choose the value of K for which 0 < K < ω.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Rebranding Program

A certifiable and costly activity (hereafter “the program”) with no productive content (i.e., an ex-cons’ participation neither raises ω nor lowers c) Before going into the labor market, ex-convicts choose whether to join this program or not. Let K denote the cost to an ex-convict for participating in this program: the program’s designers can choose the value of K for which 0 < K < ω. Program participation is verifiable by employers. (E.g. a certificate is issued which cannot be forged.)

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Program Participation Let π 0 denote employers’ prior belief about the fraction of program participants who are “going straight.”

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Program Participation Let π 0 denote employers’ prior belief about the fraction of program participants who are “going straight.” So, R(π 0 ) = V1 (π 0 ) − V0 (π 0 ) will now represent the value of going straight for program participants only. K V1( ′)

V1( ′)‐c‐K=0 “Never Join the Program ( ′)”

V0( ′) “Joining the Program ( ′)” “go‐straight”

R( ′)

c

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Existence of Unique Equilibrium

Proposition For every K ∈ (0, ω), there is an (essentially unique) equilibrium with positive program participation such that a positive fraction π e0 ∈ (0, 1) of program participants elect to go straight, where: K = V0 (e π 0 ), so π e0 = V0−1 (K ), 0 < K < ω. Moreover, program participants who go straight are strictly better-off than they would have been in the absence of a program, while non-participants are no worse-off, implying that the introduction of a program induces a (weak) Pareto improvement over the status quo ante.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

[Proof of Proposition]

First, suppose K>V0( ’)

Second, suppose K
K V1( ’)

K V1( ’)

′ 1, V0( ’)=ω>K : contradiction

V0( ’)

G(R( ’)), then  ’=0,  , V0( )=0
V0( ’)

R( ’)

c

R( ’)

c

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

[Proof of Proposition]

Finally, suppose K=V0( ’): K V1( ’)

G(R( ’))+φ[1‐G(R( ’))] join the program! Then, there exists φ∈(0,1) such that ’= G(R( ’))/ {G(R( ’))+φ[1‐G(R( ’))]}.  

V0( ’)

R( ’)

c

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Section 5. Socially Optimal Rebranding

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Net Social Surplus One may reject this program on C/B grounds due to its assumed zero “treatment effect”. Yet it is clear that this programmatic intervention would still be socially valuable.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Net Social Surplus One may reject this program on C/B grounds due to its assumed zero “treatment effect”. Yet it is clear that this programmatic intervention would still be socially valuable. The introduction of the program changes the equilibrium payoff for only one group of agents – those with c < R(e π 0 ): program utility = V1 (e π 0 ) − K = V1 (e π 0 ) − V0 (e π 0 ) = R(e π 0 ), while their payoff in the absence of any program is just c.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Net Social Surplus One may reject this program on C/B grounds due to its assumed zero “treatment effect”. Yet it is clear that this programmatic intervention would still be socially valuable. The introduction of the program changes the equilibrium payoff for only one group of agents – those with c < R(e π 0 ): program utility = V1 (e π 0 ) − K = V1 (e π 0 ) − V0 (e π 0 ) = R(e π 0 ), while their payoff in the absence of any program is just c. So, rebranding produces the overall net surplus for society: Z R(eπ0 ) Z R(eπ0 ) 0 NSS = [R(e π ) − c]dG(c) = G(c)dc 0

0

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Net Social Surplus One may reject this program on C/B grounds due to its assumed zero “treatment effect”. Yet it is clear that this programmatic intervention would still be socially valuable. The introduction of the program changes the equilibrium payoff for only one group of agents – those with c < R(e π 0 ): program utility = V1 (e π 0 ) − K = V1 (e π 0 ) − V0 (e π 0 ) = R(e π 0 ), while their payoff in the absence of any program is just c. So, rebranding produces the overall net surplus for society: Z R(eπ0 ) Z R(eπ0 ) 0 NSS = [R(e π ) − c]dG(c) = G(c)dc 0

NSS is maximized when

0

R(e π0)

is maximized: π ∗∗ = 12 .

