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Gathering Information before Signing a Contract: Experimental Evidence

Hoppe, Eva I; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2009

A central insight of agency theory is that when a principal offers a contract to a privately informed agent, the … particular, we investigate settings with both exogenous and endogenous information structures. We find that theory is indeed a …

Persistent link: https://www.econbiz.de/10005789080

Contracting under Incomplete Information and Social Preferences: An Experimental Study

Hoppe, Eva I; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2013

cornerstone of contract theory. We have conducted an experiment with 720 participants to explore whether the theoretical insights … are reflected by the behavior of subjects in the laboratory and to what extent deviations from standard theory can be … agency theory is indeed useful to qualitatively predict how variations in the degree of uncertainty affect subjects' behavior …

Persistent link: https://www.econbiz.de/10011084433

Can Market Failure Cause Political Failure

Aney, Madhav; Ghatak, Maitreesh; Morelli, Massimo - C.E.P.R. Discussion Papers - 2011

We study how inefficiencies of market failure may be further amplified by political choices made by interest groups created in the inefficient market. We take an occupational choice framework, where agents are endowed heterogeneously with wealth and talent. In our model, market failure due to...

Persistent link: https://www.econbiz.de/10009246601

A Large-Market Rational Expectations Equilibrium Model

Vives, Xavier - C.E.P.R. Discussion Papers - 2011

This paper presents a market with asymmetric information where a privately revealing equilibrium obtains in a competitive framework and where incentives to acquire information are preserved. The equilibrium is efficient, and the paradoxes associated with fully revealing rational expectations...

Persistent link: https://www.econbiz.de/10009644035

Insurance Search and Switching Behavior

Bolhaar, Jonneke; Lindeboom, Maarten; van der Klaauw, Bas - C.E.P.R. Discussion Papers - 2010

This paper looks into the search behavior of consumers in the market for health insurance contracts. We consider the recent health insurance reform in The Netherlands, where a private-public mix of insurance provision was replaced by a system based on managed competition. Although all insurers...

Persistent link: https://www.econbiz.de/10008466330

Adverse Selection of Investment Projects and the Business Cycle

Reichlin, Pietro; Siconolfi, Paolo - C.E.P.R. Discussion Papers - 1997

In an economy where entrepreneurs with unequal ‘abilities’ face alternative investment projects, which differ in their degree of risk and productivity, we analyse the Nash equilibrium contracts arising from a banks-borrowers game in the context of asymmetric information. We show that, for a...

Persistent link: https://www.econbiz.de/10005666565

Insider Trading in Credit Derivatives

Acharya, Viral V; Johnson, Tim - C.E.P.R. Discussion Papers - 2005

Insider trading in the credit derivatives market has become a significant concern for regulators and participants. This paper attempts to quantify the problem. Using news reflected in the stock market as a benchmark for public information, we report evidence of significant incremental...

Persistent link: https://www.econbiz.de/10005666591

Optimal Contracting in Agency with Verifiable Ex Post Information

Kessler, Anke; Lülfesmann, Christoph; Schmitz, Patrick W - C.E.P.R. Discussion Papers - 2002

The Paper studies a straightforward adverse selection problem in which an informative but imperfect signal on the agent’s type becomes public ex post. The agent is protected by limited liability, which rules out unboundedly high penalties. Analysing the consequences of the additional...

Persistent link: https://www.econbiz.de/10005666621

Strategic Supply Function Competition with Private Information

Vives, Xavier - C.E.P.R. Discussion Papers - 2008

A finite number of sellers (n) compete in schedules to supply an elastic demand. The costs of the sellers have uncertain common and private value components and there is no exogenous noise in the system. A Bayesian supply function equilibrium is characterized; the equilibrium is privately...

Persistent link: https://www.econbiz.de/10005789071

Strategic Liquidity Supply and Security Design

Biais, Bruno; Mariotti, Thomas - C.E.P.R. Discussion Papers - 2002

We study how securities and trading mechanisms can be designed to mitigate the adverse impact of market imperfections on liquidity. Following De Marzo and Duffie (1999), we consider asset owners who seek to obtain liquidity by selling their claims on future cash-flows, on which they have private...

Persistent link: https://www.econbiz.de/10005789108

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