This paper presents an experiment on a coordination game with extrinsic random signals, in which we systematically vary the stochastic process generating these signals and measure how signals affect behavior. We find that sunspot equilibria emerge naturally if there are salient public signals....

We study a market in which k identical and indivisible objects are allocated using a uniform-price auction where n k bidders each demand one object. Before the auction, each bidder receives an informative but imperfect signal about the state of the world. The good that is auctioned is a...

For the procurement of complex goods the early exchange of information is important to avoid costly renegotiation. If the buyer can specify the main characteristics of possible design improvements in a complete contingent contract, a scoring auction implements the efficient allocation. If this...

The procurement of complex projects is often plagued by large cost overruns. One important reason for these additional costs are flaws in the initial design. If the project is procured with a price-only auction, sellers who spotted some of the flaws have no incentive to reveal them early. Each...

This paper shows that the possibility of collusion between an agent and a supervisor imposes no restrictions on the set of implementable social choice functions (SCF) and associated payoff vectors. Any SCF and any payoff profile that are implementable if the supervisor′s information was public...

This paper investigates the possibility that wealth (holdings of money) serves as a signal of ability to produce high quality products for agents who cannot directly observe the quality of the products. A producer's wealth may advertise past success in selling products to agents who knew the...

We develop a model of consulting (advising) where the role of the consultant is that she can reveal signals to her client which refine the client’s original private estimate of the profitability of a project. Importantly, only the client can observe or evaluate these signals, the consultant...

Unfavorable news are often delivered under the disguise of vagueness. Our theory-driven laboratory experiment investigates this strategic use of vagueness in voluntary disclosure and asks whether there is scope for policy to improve information transmission. We find that vagueness is profitably...

We model firms' quality disclosure and pricing in the presence of cursed consumers, who fail to be sufficiently skeptical about undisclosed quality. We show that cursed consumers are exploited in duopoly markets if firms are vertically differentiated, if there are few cursed consumers, and if...