Research

University of California, Berkeley

Working papers

• The Market and the Jungle: Dual Economies in Emerging Countries Microeconomic Theory
  Juan Carlos Carbajal, Marcelo Gallardo and Cesar Martinelli.
  Abstract | Draft coming soon

  We combine Piccione and Rubinstein's (2007) jungle economy with the trading framework of Makowski and Ostroy (1995). We establish existence and efficiency of a jungle equilibrium for a fixed occupational profile, and existence in lotteries when occupations are chosen. We also define an equilibrium for a dual economy in which a competitive market operates side by side with a jungle. In the lotteries case the power relation is drawn after occupations are chosen, so the expected payoff averages over finitely many power relations and is continuous. Strategies are Borel measures over each menu, a convex set that is weak*-compact by Banach–Alaoglu. Berge's maximum theorem makes the best-reply correspondences upper hemicontinuous with non-empty compact values, convex because payoffs are affine, and the Kakutani–Fan–Glicksberg fixed point theorem then yields the equilibrium — Kakutani's own theorem does not suffice, the strategy sets being infinite-dimensional.
• Information and voting: Evidence from Peru’s 2026 presidential election - Accepted for presentation at LACEA LAMES 2026 (Lima, Peru) Political Economy
  Marcelo Gallardo, Nicolás Velarde and Cristina Gutarra.
  Abstract | Preprint (very preliminary)

  We study how election-night flash estimates shape voting in Peru's fragmented 2026 presidential election. We exploit a natural experiment: on April 12, 2026, 187 polling tables across 13 voting centers failed to install, and the Jurado Nacional de Elecciones (JNE) extended voting for the affected ≈55000 electors to Monday, April 13. These voters cast ballots after observing the Ipsos and Datum flash estimates; otherwise comparable Sunday voters did not. A Bayesian-updating model of multi-candidate plurality voting frames the analysis, yielding predictions about vote reallocation toward the three candidates the estimates rendered viable -- López Aliaga, Sánchez, and Nieto. We estimate treatment effects on candidate vote shares at both the acta level and the acta-weighted polling-station level, comparing treated and control locales de votación matched on pre-treatment covariates. How flash estimates reshape voting is of first-order importance for Peru, given its institutional instability and high political volatility over the past decade.
• Field Experiments on Seasonal Products and Markdown Pricing Industrial Organization
  Marcelo Gallardo, Carlos Noton and Marcelo Olivares.
  Abstract | Draft coming soon

Work in progress

• Near Expected Utility and Approximate Independence, 2026
  Marcelo Gallardo.

• Dynamic Programming and Production Networks: Continuous Families of Contractions with Discontinuous Fixed Points, 2026
  Marcelo Gallardo and Gabriel Orellano.

• Innovation, Power, and Identification: A Model of Endogenous Graphs, 2026
  Marcelo Gallardo and Luan Borelli.

• Price Information, Cost Uncertainty, and Advertising in Oligopoly, 2026
  Marcelo Gallardo.

• Screening Under Competition and Optimal Transport, 2026
  Marcelo Gallardo.

Papers

• A Daily Index of Economic and Political Uncertainty for Peru from X Discourse, 2026 Political Economy
  Marcelo Gallardo, Manuel Loaiza and Gabriel Rodriguez.
  Abstract | Preprint

  We build the first daily index of economic and political uncertainty (EPU) for Peru, reading the real-time discourse on X (formerly Twitter) rather than newspapers: the dominant policy-uncertainty indices count newspaper articles and are typically monthly and lagged. A large language model, DeepSeek-V3, classifies messages along economic, political and uncertainty dimensions, which recombine into a family of daily indices, among them a broader political-uncertainty index. The index co-moves moderately with the VIX and with the volatility of the Bolsa de Valores de Lima, and more strongly within documented crises — the signature of measures sharing a common uncertainty component while each captures a distinct dimension, so the moderate co-movement is evidence of non-redundancy rather than a shortcoming. Scored against a crisis calendar, the headline index detects Peru's economic crises and the political index its political ruptures, episodes neither benchmark registers. The political index also carries a policy signal: its shocks precede the Central Reserve Bank's foreign-exchange intervention, most strongly inside documented crises.
• Congestion and Penalization in Optimal Transport, 2025 - R&R at Decisions in Economics and Finance (Springer) Mathematical Economics
  Marcelo Gallardo, Manuel Loaiza and Jorge Chávez.
  Abstract | Preprint

