I study how a firm manages its reputation by both investing in the quality of its product and censoring, hiding bad news from consumers. Without censorship, the threat of bad news provides strong incentives for investment. I highlight discontinuities in the firm’s maximum equilibrium payoff that censorship creates. When censorship is inexpensive, the firm never invests and a patient firm’s payoffs approach the lowest possible. In contrast, when censorship is moderately expensive, there exist equilibria where product quality is persistently high and payoffs approach the first-best, which can exceed the maximum equilibrium payoff if it was unable to censor. (JEL D21, D82, D83, G31, G32, L15)
{"title":"Censorship and Reputation","authors":"Daniel N. Hauser","doi":"10.1257/mic.20200266","DOIUrl":"https://doi.org/10.1257/mic.20200266","url":null,"abstract":"I study how a firm manages its reputation by both investing in the quality of its product and censoring, hiding bad news from consumers. Without censorship, the threat of bad news provides strong incentives for investment. I highlight discontinuities in the firm’s maximum equilibrium payoff that censorship creates. When censorship is inexpensive, the firm never invests and a patient firm’s payoffs approach the lowest possible. In contrast, when censorship is moderately expensive, there exist equilibria where product quality is persistently high and payoffs approach the first-best, which can exceed the maximum equilibrium payoff if it was unable to censor. (JEL D21, D82, D83, G31, G32, L15)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":"7 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136177748","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Principals seek to trade with homogeneous agents by posting incentive contracts, which direct their search. Search and moral hazard interact in equilibrium. If using transfers to compensate agents failing to contract, the equilibrium allocation is always constrained-welfare-optimal in contrast to the one-to-one principal-agent problem. Search frictions thus correct that inefficiency because search requires internalizing the utility of agents. Incentives are weaker than in bilateral contracting, and agents enjoy more efficient risk sharing. With a constraint on transfers the allocation may become inefficient; principal competition results in overinsurance of the agents, too little effort in equilibrium, and excessive entry by principals. (JEL D82, D83, D86)
{"title":"Moral Hazard and Efficiency in a Frictional Market","authors":"G. Roger, B. Julien","doi":"10.1257/mic.20200378","DOIUrl":"https://doi.org/10.1257/mic.20200378","url":null,"abstract":"Principals seek to trade with homogeneous agents by posting incentive contracts, which direct their search. Search and moral hazard interact in equilibrium. If using transfers to compensate agents failing to contract, the equilibrium allocation is always constrained-welfare-optimal in contrast to the one-to-one principal-agent problem. Search frictions thus correct that inefficiency because search requires internalizing the utility of agents. Incentives are weaker than in bilateral contracting, and agents enjoy more efficient risk sharing. With a constraint on transfers the allocation may become inefficient; principal competition results in overinsurance of the agents, too little effort in equilibrium, and excessive entry by principals. (JEL D82, D83, D86)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.4,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45754856","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We quantify how switching costs and limited awareness affect consumer inertia in liberalized retail electricity markets by developing and estimating a structural demand model using a novel dataset on electricity contract choices in Belgium. Our data allow us to disentangle different sources of inertia by using a rich combination of macromoments and micromoments. We find that consumers perceive contracts as differentiated and both limited awareness and switching costs hinder efficient choices. Our counterfactuals reveal substantial welfare gains from alleviating both frictions, in particular switching costs, and that a well-regulated monopoly can generate similar consumer surplus as the current deregulated market. (JEL D12, D83, L13, L43, L94, L98)
{"title":"Alert the Inert? Switching Costs and Limited Awareness in Retail Electricity Markets","authors":"Luisa Dressler, Stefan Weiergraeber","doi":"10.1257/mic.20190163","DOIUrl":"https://doi.org/10.1257/mic.20190163","url":null,"abstract":"We quantify how switching costs and limited awareness affect consumer inertia in liberalized retail electricity markets by developing and estimating a structural demand model using a novel dataset on electricity contract choices in Belgium. Our data allow us to disentangle different sources of inertia by using a rich combination of macromoments and micromoments. We find that consumers perceive contracts as differentiated and both limited awareness and switching costs hinder efficient choices. Our counterfactuals reveal substantial welfare gains from alleviating both frictions, in particular switching costs, and that a well-regulated monopoly can generate similar consumer surplus as the current deregulated market. (JEL D12, D83, L13, L43, L94, L98)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.4,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45284926","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Economists have long been puzzled by event-ticket underpricing: underpricing reduces revenue for the performer and encourages socially wasteful rent-seeking by ticket brokers. What about using an auction? This paper studies the introduction of auctions into this market by Ticketmaster in the mid-2000s. By combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that Ticketmaster’s auctions “worked”: they substantially improved price discovery, roughly doubled performer revenues, and, on average, nearly eliminated the potential arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions failed to take off. (JEL D44, D47, L82)
