1,720,962 research outputs found
Coarse Information Leads to Less Effective Signaling
No full textThis study considers firms’ coarse information about a worker’s possible types in Spence’s (1973) job market signaling model. Using incentive compatibility constraints appropriate to coarse information, we derive perfect Bayesian equilibria, which are refined into a unique equilibrium by invoking an extension of Cho and Kreps’ (1987) Intuitive Criterion. In the unique refined equilibrium, a high-type worker may acquire a higher education level with a lower wage than in Spence’s (1973) model. This implies that education signaling may be less effective signal when firms have coarse information about a worker’s possible types compared to that in Spence (1973). © 2018, Korean Econometric Society. All rights reserved.11scopuskc
Patent Signaling of Startups Can Be Less Effective under Coarse Information
No full textA startup may have little track record and investors may not have the exact information
about an entrepreneur’s true success probability. To model this, we consider a patent
signaling model for startup financing where the entrepreneur signals his type by acquiring
patents at his own cost and investors have coarse information about the entrepreneur’s
true success probability. Rather than having the exact information about
each type’s true success probability, investors only perceive the ranges of the entrepreneur’s
possible success probabilities. Adopting perfect Bayesian equilibrium
(PBE) as a solution concept, we consider only pure-strategy separating and pooling
PBEs of the signaling game between the entrepreneur and investors. By invoking an
extension of Cho and Kreps’ (1987) Intuitive Criterion adapted to our model, we obtain
the unique least-cost perfect Bayesian equilibrium. In the refined equilibrium, as investors
consider a higher success probability of each type, it takes more equity share.
Furthermore, a high-type entrepreneur may get a smaller equity share despite of acquiring
a higher level of patent than in the benchmark where investors know the exact possible
success probabilites of the entrepreneur. This implies that coarse information faced
by investors may lead to less effective patent-signaling than in the benchmark.22Ykc
Strategic Delegation with Network Externality and Product Compatibility
No full textWe investigate the effects of network externality and product compatibility on strategic delegation under price competition in duopoly. We extend the Hoernig (2012) to the case in which product compatibility is endogenously determined and is built into network effects. When the spillover effect for network size depends on the rival’s choice of product compatibility, perfect compatibility is a dominant strategy for each manager. Thus, endogenizing product compatibility excludes the equilibrium of Hoernig (2012) who assumes no compatibility between products. In equilibrium, firm owners require their managers to be more aggressive than profit maximizer if network externality is sufficiently strong but not too strong.22kc
Stock-Based Compensation and Insider Trading with Liquidity Signal
No full textWe study a stock-based executive (CEO) compensation contract for the case where the insider receives a signal about the demand of liquidity traders in the stock market. The single-period model of Kyle (1985) is adopted for deriving the stock market equilibrium. Based on the equilibrium stock price, the optimal linear contract for executive compensation is obtained by applying a standard principal-agent model. Surprisingly, it is found that the firm’s liquidation value is not used in the optimal executive compensation contract in both our model and the benchmark model (where there is no signal about liquidity). We also make comparative statics for the equilibrium stock price and the optimal executive compensation contract with respect to exogenous parameters.22Nkc
Survival, Arbitrage, and Equilibrium with Financial Derivatives in Constrained Asset Markets
No full textPatent Signaling of Startups Can Be Less Effective under Coarse Information
No full textWe consider a patent signaling model for startup financing where an entrepreneur signals
his type by acquiring patents and investors have coarse information about the entrepreneur’s
true success probability. By invoking an extension of Cho and Kreps’ (1987) Intuitive Criterion
adapted to our model, we obtain the least-cost perfect Bayesian equilibrium, in which
a high-type entrepreneur may get a lower equity share despite of acquiring a higher level of
patent than in the benchmark where investors do not face coarse information. This implies
that coarse information faced by investors may lead to less effective patent-signaling than
in the benchmark.2
Market-Based Executive Compensation Contract under Endogenous Information Acquisition
No full textThe study investigates how a publicly traded firm’s liquidation value and stock price are
used in an executive compensation contract when information acquisition in the asset market
is endogenized. If the inside owner offers market-based compensation contract to the
risk-averse manager, the inside owner expects higher utility than when stock prices are excluded
from the contract. If information cost displays an intermediate value, changes in the
exogenous parameters generate the direct effect and the indirect effect via the information
market. Finally, we find that the market-based compensation contract contributes to the
increase of social welfare.
Essays on differential information economies
No full textIn the first essay, we analyze the necessary and sufficient conditions for coalitional Bayesian Nash implementation. A mechanism coalitionally implements a social choice set if any outcome of the social choice set can be achieved as a coalitional Bayesian Nash equilibrium of a mechanism and vice versa. We say that a social choice set is coalitionally implementable if there is a mechanism which coalitionally implements it. Our main theorem proves that a social choice set is coalitionally implementable if and only if it is individually rational, Pareto optimal, coalitional Bayesian incentive compatible, and satisfies a coalitional Bayesian monotonicity condition as well as a closure condition. As an application of our main result, we show that the private core and the private Shapley value of an economy with differential information are coalitionally implementable.In the second essay, we introduce several efficiency notions depending upon what kind of expected utility is used (ex ante, interim, ex post) and how agents share their information, i.e., whether they redistribute their initial endowments based on their own private information, common knowledge information, or pooled information. Moreover, we introduce several Bayesian incentive compatibility notions and identify several efficiency concepts which maintain (coalitional) Bayesian incentive compatibility.Made available in DSpace on 2011-05-07T13:17:08Z (GMT). No. of bitstreams: 2
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