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Author: Alexander Rodivilov
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 109
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Book Description
My dissertation investigates optimal contracts for experimentation and a matching problem for the runway slot allocation. The first chapter of my dissertation examines the role of monitoring in experimentation where agents may observe success privately. In the benchmark model without monitoring, private observability of success is inconsequential as the agent never wants to delay announcing success. However, with monitoring of the agent's effort, private observability of success plays a role in choosing the optimal time for monitoring. When success is observed publicly, the optimal time for a principal to hire a monitor is at the start of the relationship. On the contrary, if the agent observes success privately, and the discount factor is high enough, monitoring is performed during the final period. The second chapter discusses optimal contracts for both experimentation and production. It can be optimal to pay a rent after failure and over experimentation can be optimal. Over production can occur in the exploitation phase. The third chapter considers a financially significant matching problem that emerges when inclement weather conditions strike an airport and runway slots must be reallocated.
Author: Alexander Rodivilov
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 109
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Book Description
My dissertation investigates optimal contracts for experimentation and a matching problem for the runway slot allocation. The first chapter of my dissertation examines the role of monitoring in experimentation where agents may observe success privately. In the benchmark model without monitoring, private observability of success is inconsequential as the agent never wants to delay announcing success. However, with monitoring of the agent's effort, private observability of success plays a role in choosing the optimal time for monitoring. When success is observed publicly, the optimal time for a principal to hire a monitor is at the start of the relationship. On the contrary, if the agent observes success privately, and the discount factor is high enough, monitoring is performed during the final period. The second chapter discusses optimal contracts for both experimentation and production. It can be optimal to pay a rent after failure and over experimentation can be optimal. Over production can occur in the exploitation phase. The third chapter considers a financially significant matching problem that emerges when inclement weather conditions strike an airport and runway slots must be reallocated.
Author: Weixin Chen (Researcher in microeconomic theory)
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This thesis consists of three papers in mechanism design. Chapter 1 is based on a paper of mine entitled "Quality Disclosure and Price Discrimination". Chapter 2 is based on "Penalty, Voting, and Collusion: a Common Agency Approach to Industrial Regulation and Political Power". Chapter 3 is based on "Partitional Information Revelation under Renegotiation". A key framework in mechanism design is screening: a principal who designs the contract induces agents with private information to select certain action(s) or bundle(s). Classical results are second-best distortion and Myerson ironing, which are derived when the agency involves a single task (or tasks independent across agents), an agent's information is privately known by himself, and there is full commitment. Chapter 1 considers incentivizing tasks that are related through a resource constraint. It studies the second-degree price discrimination when the supply quality follows some exogenous distribution, or more specifically, the design of information and pricing in a monopolistic market with product quality dispersion. The main message is that optimality requires a partial disclosure, and finer results on the allocation distortion depend on the heterogeneity of the buyers' preference. When such preference over assignment, i.e., quality distribution, has a uni-dimensional sufficient statistics in the quality space, the optimal distortion resembles Myerson's ironing and the optimal disclosure takes a partitional form. For more general preference, the optimal distortion departs from Myerson's result. Chapter 2 considers eliciting signals informative of the agent's private information from multiple sources. An interesting case is by considering a voting committee as the principal, where voting aggregates welfare-relevant information but faces corruptive incentives. The key insights are that the optimal rule is a binary verdict, resembling the principle of maximum deterrence, and the corruptive incentives typically push the optimal voting rule towards unanimity. Chapter 3 considers commitment with renegotiation: the counterparties can stick to the previously signed long-term contract or revise it with mutual consent. More specifically, it studies a long-term relationship between a seller and a buyer whose valuation (for a per-period service or a rental good) is private. In such a dynamic game, a new dimension of mechanism design, namely intertemporal type separation, arises as its induced belief-updating affects the rent extraction--efficiency tradeoff. The main message is that all PBE share the following property in the progressive screening process: at each history, the seller partitions the posterior support into countable intervals and offers a pooling contract to each of these intervals.
