A. Liberman, Christopher A. Neilson, L. Opazo, S. Zimmerman
This paper studies the equilibrium effects of information restrictions in credit markets using a large-scale natural experiment. In 2012, Chilean credit bureaus were forced to stop reporting defaults for 2.8 million individuals (21% of the adult population). Using panel data on the universe of bank borrowers in Chile combined with the deleted registry information, we implement machine learning techniques to measure changes in the predictions lenders can make about default rates following deletion. Deletion lowers (raises) predicted default the most for poorer defaulters (non-defaulters) with limited borrowing histories. Using a difference-in-differences design, we show that individuals exposed to increases in predicted default reduce borrowing by 6.4% following deletion, while those exposed to decreases raise borrowing by 11.8%. In aggregate, deletion reduces borrowing by 3.5%. Taking the difference-in-difference estimates as inputs into a model of borrowing under adverse selection, we find that deletion reduces surplus under a variety of assumptions about lenders' pricing strategies.
{"title":"The Equilibrium Effects of Information Deletion: Evidence from Consumer Credit Markets","authors":"A. Liberman, Christopher A. Neilson, L. Opazo, S. Zimmerman","doi":"10.2139/ssrn.3258697","DOIUrl":"https://doi.org/10.2139/ssrn.3258697","url":null,"abstract":"This paper studies the equilibrium effects of information restrictions in credit markets using a large-scale natural experiment. In 2012, Chilean credit bureaus were forced to stop reporting defaults for 2.8 million individuals (21% of the adult population). Using panel data on the universe of bank borrowers in Chile combined with the deleted registry information, we implement machine learning techniques to measure changes in the predictions lenders can make about default rates following deletion. Deletion lowers (raises) predicted default the most for poorer defaulters (non-defaulters) with limited borrowing histories. Using a difference-in-differences design, we show that individuals exposed to increases in predicted default reduce borrowing by 6.4% following deletion, while those exposed to decreases raise borrowing by 11.8%. In aggregate, deletion reduces borrowing by 3.5%. Taking the difference-in-difference estimates as inputs into a model of borrowing under adverse selection, we find that deletion reduces surplus under a variety of assumptions about lenders' pricing strategies.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"56 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-09-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125119765","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}
We study a principal–agent model. The parties are symmetrically informed at first; the principal then designs the process by which the agent learns his type and, concurrently, the screening mechanism. Because the agent can opt out of the mechanism ex post, it must leave him with nonnegative rents ex post. We characterize the profit‐maximizing mechanism. In that optimal mechanism, learning proceeds in continuous time and, at each moment, the agent learns a lower bound on his type. For each type, there is one of two possible outcomes: the type is allocated the efficient quantity or is left with zero rents ex post.
{"title":"Information Design and Sequential Screening with Ex Post Participation Constraint","authors":"T. Heumann","doi":"10.2139/ssrn.3403275","DOIUrl":"https://doi.org/10.2139/ssrn.3403275","url":null,"abstract":"We study a principal–agent model. The parties are symmetrically informed at first; the principal then designs the process by which the agent learns his type and, concurrently, the screening mechanism. Because the agent can opt out of the mechanism ex post, it must leave him with nonnegative rents ex post. We characterize the profit‐maximizing mechanism. In that optimal mechanism, learning proceeds in continuous time and, at each moment, the agent learns a lower bound on his type. For each type, there is one of two possible outcomes: the type is allocated the efficient quantity or is left with zero rents ex post.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"89 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-08-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126227052","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}
This paper examines the question whether information is contained in forecasts from DSGE models beyond that contained in lagged values, which are extensively used in the models. Four sets of forecasts are examined. The results are encouraging for DSGE forecasts of real GDP. The results suggest that there is information in the DSGE forecasts not contained in forecasts based only on lagged values and that there is no information in the lagged-value forecasts not contained in the DSGE forecasts. The opposite is true for forecasts of the GDP deflator.
