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on Contract Theory and Applications |
| By: | Yi-Chun Chen; Gaoji Hu; Xiangqian Yang |
| Abstract: | A principal who values an object allocates it to one or more agents. Agents learn private information (signals) from an information designer about the allocation payoff to the principal. Monetary transfer is not available but the principal can costly verify agents' private signals. The information designer can influence the agents' signal distributions, based upon which the principal maximizes the allocation surplus. An agent's utility is simply the probability of obtaining the good. With a single agent, we characterize (i) the agent-optimal information, (ii) the principal-worst information, and (iii) the principal-optimal information. Even though the objectives of the principal and the agent are not directly comparable, we find that any agent-optimal information is principal-worst. Moreover, there exists a robust mechanism that achieves the principal's payoff under (ii), which is therefore an optimal robust mechanism. Many of our results extend to the multiple-agent case; if not, we provide counterexamples. |
| Date: | 2022–10 |
| URL: | http://d.repec.org/n?u=RePEc:arx:papers:2210.16001&r=cta |
| By: | Caio Lorecchio (Universitat de Barcelona and BEAT) |
| Abstract: | A sequence of short-lived agents must choose which action to take under a fixed, but unknown, state of the world. Prior to the realization of the state, the long-lived principal designs and commits to a dynamic information policy to persuade agents toward his most preferred action. The principal's persuasion power is potentially limited by the existence of conditionally independent and identically distributed private signals for the agents as well as their ability to observe the history of past actions. I characterize the problem for the principal in terms of a dynamic belief manipulation mechanism and analyze its implications for social learning. For a class of private information structure - the log-concave class, I derive conditions under which the principal should encourage some social learning and when he should induce herd behavior from the start (single disclosure). I also show that social learning is less valuable to a more patient principal: as his discount factor converges to one, the value of any optimal policy converges to the value of the single disclosure policy. |
| Keywords: | Observational learning, Bayesian persuasion, dynamic information design. |
| JEL: | D82 D83 |
| Date: | 2022 |
| URL: | http://d.repec.org/n?u=RePEc:ewp:wpaper:434web&r=cta |
| By: | Charles M. Kahn (University of Illinois); Maarten R.C. van Oordt (Vrije Universiteit Amsterdam) |
| Abstract: | his paper studies the desirability of programmable payments where transfers are automatically executed conditional upon preset objective criteria. We do so by studying optimal payment arrangements in a framework that captures a wide range of economic relationships between two parties. Our framework stacks the cards in favor of programmable payments by considering an environment without legal recourse. The results show that the optimal payment arrangements for long-term economic relationships consist predominantly of simple direct payments. Direct payments increase the surplus by avoiding the liquidity cost of locking-up funds from the moment where the payer commits the funds in a programmable payment until the moment where the conditions are satisfied to release those funds to the payee. Programmable payments will be desirable, and may in fact be the only viable payment arrangement, in situations where economic relationships are of a short duration. Our results identifies a limit to the growth in the demand for payments as their cost decreases: While the number of feasible trading relationships will increase, existing trading relationships will optimally rely on fewer payments. |
| Keywords: | Bill Payments, Blockchain, CBDC, Smart Contracts, Payment Economics |
| JEL: | E40 E42 E58 |
| Date: | 2022–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20220076&r=cta |
| By: | Andrej Woerner (Ludwig Maximilian University of Munich); Sander Onderstal (University of Amsterdam); Arthur Schram (University of Amsterdam) |
| Abstract: | For reward-based crowdfunding, we introduce the strategy-proof Generalized Moulin-Shenker mechanism (GMS) and compare its performance to the prevailing All-Or-Nothing mechanism (AON). Theoretically, GMS outperforms AON in equilibrium profit and funding success. We test these predictions experimentally, distinguishing between a sealed-bid and a dynamic version of GMS. We find that the dynamic GMS outperforms the sealed-bid GMS. It performs better than AON when the producer aims at maximizing funding success. For crowdfunding in practice, this implies that the current standard of financing projects could be improved upon by implementing a crowdfunding mechanism that is similar to the dynamic GMS. |
| Keywords: | keywords |
| Date: | 2022–11–13 |
| URL: | http://d.repec.org/n?u=RePEc:tin:wpaper:20220084&r=cta |
| By: | Bruno Jullien (TSE-R - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, CNRS - Centre National de la Recherche Scientifique); Matthieu Bouvard (TSE-R - Toulouse School of Economics - UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, UT1 - Université Toulouse 1 Capitole - Université Fédérale Toulouse Midi-Pyrénées) |
| Abstract: | We study a cost-sharing mechanism where a content provider contributes to covering the costs incurred by a network operator when delivering content to consumers. The costshare not only boosts the content provider's incentives to moderate trac but also aects the price composition for consumers buying access and content. We show the overall eect on consumer welfare depends on the content provider's ability to monetize users. When that ability is high, introducing a cost-share can lead to lower overall prices and higher consumer welfare. We study the robustness of this result to long-term investments in cost reduction by the operator and to heterogeneity in consumers' taste for content. In extensions with multiple contents and multiple operators, contractual externalities arise that suggest a role for regulation. |
| Date: | 2022–10–28 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:hal-03832908&r=cta |