This paper examines the role that agents play in fraudulent activities in the housing market in China. Using a representative sample of housing transactions in Beijing from 2014 to 2017, we investigate the existence and magnitudes of the so-called Yin-Yang contracts, and explore whether and how agents affect tax evasion. First, we find that agents can learn the monitoring distance of local tax authorities through their cumulative experiences and strategically report prices as close as possible to the internal guideline prices set by local authorities. At the same time, agents' involvement in tax evasion is significantly affected by the tax evasion behaviors of their peers. Second, we show that agents’ work experiences contribute to creating more severe Yin-Yang contracts in the presence of loosening financial constraints, and vice versa. Our results suggest that agents' expertise becomes more important for buyers who face a trade-off between reporting higher to borrow more from the bank and reporting lower to evade taxes.
{"title":"The Role of Agents in Fraudulent Activities: Evidence from the Housing Market in China","authors":"Sumit Agarwal, Weida Kuang, Long Wang, Zoe Yang","doi":"10.2139/ssrn.3507754","DOIUrl":"https://doi.org/10.2139/ssrn.3507754","url":null,"abstract":"This paper examines the role that agents play in fraudulent activities in the housing market in China. Using a representative sample of housing transactions in Beijing from 2014 to 2017, we investigate the existence and magnitudes of the so-called Yin-Yang contracts, and explore whether and how agents affect tax evasion. First, we find that agents can learn the monitoring distance of local tax authorities through their cumulative experiences and strategically report prices as close as possible to the internal guideline prices set by local authorities. At the same time, agents' involvement in tax evasion is significantly affected by the tax evasion behaviors of their peers. Second, we show that agents’ work experiences contribute to creating more severe Yin-Yang contracts in the presence of loosening financial constraints, and vice versa. Our results suggest that agents' expertise becomes more important for buyers who face a trade-off between reporting higher to borrow more from the bank and reporting lower to evade taxes.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130063905","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
When the central bank has information that can help the private sector predict the future better, should it communicate such information to the public? In a simple New Keynesian model, such Delphic forward guidance unambiguously reduces ex ante welfare by increasing the variability of inflation and the output gap. In other words, it cannot persuade private agents to change their actions in favor of the central bank. In more elaborate DSGE models, the welfare effect may be either positive or negative, depending on the type of shock as well as distortions and frictions. These results suggest that improving welfare by Delphic forward guidance may be particularly difficult under model uncertainty.
{"title":"Private News and Monetary Policy - Forward Guidance As Bayesian Persuasion","authors":"Ippei Fujiwara, Yuichiro Waki","doi":"10.2139/ssrn.3507183","DOIUrl":"https://doi.org/10.2139/ssrn.3507183","url":null,"abstract":"When the central bank has information that can help the private sector predict the future better, should it communicate such information to the public? In a simple New Keynesian model, such Delphic forward guidance unambiguously reduces ex ante welfare by increasing the variability of inflation and the output gap. In other words, it cannot persuade private agents to change their actions in favor of the central bank. In more elaborate DSGE models, the welfare effect may be either positive or negative, depending on the type of shock as well as distortions and frictions. These results suggest that improving welfare by Delphic forward guidance may be particularly difficult under model uncertainty.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"8 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-12-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114730552","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
An active M&A market incentivizes many firms to specialize in innovation with the anticipation of being acquired in the future. Acquiring innovation, however, is subject to information frictions, because acquirers often find it challenging to assess the value and impact of innovative targets. Using data on US public firms, we document that (i) there is a robust inverted-U relationship between firm innovation and takeover exposure, (ii) equity usage increases with target innovation, and (iii) deal completion rate drops as targets become more innovative. Motivated by these findings, we develop and estimate a model of acquiring innovation under information frictions. We find that acquirers' due diligence reveals only 33% of private information possessed by targets, and eliminating the remaining information friction can increase firms' expected gains from the M&A market by 38%. This efficiency gain is achieved through a higher probability of mergers and a larger value creation in completed transactions. We also find that a more efficient M&A market encourages more firm innovation, resulting in a higher average firm growth rate.