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Socially Optimal Program The socially optimal rebranding program will be: 1 1 1 K ∗∗ = V0 ( ) = (1 − p)W ( , pass) + pW ( , fail) 2 2 2 = 2ωp(1 − p).

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Socially Optimal Program The socially optimal rebranding program will be: 1 1 1 K ∗∗ = V0 ( ) = (1 − p)W ( , pass) + pW ( , fail) 2 2 2 = 2ωp(1 − p). Thus, the optimal program is more onerous, (1) the higher is the value of legitimate work and (2) the less accurate is employers’ information about workers’ criminal intentions.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Socially Optimal Program The socially optimal rebranding program will be: 1 1 1 K ∗∗ = V0 ( ) = (1 − p)W ( , pass) + pW ( , fail) 2 2 2 = 2ωp(1 − p). Thus, the optimal program is more onerous, (1) the higher is the value of legitimate work and (2) the less accurate is employers’ information about workers’ criminal intentions. The size of the optimal program (in terms of the fraction of ex-convicts who participate in it), N(π ∗∗ ), will be: N(π ∗∗ ) =

G(R(π ∗∗ )) 1 ω = 2G(R( )) = ( )(2p − 1)2 . π ∗∗ 2 µ

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Socially Optimal Program The socially optimal rebranding program will be: 1 1 1 K ∗∗ = V0 ( ) = (1 − p)W ( , pass) + pW ( , fail) 2 2 2 = 2ωp(1 − p). Thus, the optimal program is more onerous, (1) the higher is the value of legitimate work and (2) the less accurate is employers’ information about workers’ criminal intentions. The size of the optimal program (in terms of the fraction of ex-convicts who participate in it), N(π ∗∗ ), will be: G(R(π ∗∗ )) 1 ω = 2G(R( )) = ( )(2p − 1)2 . π ∗∗ 2 µ ∗∗ The program size N(π ) is greater, (1) the higher is the value of legitimate work, (2) the smaller is the mean value of criminal participation and (3) the more accurate is the information available to employers. N(π ∗∗ ) =

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Section 6. Concluding Remarks

Conclusion

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Concluding Remarks While we have adopted Assumption (3) in order to be sure that the market collapses completely, our result that a Pareto improvement is possible here does not depend on that assumption.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Concluding Remarks While we have adopted Assumption (3) in order to be sure that the market collapses completely, our result that a Pareto improvement is possible here does not depend on that assumption. The stability of the equilibrium is not fully discussed in the given simplest set-up, but this stability issue is just solved in a more generalized set-up.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Concluding Remarks While we have adopted Assumption (3) in order to be sure that the market collapses completely, our result that a Pareto improvement is possible here does not depend on that assumption. The stability of the equilibrium is not fully discussed in the given simplest set-up, but this stability issue is just solved in a more generalized set-up. Broader applicability: e.g., periodic and costly “franchise re-branding campaigns” wherein a franchise retailer “reinvents” itself from time to time

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Concluding Remarks While we have adopted Assumption (3) in order to be sure that the market collapses completely, our result that a Pareto improvement is possible here does not depend on that assumption. The stability of the equilibrium is not fully discussed in the given simplest set-up, but this stability issue is just solved in a more generalized set-up. Broader applicability: e.g., periodic and costly “franchise re-branding campaigns” wherein a franchise retailer “reinvents” itself from time to time by imposing costly (and seemingly meaningless!) requirements on its current members, or,

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Conclusion

Concluding Remarks While we have adopted Assumption (3) in order to be sure that the market collapses completely, our result that a Pareto improvement is possible here does not depend on that assumption. The stability of the equilibrium is not fully discussed in the given simplest set-up, but this stability issue is just solved in a more generalized set-up. Broader applicability: e.g., periodic and costly “franchise re-branding campaigns” wherein a franchise retailer “reinvents” itself from time to time by imposing costly (and seemingly meaningless!) requirements on its current members, or, by creating a “super-brand” that is costly to attain.

Introduction

Basic Framework

Labor Market Analysis

Rebranding Program

Socially Optimal Rebranding

Thank You for Paying Attention!

Conclusion