Why it Pays to Conceal - On the Optimal Timing of Acquiring Verifiable Information

We consider optimal contracts when a principal has two sources to detect bad projects. The first one is an information technology without agency costs ($$), whereas the second one is the expertise of an agent subject to moral hazard, adverse selection and limited liability ($IT_A$). First, we show that the principal does not necessarily benefit from access to additional information and thereby may prefer to ignore it. Second, we discuss different timings of information release, i.e. a \emph{disclosure} contract offered to the agent after the principal announced the result of $$, and a \emph{concealment} contract where the agent exerts effort before $IT_{P}$ is checked. We find that oncealment is superior whenever the quality of $IT_{P}$ is sufficiently low. Then, $IT_{P}$ is almostworthless under a disclosure contract, while it can still be exploited to reduce the agent''s information rent under concealment. If the quality of $$ improves, disclosure can be superior as it allows to adjust the agent''s effort to the up-dated expected quality of the project. However, even for a highly informative $IT_{P}$, concealment can be superior as itmitigates the adverse selection problem. Finally, we prove that the principal always benefits from checking $IT_P$ \textit{if} he chooses the optimal timing of information release. In particular, he may benefit only if he does not check $IT_P$ until the agent reported his findings.management information;

Dust Measurements in the Outer Solar System

Dust measurements in the outer solar system are reviewed. Only the plasma wave instrument on board Voyagers 1 and 2 recorded impacts in the Edgeworth-Kuiper belt (EKB). Pioneers 10 and 11 measured a constant dust flux of 10-micron-sized particles out to 20 AU. Dust detectors on board Ulysses and Galileo uniquely identified micron-sized interstellar grains passing through the planetary system. Impacts of interstellar dust grains onto big EKB objects generate at least about a ton per second of micron-sized secondaries that are dispersed by Poynting-Robertson effect and Lorentz force. We conclude that impacts of interstellar particles are also responsible for the loss of dust grains at the inner edge of the EKB. While new dust measurements in the EKB are in an early planning stage, several missions (Cassini and STARDUST) are en route to analyze interstellar dust in much more detail.Comment: 10 pages, 5 figures, Proceedings of the ESO workshop on ``Minor bodies in the outer solar system'

When Bidding More is Not Enough: All-Pay Auctions with Handicaps

We consider a standard two-player all-pay auction with private values, where the valuation for the object is private information to each bidder. The crucial feature is that one bidder is favored by the allocation rule in the sense that he need not bid as much as the other bidder to win the auction. Analogously, the other bidder is handicapped by the rule as overbidding the rival may not be enough to win the auction. Clearly, this has important implications on equilibrium behavior. We fully characterize the equilibrium strategies for this auction format and show that there exists a unique pure strategy Bayesian Nash Equilibrium.All-pay auction, contest, asymmetric allocation rule, rent-seeking, asymmetric information

Unfair Contests

Real-world contests are often "unfair" in the sense that outperforming all rivals may not be enough to be the winner, because some contestants are favored by the allocation rule, while others are handicapped. Examples of such contests can be inter alia found in the area of litigation and procurement.This paper analyzes discriminatory contests (which are strategically equivalent to all-pay auctions) with a handicap for one of the participants. We first characterize the equilibriumstrategies, provide closed form solutions, and illustrate the additional strategic issues arising through this asymmetry. We then analyze the issue of the optimal degree of unfairness. From a social point of view, the following trade-off arises: The disadvantage of unfair contests is that the prize may be awarded to an inferior contestant. On the other hand, under the assumption that the effort exerted by contestants to increase their chancesof winning the prize is wasteful from a social point of view, one advantage of an unfair contest is that it leads to lower effort incentives. We characterize situations in which it is optimal for an authority to either stipulate a fair contest, an interior degree of unfairness or even an infinitely unfair contest where the prize is directly awarded to one of the ontestants.microeconomics ;

When should principals acquire verifiable information?

We analyze a principal-agent model in which a principal has two possibilities to improve his knowledge about the quality of an investment project. First, he has access to an informationtechnology that provides a \textit{verifiable}, unbiased signal. Second, he can hire an agent who detects bad projects with some probability depending on his unobservable effort, and who reports his findings opportunistically. We analyze whether the principal should check the signal before or after he offers a contract. The first policy has the advantage that the agent''s effort can be adjusted to the signal, whereas the second policy allows areduction in the agent''s rent. We show that checking the signal afterwards is always superior if the signal is sufficiently uninformative.microeconomics ;

Superficial papilloma of the ovary

Superficial papilloma of the ovary is a rare benign ovarian finding, which was first described back in 1895. Here, we present the intraoperative and histological findings of a superficial papilloma of the ovary in a 59-year-old patient. Keywords: finding; laparoscopy; ovary; papillom