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on Contract Theory and Applications |
| By: | Jeanne Hagenbach (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Frédéric Koessler (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales - Ecole Nationale des Ponts et Chaussées - Ecole Normale Supérieure de Paris - ENS Paris) |
| Abstract: | We consider situations in which individuals would like to choose an action which is close to that of others, as well as close to a state of nature, with the ideal proximity to the state varying across agents. Before this coordination game is played, a cheap-talk communication stage is offered to the individuals who decide to whom they reveal their private information about the state. The information transmission occurring in the communication stage is characterized by a strategic communication network. We provide an explicit link between players' preferences and the equilibrium strategic communication networks. A key feature of our equilibrium characterization is that whether communication takes place between two agents not only depends on the conflict of interest between these agents, but also on the number and preferences of the other agents with whom they communicate. Apart from some specific cases, the equilibrium communication networks are quite complex despite our simple one-dimensional description of preference heterogeneity. In general, strategic communication networks cannot be completely Pareto-ranked, but expected social welfare always increases as the communication network expands. |
| Keywords: | Cheap talk ; coordination ; incomplete information ; networks |
| Date: | 2009–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00367692_v1&r=cta |
| By: | Bernard De Meyer (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Ehud Lehrer (School of Mathematical Sciences - Tel Aviv University); Dinah Rosenberg (LAGA - Laboratoire d'Analyse, Géométrie et Applications - CNRS : UMR7539 - Université Paris-Nord - Paris XIII) |
| Abstract: | In a Bayesian game some players might receive a noisy signal regarding the specific game actually being played before it starts. We study zero-sum games where each player receives a partial information about his own type and no information about that of the other player and analyze the impact the signals have on the payoffs. It turns out that the functions that evaluate the value of information share two property. The first is Blackwell monotonicity, which means that each player gains from knowing more. The second is concavity on the space of conditional probabilities. |
| Keywords: | Value of information, Blackwell monotonicity, concavity. |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00390625_v1&r=cta |
| By: | Takanori Tanaka (Institute of Social and Economic Research, Osaka University) |
| Abstract: | This article examines whether trade credit provides credible information about borrowerfs creditworthiness, thereby facilitating provision of bank credit. Using data on Japanese manufacturing firms over the period 1990-1995, our empirical analyses reveal that trade payables as a credible signal about borrowerfs creditworthiness facilitate the provision of short-term credit by less-informed banks. Consequently, in the firms that have armfs-length relations with banks, trade payables play an important role in mitigating asymmetric information problems between firms and banks, thereby facilitating extension of bank credit. |
| Keywords: | trade credit; bank credit |
| JEL: | G32 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:0922&r=cta |
| By: | Feng, Shuaizhang (Princeton University); Zheng, Bingyong (Shanghai University of Finance and Economics) |
| Abstract: | We study a competitive labor market with imperfect information. In our basic model, the labor market consists of heterogeneous workers and ex ante identical firms who have only imperfect private information about workers' productivities. Firms compete by posting wages in order to cherry-pick more productive workers from the applicant pool. The model predicts many important empirical regularities, including non-degenerated firm size distribution, persistent wage dispersion, and employer size-wage premium. We also consider extensions of the model where firms differ in either productivity or information about worker types, both generating assortative matching with a positive but imperfect correlation of worker and firm types. The main insight of this paper is that identical workers can get different wages depending on productivities of their coworkers in a competitive market with informational frictions. Our model also sheds light on inter-industry wage differential and sorting between industry and worker characteristics. |
| Keywords: | imperfect information, cherry-picking, wage dispersion, size-wage premium, inter-industry wage differential |
| JEL: | D83 J31 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4309&r=cta |
| By: | Gian Luca Clementi; Thomas F. Cooley; Sonia Di Giannatale |
| Abstract: | We study the problem of an investor who buys an equity stake in an entrepreneurial venture, under the assumption that the former cannot monitor the latter’s operations. The dynamics implied by the optimal incentive scheme is rich and quite different from that induced by other models of repeated moral hazard. In particular, our framework generates a rationale for firm decline. As young firms accumulate capital, the claims of both investor (outside equity) and entrepreneur (inside equity) increase. At some juncture, however, even as the latter keeps on growing, invested capital and firm value start declining and so does the value of outside equity. The reason is that incentive provision is costlier the wealthier the entrepreneur (the greater is inside equity). In turn, this leads to a decline in the constrained–efficient level of effort and therefore to a drop in the return to investment. |
| JEL: | E0 L11 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15192&r=cta |
| By: | Kohei Daido (School of Economics, Kwansei Gakuin University) |
| Abstract: | Abstract This paper studies the optimal organizational form and the optimal type of manager by considering the nonmaterial (psychological) payoff as well as the standard material payoff for agents. I compare two organizational forms: T-form, where all agents have the same job title so that they are in a single reference group; and H-form, where one agent is appointed to be the manager and the others are subordinates who form a reference group. I show that the principal should appoint a more (less) able agent to be the manager when the effects of peer pressure are more (less) critical. In addition, I find the conditions under which H-form is more likely to be preferred to T-form. Finally, I discuss the phenomenon of the proliferation of job titles in the context of this model. |
| Keywords: | Principal-agent Model, Multiagents, Moral Hazard, Reference Group, Peer Pressure, Identity, Proliferation of Job Titles. |
| JEL: | B49 D82 D86 M12 M54 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:47&r=cta |
| By: | Jeanne Hagenbach (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | In the dynamic game we consider, players are the members of a fixed network. Everyone is initially endowed with an information item that he is the only paper to hold. Players are offered a finite number of periods to centralize the initially dispersed items in the hands of any one member of the network. In every period, each agent strategically chooses whether or not to transmit the items he holds to this neighbors in the network. The sooner all the items are gathered by any individual, the better it is for the group of players as a whole. Besides, the agent who first centralizes all the items is offered an additional reward that he keeps for himself. In this framework where information transmission is strategic and physically restricted, we provide a necessary and sufficient condition for a group to pool information items in every equilibrium. This condition is independent of the network structure. The architecture of links however affects the time needed before items are centralized in equilibrium. This paper provides theoretical support to Bonacich (1990)'s experimental results. |
| Keywords: | Social network ; social dilemma ; dynamic network game ; strategic communication |
| Date: | 2009–03 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00367894_v1&r=cta |