{"title":"Information Content of DSGE Forecasts","authors":"R. Fair","doi":"10.2139/ssrn.3228762","DOIUrl":"https://doi.org/10.2139/ssrn.3228762","url":null,"abstract":"This paper examines the question whether information is contained in forecasts from DSGE models beyond that contained in lagged values, which are extensively used in the models. Four sets of forecasts are examined. The results are encouraging for DSGE forecasts of real GDP. The results suggest that there is information in the DSGE forecasts not contained in forecasts based only on lagged values and that there is no information in the lagged-value forecasts not contained in the DSGE forecasts. The opposite is true for forecasts of the GDP deflator.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"18 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-08-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117149030","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}
Exam scores are often the main criteria of students’ priorities in college admissions. Depending on the timing of preference submissions relative to the knowledge of scores, students have various degrees of information about their own priorities. I study three widely used timings under the Boston mechanism. The results suggest first, timing that is associated with less information about priorities yields higher expected utility ex-ante; Second, timing with full information about priorities generates full sorting on scores, whereas timing with less information reduces the tension of such sorting.
{"title":"Timing of Preference Submissions Under the Boston Mechanism","authors":"Li Chen","doi":"10.2139/ssrn.3017156","DOIUrl":"https://doi.org/10.2139/ssrn.3017156","url":null,"abstract":"Exam scores are often the main criteria of students’ priorities in college admissions. Depending on the timing of preference submissions relative to the knowledge of scores, students have various degrees of information about their own priorities. I study three widely used timings under the Boston mechanism. The results suggest first, timing that is associated with less information about priorities yields higher expected utility ex-ante; Second, timing with full information about priorities generates full sorting on scores, whereas timing with less information reduces the tension of such sorting.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"74 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127347496","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}
Abstract We analyze a model of competition in Bayesian persuasion in which multiple symmetric senders vie for the patronage of a receiver by disclosing information about their respective proposal qualities. We show that a symmetric equilibrium exists and is unique. We then show that as the number of senders increases, each sender discloses information more aggressively, and full disclosure by each sender arises in the limit of infinitely many senders.
{"title":"Competitive Information Disclosure by Multiple Senders","authors":"Pak Hung Au, Keiichi Kawai","doi":"10.2139/ssrn.2728091","DOIUrl":"https://doi.org/10.2139/ssrn.2728091","url":null,"abstract":"Abstract We analyze a model of competition in Bayesian persuasion in which multiple symmetric senders vie for the patronage of a receiver by disclosing information about their respective proposal qualities. We show that a symmetric equilibrium exists and is unique. We then show that as the number of senders increases, each sender discloses information more aggressively, and full disclosure by each sender arises in the limit of infinitely many senders.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"70 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121954822","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}
Abstract We study a model where one information sender communicates with many information recipients. The sender provides a public good in the form of an announcement. The announcement involves a set of answers to some potential queries (e.g., frequently asked questions (FAQs), product manuals, and user guides). The sender also provides a private good in the form of a private communication service. Information recipients learn about their heterogeneous query and the size of the FAQs. The recipients then decide whether or not to consult the FAQs, and, when necessary, purchase the private communication service, the price of which is ex-post determined by the number of people who purchase the service at the same time. It is difficult to achieve efficiency in this model, when the queries are not observable by the sender. The inefficiency can be summarized by an under-provided public good (i.e., FAQs) and an overpriced private good (i.e., private communication) in equilibrium. A marginal change in the private communication capacity does not affect the equilibrium size of the FAQs.
