Information, Incentives, and Economic Mechanisms PDF Download

Author: Theodore Groves
Publisher: U of Minnesota Press
ISBN: 1452908044
Category : Business & Economics
Languages : en
Pages : 410

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Author: Chifeng Dai
Publisher:
ISBN:
Category :
Languages : en
Pages : 228

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Author: Matthew Robertson
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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In three distinct, yet interrelated, essays I examine the effects of asymmetric information and imperfect information on economic decision makers' incentives and behaviour. To do so I employ, and modify, the methodology of Bayesian games.In chapter one, I analyse an unconventional contest inspired by the real world.In this contest, players are ranked by a scoring rule based on both their realised performance and how close this performance is to a target set before the contest,which is private information. I elucidate and analyse the incentive properties of these rules then characterise the equilibrium behaviour of the players.In chapter two, I integrate aspects from adverse selection and moral hazard models to provide a unied theory of securitisation under asymmetric information.I show that introducing skin in the game increases signalling costs for originators who performed sufficient due-diligence yet still improves incentives by making high effort relatively more likely. I relax the conventional assumption of risk neutrality and show that risk-sharing concerns are sufficient for the aforementioned qualitative properties of equilibrium to hold. Finally, I demonstrate that, depending on the severity of the originator's preference for liquidity or need to share risk, each setting may be more conducive for signalling.In chapter three, I propose a simple and intuitive way to transform canonical signalling games with exogenous types into games in which the informed agent endogenously generates her private information through an unobservable costly effort decision. I provide portable results on the differentiability of action functions and existence of equilibrium. I then apply these results to classic models of security design and the job market to demonstrate the practical usefulness of endogenous effort. In particular, my approach in these applications lends theoretical support to stylised facts that cannot be derived from the standard signalling framework.

Author: Chen Lyu Ph.D.
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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In the first chapter, a recommendation platform sequentially collects information on a new product revealed from past consumer trials and uses it to better guide later consumers. Because consumers do not internalize the value of information they bring to others, their incentive for trying out the product can be socially insufficient. Given such a challenge, I study how the platform can maximize the total social surplus generated on it by designing its recommendation policy. In a model with binary product quality and general trial-generated signals, I show that the optimal design features a sequence of time-specific thresholds, which vary in a U-shaped pattern over the product's life. At any time, the platform should recommend the product if, based on its current belief, the probability of the product's quality being high is above the current threshold. My analysis also illustrates the potential usefulness of a Lagrangian duality approach for dynamic information design. The second chapter studies optimal information provision by a search goods seller. While the seller controls a consumer's pre-search information, he cannot control post-search information because the consumer will inevitably learn the product's match after search. A relaxed problem approach is developed to solve the optimal design, which accommodates both continuous value distributions and ex-ante heterogeneous consumers with privately known outside options. The optimal design is shown to crucially depend on the outside option value distribution, and can be implemented by a simple upper-censorship signal under certain regularity conditions. Several applications are provided, including comparing information designs of search goods and experience goods, and studying the effect of competition with a large number of sellers. The third chapter studies optimal disclosure regulation for entrepreneur public financing with a post-financing moral hazard problem. I show that partial disclosure can improve social welfare over full disclosure through reducing efficiency loss caused by the moral hazard problem. As a result, a properly designed partial disclosure rule would be optimal without assuming any disclosure cost. This remains true after allowing for endogenous entrepreneur types with adverse selection concerns. With (constrained) Bayesian persuasion tools, the optimal disclosure rule is fully characterized.

Author: Fredrik Andersson
Publisher:
ISBN:
Category : Information theory in economics
Languages : en
Pages : 136

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Author: Jakub Redlicki
Publisher:
ISBN:
Category : Microeconomics
Languages : en
Pages : 368

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Author: Aaron Finkle
Publisher:
ISBN:
Category : Actions and defenses
Languages : en
Pages : 96

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Author: Xiao Lin
Publisher:
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Category :
Languages : en
Pages : 0

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The dissertation comprises three papers in information economics that try to understand, respectively, how information is credibly disclosed, how information is robustly acquired, as well as how hard information is sold in the market by a third-party intermediary. The first chapter "Credible Persuasion," joint with Ce Liu, develops a new framework for understanding credibility considerations in Bayesian persuasion problems. We call a disclosure policy credible if the sender cannot profit from tampering with her messages while keeping the message distribution unchanged. We show that the credibility of a disclosure policy is equivalent to a cyclical monotonicity condition on its induced distribution over states and actions. We also characterize how credibility restricts the Sender's ability to persuade under different payoff structures. In particular, when the sender's payoff is state-independent, all disclosure policies are credible. We apply our results to the market for lemons, and show that no useful information can be credibly disclosed by the seller, even though a seller who can commit to her disclosure policy would perfectly reveal her private information to maximize profit. The second chapter "Robust Merging of Information," joint with Henrique de Oliveira and Yuhta Ishii, asks how people robustly combine different sources of information when the underlying correlation is unknown. Our main results characterize the strategies that are robust to possible hidden correlations. In particular, with two states and two actions, the robustly optimal strategy pays attention to a single information source, ignoring all others. More generally, the robustly optimal strategy may need to combine multiple information sources, but can be constructed quite simply by using a decomposition of the original problem into separate decision problems, each requiring attention to only one information source. An implication is that an information source generates value to the agent if and only if it is best for at least one of these decomposed problems. The third chapter "How to Sell Hard Information," joint with S. Nageeb Ali, Nima Haghpanah, and Ron Siegel, studies a setting where the seller of an asset has the option to buy hard information about the value of the asset from an intermediary. The seller can then disclose the acquired information before selling the asset in a competitive market. We study how the intermediary designs and sells hard information to robustly maximize her revenue across all equilibria. Even though the intermediary could use an accurate test that reveals the asset's value, we show that robust revenue maximization leads to a noisy test with a continuum of possible scores. In addition, the intermediary always charges the seller for disclosing the test score to the market, but not necessarily for running the test. This enables the intermediary to robustly appropriate a significant share of the surplus resulting from the asset sale.

Author: Wei Li
Publisher:
ISBN:
Category :
Languages : en
Pages : 148

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(Cont.) The third chapter models how people's improving ability to observe the state of the world interacts with their incentive to reveal their information truthfully. A principal makes a decision based on a sequence of reports from an agent with reputational concerns. Agents with privately known ability receive signals of different initial quality, as well as varying speed of quality improvement. Thus both the accuracy and the sequencing of the reports affect the principal's perception of the agent's ability. This paper has three main findings. First, in equilibrium, mind changes or inconsistent reports may be more valued by the market as a sign of talent and fast improvement, yet mediocre agents still repeat their early opinion more frequently because they have less relative confidence in their signal quality improvement. Second, sequential reporting can be superior to a final reporting system ...

Author: Joseph H. Carens
Publisher: Joseph H. Carens
ISBN: 0226092690
Category : Philosophy
Languages : en
Pages : 268

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The book argues that by relying on moral incentives it is possible, in principle, to separate the organizational advantages of the market from its distributional disadvantages. In theory, we can imagine a politico-economic system that distributes income equally (or on some other principle) but has all the efficiency characteristics of a capitalist market system. This shows that the market can provide an institutional mechanism for realizing ideals of distributive justice. The book provides a theoretical model of the system, identifying its requirements. It then offers arguments from empirical social science about why the model should work under appropriate conditions.