{"title":"Acquiring Innovation Under Information Frictions","authors":"M. Celik, X. Tian, Wenyu Wang","doi":"10.2139/ssrn.3475698","DOIUrl":"https://doi.org/10.2139/ssrn.3475698","url":null,"abstract":"An active M&A market incentivizes many firms to specialize in innovation with the anticipation of being acquired in the future. Acquiring innovation, however, is subject to information frictions, because acquirers often find it challenging to assess the value and impact of innovative targets. Using data on US public firms, we document that (i) there is a robust inverted-U relationship between firm innovation and takeover exposure, (ii) equity usage increases with target innovation, and (iii) deal completion rate drops as targets become more innovative. Motivated by these findings, we develop and estimate a model of acquiring innovation under information frictions. We find that acquirers' due diligence reveals only 33% of private information possessed by targets, and eliminating the remaining information friction can increase firms' expected gains from the M&A market by 38%. This efficiency gain is achieved through a higher probability of mergers and a larger value creation in completed transactions. We also find that a more efficient M&A market encourages more firm innovation, resulting in a higher average firm growth rate.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"120 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-25","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131592509","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Public markets are transparent institutions, where disclosure is mandatory and order flow observable. We show that transparency can lead to insufficient information acquisition and inefficient investment. Our model links a firm's preference for public markets to the quality of disclosure metrics. When short-term signals diverge from the long-run value of a project, entrepreneurs prefer opaque private markets where investors can bargain over the costs of acquiring information. Imperfect communication is a mechanism by which mandatory disclosure may destroy value, leading firms to remain private.
{"title":"Going Public or Staying Private: The Cost of Mandated Transparency","authors":"Yifeng Guo, Joshua Mitts","doi":"10.2139/ssrn.3465919","DOIUrl":"https://doi.org/10.2139/ssrn.3465919","url":null,"abstract":"Public markets are transparent institutions, where disclosure is mandatory and order flow observable. We show that transparency can lead to insufficient information acquisition and inefficient investment. Our model links a firm's preference for public markets to the quality of disclosure metrics. When short-term signals diverge from the long-run value of a project, entrepreneurs prefer opaque private markets where investors can bargain over the costs of acquiring information. Imperfect communication is a mechanism by which mandatory disclosure may destroy value, leading firms to remain private.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"34 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128242930","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Over the past decade, non–Paris Club creditors, notably China, have become an important source of financing for low- and middle-income countries. In contrast with typical sovereign debt, these lending arrangements are not public, and other creditors have no information about their magnitude. We transform the traditional sovereign debt and default model to quantitatively study incomplete information arrangements and find they greatly reduce traditional/Paris Club creditors’ debt sustainability. Disclosure of nontraditional debt would imply significant welfare gains for the recipient countries but would reduce its sustainability. We discuss the implications of nontraditional lending on standard assumptions of sovereign debt models in particular defaulting costs.
{"title":"Undisclosed Debt Sustainability","authors":"Laura Alfaro, Fabio Kanczuk","doi":"10.3386/w26347","DOIUrl":"https://doi.org/10.3386/w26347","url":null,"abstract":"Over the past decade, non–Paris Club creditors, notably China, have become an important source of financing for low- and middle-income countries. In contrast with typical sovereign debt, these lending arrangements are not public, and other creditors have no information about their magnitude. We transform the traditional sovereign debt and default model to quantitatively study incomplete information arrangements and find they greatly reduce traditional/Paris Club creditors’ debt sustainability. Disclosure of nontraditional debt would imply significant welfare gains for the recipient countries but would reduce its sustainability. We discuss the implications of nontraditional lending on standard assumptions of sovereign debt models in particular defaulting costs.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"718 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122994156","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Employees are often assigned tasks comprising two distinct phases: in the first phase, ideas are generated; in the second phase, the best idea is implemented. Furthermore, it is common for supervisors to give feedback to their employees during this process. This paper studies the supervisor’s problem. Supervisors face the following tradeoff: while honest feedback encourages employees to discard bad ideas, it can also be demotivating. We obtain three main results. First, the supervisor only gives honest feedback to agents who believe in their ability to succeed. Second, receiving honest feedback leads such high self-opinion agents to exert more effort. Third, overconfidence is potentially welfare improving.