  We propose a new model that transforms the classical discrete optimal transport framework by incorporating heterogeneous congestion costs and replacing traditional equality constraints with weighted penalization terms. The resulting formulation is a strictly convex optimization problem that better captures demand–supply imbalances in economic matching contexts and the congestion phenomenon. We first introduce the model and establish existence and uniqueness of the optimal transport plan under general conditions. For interior solutions, we present two analytical methods—based on the Neumann series expansion and the Sherman–Morrison formula—and develop a practical $O((N+L)N^2L^2)$ algorithm for computing the optimum. We then address the case of infinitely many types, corresponding to optimal transport on measure spaces, absolutely continuous with respect to Lebesgue, and prove existence and uniqueness under reasonable assumptions via infinite-dimensional optimization methods. Finally, we illustrate the applicability of our framework with examples from Peru’s health and education sectors, showing how it yields allocation patterns that differ from classical approaches and provide more accurate predictions. Pre-print in arXiv differs from the last version.
• Heterogenous Quadratic Regularization in Optimal Transport, 2025 - Presented at XXXVIII Colloquium of the Peruvian Mathematical Society Mathematical Economics
  Marcelo Gallardo, Manuel Loaiza and Jorge Chávez.
  Abstract | Preprint

  In this paper, we build upon the optimal transport quadratic regularization model to develop a framework that incorporates congestion costs, particularly in matching within the healthcare and education sectors. Specifically, we introduce a model with heterogeneous quadratic costs. We analyze the model's properties under specific cases, extending the existing literature. Furthermore, we explore key structural characteristics of the model and provide numerical examples illustrating why this formulation more accurately captures real-world phenomena, particularly in the Peruvian context. The main result consists of identifying a specific type of corner solution when matching the same number of clusters, i.e., N=L.

Books

• Dynamical Systems and Optimal Control for Economists, 2026 - Under revision at Springer Verlag Mathematical Economics
  Jorge Chávez and Marcelo Gallardo.
  Summary | Index | Book Excerpt

  Dynamical Systems and Optimal Control in Continuous Time for Economists. Topics include linear differential equations, nonlinear dynamical systems, limit cycles, calculus of variations, optimal control theory, and economic models.
• Linear Algebra and Optimization for Economists, 2025 - Published by Fondo Editorial PUCP Mathematical Economics
  Jorge Chávez and Marcelo Gallardo. Foreword by Professor Cesar Martinelli.
  Summary | Book page

  The book covers topics such as vector spaces, linear systems, topology in real vector normed spaces, convex sets (Farkas Lemma), convex functions, unconstrained and constrained optimization, smooth comparative statics and economic applications (such as pure exchange economies).
• Optimal Transport Theory and its Applications in Economics and Finance, 2024 - Working book Mathematical Economics
  Marcelo Gallardo, Carlos Cosentino and Gabriel Orellano. Final project for the course Introduction to Optimal Transport, taught by Johel Beltrán.
  Summary | Draft

  This document discusses applications of optimal transport theory in economics and finance, with a focus on computational methods like entropic regularization and the Sinkhorn-Knopp algorithm. It covers topics such as matching markets stability, cost structure estimation, Credit Value Adjustment, and risk measures, aiming to provide detailed explanations and translations of complex results for students with a strong mathematical background. The document includes an appendix to support understanding and is intended for advanced students interested in economic and financial applications of optimal transport.
• Fundamentals of Econometric Theory, 2025 - Published at Decon PUCP Econometrics
  Juan Leon Jara-Almonte and Marcelo Gallardo.
  Summary | Book

  These lecture notes offer a deep dive into econometrics, structured around key themes from matrix algebra basics to statistical models. The content begins with foundational matrix operations and their relevance to econometrics, advancing to multivariate models with a focus on linear models and optimization issues. It also addresses qualitative variables, sampling methods, and experimental designs. Crucial econometric challenges such as multicollinearity, parameter stability, heteroscedasticity, and serial autocorrelation are thoroughly examined, alongside detection and correction techniques. The notes culminate in discussions on more advanced topics like instrumental variables, maximum likelihood estimation, basic time series analysis, and an appendix on probability theory, equipping readers with a broad understanding of econometric analysis and application.