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on Contract Theory and Applications |
| By: | Gwenaël Piaser |
| Abstract: | It is argued that the revelation principle in multi-principal multi-agent games cannot be generalized. In other words, one cannot restrict attention to incentive compatible mechanisms, even if the concept of information is enlarged. |
| Keywords: | Direct Mechanisms, Incentive compatible, Multiprincipals. |
| JEL: | D82 |
| Date: | 2014–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-049&r=cta |
| By: | Güth, Werner; Pull, Kerstin; Stadler, Manfred; Zaby, Alexandra |
| Abstract: | Based on the acquiring-a-company game of Samuelson and Bazerman (1985), we theoretically and experimentally analyze the acquisition of a firm. Thereby we compare cases of symmetrically and asymmetrically informed buyers and sellers. This setting allows us to predict and test the effects of information disclosure as prescribed by two recently implemented directives of the European Union, the Transparency and the Takeover-Bid Directive. Our theoretical and experimental results suggest a welfare-enhancing effect of compulsory information disclosure. Hence, the EU Transparency and the EU Takeover-Bid Directive should both be welfare enhancing. -- |
| Keywords: | acquisition of firms,disclosure of private information,experimental economics |
| JEL: | C91 D61 D82 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:tuewef:69&r=cta |
| By: | Andrea Attar; Eloisa Campioni; Gwenaël Piaser |
| Abstract: | In the present note, we show that a weak restriction on out of equilibrium beliefs allows to extend the Revelation Principle to exclusive agency games, even if we consider mixed strategy equilibria. Next, we argue that this result does not extend to games with several agents, even if we restrict the analysis to pure strategy equilibria. |
| Keywords: | Competing Mechanisms, Exclusive Contracts, Incomplete Information,Participation decision |
| JEL: | D82 |
| Date: | 2014–01–06 |
| URL: | http://d.repec.org/n?u=RePEc:ipg:wpaper:2014-048&r=cta |
| By: | Bontems, Philippe; Mahenc, Philippe |
| Abstract: | This paper addresses the issue of price signaling in a model of vertical relationship between a manufacturer and a retailer who share the same information about quality, unlike consumers who do not observe it a priori. We show that delegating the price setting task to a retailer and controlling it through a vertical contract (two-part tari¤) helps drastically reduce the number of price signaling equilibria available to the retailer. The outcome of a unique price charged to consumers obtains without invoking the consumer sophistication usually required by selection criterions. The vertical contract turns to be the most e¢ cient way for the vertical chain to tie its hands on a unique ?nal price. This price may disclose or not information to consumers depending on their initial optimism about quality. We prove that there also exists circumstances where consumers prefer ex ante not to learn the true quality through price. |
| Keywords: | quality signalling, vertical relationship, information disclosure. |
| JEL: | D82 L12 L15 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:27906&r=cta |
| By: | Gerlinde Fellner; Yoshio Iida; Sabine Kröger; Erika Seki |
| Abstract: | We study voluntary contribution behavior of individuals who vary in their ability to contribute to a joint project under different information scenarios. We investigate a situation with two types who vary only in their external marginal return (low and high). Results of a laboratory experiment suggest that, when group members are not aware of the heterogeneity in their group, both types make the same nominal contributions. When agents are informed about the heterogeneity, contributions increase but differently by type. High types contribute only more with sufficient social exposure, i.e., when information on the type of the contributor is available. Low types, on the other hand, contribute only more when they are aware of the distribution of types, but have no information on the type of the contributor. |
| Keywords: | Public goods, Voluntary contribution mechanism, Heterogeneity, Information, Norms |
| JEL: | C9 H41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:1411&r=cta |
| By: | Seung Han Yoo (Department of Economics, Korea University, Seoul, Republic of Korea) |
| Abstract: | This paper introduces a dynamic Bayesian game with an unknown population distribution. Players do not know the true population distribution and assess it based on their private observations using Bayes' rule. First, we show the existence and characterization of an equilibrium in which each player's strategy is a function not only of the player's type but also of experience. Second, we show that each player's initial belief about the population distribution converges almost surely to a "correct" belief. |
| Keywords: | Bayesian games, Dynamic games, Bayesian learning |
| JEL: | C72 C73 D83 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:iek:wpaper:1401&r=cta |
| By: | Christophe Godlewski (LaRGE Research Center, Université de Strasbourg) |
| Abstract: | Debt renegotiation matters for the borrower-lender relationship to ensure the credit agreement is regularly amended to include new information and make it more “complete”. I investigate the determinants of the dynamics of bank loan renegotiations using a sample of 1 600 amendments to private debt contracts in Europe. The median duration between loan amendments equals 1 year, although frequently renegotiated contracts are amended every 5 months. Employing a stratified Cox-type hazard model, I find that initial loan terms, banking pool features, amendments’ characteristics, and the legal environment significantly influence the duration time between renegotiations. Contract complexity, informational frictions in the borrower-lender relationship, the uncertainty of the economic environment, and the legal protection of creditors also play a major role in shaping the dynamics of bank loan renegotiation in Europe. |