{"title":"A Theory of FAQs: Public Announcements with Rational Ignorance","authors":"Duk Gyoo Kim, Yeochang Yoon","doi":"10.2139/ssrn.3118097","DOIUrl":"https://doi.org/10.2139/ssrn.3118097","url":null,"abstract":"Abstract We study a model where one information sender communicates with many information recipients. The sender provides a public good in the form of an announcement. The announcement involves a set of answers to some potential queries (e.g., frequently asked questions (FAQs), product manuals, and user guides). The sender also provides a private good in the form of a private communication service. Information recipients learn about their heterogeneous query and the size of the FAQs. The recipients then decide whether or not to consult the FAQs, and, when necessary, purchase the private communication service, the price of which is ex-post determined by the number of people who purchase the service at the same time. It is difficult to achieve efficiency in this model, when the queries are not observable by the sender. The inefficiency can be summarized by an under-provided public good (i.e., FAQs) and an overpriced private good (i.e., private communication) in equilibrium. A marginal change in the private communication capacity does not affect the equilibrium size of the FAQs.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"9 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-07-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"114741567","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}
This paper investigates the strategies of a data broker in selling information to one or to two competing firms that can price-discriminate consumers. The data broker can strategically choose any segment of the consumer demand (information structure) to sell to firms that implement third-degree price-discrimination. We show that the equilibrium profits of the data broker are maximized when (1) information identifies the consumers with the highest willingness to pay; (2) consumers with a low willingness to pay remain unidentified; (3) the data broker sells two symmetrical information structures. The data broker therefore strategically sells partial information on consumers in order to soften competition between firms. Extending the baseline model, we prove that these results hold under first-degree price-discrimination.
{"title":"Selling Strategic Information in Digital Competitive Markets","authors":"D. Bounie, Antoine Dubus, P. Waelbroeck","doi":"10.2139/ssrn.3180277","DOIUrl":"https://doi.org/10.2139/ssrn.3180277","url":null,"abstract":"This paper investigates the strategies of a data broker in selling information to one or to two competing firms that can price-discriminate consumers. The data broker can strategically choose any segment of the consumer demand (information structure) to sell to firms that implement third-degree price-discrimination. We show that the equilibrium profits of the data broker are maximized when (1) information identifies the consumers with the highest willingness to pay; (2) consumers with a low willingness to pay remain unidentified; (3) the data broker sells two symmetrical information structures. The data broker therefore strategically sells partial information on consumers in order to soften competition between firms. Extending the baseline model, we prove that these results hold under first-degree price-discrimination.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"27 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-06-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129394739","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}
Online crowdfunding markets facilitate the unbundling of resources, expertise, and signals – the three important components of a transactions. This study examines whether an early investor’s expertise per se, serves as a credible signal of quality for the other investors in the crowd and if so under what conditions. Using a data set on individual investments in a crowdfunding market for mobile applications, we find that early investors with expertise – particularly, investors with app development expertise and investors with investment expertise - have a disproportionate influence on later investors in the crowd. Investors with app development expertise who are likely to have a better knowledge of the product are found to be more influential for “concept apps” (apps in the pre-release stage), while investors with investment expertise with a better knowledge of market performance are found to be more influential for “live apps” (apps that are already being sold in the market). Our findings show that the majority of investors in this market – the crowd – although inexperienced, are rather sophisticated in their ability to identify and exploit nuanced differences in the underlying expertise of the early investors – informational signals that align well with the specific nature of uncertainty they face. In examining the ex-post performance of apps, we find that apps with “expert” investors are positively associated with ex-post app sales. We also find that these “experts” have the ability to select better apps to invest in, making their investment choices credible signals of quality for the crowd. Contrary to popular perceptions of crowdfunding markets as means for democratizing expertise and as substitutes for traditional expert-dominated mechanisms, our findings indicate that the participation by individuals with expertise can be beneficial to these markets.