Author: Paula Cordero-Salas
Publisher:
ISBN:
Category :
Languages : en
Pages : 185
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Abstract: This dissertation applies relational contract theory to study the optimal incentive provision in situations when formal enforcement is too costly. Essay one considers a theoretical redistribution of bargaining power among business partners who trade repeatedly and that traditionally hold asymmetric power to negotiate contract terms. I included a bargaining process in a relational contracts model to analyze the economic consequences of shifting bargaining power under different enforcement regimes. The model predicts that as the agent's bargaining power increases, her incentive payments decrease even though her total compensation increases. Thus, efficiency wage contracts are more likely to be observed than contingent performance contracts in markets where agents have bargaining power. In contexts where enforcement is weak, a transfer of bargaining power can erode market efficiency in a dynamic relational contracting environment. If principals lose power coupled with the absence of enforcement, they may find the short-term gains of reneging on contractual promises more attractive than long-term benefits of faithfully executing a contract where they hold less power. As a consequence trade is more likely to break down. In this case, the agent is better off exercising less bargaining power than she has. Nonetheless, the model also predicts that such a collapse in good-faith execution of contracts in the light of such a power shift may not occur if some minimum payment for contract participation is enforced. Essay two provides experimental evidence on the theoretical predictions from essay one. I implement an experimental design that adjusts the bargaining power of sellers (agents) and the enforceability of the contract. I find that the vast majority of contracts take the form of efficiency wage contracts instead of contingent performance contracts when enforcement is partially incomplete and sellers have more bargaining power than buyers. The total contracted and actual compensation increase with the bargaining power of the sellers. However, sellers' profits are found to increase only if a part of the total payment is third-party enforceable. In this case, observed surplus and efficiency are lower than predictions. When no part of a contract is third-party enforceable, more cooperative relationships emerge, exhibiting higher quality provision resulting in higher surplus and efficiency while rent sharing is lower. The result is explained by the stronger buyer's deviation, confirming predictions from essay one. Essay three considers the application of relational contracts as a mechanism for the reduction of carbon emissions from deforestation and forest degradation (REDD). I compared the structure of the optimal relational contract in the presence of purely self-interested participants to the optimal structure when participants are motivated by other preferences including altruism, spite, inequality aversion or warm-glow concerns. I find that the optimal contract structure only differs from the benchmark case of self-interested agents when seller preferences are different than only profit-maximizing preferences or if either party is inequality averse. Moreover, I also show that the presence of other regarding preferences increases or decreases the likelihood of cooperation in the long-term relationship relative to the case of self-interested participants.
Author: Peter Benson
Publisher: Cambridge University Press
ISBN: 0521640385
Category : Law
Languages : en
Pages : 365
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Book Description
Essays addressing a variety of issues in the theory and practice of contract law.
Author: Aaron Luke Bodoh-Creed
Publisher:
ISBN:
Category :
Languages : en
Pages :
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The focus of this dissertation is the role of information in the determination of market outcomes. The first essay provides a novel framework for studying large market mechanisms with an application to the information aggregation properties of uniform price auctions. The second essay analyzes a model of mood and associative memory and shows that this bias could explain anomalous results in the behavioral finance and organizational behavior literatures. The third and final essay analyzes ambiguity aversion and how it affects outcomes in general mechanisms. The first essay, "Mean Field Approximation of Large Games, " provides a general framework for approximating the equilibria of games with many participants using analytically tractable nonatomic limit games. We prove that if the game is continuous, then the set of equilibria is upper hemicontinuous in the number of agents. This implies that we can use equilibrium strategies of the limit game as an approximation of the equilibrium actions of the agents in the large finite game. We argue that this continuity property implies that generic large, continuous markets are almost competitive in the limit. We use our framework to analyze multi-unit demand uniform price auctions with both a common value component and bidders who value successive units as complements. We show that these auctions fully reveal the state of the world asymptotically and result in ex post efficient allocations with arbitrarily high probability in the asymptotic