{"title":"Primary-Market Auctions for Event Tickets: Eliminating the Rents of “Bob the Broker”?","authors":"Aditya Bhave, Eric Budish","doi":"10.1257/mic.20180230","DOIUrl":"https://doi.org/10.1257/mic.20180230","url":null,"abstract":"Economists have long been puzzled by event-ticket underpricing: underpricing reduces revenue for the performer and encourages socially wasteful rent-seeking by ticket brokers. What about using an auction? This paper studies the introduction of auctions into this market by Ticketmaster in the mid-2000s. By combining primary-market auction data from Ticketmaster with secondary-market resale value data from eBay, we show that Ticketmaster’s auctions “worked”: they substantially improved price discovery, roughly doubled performer revenues, and, on average, nearly eliminated the potential arbitrage profits associated with underpriced tickets. We conclude by discussing why, nevertheless, the auctions failed to take off. (JEL D44, D47, L82)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":"21 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"136019485","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We compare contrarian to conformist advice, a contrarian expert being one whose preference bias is against the decision-maker’s prior optimal decision. Optimality of an expert depends on characteristics of prior information and learning. If either the expert is fully informed or fine information can be acquired cheaply, then for symmetric distributions F of the state, a conformist (contrarian) is superior if F is single peaked (bimodal). If only coarse information can be acquired, then a contrarian acquires more on average and hence is superior. If information is verifiable, a contrarian has less incentive to hide unfavorable evidence and again is superior. (JEL D72, D82, D83, G34, H71, I12, L94)
{"title":"When Is a Contrarian Adviser Optimal?","authors":"R. Evans, Sönje Reiche","doi":"10.1257/mic.20200204","DOIUrl":"https://doi.org/10.1257/mic.20200204","url":null,"abstract":"We compare contrarian to conformist advice, a contrarian expert being one whose preference bias is against the decision-maker’s prior optimal decision. Optimality of an expert depends on characteristics of prior information and learning. If either the expert is fully informed or fine information can be acquired cheaply, then for symmetric distributions F of the state, a conformist (contrarian) is superior if F is single peaked (bimodal). If only coarse information can be acquired, then a contrarian acquires more on average and hence is superior. If information is verifiable, a contrarian has less incentive to hide unfavorable evidence and again is superior. (JEL D72, D82, D83, G34, H71, I12, L94)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.4,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"49106160","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We characterize the optimal misbehavior by bidding rings or an auctioneer in the ascending English auction with common values. We also show, in an extended game, that in equilibrium potential members join and truthfully reveal their signals. Under a separability assumption, behavior does not change if nonring bidders are informed about the ring’s existence. In general, misbehavior in dynamic settings is more profitable than in outcome-equivalent static settings. However, under a stronger separability assumption, the ring can do no better in the dynamic English format than in the outcome-equivalent, static Sophi format. (JEL D44, D82)
{"title":"Misbehavior in Common Value Auctions: Bidding Rings and Shills","authors":"Dan Levin, J. Peck","doi":"10.1257/mic.20200447","DOIUrl":"https://doi.org/10.1257/mic.20200447","url":null,"abstract":"We characterize the optimal misbehavior by bidding rings or an auctioneer in the ascending English auction with common values. We also show, in an extended game, that in equilibrium potential members join and truthfully reveal their signals. Under a separability assumption, behavior does not change if nonring bidders are informed about the ring’s existence. In general, misbehavior in dynamic settings is more profitable than in outcome-equivalent static settings. However, under a stronger separability assumption, the ring can do no better in the dynamic English format than in the outcome-equivalent, static Sophi format. (JEL D44, D82)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.4,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"47330592","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In perfectly discriminating contests with private information, low-ability contestants prefer to appear strong, while high-ability contestants prefer to appear weak. In a two-stage contest, this leads to a unique symmetric equilibrium with partial pooling in the first stage. A higher output in the first contest leads to a weakly higher belief about the contestant’s ability entering the second contest. We characterize this unique equilibrium when cost of effort is linear and show how the prize allocation and type distribution impact contestants’ expected output, payoffs, and the probability of surprise victories. (JEL D44, D82, D83)
{"title":"Two-Stage Contests with Private Information","authors":"Gregory Kubitz","doi":"10.1257/mic.20200071","DOIUrl":"https://doi.org/10.1257/mic.20200071","url":null,"abstract":"In perfectly discriminating contests with private information, low-ability contestants prefer to appear strong, while high-ability contestants prefer to appear weak. In a two-stage contest, this leads to a unique symmetric equilibrium with partial pooling in the first stage. A higher output in the first contest leads to a weakly higher belief about the contestant’s ability entering the second contest. We characterize this unique equilibrium when cost of effort is linear and show how the prize allocation and type distribution impact contestants’ expected output, payoffs, and the probability of surprise victories. (JEL D44, D82, D83)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.4,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"46540110","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Jasmina Arifovic, C. Hommes, Anita Kopányi-Peuker, I. Salle