| Keywords: | renegotiation process, bank loans, multiple failure-time data, Cox model, Europe. |
| JEL: | C41 G14 G20 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:lar:wpaper:2014-01&r=cta |
| By: | Bontems, Philippe; Gozlan, Estelle |
| Abstract: | In this paper, we address two questions: (i) how should a government pursuing both environmental and redistributive objectives design domestic taxes when redistribution is costly, and (ii) how does trade liberalization affect this optimal tax system, and modify the economy's levels of pollution and inequalities ? Using a general equilibrium model under asymmetric information with two goods, two factors (skilled and unskilled labor) and pollution, we fully characterize the optimal mixed tax system (nonlinear income tax and linear commodity and production taxes/subsidies). We provide simulations highlighting the linkages between pollution, labor income redistribution and increasing globalization with our endogenous fiscal system. In the redistributive case (i.e. in favor of the unskilled workers) and when the dirty sector is intensive in unskilled labor, we show that (i) trade liberalization involves a clear trade-off between the reduction of inequalities and the control of pollution when the source of externality is mainly production ; this is not necessarily true with a consumption externality; (ii) under openness to trade, the source of the externality matters for redistribution, while it is not the case in autarky. Finally we discuss the impact of an increasing willingness to redistribute income and of a technological shock affecting emissions intensity. |
| Keywords: | quality signalling, vertical relationship, information disclosure. |
| JEL: | F13 F18 H21 H23 |
| Date: | 2014–02–05 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:27907&r=cta |
| By: | Simon Cornée (CREM UMR CNRS 6211, University of Rennes 1, and CERMi, France) |
| Abstract: | In this paper, to begin with, we define soft information as qualitative, subjective information produced by banks through the establishment of long-term lending relationships. We then highlight the importance of soft information for cooperative and social banks in the screening, pricing and monitoring of their borrowers as a result of their institutional features (governance, values, etc.) and the specificities of their clientele. We finally emphasise the value of qualitative (economic, social and/or environmental) factors stemming from the production of soft information in predicting credit default events. |
| Keywords: | Relationship Lending, Soft Information, Credit Rating, Cooperative and Social Banking |
| JEL: | G21 L22 M21 P13 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:201402&r=cta |
| By: | Maarten Janssen (National Research University Higher School of Economics); Alexei Parakhonyak (National Research University Higher School of Economics); Anastasia Parakhonyak (Toulouse School of Economics.) |
| Abstract: | When consumers do not know the prices at which different firms sell, they often also do not know production costs. Consumer search models which take asymmetric information about production costs into account continue focusing on reservation price equilibria (RPE) and their properties. We argue that RPE assume specific out-of-equilibrium beliefs that are not consistent with the logic of the D1 refinement criterion. Moreover, RPE suffer from a non-existence problem as they typically do not exist when cost uncertainty is large. We characterize an alternative class of socalled non-RPE. We show these equilibria always exist and do not rely on specific out-of-equilibrium beliefs. Non-reservation equilibria are characterized by active consumer search among consumers. As cost uncertainty facilitates search, more consumers make price comparisons resulting in stronger price competition between firms and higher consumer surplus. |
| Keywords: | Sequential Search, Non-Reservation Price Equilibria, Asymmetric Information |
| JEL: | D40 D83 L13 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:hig:wpaper:51/ec/2014&r=cta |
| By: | Soumyanetra Munshi (Indira Gandhi Institute of Development Research) |
| Abstract: | This paper propounds a contract-theoretic model where dowry acts as a screening device to differentiate grooms of varying qualities. In 'arranged' marriage settings that are characterized by incomplete information in the sense that the true quality of the groom remains unobservable to the bride, and in the presence of observable traits like education that are easier for the better quality groom to achieve, education-dowry contracts can potentially serve as a screening instrument. Moreover increasing dowry levels can be explained through increased educational attainments brought about by modernization and government policies. The paper also discusses historical and narrative evidences in support of its main hypotheses. |
| Keywords: | 'Arranged' marriage, 'arranged' marriage and dowry, dowry inflation, dowry and education, dowry as a screening device, dowry as a signal of the quality of the groom |
| JEL: | J12 J16 D10 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:ind:igiwpp:2014-006&r=cta |