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on Contract Theory and Applications |
| By: | Kvaløy, Ola (UiS); Olsen, Trond (NHH) |
| Abstract: | When a worker is offered performance related pay, the incentive effect is not only determined by the shape of the incentive contract, but also by the probability of contract enforcement. We show that weaker enforcement may reduce the worker's effort, but lead to higher-powered incentive contracts. This creates a seemingly negative relationship between effort and performance pay. |
| Keywords: | . |
| JEL: | A10 |
| Date: | 2012–06–01 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:stavef:2012_011&r=cta |
| By: | Wladimir Andreff (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne) |
| Abstract: | Auction theory, when the bidders do not know the value of what is auctionned, is used to explain how the Olympic Games are allocated to competing bidding cities. It is a centralized allocation process with asymmetric information which usually comes out with a winner's curse. Various indicators of the latter are proposed and exemplified, the major one being the systematic ex ante underestimation of the Olympics costs. |
| Keywords: | auctions, bids, winner's curse, asymmetric information, cost underestimation, mega sporting events, Olympics |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00703466&r=cta |
| By: | Julian A. Parra-Polania |
| Abstract: | To evaluate whether transparency is beneficial, it is usual to assume that the central bank may choose one of two options, opacity versus truthful communication. However, the monetary policymaker may have incentives to misrepresent private information so as to reduce economic volatility by manipulating inflation expectations. Using a standard model, this paper points out the fact that if misrepresentation is included as a possible action there is no rational expectations equilibrium with inflation announcements. Therefore, even if transparency is preferred over secrecy the central bank cannot credibly commit to truth-telling, in contrast to what is commonly assumed in the literature on transparency |
| Date: | 2012–05–28 |
| URL: | http://d.repec.org/n?u=RePEc:col:000094:009614&r=cta |
| By: | Julian A. Parra POlanía |
| Abstract: | To evaluate whether transparency is beneficial, it is usual to assume that the central bank may choose one of two options, opacity versus truthful communication. However, the monetary policymaker may have incentives to misrepresent private information so as to reduce economic volatility by manipulating inflation expectations. Using a standard model, this paper points out the fact that if misrepresentation is included as a possible action there is no rational expectations equilibrium with inflation announcements. Therefore, even if transparency is preferred over secrecy the central bank cannot credibly commit to truth-telling, in contrast to what is commonly assumed in the literature on transparency. |
| Keywords: | Central Bank Announcements, Monetary Policy, Transparency. Classification JEL:E52, E58, D82 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:bdr:borrec:711&r=cta |
| By: | Oz Shy; Rune Stenbacka |
| Abstract: | We investigate how costly acquisition and exchange of customer-specific information affects industry profit and consumer welfare. Consumers differ in their preferences for competing brands and in their switching costs between brands. Brand-producing firms use their acquired knowledge of customer-specific preferences to differentiate prices. We show that consumers are worse off when firms acquire information about their preferences and that information sharing between firms further magnifies their losses. No information sharing supports a subgame perfect equilibrium that is also efficient. Finally, equilibrium investments in customer information may be excessive if firms bear low costs of acquiring customer-specific information. |
| Keywords: | Consumers' preferences |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:12-4&r=cta |
| By: | Brown, Martin; Degryse, Hans; Höwer, Daniel; Penas, María Fabiana |
| Abstract: | Start-up firms often face difficulties in raising external funds. Employing a unique panel dataset covering 9,715 start-up firms over the period 2007-2009, we find that high-tech startups are less likely to use bank finance and face more difficulties in raising bank finance than low-tech start-ups. We find that external credit scores do affect the availability of credit for start-up firms, but that banks rely less on external rating information in their decision making for high-tech start-ups than low-tech start-ups. Start-ups that have their main relation with a small bank use more bank finance and report less difficulties in getting credit. By contrast, a greater expertise of the bank in the firm's industry is not associated with fewer difficulties to get bank loans. There are no differences between high-tech and low-tech start-ups regarding the impact of bank size. -- |
| Keywords: | Innovation,Start-up,Credit information sharing,Soft information |
| JEL: | G2 G18 O16 P34 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12032&r=cta |
| By: | Meier, Martin (IHS Vienna); Schipper, Burkhard C. (University of CA, Davis) |
| Abstract: | Applying unawareness belief structures introduced in Heifetz, Meier, and Schipper (2012), we develop Bayesian games with unawareness, define equilibrium, and prove existence. We show how equilibria are extended naturally from lower to higher awareness levels and restricted from higher to lower awareness levels. We apply Bayesian games with unawareness to investigate the robustness of equilibria to uncertainty about opponents' awareness of actions. We show that a Nash equilibrium of a strategic game is robust to unawareness of actions if and only if it is not weakly dominated. Finally, we discuss the relationship between standard Bayesian games and Bayesian games with unawareness. |
| JEL: | C70 C72 D80 D82 |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:2012-09&r=cta |
| By: | Hitoshi Matsushima (Faculty of Economics, University of Tokyo) |
| Abstract: | We investigate multiunit exchange where a central planner and participants both bring commodities to sell and the central planner plays the role of platform provider. The central planner has restrictions on allocations. We characterize the optimal mechanism concerning his (her) revenue under incentive compatibility and individual rationality in the ex-post term. We introduce modified virtual valuation and show that the optimization problem can be replaced with the maximization of modified virtual valuations. We apply our results to important problems of single-unit demands and position exchanges. We demonstrate a clock auction design that implements the optimal position allocation through dominant strategies. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:tky:fseres:2012cf853&r=cta |
| By: | Banerjee, Abhijit (MIT); Hanna, Rema (Harvard University); Mullainathan, Sendhil (Harvard University) |
| Abstract: | In this paper, we provide a new framework for analyzing corruption in public bureaucracies. The standard way to model corruption is as an example of moral hazard, which then leads to a focus on better monitoring and stricter penalties with the eradication of corruption as the final goal. We propose an alternative approach which emphasizes why corruption arises in the first place. Corruption is modeled as a consequence of the interaction between the underlying task being performed by bureaucrat, the bureaucrat's private incentives and what the principal can observe and control. This allows us to study not just corruption but also other distortions that arise simultaneously with corruption, such as red-tape and ultimately, the quality and efficiency of the public services provided, and how these outcomes vary depending on the specific features of this task. We then review the growing empirical literature on corruption through this perspective and provide guidance for future empirical research. |
| Date: | 2012–05 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp12-023&r=cta |
| By: | Dominik Erharter |
| Abstract: | We study credence goods markets where an expert not only cares for her own monetary payoff, but also for the monetary payoff of her customer. We show how an expert with heterogeneous distributional preferences responds to monetary incentives in the absence of institutions, under liability and/or verifiability and identify optimal contracts for an expert with distributional preferences in each of these settings. |
| Keywords: | other-regarding preferences, credence good, institution, contract theory, industrial organization |
| JEL: | D63 D64 L13 L15 C72 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2012-11&r=cta |