{"title":"The 'Experts' in the Crowd: The Role of Experienced Investors in a Crowdfunding Market","authors":"Keongtae Kim, S. Viswanathan","doi":"10.2139/ssrn.2258243","DOIUrl":"https://doi.org/10.2139/ssrn.2258243","url":null,"abstract":"Online crowdfunding markets facilitate the unbundling of resources, expertise, and signals – the three important components of a transactions. This study examines whether an early investor’s expertise per se, serves as a credible signal of quality for the other investors in the crowd and if so under what conditions. Using a data set on individual investments in a crowdfunding market for mobile applications, we find that early investors with expertise – particularly, investors with app development expertise and investors with investment expertise - have a disproportionate influence on later investors in the crowd. Investors with app development expertise who are likely to have a better knowledge of the product are found to be more influential for “concept apps” (apps in the pre-release stage), while investors with investment expertise with a better knowledge of market performance are found to be more influential for “live apps” (apps that are already being sold in the market). Our findings show that the majority of investors in this market – the crowd – although inexperienced, are rather sophisticated in their ability to identify and exploit nuanced differences in the underlying expertise of the early investors – informational signals that align well with the specific nature of uncertainty they face. In examining the ex-post performance of apps, we find that apps with “expert” investors are positively associated with ex-post app sales. We also find that these “experts” have the ability to select better apps to invest in, making their investment choices credible signals of quality for the crowd. Contrary to popular perceptions of crowdfunding markets as means for democratizing expertise and as substitutes for traditional expert-dominated mechanisms, our findings indicate that the participation by individuals with expertise can be beneficial to these markets.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"AES-1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-26","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126481657","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}
Pub Date : 2018-05-20DOI: 10.1016/J.INSMATHECO.2018.06.006
Ajay Subramanian, Jinjing Wang
{"title":"Reinsurance Versus Securitization of Catastrophe Risk","authors":"Ajay Subramanian, Jinjing Wang","doi":"10.1016/J.INSMATHECO.2018.06.006","DOIUrl":"https://doi.org/10.1016/J.INSMATHECO.2018.06.006","url":null,"abstract":"","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"601 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"119751280","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}
S. Barbieri, D. Kovenock, David A. Malueg, I. Topolyan
We study group competition with a single public good prize, perfectly discriminating contest success function, and the weakest-link effort technology, in which the marginal cost of effort for each player is private information. We focus on pure strategy Bayes-Nash equilibria and show that teammates always employ symmetric strategies. Various degrees of coordination are possible, ranging from all cost types coordinating on a single effort level to every cost type choosing a distinct effort level. Such coordination may not enhance welfare. If groups are symmetric except for group size, players in the smaller group bid more aggressively than those in the larger group, but when the asymmetries are along multiple dimensions, no clear-cut conclusions can be made with respect to the effects of group sizes and valuations. As an additional avenue for cooperation, we investigate incentives to share private information via cheap talk among teammates, who then coordinate on the effort level most preferred by the player with the largest cost. A single group sharing information does better. But when players within-group cooperate in this fashion, all within-group gains are lost to increased competition between groups.
{"title":"Group Contests with Private Information and the 'Weakest Link'","authors":"S. Barbieri, D. Kovenock, David A. Malueg, I. Topolyan","doi":"10.2139/ssrn.3179725","DOIUrl":"https://doi.org/10.2139/ssrn.3179725","url":null,"abstract":"We study group competition with a single public good prize, perfectly discriminating contest success function, and the weakest-link effort technology, in which the marginal cost of effort for each player is private information. We focus on pure strategy Bayes-Nash equilibria and show that teammates always employ symmetric strategies. Various degrees of coordination are possible, ranging from all cost types coordinating on a single effort level to every cost type choosing a distinct effort level. Such coordination may not enhance welfare. If groups are symmetric except for group size, players in the smaller group bid more aggressively than those in the larger group, but when the asymmetries are along multiple dimensions, no clear-cut conclusions can be made with respect to the effects of group sizes and valuations. As an additional avenue for cooperation, we investigate incentives to share private information via cheap talk among teammates, who then coordinate on the effort level most preferred by the player with the largest cost. A single group sharing information does better. But when players within-group cooperate in this fashion, all within-group gains are lost to increased competition between groups.","PeriodicalId":232169,"journal":{"name":"ERN: Other Microeconomics: Asymmetric & Private Information (Topic)","volume":"223 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-05-16","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116064820","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}
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