157 research outputs found
Self-confidence and survival
We consider the impact of history on the survival of a monopolist selling single units in discrete time periods, whose quality is learned slowly. If the seller learns her own quality at the same rate as customers, a sufficiently bad run of luck could induce her to stop selling. When she knows her quality, a good seller never stops selling. Furthermore, a seller with positive, though imperfect, information sells for the same number of periods whether her information is private or public. We further consider the robustness of the central result when the seller's opportunities for strategic behaviour are limited
Long term debt with hidden borrowing
We consider borrowers with the opportunity to raise funds from a competitive baking sector, that shares information about borrowers, and an alternative hidden lender. We highlight that the presence of the hidden lender restricts the contracts that can be obtained from the banking sector and that in equilibrium some borrowers obtain funds from both the banking sector and the (inefficient) hidden lender simultaneously. We further show that as the inefficiency of the hidden lender increases, total welfare decreases. By extending the model to examine a partially hidden lender, we further highlight the key role of information.Hidden Borrowing, Informal Lenders, Borrower Screening, Long Term Debt
Imperfect Competition and Committment
The degree of competition that a rm faces affects its ability to commit to good
behavior. However, the relationship need not be monotonic since competition affects
the pro ts when committed to good behavior (such as efficient high quality) and bad
behavior as well as the short-term profits from "cheating". We demonstrate that as
a result competition (using two different measures of competition which show qualitatively similar effects) might have non-monotonic effects on a rm s ability to commit. In particular, a firm might choose to operate in a more competitive environment
Breadth, Depth, and Competition
In a spatial model of both horizontal and vertical differentiation where an agent can occupy an interval rather than a point on the Hotelling line, one can examine the trade-off between depth (a narrow high quality position) and breadth (a wide low quality range). In particular, the extent of depth or breadth can be non-monotonic in the strength of competition
Long-term Debt and Hidden Borrowing
We consider borrowers with the opportunity to raise funds from a
competitive banking sector that shares information, as well as from
other hidden lenders. The presence of hidden lenders allows borrowers to
conceal poor results from their banks and, thus, restricts the contracts
that can be obtained from the banking sector. In equilibrium, borrowers
obtain funds from both the banking sector and ine¢ cient hidden
lenders simultaneously, so that different types of borrowers cannot be
distinguished by banks. This generates cross-subsidies between different
borrowers that are observationally equivalent to the banking sector. We
show that the cheaper the cost of hidden borrowing, the lower is welfare
and the lower is the variety of funding arrangements in the banking
sector. In particular, while high costs of hidden borrowing allow each
different (viable) type of borrower to access different terms from the
banking sector, as the cost of hidden borrowing falls, more and more
borrowers face identical terms up to the point where all borrowers who
access the banking sector (which may include inefficient ones) face
identical terms. We generalize the model to allow for partially-hidden
lenders and obtain qualitatively similar results
Interrogation Methods and Terror Networks
We examine how the structure of terror networks varies with legal limits on interrogation and the ability of authorities to extract information from detainees. We assume that terrorist networks are designed to respond optimally to a trade-off caused by information exchange: Diffusing information widely leads to greater internal efficiency,
but it leaves the organization more vulnerable to law enforcement. The extent of this vulnerability depends on the law enforcement authorityās resources, strategy and interrogation methods. Recognizing that the structure of a terrorist network responds
to the policies of law enforcement authorities allows us to begin to explore the most effective policies from the authoritiesā point of view
Costly search and design
Firms compete by choosing both a price and a design from a family of designs that can be represented as demand rotations. Consumers engage in costly sequential search among firms. Each time a consumer pays a search cost he observes a new offering. An offering consists of a price quote and a new good, where goods might vary in the extent to which they are good matches for the consumer. In equilibrium, only two design- styles arise: either the most niche where consumers are likely to either love or loathe the product, or the broadest where consumers are likely to have similar valuations. In equilibrium, different firms may simultaneously offer both design-styles. We perform comparative statics on the equilibrium and show that a fall in search costs can lead to higher industry prices and profits and lower consumer surplus. Our analysis is related to discussions of how the internet has led to the prevalence of niche goods and the "long tail" phenomenon.Product design, search costs, long tail
Brokersā contractual arrangements in the Manhattan residential rental market
We bring new evidence to bear on the role of intermediaries in frictional matching markets and on how parties design contracts with them. Specifically, we examine two features of contracts between landlords and agents in the Manhattan residential rental market. In our data, 72 percent of listings involve exclusive relationships between landlords and agents (the remaining 28 percent are non-exclusive); and in 21 percent of listings, the landlord commits to pay the agentās fee (in the other 79 percent, the tenant pays the agentās the fee). Our analysis highlights that these contractual features reflect landlordsā concerns about providing agents with incentives to exert effort specific to their rental units and to screen among heterogeneous tenants
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