{"title":"Feedback on Ideas","authors":"Zeinab Aboutalebi, Ayush Pant","doi":"10.2139/ssrn.3422097","DOIUrl":"https://doi.org/10.2139/ssrn.3422097","url":null,"abstract":"Employees are often assigned tasks comprising two distinct phases: in the first phase, ideas are generated; in the second phase, the best idea is implemented. Furthermore, it is common for supervisors to give feedback to their employees during this process. This paper studies the supervisor’s problem. Supervisors face the following tradeoff: while honest feedback encourages employees to discard bad ideas, it can also be demotivating. We obtain three main results. First, the supervisor only gives honest feedback to agents who believe in their ability to succeed. Second, receiving honest feedback leads such high self-opinion agents to exert more effort. Third, overconfidence is potentially welfare improving.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"2008 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127312769","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A merchant dynamically sets prices in each time period when selling a product over a finite time horizon with a given initial inventory. The merchant utilizes new external information that is observed at the beginning of each time period, whereas the demand function—how the external information and the price jointly impact that single-period demand distribution—is unknown. The merchant’s decision, setting price dynamically, serves dual roles to learn the unknown demand function and to balance inventory with an ultimate objective to maximize the expected cumulative revenue. The main objective of this work is to characterize and provide a full spectrum of relations between the order of optimal expected cumulative revenue achieved in three decision-making regimes: the merchant’s online decision-making regime, a clairvoyant regime with complete knowledge about the demand function, and a deterministic regime in which all the uncertainties are relaxed to the expectations. In the analyses, we derive an unconstrained representation of the optimality gap for generic constrained online learning problems, which renders tractable lower and upper bounds for the expected revenue achieved by dynamic pricing algorithms between different regimes. This analytical framework also inspires the design of two dual-based dynamic pricing algorithms for the clairvoyant and online regimes. This paper was accepted by Hamid Nazerzadeh, data science. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4963 .
{"title":"Dynamic Pricing with External Information and Inventory Constraint","authors":"Xiaocheng Li, Zeyu Zheng","doi":"10.2139/ssrn.3458662","DOIUrl":"https://doi.org/10.2139/ssrn.3458662","url":null,"abstract":"A merchant dynamically sets prices in each time period when selling a product over a finite time horizon with a given initial inventory. The merchant utilizes new external information that is observed at the beginning of each time period, whereas the demand function—how the external information and the price jointly impact that single-period demand distribution—is unknown. The merchant’s decision, setting price dynamically, serves dual roles to learn the unknown demand function and to balance inventory with an ultimate objective to maximize the expected cumulative revenue. The main objective of this work is to characterize and provide a full spectrum of relations between the order of optimal expected cumulative revenue achieved in three decision-making regimes: the merchant’s online decision-making regime, a clairvoyant regime with complete knowledge about the demand function, and a deterministic regime in which all the uncertainties are relaxed to the expectations. In the analyses, we derive an unconstrained representation of the optimality gap for generic constrained online learning problems, which renders tractable lower and upper bounds for the expected revenue achieved by dynamic pricing algorithms between different regimes. This analytical framework also inspires the design of two dual-based dynamic pricing algorithms for the clairvoyant and online regimes. This paper was accepted by Hamid Nazerzadeh, data science. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2023.4963 .","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"6 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-23","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131126318","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
If experiment A is Blackwell more informative than experiment B, it is always possible that A and B are induced by signals A′ and B′ such that A′ is a refinement of B′, that is, A′ entails observing B′ plus some additional information. We first show that this result does not extend beyond pairs of experiments: There exist collections of experiments that cannot be induced by a collection of signals so that whenever two experiments are Blackwell ordered, the associated signals are refinement ordered. In other words, sometimes it is impossible for more informed agents to know everything that less informed agents know. More broadly, define an information hierarchy to be a partially ordered set that ranks experiments in terms of informativeness. Is it the case that for any choice of experiments indexed on the hierarchy such that higher experiments are Blackwell more informative, there are signals that induce these experiments with higher signals being refinements of lower signals? We show that the answer is affirmative if and only if the undirected graph of the information hierarchy is a forest.
{"title":"Information Hierarchies","authors":"Benjamin Brooks, A. Frankel, Emir Kamenica","doi":"10.2139/ssrn.3448870","DOIUrl":"https://doi.org/10.2139/ssrn.3448870","url":null,"abstract":"If experiment \u0000 A is Blackwell more informative than experiment \u0000 B, it is always possible that \u0000 A and \u0000 B are induced by signals A′ and B′ such that A′ is a refinement of B′, that is, A′ entails observing B′ plus some additional information. We first show that this result does not extend beyond pairs of experiments: There exist collections of experiments that cannot be induced by a collection of signals so that whenever two experiments are Blackwell ordered, the associated signals are refinement ordered. In other words, sometimes it is impossible for more informed agents to know everything that less informed agents know. More broadly, define an \u0000 information hierarchy to be a partially ordered set that ranks experiments in terms of informativeness. Is it the case that for any choice of experiments indexed on the hierarchy such that higher experiments are Blackwell more informative, there are signals that induce these experiments with higher signals being refinements of lower signals? We show that the answer is affirmative if and only if the undirected graph of the information hierarchy is a forest.\u0000","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"24 3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-09-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116644604","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
When agents are presented with information from others, they might ignore their own information and follow the “wisdom of the crowds”. As first noted by Bikhchandani et al. (1992) and Banerjee (1992), this can harm overall learning in a society. In this paper, I consider the strategic decisions of agents in gathering this public information when there is a constant marginal cost to observing other agents. Costs have an ambiguous effect on the likelihood that society herds on the correct action. In some cases, there is an intermediate range of costs that are high enough that some agents will choose not to imitate others but low enough that later agents will then aggregate this additional information.
