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on Contract Theory and Applications |
| By: | Jellal, Mohamed |
| Abstract: | In this paper, we consider a model that suggests that the theory of exchange with asymmetric information seems suitable to provide a possible explanation model of occurrence and duration of civil wars. We show that although civil conflicts are not Pareto optimal ex post they may be Pareto optimal ex ante, in the way that every alternative leaves either the government or the rebellion worse off in some contingency which cannot be ruled out on the basis of the information which is common to both sides. Therefore, the critical determinants of the occurrence of civil conflicts appear to be arising as consequences of asymmetries in the amount of information about some relevant variables available to bargaining parties. Indeed, the civil war commitment is used as device of division of rents accruing to rebellion and the ruling government elite. |
| Keywords: | Civil Wars, Transfers, Conflict Duration, Asymmetric Information, Rents, Mechanism Design |
| JEL: | C7 D74 D82 D86 |
| Date: | 2014–07–26 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57600&r=cta |
| By: | Fan, Cuihong; Jun, Byoung Heon; Wolfstetter, Elmar G. |
| Abstract: | The literature on license auctions for process innovations in oligopoly assumed that the auctioneer reveals the winning bid and stressed that this gives firms an incentive to signal strength through their bids, to the benefit of the innovator. In the present paper we examine whether revealing the winning bid is optimal. We consider three disclosure rules: full, partial, and no disclosure of bids, which correspond to standard auctions. We show that more information disclosure increases the total surplus divided between firms and the innovator as well as social surplus. More disclosure also increases bidders’ payoff. However, no disclosure maximizes the innovator’s expected revenue. |
| Keywords: | Auctions; innovation; licensing; information sharing. |
| JEL: | D21 D43 D44 D45 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:trf:wpaper:467&r=cta |
| By: | Song, Jae Eun |
| Abstract: | This paper develops a model of a competitive search credit market under hidden information and limited commitment. Using the model, it provides a theoretical account that links time delays and costs in financial intermediation as well as lack of collateral to the distribution of credit supply and interest rate spreads. The link sheds light on and explains the possibility of pure credit rationing due to the credit frictions. This paper also demonstrates the possibility of contract dispersion among homogeneous borrowers. |
| Keywords: | credit frictions, competitive search, contract, market tightness |
| JEL: | D82 E43 E51 G21 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57515&r=cta |
| By: | Janna Ter Meer (University of Cologne) |
| Abstract: | This paper investigates whether working under competitive or cooperative incentives affects deception in a subsequent, unrelated task. I use a laboratory study with two stages. First, participants work under a piece rate, tournament or team incentive in a real effort task. The second part consists of a sender-receiver game where the sender can gain financially at the expense of the receiver by sending a deceptive message. I find that senders who worked under tournament incentives are less honest than those who worked under a piece rate. I find no increase in honesty for those who performed under team incentives relative to the piece rate. Interestingly, this only holds when participants are not informed about their relative performance during the work task. When such feedback is provided I find that relative performance affects honesty across all incentive conditions. In particular, honesty decreases as relative performance differences become small. |
| JEL: | M52 C92 D02 D03 |
| Date: | 2014–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:cgr:cgsser:05-04&r=cta |
| By: | Ke, Qiulin; McAllister, Patrick |
| Abstract: | The objective of the research is to investigate the relationship between financial reporting disclosure and the financial performance of European publicly traded real estate companies. Information risks and agency costs are key issues for investors. Agency costs arise when managers have incentives to pursue their own interests at the expense of investors. A lack of transparent financial information can result in greater information risk for investors who experience increased uncertainty about the true economic value of the firm creating potential adverse selection problems. Without sufficient controls and monitoring, investors will tend to pay the same prices for ‘lemons’ and ‘good’ companies. The topic of corporate governance has attracted major attention in the professional sphere and across different areas of academic research. In real estate sector, there is a body of work; most of them look at US REITS on the relationship between corporate governance and firm performance (e.g , Ghosh and Sirmans, 2001,and 2003; Feng, et al. 2005, Bauer, et. al. 2010; Bianco, et. al. 2007; Hartzell, et.al. 2008). In most of these studies, the researchers tended to focus on individual governance variables to find out which of the conventional corporate governance mechanisms, be it board size and independence, insider ownership, ownership concentration play a significant role in the governance structure of US REITS and the REITs performance and market value. Results have been mixed. In these studies, the financial disclosure transparency by REITs as one of corporate governance variables was not explicitly examined, though it is an important governance issue of a firm. In this study, we investigate whether enhanced level of financing reporting disclosure and transparency of European listed real estate companies will reduce the information asymmetry, minimise firm risk and enhance firm’s performance. The level of disclosure and transparency will be proxied by the winners of the EPRA’s best annual report survey conducted by Deloitte. To assess the linkages, a dynamic ordinary least squares model will be employed to test a range of factors that affect corporate disclosure transparency as a corporate governance variable and its impact on firm’s performance. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2014_44&r=cta |
