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on Contract Theory and Applications |
| By: | Martimort, David; Moreira, Humberto |
| JEL: | H41 D82 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ner:toulou:http://neeo.univ-tlse1.fr/2677/&r=cta |
| By: | Berliant, Marcus; Yu, Chia-Ming |
| Abstract: | Agglomeration can be caused by asymmetric information and a locational signaling effect: The location choice of workers signals their productivity to potential employers. The cost of a signal is the cost of housing at a location. When workers' marginal utility of housing is negatively correlated with their productivity, skill-biased technological change causes a core-periphery bifurcation where the agglomeration of high-skill workers eventually constitutes a unique stable equilibrium. When workers' marginal utility of housing and their productivity are positively correlated, skill-biased technological improvements will never result in a core-periphery equilibrium. Location can at best be an approximate rather than a precise sieve for high-skill workers. |
| Keywords: | Agglomeration; Adverse Selection; Asymmetric Information; Locational Signaling |
| JEL: | R13 D82 D51 |
| Date: | 2010–07–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24155&r=cta |
| By: | Martimort, David; Poudou, Jean-Christophe; Sand-Zantman, Wilfried |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:ner:toulou:http://neeo.univ-tlse1.fr/2676/&r=cta |
| By: | Ralph de Haas; Neeltje van Horen |
| Abstract: | To what extent was the credit contraction during the global financial crisis due to more intense screening and monitoring by banks? We address this question by analyzing changes in the structure of a large number of syndicated loans to private, non-financial corporations. We find an increase in retention rates among syndicate arrangers during the crisis that we cannot explain by borrower risk or interbank liquidity alone. This increased ‘skin in the game’ is especially pronounced when information asymmetries between the borrower and the lending syndicate – or within the syndicate – are high. This indicates that the reduction in bank lending during the crisis was at least partly caused by stricter bank screening and monitoring: a wake-up call. |
| Keywords: | bank lending; financial crisis; loan retention; screening and monitoring; syndication |
| JEL: | D82 G15 G21 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:dnb:dnbwpp:255&r=cta |
| By: | Roland Hodler (Study Center Gerzensee); Simon Loertscher (University of Melbourne); Dominic Rohner (University of Zurich) |
| Abstract: | Decision makers lacking crucial specialist know-how often consult with better informed but biased experts. In our model the decision maker’s choice problem is binary and her preferred option depends on the state of the world unknown to her. The expert observes the state and sends a report to the decision maker. His bias is such that he prefers the same decision for all states. Lying about the state leads to a cost that increases in the size of the lie. As a function of the size of the expert’s bias and the decision maker’s prior about the underlying state, three kinds of equilibrium behavior occur. In each case equilibrium consists of separating and pooling segments, and the decision maker takes the expert’s preferred decision for some states for which she would not take this decision had she observed the state herself. The model has a variety of applications and extends to situations in which the decision maker may be naive and take the report by its face value, and to situations with multiple experts and uncertainty about the size of the expert’s bias. |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:szg:worpap:1001&r=cta |
| By: | Fremeth, Adam R.; Holburn, Guy L. F. |
| Abstract: | We argue that information asymmetries between regulators and firms increase the administrative decision costs of initiating new policies due to the costs of satisfying evidentiary or ‘‘burden of proof’’ requirements. We further contend that regulators with better information about regulated firms—that is, with lower information asymmetries—have lower decision costs, thereby facilitating regulator policy making. To empirically test our predictions, we examine the relationship between regulatory informational environments and changes to regulated rates for all investor-owned electric utilities from 1980 to 2000. We exploit several natural sources of variation in the informational environments of US state utility regulators. These stem from the prior experiences and administrative resources of regulators, observable policy decisions of other regulatory agencies for a given utility, and differences in procedural regulations pertaining to rate increases and decreases. Our results suggest that as regulators acquire more information about utility operations, including from experience in office, they are more likely to enact rate decreases and less likely to implement rate increases. |
| Date: | 2010–02 |
| URL: | http://d.repec.org/n?u=RePEc:reg:rpubli:595&r=cta |
| By: | Elisabetta Iossa (Faculty of Economics, University of Rome "Tor Vergata"); Bruno Jullien (University of Toulouse 1) |
| Abstract: | Studying the strategic interaction between litigants, lawyers and judges, we analyze the value of the quality of legal representation and how public information over quality affects the outcome of the judicial process. Judges have reputational concerns and the quality of lawyers is reflected in knowledge of legal principles and in proof-taking ability. Deriving the demand for legal representation and the market equilibrium, we show that higher quality of legal representation is welfare increasing but better information over quality may be welfare reducing. We discuss the implications of our results on the desirability of quality ceritfication, such as the Queen's Counselor system |
| Keywords: | Carrer Concerns, Decision Bias, Market for Lawyers |
| JEL: | D82 K40 |
| Date: | 2010–07–20 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:170&r=cta |
| By: | Thomas J. Dohmen |
| Abstract: | High rewards or the threat of severe punishment do not only provide incentives to exert high levels of effort but also create pressure. Such pressure can cause paradoxical performance effects, namely performance decrements despite strong incentives and high motivation. By analyzing the performance of professional football players on a well-defined task, namely to score on a penalty kick, the paper provides empirical evidence for the existence of such detrimental incentive effects. Two pressure variables are considered in particular: (1) the importance of success and (2) the presence of spectators. There are plenty of situations in which pressure arises in the workplace. Knowing how individuals perform under pressure conditions is crucial for labor economists because it has implications for the design of the workplace and the design of incentive schemes. [IZA Discussion Paper No. 1905] |
| Keywords: | choking under pressure, paradoxical performance effects of incentives, social pressure |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:ess:wpaper:id:2742&r=cta |