{"title":"Herding with Costs to Observation","authors":"Stephen M. Nei","doi":"10.2139/ssrn.3433717","DOIUrl":"https://doi.org/10.2139/ssrn.3433717","url":null,"abstract":"When agents are presented with information from others, they might ignore their own information and follow the “wisdom of the crowds”. As first noted by Bikhchandani et al. (1992) and Banerjee (1992), this can harm overall learning in a society. In this paper, I consider the strategic decisions of agents in gathering this public information when there is a constant marginal cost to observing other agents. Costs have an ambiguous effect on the likelihood that society herds on the correct action. In some cases, there is an intermediate range of costs that are high enough that some agents will choose not to imitate others but low enough that later agents will then aggregate this additional information.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"98 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-08-31","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124062579","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Gaetano Antinolfi, Francesca Carapella, Francesco Carli
This paper adopts a mechanism design approach to study optimal clearing arrangements for bilateral financial contracts in which an assessment of counterparty risk is crucial for efficiency. The economy is populated by two types of agents: a borrower and lender. The borrower is subject to limited commitment and holds private information about the severity of such lack of commitment. The lender can acquire information at a cost about the commitment of the borrower, which affects the assessment of counterparty risk. When truthful revelation by the borrower is not incentive compatible, the mechanism designer optimally trades off the value of information about the lack of commitment of the borrower with the cost of incentivizing the lender to acquire such information. Central clearing of these financial contracts through a central counterparty (CCP) allows lenders to mutualize their counterparty risks, but this insurance may weaken incentives to acquire and reveal informatio n about such risks. If information acquisition is incentive compatible, then lenders choose central clearing. If it is not, they may prefer bilateral clearing to prevent strategic default by borrowers and to economize on costly collateral. Central clearing is analyzed under different institutional features observed in financial markets, which place different restrictions on the contract space in the mechanism design problem. The interaction between the costly information acquisition and the limited commitment friction differs significantly in each clearing arrangement and in each set of restrictions. This results in novel lessons about the desirability of central versus bilateral clearing depending on traders' characteristics and the institutional features defining the operation of the CCP.
{"title":"Transparency and Collateral: The Design of CCPs' Loss Allocation Rules","authors":"Gaetano Antinolfi, Francesca Carapella, Francesco Carli","doi":"10.17016/feds.2019.058","DOIUrl":"https://doi.org/10.17016/feds.2019.058","url":null,"abstract":"This paper adopts a mechanism design approach to study optimal clearing arrangements for bilateral financial contracts in which an assessment of counterparty risk is crucial for efficiency. The economy is populated by two types of agents: a borrower and lender. The borrower is subject to limited commitment and holds private information about the severity of such lack of commitment. The lender can acquire information at a cost about the commitment of the borrower, which affects the assessment of counterparty risk. When truthful revelation by the borrower is not incentive compatible, the mechanism designer optimally trades off the value of information about the lack of commitment of the borrower with the cost of incentivizing the lender to acquire such information. Central clearing of these financial contracts through a central counterparty (CCP) allows lenders to mutualize their counterparty risks, but this insurance may weaken incentives to acquire and reveal informatio n about such risks. If information acquisition is incentive compatible, then lenders choose central clearing. If it is not, they may prefer bilateral clearing to prevent strategic default by borrowers and to economize on costly collateral. Central clearing is analyzed under different institutional features observed in financial markets, which place different restrictions on the contract space in the mechanism design problem. The interaction between the costly information acquisition and the limited commitment friction differs significantly in each clearing arrangement and in each set of restrictions. This results in novel lessons about the desirability of central versus bilateral clearing depending on traders' characteristics and the institutional features defining the operation of the CCP.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-08-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134643610","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：