Abstract: This paper discusses the role of prices as signals of quality in a monopolistic two-sided asymmetric information model. The precision of the public information is made endogenous through revelation. If the market partial-pooling price is sufficiently responsive to information, improving the quality of private signals harms the consumer. Standardization decreases the value of private information to the consumer. It also decreases the precision of the public information for some parameter values.
Abstract: I analyze a repeated game using a two-sided asymmetric information oligopolistic model. A group of sellers compete for selling their good in the market each period. I assume that two exogenously given qualities, which are represented by sellers’ types, are offered in the market. Prices are fixed. Low quality sellers choose to either charge the lower market price or the higher price. We show that a more precise customers’ private information leads to less information revelation and a higher incidence of loss in equilibrium for some parameter values. Furthermore, we show that the seller's information revelation is non-decreasing in the level of market competition in equilibrium. We conclude that the more competitive a market is, the less precise the market prices may be as signals of quality for intermediate private information precisions.
Abstract: I analyze the imposition of a binding price ceiling in a two-sided asymmetric information monopolistic model. Equilibria involving consumers’ loss exist for all parameter values. A complete characterization of the equilibria is provided. I discuss the role of consumers’ private information on the equilibrium revelation, on the incidence of loss and on trade. I demonstrate that the equilibrium incidence of loss is non-monotonic in information. This result holds if and only if the price ceiling is above (below) the ex-ante expected valuation of the good when the consumer's information is private (public). Better information is not socially desirable if and only if the high-quality seller's reservation price is sufficiently high, the prior belief takes intermediate values and
the consumer's private signal is not too informative. The public disclosure of the buyer’s private information is efficient. However, the consumer loses from its disclosure if and only if the prior belief is very biased toward the low quality product or it is just biased and the information is very precise. Better information is now detrimental to the buyer if and only if the prior belief is biased toward the high quality product.
Abstract: We study a theoretical framework with quality uncertainty by both market parties. The information gap between consumers and traders is decreased as the information owned by the party with the least accurate private information gets more precise. The main purpose of the article is to investigate the relationship between the degree of relative information asymmetries, trade and welfare. We also study under which conditions the relative quality of private information is not the only parameter relevant to the model and the parties’ absolute information precisions also matter, and how they do matter.
Abstract: The aim of this paper is to explain the phenomenon of the sexual division of labor in a society which treats the sexes equally and that is characterized by heterogeneity and nonrandom matching. Premarital investments and heterogeneous aptitudes determine the individuals’ abilities at two tasks and hence, their desirability on the marriage market. I show that the sexual division of labor is an equilibrium outcome in large marriage markets if the fraction of males differ substantially from the fraction of females, or if the individuals have a high aptitude on average at the task the sex that is in majority is trained in. Furthermore, it constitutes an equilibrium outcome in all types of markets if every agent is guaranteed to have a high ability at performing at least one task as long as complete training in that task were to be received by the agent. Finally, the training-according-to-sex can help coordinate people efficiently in the choice of premarital investments in small markets, which are characterized by a high risk associated to mismatches in the population.
Abstract: A manager sets a standard on a noisy signal to either accept or reject a candidate who may or may not be qualified for the position. Wrong decisions, i.e., accepting unqualified candidates and rejecting qualified candidates are costly. Unqualified candidates may exert an effort in order to improve their signal distribution and, hence, increase their chances to meet the standard. We show that ex-post harsh and soft standards, in comparison to those that would be efficient ex post given the evidence, are ex-ante optimal when the standard and the level of effort of unqualified candidates are strategic complements and strategic substitutes, respectively.
Abstract: We test two incentives mechanisms that are based on nonlinear subsidy schemes that change the public good voluntary contribution game from a Prisoner’s Dilemma to a Stag Hunt game: (a) the Hybrid Lottery,a variation of a pari-mutuel lottery in which a nonlinear decreasing fraction of total gross contributions is rebated in the form of prizes, with two treatments exhibiting different degrees of endogenous risk (i.e., the possibility of failing to coordinate on the Pareto efficient equilibrium); and (b) the Relative Time Subsidy Scheme, in which rebates are a function of the relative time of contributions (a costless extra dimension which is useful in generating price-discrimination among participants since early contributors are rewarded heavily in relative terms). An exogenous risk originates from the variability in payoffs associated to the tournament. Different combinations of exogenous and endogenous risk levels are analyzed in six experimental treatments. Our main findings are that: (i) both mechanisms (a and b) are effective means of financing public good provision (both mechanisms out-perform a standard voluntary contribution mechanism); (ii) controlling for endogenous risk, offering rebates with no variability in payoffs (no exogenous risk) increases significantly performance. As a result, the Hybrid Lottery outclasses the Relative Time Subsidy Scheme mechanism in eliciting contributions; (iii) controlling for exogenous risk, the elimination of endogenous risk (contributing is made a weakly dominant strategy) does not significantly increase performance.
Abstract: A new mechanism to raise funds is proposed in this theoretical paper. The ``hybrid lottery" is a variation of a pari-mutuel lottery in which a nonlinear decreasing fraction of total gross contributions is rebated in the form of prizes. The negative externality exerted on the other players through further contributions to the public good is so powerful that the decrease in the prize amount increases the public good provision sufficiently enough as to overcompensate the higher private cost of contributing. This key feature of the hybrid lottery makes of it a superior mechanism to the fixed-prize lottery (analyzed by J. Morgan (RES, 2000)). If properly designed, contributing the social optimal level could be made a weakly dominant strategy for each agent and zero payments in form of rebates (null prize) made in equilibrium by the principal (i.e., the first best can be implemented).
Abstract: This is an experimental paper where we intend to compare three different types of lotteries (the Hybrid Lottery, the Fixed-Prize Lottery and the Pari-mutuel Lottery) and the all pay auction as fund-raising mechanisms and investigate which one performs better in different environments (characterized by different group sizes and marginal per capita returns on the public good) under complete information.
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