limit. As a second application, we provide a framework for approximating large stochastic games using dynamic competitive equilibria with applications to macroeconomics, industrial organization, engineering and computer science. The second essay, "Mood and Associative Memory, " examines the biases in memory caused by an agent's affective state. Within the psychology literature, it is a well established fact that decision makers in a positive emotional state are optimistic about the odds of positive random events and agents in a negative emotional state are pessimistic. By building a mathematical model firmly grounded on psychological primitives, we develop a behavioral decision theory framework that can be utilized in a wide range of microeconomic models. We apply our model to study employee morale and clarify a severely conflicted literature on morale within the Organizational Behavior literature. We also show that biases in memory are a potential explanation for a wide range of asset pricing anomalies such as excess volatility, short run underreaction and long run overreaction to news, and the influence of non-fundamental events. Our model provides a tool for policy makers to analyze the effects of biases in memory on the response of agents to firms, markets, and government policies and can be used to identify situations in which either public or private intervention may be required to ameliorate the effects of the agents' errors in judgment. The third and final essay, "Ambiguous Beliefs and Mechanism Design, " explores the effects of ambiguity aversion, also known as Knightian Uncertainty, on mechanism design theory. Knightian uncertainty refers to risk within the economy that is not characterized by a stochastic process commonly known to the agents. Compelling psychological data, such as the classical Ellsberg Paradox, have shown that agents reveal a strong aversion to Knightian Uncertainty above and beyond the risk aversion considered in neoclassical microeconomic theory. Policy makers ought to be especially concerned about the effects of ambiguity aversion, neglected in traditional studies of mechanism and market design, in situations where the agents are unfamiliar with the mechanism and the economic environment the mechanism creates. We unify the Multiple Prior Expected Utility (MEU) model of ambiguity aversion with the tools of contract theory to provide a general framework to analyze the effects of ambiguity aversion in market settings and use these tools to assess the effect of ambiguity aversion on auctions and bargaining problems. We show that the first and second price auction cannot be ranked when the agents are ambiguity averse, derive the optimal auction format, and study the effects of ambiguity on auction entry. We also prove that ambiguity aversion can be efficiency enhancing in ex ante budget balanced mechanisms and revenue enhancing in ex post efficient bargaining mechanisms.
Author:
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Author: Eva I. Hoppe-Fischer
Publisher: Springer
ISBN: 3658241330
Category : Business & Economics
Languages : en
Pages : 211
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Contract theory, which emphasizes the importance of unverifiable actions and private information, has been a highly active field of research in microeconomics in the last decades. This thesis is divided into two parts. Part I consists of three chapters that study contract-theoretic models which are motivated by the classic procurement problem of a principal who wants an agent to deliver a certain good or service. In such models it is typically assumed that decision makers are interested in their own monetary payoffs only. Moreover, they have unlimited cognitive abilities and behave in a perfectly rational way. Yet, in practice people often do not behave this way. While empirical research is very difficult in contract theory, laboratory experiments have recently turned out to be an important source of data. In Part II, three experimental studies are presented that investigate contract-theoretic problems brought up in Part I.
Author: Ritesh Jain (Ph. D. in economics)
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 119
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In Chapter 2 titled "Symmetric Mechanism Design," (Jointly with Yaron Azrieli) we study the extent to which regulators can guarantee fair outcomes by a policy requiring mechanisms to treat agents symmetrically. This is an exercise in mechanism design. Our main result is a characterization of the class of social choice functions that can be implemented under this constraint. In many environments, extremely discriminatory social choice functions can be implemented by symmetric mechanisms, but there are also cases in which symmetry is binding. Our characterization is based on a `revelation principle' type of result, where we show that a social choice function can be symmetrically implemented if and only if a particular kind of (indirect) symmetric mechanism implements it. We illustrate the result in environments of voting with private values, voting with a common value, and assignment of indivisible goods.
Author: Hsin-Yu Tseng
Publisher:
ISBN:
Category : Health insurance
Languages : en
Pages : 262
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Author: Kyoungwon Rhee
Publisher:
ISBN:
Category :
Languages : en
Pages : 144
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