| By: | Pei Kuang |
| Abstract: | The paper presents a model of housing and credit cycles featuring distorted beliefs and comovement and mutual reinforcement between house price expectations and price developments via credit expansion/contraction. Positive (negative) development in house price fuels optimism (pessimism) and credit expansion (contraction), which in turn boost (dampen) housing demand and house prices and reinforce agents' optimism (pessimism). Bayesian learning about house prices can endogenously generate self-reinforcing booms and busts in house prices and significantly strenthen the role of collateral constraints in aggregate fluctuations. The model can quantitatively account for the 2001-2008 U.S. boom-bust cycle in house prices and associated household debt and consumption dynamics. It also demonstrates that allowing for imperfect knowledge knowledge of agents, a higher leveraged economy is more prone to self-reinforcing fluctuations. |
| Keywords: | Boom Bust, Collateral Constraints, Learning, Leverage Housing |
| JEL: | D83 D84 E32 E44 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:bir:birmec:14-07&r=cta |
| By: | Joel M. David; Hugo A. Hopenhayn; Venky Venkateswaran |
| Abstract: | We propose a theory linking imperfect information to resource misallocation and hence to aggregate productivity and output. In our setup, firms look to a variety of noisy information sources when making input decisions. We devise a novel empirical strategy that uses a combination of firm-level production and stock market data to pin down the information structure in the economy. Even when only capital is chosen under imperfect information, applying this methodology to data from the US, China, and India reveals substantial losses in productivity and output due to the informational friction. Our estimates for these losses range from 7-10% for productivity and 10-14% for output in China and India, and are smaller, though still significant, in the US. Losses are substantially higher when labor decisions are also made under imperfect information. We find that firms turn primarily to internal sources for information; learning from financial markets contributes little, even in the US. |
| JEL: | E44 O11 O16 O47 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20340&r=cta |
| By: | Kopsch, Fredrik; Muyingo, Henry |
| Abstract: | Purpose - Recent evidence finds that monthly fees paid by owner-tenants in cooperative housing are kept artificially low in newly established cooperatively owned apartment complexes as compared to already established ones. This finding has been accredited to the lack of knowledge about future renovation needs of the building by their occupants, thus resulting in optimistic net present values of future costs and consequently in property management fees lower than they ought to be. However, the fact that the division of over-estimated and under-estimated fees is not close to unity points to the presence of some other underlying factor contributing to what is observed. One possible, and we argue, more credible explanation is that the tenant-owner agents of the cooperative who are involved in the tenure conversion process from rental ownership act strategically with the aim of profit maximizing for personal gain. As Swedish law requires that 70 percent of the households be in favor before a conversion can take place there is an incentive for the agents to strategically keep artificially low fees so as to acquire the 70 percent acceptance as lower fees will seem more beneficial to the uninformed occupant. The second incentive is a result of a conflict between short- and long-term interests. Some agents view their apartment mainly as a good where you intend to live for a long period of time, while others view it as an investment opportunity to be sold within a short period of time. If the driving forces behind the transfer of ownership are conceived out of short-term interests there will be an incentive to keep fees lower in order to attract a higher sales price in the immediate future. The aim of this paper is explore the existence of such strategic behavior in the market. Methodology – Quantitative analysis of sales data over a 10 year period as well as a case study of recent converted objects. Originality/value – Correctly understanding the underlying forces to this problem is important for a well-functioning market. New buyers are concerned with the monthly expenses. Artificially low fees lead to allocation inefficiencies in the market with tenants over-paying and thus buying the 'wrong' apartment. If this is due to lack of information, it might be warranted to educate those who take part in the transfer of ownership. If this is due to strategic behavior, it might be warranted with some sort of governmental intervention to protect buyers. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:arz:wpaper:eres2013_128&r=cta |
| By: | Paul Dolan; Matteo M. Galizzi |
| Abstract: | We conduct a controlled lab-field experiment to directly test the short-run spillover effects of one-off financial incentives in health. We consider how incentives affect effort in a physical activity task - and then how they spillover to subsequent eating behaviour. Compared to a control group, we find that low incentives increase effort and have little effect on eating behaviour. High incentives also induce more effort but lead to significantly more excess calories consumed. The key behavioural driver appears to be the level of satisfaction associated with the physical activity task, which 'licensed' highly paid subjects to indulge in more energy-dense food. |
| Keywords: | Incentives in health, spillover effects, licensing, hidden costs of incentives |
| JEL: | C91 C93 D03 I10 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1286&r=cta |