We provide experimental evidence on coordination within large groups that could proxy the atomistic nature of real-world markets. We use a bank run game where the two pure-strategy equilibria can be ranked by payoff and risk dominance and a sequence of public announcements introduces stochastic sunspot equilibria. We find systematic group size effects that theory fails to predict. When the payoff-dominant strategy is risky enough, the behavior of small groups is uninformative of the behavior in large groups: unlike smaller groups of size ten, larger groups exclusively coordinate on the Pareto-inferior strategy and never coordinate on sunspots. (JEL C92, D83, D91, G21)
{"title":"Ten Isn’t Large! Group Size and Coordination in a Large-Scale Experiment","authors":"Jasmina Arifovic, C. Hommes, Anita Kopányi-Peuker, I. Salle","doi":"10.34989/SWP-2020-30","DOIUrl":"https://doi.org/10.34989/SWP-2020-30","url":null,"abstract":"We provide experimental evidence on coordination within large groups that could proxy the atomistic nature of real-world markets. We use a bank run game where the two pure-strategy equilibria can be ranked by payoff and risk dominance and a sequence of public announcements introduces stochastic sunspot equilibria. We find systematic group size effects that theory fails to predict. When the payoff-dominant strategy is risky enough, the behavior of small groups is uninformative of the behavior in large groups: unlike smaller groups of size ten, larger groups exclusively coordinate on the Pareto-inferior strategy and never coordinate on sunspots. (JEL C92, D83, D91, G21)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.4,"publicationDate":"2023-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45592558","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
A monopolistic firm observes a signal about the state of the world and then makes a take-it-or-leave-it offer to an uninformed consumer who has recourse to some outside option. We provide a geometric characterization of the firm’s information structure that maximizes the consumer’s surplus: the optimal regime partitions the space of payoff states into polyhedral cones with disjoint interiors. We interpret our results in terms of the maximization of the consumer’s “privacy rent.” We illustrate and motivate our approach through the example of the regulation of the privacy of medical information in monopolistic health insurance markets. (JEL D21, D42, D83, G22, I13)
{"title":"What Should a Firm Know? Protecting Consumers’ Privacy Rents","authors":"Daniel Bird, Z. Neeman","doi":"10.1257/mic.20200215","DOIUrl":"https://doi.org/10.1257/mic.20200215","url":null,"abstract":"A monopolistic firm observes a signal about the state of the world and then makes a take-it-or-leave-it offer to an uninformed consumer who has recourse to some outside option. We provide a geometric characterization of the firm’s information structure that maximizes the consumer’s surplus: the optimal regime partitions the space of payoff states into polyhedral cones with disjoint interiors. We interpret our results in terms of the maximization of the consumer’s “privacy rent.” We illustrate and motivate our approach through the example of the regulation of the privacy of medical information in monopolistic health insurance markets. (JEL D21, D42, D83, G22, I13)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.4,"publicationDate":"2022-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"45852125","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We develop a general framework for analyzing games where each player is a team and members of the same team all receive the same payoff. The framework combines noncooperative game theory with collective choice theory, and is developed for both strategic form and extensive form games. We introduce the concept of team equilibrium and identify conditions under which it converges to Nash equilibrium with large teams. We identify conditions on collective choice rules such that team decisions are stochastically optimal: the probability the team chooses an action is increasing in its equilibrium expected payoff. The theory is illustrated with some binary action games. (JEL C72, D71)
{"title":"Games Played by Teams of Players","authors":"Jeongbin Kim, T. Palfrey, Jeffrey R. Zeidel","doi":"10.1257/mic.20200391","DOIUrl":"https://doi.org/10.1257/mic.20200391","url":null,"abstract":"We develop a general framework for analyzing games where each player is a team and members of the same team all receive the same payoff. The framework combines noncooperative game theory with collective choice theory, and is developed for both strategic form and extensive form games. We introduce the concept of team equilibrium and identify conditions under which it converges to Nash equilibrium with large teams. We identify conditions on collective choice rules such that team decisions are stochastically optimal: the probability the team chooses an action is increasing in its equilibrium expected payoff. The theory is illustrated with some binary action games. (JEL C72, D71)","PeriodicalId":47467,"journal":{"name":"American Economic Journal-Microeconomics","volume":" ","pages":""},"PeriodicalIF":2.4,"publicationDate":"2022-11-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"44408957","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":2,"RegionCategory":"经济学","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：