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Credence goods, costly diagnosis, and subjective evaluation

Bester, Helmut; Dahm, Matthias - 2014

We study contracting between a consumer and an expert. The expert can invest in diagnosis to obtain a noisy signal about whether a low-cost service is sufficient or whether a high-cost treatment is required to solve the consumerś problem. This involves moral hazard because diagnosis effort and...

Persistent link: https://www.econbiz.de/10010429934

Signaling versus auditing

Bester, Helmut; Lang, Matthias; Li, Jianpei - 2021

We analyze a competitive labor market in which workers signal their productivities through education à la Spence (1973), and firms have the option of auditing to learn workers’ productivities. Audits are costly and non–contractible. We characterize the trade–offs between signaling by...

Persistent link: https://www.econbiz.de/10012648090

Signaling versus costly information acquisition

Bester, Helmut; Lang, Matthias; Li, Jianpei - 2018

In Spence's (1973) signaling by education model and in many of its extensions, firms can only infer workers' productivities from their education choices. In reality, firms also use sophisticated pre-employment auditing to learn workers' productivities. We characterize the trade-offs between...

Persistent link: https://www.econbiz.de/10011878774

Persuasion against self-control problems

Wangenheim, Jonas von - 2018

I derive a social planner's optimal information design in an environment with quasi-hyperbolic discounting consumers without commitment. Consumption induces instantaneous utility, but unknown delayed cost. Consumers may or may not acquire additional costless information on the cost parameter....

Persistent link: https://www.econbiz.de/10011902726

Deterministic versus stochastic contracts in a dynamic principal-agent model

Mettral, Thomas - 2018

I show that deterministic dynamic contracts between a principal and an agent are always at least as profitable to the principal as stochastic ones, if the so-called first-order approach in dynamic mechanism design is satisfied. The principal commits, while the agent's type evolution follows a...

Persistent link: https://www.econbiz.de/10011901976

Safe but fragile : information acquisition, sponsor support and shadow bank runs

König, Philipp Johann; Pothier, David - 2018

This paper proposes a theory of shadow bank runs in the presence of sponsor liquidity support. We show that liquidity lines designed to insulate shadow banks from market and funding liquidity risk can be destabilizing, as they provide them with incentives to acquire private information about...

Persistent link: https://www.econbiz.de/10011855308

Social norms and market behavior : evidence from a large population sample

Riehm, Tobias; Fugger, Nicolas; Gillen, Philippe; … - 2021

We test the importance of social norms for market interactions associated with negative real-world externalities in a large-scale experiment with a heterogeneous population sample from Germany. The majority of experimental participants refuses to trade, thus behaving in a moral way. Our data...

Persistent link: https://www.econbiz.de/10012431941

Subjective evaluation versus public information

Bester, Helmut; Münster, Johannes - 2013

This paper studies a principal-agent relation in which the principal's private information about the agent's effort … choice is more accurate than a noisy public performance measure. For some contingencies the optimal contract has to specify … the loss from termination is small. Under an optimal contract the agent's wage may depend only on the principal's report …

Persistent link: https://www.econbiz.de/10009752336

Exit options and the allocation of authority

Bester, Helmut; Krähmer, Daniel - 2013

entitled to prematurely terminate the relation after the other party's choice. We show that under such a contract it is always …. Indeed, the first-best efficient solution can be obtained by such a contract. …

Persistent link: https://www.econbiz.de/10009752337

Public good overprovision by a manipulative provider

Celik, Gorkem; Shin, Dongsoo; Strausz, Roland - 2020

We study contracting between a public good provider and users with private valuations of the good. We show that, once the provider extracts the users' private information, she benefits from manipulating the collective information received from all users when communicating with them. We derive...

Persistent link: https://www.econbiz.de/10012255849

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