Signal-Jamming in a Sequential Auction

In a recurring auction early bids may reveal bidders’ types, which in turn affects bidding in later auctions. Bidders take this into account and may bid in a way that conceals their private information until the last auction is played. The present paper analyzes the equilibrium of a sequence of ?rst-price auctions assuming bidders have stable private values. We show that signal-jamming occurs and explore the dynamics of equilibrium prices

Signaling, Learning and Screening Prior to Trial: Informational Implications of Preliminary Injunctions

The decision to request a preliminary injunction—a court order that bans a party from certain actions until their lawfulness are ascertained in a final court ruling at trial—is an important litigation instrument in many areas of the law including antitrust, copyright, patents, trademarks, employment and labor relations as well as contracts. The process of filing for a preliminary injunction and the court's ruling on such a request generates information that can affect possible settlement decisions. We consider these implications when there is uncertainty about both the plaintiff's damages as well as the merits of case in the eyes of the court. Both plaintiff and defendant revise their beliefs about the case strength in dispute once they observe the court's ruling on preliminary injunctive relief. We study how such learning affects the likelihood of settlement. A precursor to this analysis is the study of the strategic role of preliminary injunctions as a means to signal the plaintiff's willingness to settle.preliminary injunction, learning, signaling, screening, litigation, pre-trial motion, settlement

Signaling in deterministic and stochastic settings

We contrast a standard deterministic signaling game with one where the signal-generating mechanism is stochastic. With stochastic signals a unique equilibrium emerges that involves separation and has intuitive comparative-static properties as the degree of signaling depends on the prior type distribution. With deterministic signals both pooling and separating configurations occur. Laboratory data support the theory: In the stochastic variant, there is more signaling behavior than with deterministic signals, and less frequent types distort their signals relatively more. Moreover, the degree of congruence between equilibrium and subject behavior is greater in stochastic settings compared to deterministic treatments. --experiments,learning,noise,signaling,stochastic environments

Auctions when Bidders Prepare by Investing in Ideas

We consider auction games where, prior to the auction, bidders spend resources to increase their valuations. The market game is solved by solving an equivalent auxiliary social choice problem. We show that standard auctions are fully efficient, whereas reserve price requirements entail a double inefficiency. Moreover, we explain how optimal auctions differ from the well-known static optimum, and sketch the impact of information spillovers.Auctions, procurement

Incongruities of Real and Intellectual Property: Economic Concerns in Patent Policy and Practice

Article published in the Michigan State Law Review

Signal-Jamming in a Sequential Auction

In a recurring auction early bids may reveal bidders’ types, which in turn affects bidding in later auctions. Bidders take this into account and may bid in a way that conceals their private information until the last auction is played. The present paper analyzes the equilibrium of a sequence of ?rst-price auctions assuming bidders have stable private values. We show that signal-jamming occurs and explore the dynamics of equilibrium prices.Auctions; Signaling; Price Competition

JLEO 1

Preliminary injunctions (PIs) are important in litigation in many settings, including antitrust, copyright, patent, trademark, employment and labor relations, and contracts. The filing of a PI and the court's ruling generate information that can impact settlement. We find that some plaintiffs request a PI to signal bounds on their damages in order to elicit better settlement offers. As a result, the parties are more likely to come to an out-of-court agreement permitting the disputed activity, compared to when a PI is motivated solely by defensive reasons to avert immediate damages during trial. Although the grant of a PI reduces ex post incentives for potential litigants to settle, this is more than offset by an increase in settlement upon a denial. Thus, ex ante, learning leads to more settlement. Nevertheless, the anticipation of learning and increased chances of settlement do not affect the initial filing decision. (JEL D

Can fear cause economic collapse? Insights from an experimental study

"Wir untersuchen das Verhalten experimenteller Subjekte, die in Anwesenheit von Netzexternalitäten (externen Effekten) eine Reihe von riskanten Investitionsentscheidungen machen sollen. Die Subjekte folgen einer einfachen Heuristik – sie investieren nach positiven Erfahrungen, nach einem Misserfolg reduzieren sie ihre Investitionsneigung. Diese Resultate stehen im Gegensatz zu den theoretischen Befunden von Jeitschko und Taylor (2001), in welchen sogar die Agenten, die ausschließlich positive Erfahrungen gemacht haben, schließlich aufhören zu investieren, weil sie Angst haben, dass die anderen, mit schlechteren Erfahrungen, ausscheiden werden. Theoretisch kann diese 'Bayesianische Angst' einen plötzlichen Wirtschaftszusammenbruch auslösen – auch in dem effizientesten Bayesianischen Gleichgewicht. Im Experiment sind die Subjekte überraschend furchtlos bezüglich der Erfahrungen der anderen. Sie folgen einfach nur eigenen Erfahrungen und verhindern so den totalen Zusammenbruch." (Autorenreferat)"We study the behavior of experimental subjects who have to make a sequence of risky investment decisions in the presence of network externalities. Subjects follow a simple heuristic – investing after positive experiences and reducing their propensity to invest after a failure. This result contrasts with the theoretical findings of Jeitschko and Taylor (2001) in which even agents who have only good experiences eventually stop investing because they are afraid that others with worse experiences will quit. In theory, this 'Bayesian fear' can trigger sudden economic collapse – even in the most efficient Bayesian equilibrium. In the experiment, subjects are surprisingly fearless of others’ experiences, and simply follow their own experiences, thus averting a total collapse." (author's abstract

Bundling and Joint Marketing by Rival Firms

We study joint marketing by firms who price discriminate between consumers who patronize only one firm (single purchasers) and those who purchase from both (bundle purchasers). Firms either set the price of the bundle and then compete along side the bundle; or they determine a rebate that is applied to joint purchasers and then set prices. Even though the pricing structure in the joint marketing scheme is determined noncooperatively, the commitment to the joint marketing agreement allows firms to leverage their stand-alone prices—leading to higher profits and lower consumer surplus in either case, compared to both uniform pricing and independent price discrimination without a joint marketing agreement. Nevertheless the two schemes differ dramatically, in that rebates increase joint purchasing, whereas bundle pricing diminishes bundle purchases

Love Thy Neighbor as Thyself: Community Formation and the Church

The church has played a central role in establishing and maintaining, as well as undermining, communities throughout modern history. In this paper we explore some of the mechanisms through which the church can coordinate individual behavior to achieve improvements in individual and social welfare, and reveal the ways in which the church can fail, causing established communities to founder or dissolve. In our model inherently religious individuals may become trapped in a secular equilibrium that is strictly dominated by a religious equilibrium in which individuals’ actions bestow positive external benefits on other community members. The church, via its teachings, clergy and ministries, reveals the benefits of coordinated behavior, both in this world and in the world to come, and the costs of uncoordinated behavior, separation from God and one’s fellow man, to induce community members to take actions which are both individually and socially beneficial. External forces, such as the state and secular society, and internal forces, such as doctrinal disputes, inconsistencies, and incoherence, can reduce a church’s ability to coordinate, to the detriment of all