|
on Contract Theory and Applications |
| By: | Lionel De Boisdeffre (Centre d'Economie de la Sorbonne & CATT - Université de Pau) |
| Abstract: | We consider a pure exchange financial economy, where rational agents, possibly asymmetrically informed, forecast prices privately with no model of how they are determined. Therefore, agents face both ‘exogenous uncertainty’ on the future state of nature, and ‘endogenous uncertainty’ on the future price. At a sequential equilibrium, all consumers expect the ‘true’ price as a possible outcome and elect optimal strategies at the first period, which clear on all markets ex post. The paper's purpose is twofold. First, it defines no-arbitrage prices, which comprise all equilibrium prices, and displays their revealing properties. Second, it shows under mild conditions, that a sequential equilibrium always exists in this model, whatever agents' prior beliefs or the financial structure. This outcome suggests that standard existence problems, which followed Hart [1975] and Radner [1979], stem from the national expectation and perfect foresight assumptions of the classical model |
| Keywords: | Sequential equilibrium; temporary equilibrium; perfect foresight; existence; rational expectations; financial markets; asymmetric information; arbitrage |
| JEL: | D52 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:15037&r=cta |
| By: | Minchuk, Yizhaq; Sela, Aner |
| Abstract: | We study a two-stage sequential search model with two agents who compete for one job. The agents arrive sequentially, each one in a different stage. The agents' abilities are private information and they are derived from heterogeneous distribution functions. In each stage the designer chooses an ability threshold. If an agent has a higher ability than the ability threshold in the stage in which he arrives, he gets the job and the search is over. We analyze the equilibrium ability thresholds imposed by the designer who wishes to maximize the ability of the agent who gets the job minus the search cost. We also investigate the ratio of the equilibrium ability thresholds as well as the optimal allocation of agents in both stages according to the agents' distributions of abilities. |
| Keywords: | asymmetric information; sequential search |
| JEL: | D11 D82 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10579&r=cta |
| By: | de Haas, R.T.A. (Tilburg University, Center For Economic Research); Bos, J.; Millone, Matteo |
| Abstract: | We exploit detailed data on approved and rejected small business loans to assess the impact of the introduction of a credit registry in Bosnia and Herzegovina. Our findings are threefold. First, mandatory information sharing tightens lending at the extensive margin as more applications are rejected, in particular in areas with strong credit market competition. These rejections are increasingly based on hard information—especially positive borrower information from the new registry—and less on soft information. Second, lending standards also tighten at the intensive margin: the registry leads to smaller, shorter and more expensive loans. Third, the tightening of lending along both margins improves loan quality. Default rates go down in particular in high competition areas and for first-time borrowers. This suggests that a reduction in adverse selection is an important channel through which information sharing affects loan quality. |
| Keywords: | information sharing; credit market competition; hazard models |
| JEL: | D04 D82 G21 G28 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:tiu:tiucen:2e27a9e9-2d06-48ea-ae43-5be37f62d314&r=cta |
| By: | Drew Fudenberg; Philipp Strack; Tomasz Strzalecki |
| Abstract: | We model the joint distribution of choice probabilities and decision times in binary choice tasks as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant cost per unit time for gathering information. In the resulting optimal policy, the agent?s choices are more likely to be correct when the agent chooses to decide quickly, provided that the agent?s prior beliefs are correct. For this reason it better matches the observed correlation between decision time and choice probability than does the classical drift-diffusion model, where the agent is uncertain which of two actions is best but knows the utility difference between them. |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:qsh:wpaper:254346&r=cta |
| By: | Anne-Sophie Hayek; Claudia Toma; Dominique Oberlé; Fabrizio Butera |
| Abstract: | We hypothesized that individual grading in group work, a widespread practice, hampers information sharing in cooperative problem solving. Experiment 1 showed that a condition in which members’ individual contribution was expected to be visible and graded, as in most graded work, led to less pooling of relevant, unshared information and more pooling of less-relevant, shared information than two control conditions where individual contribution was not graded, but either visible or not. Experiment 2 conceptually replicated this effect: Group members primed with grades pooled less of their unshared information, but more of their shared information, compared to group members primed with neutral concepts. Thus, grading can hinder cooperative work and impair information sharing in groups. |
| Keywords: | information sharing; grades; hidden profiles; cooperation; mixed-motives |
| Date: | 2015–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:sol:wpaper:2013/199362&r=cta |
| By: | Joel Sandonís Díez (Universidad de Alicante); Javier M. López Cuñat (Universidad de Alicante) |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2015-04&r=cta |
| By: | Fehrler, Sebastian (University of Konstanz); Hughes, Niall (University of Warwick) |
| Abstract: | We investigate the potential of transparency to influence committee decision-making. We present a model in which career concerned committee members receive private information of different type-dependent accuracy, deliberate and vote. We study three levels of transparency under which career concerns are predicted to affect behavior differently, and test the model's key predictions in a laboratory experiment. The model's predictions are largely borne out – transparency negatively affects information aggregation at the deliberation and voting stages, leading to sharply different committee error rates than under secrecy. This occurs despite subjects revealing more information under transparency than theory predicts. |
| Keywords: | committee decision-making, deliberation, transparency, career concerns, information aggregation, experiments, voting, strategic communication |
| JEL: | C92 D71 D83 |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp9027&r=cta |
| By: | Décamps, Jean-Paul; Villeneuve, Stéphane |
| Abstract: | We develop a bi-dimensional dynamic model of corporate cash management in which shareholders learn about a firm's profitability and weigh the costs and benefits of holding cash. We explicitly characterize the optimal payout policy. We explain how the evolution of the strength of shareholders' beliefs about profitability and changes in corporate cash management are intertwined. The model predicts that both cash target levels and target dividend payout ratios are increasing in profitability prospects. This yields novel insights into the relationship between profitability prospects, precautionary cash savings, dividend policy and the dynamics of firm value. |
| Date: | 2015–04 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:29280&r=cta |
| By: | Saurabh Bhargava; George Loewenstein; Justin Sydnor |
| Abstract: | The recent expansion of health-plan choice has been touted as increasing competition and enabling people to choose plans that fit their needs. This study provides new evidence challenging these proposed benefits of expanded health-insurance choice. We examine health-insurance decisions of employees at a large U.S. firm where a new plan menu included a large share of financially dominated options. This menu offers a unique litmus test for evaluating choice quality since standard risk preferences and beliefs about one’s health cannot rationalize enrollment into the dominated plans. We find that a majority of employees – and in particular, older workers, women, and low earners – chose dominated options, resulting in substantial excess spending. Most employees would have fared better had they instead been enrolled in the single actuarially-best plan. In follow-up hypothetical-choice experiments, we observe similar choices despite far simpler menus. We find these choices reflect a severe deficit in health insurance literacy and naïve considerations of health risk and price, rather than a sensible comparison of plan value. Our results challenge the standard practice of inferring risk attitudes and assessing welfare from insurance choices, and raise doubts whether recent health reforms will deliver their promised benefits. |
| JEL: | D82 D89 I11 I13 |
| Date: | 2015–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:21160&r=cta |
| By: | Uwe Jirjahn |
| Abstract: | Using German establishment data, this study finds that the share of blue-collar workers, an outdated production technology and a high-wage policy increase the probability that employers regard the threat of dismissal as a suitable incentive. A participatory HRM policy, the incidence of a works council and difficulties in filling vacancies decrease the probability. |
| Keywords: | Dismissal threat, efficiency wage, monitoring, cooperation, regulation |
| JEL: | J30 J50 J60 M50 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:trr:wpaper:201506&r=cta |