Essays in Microeconomics

Die Dissertation untersucht die Auswirkung fehlenden Commitments eines zentralen ökonomischen Akteurs in verschiedenen institutionellen Umfeldern. Aufsatz 1 bietet eine neuartige Erklärung für grobe Zertifizierung: Diese verringert die Anreize für Kollusion zwischen Zertifizieren und Zertifizierten. Kollusion wird verstanden als die Möglichkeit, gegen Bestechung, ein vorteilhaftes Zertifikat an einen Verkäufer zu vergeben. Konfrontiert mit einem Bestechungsangebot wägt der Zertifizier ab ob der kurzfristige Ertrag - in Form eines Bestechungsgeldes - die langfristigen Kosten – in Form des einhergehenden Reputationsverlustes – aufwiegt. Dabei erweist sich eine gröbere Zertifizierung als besonders nützlich um den kurzfristigen Ertrag zu reduzieren. Im zweiten Aufsatz werden optimale Vertragsmechanismen untersucht, wenn sich der Prinzipal nicht auf eine Auditstrategie verpflichten kann. Solche optimalen Mechanismen nutzen unparteiische Mediatoren aus. Die Verwendung eines Mediators ist profitabel, da somit Korrelation zwischen dem Report des Agenten und der Handlungsempfehlung an den Prinzipal erzeugt werden kann. Optimale Mechanismen verwenden zudem strikt mehr Verträge als Typen des Agenten, was unter vollständigem Commitment nie optimal sein kann. Der dritte Aufsatz beschäftigt sich mit Verträgen welche die Abwanderung von Unternehmen verhindern können. Der Regulierer kann sich dabei nur auf kurzfristige Verträge verpflichten und die Firmen können standortspezifische Investitionen tätigen. Wenn im Gleichgewicht Abwanderung permanent verhindert wird, dann werden keine Subventionen in der Zukunft gezahlt. Dies bedeutet, dass die Firma in Zukunft gar keinen Anreiz mehr haben darf abzuwandern. Um dies zu erreichen muss also der heutige Vertrag enorme Investitionsanreize setzen. Im Extremfall ist dann teurer Abwanderung zu verhindern wenn die Firma investieren kann, als im hypothetischen Fall ohne Investitionsmöglichkeit.This dissertation studies the impact of a lack of commitment of a central economic actor in a given institutional environment. Essay 1 offers a novel explanation for the occurrence of coarse disclosure in certification: coarseness reduces the threat of collusion between certifiers and sellers. Collusion is understood as the possibility of selling a favorable certificate to a seller. Upon accepting a bribing offer, the certifier trades-off short-run gains – in form of the bribe – against long-run losses, from loosing reputation. Coarse disclosure is shown effective in reducing the short-run gain. The second essay studies optimal mechanisms in a contracting problem where the principal cannot commit to an auditing strategy. In this framework optimal mechanisms make use of an impartial mediator. Employing a mediator is strictly beneficial because it allows for correlating the agent’s report with the recommendation to the mediator. In general, optimal mechanisms use strictly more contracts than types, which would be not profitable under full commitment. The third essay studies contracts that avert relocation of a firm. The regulator can offer contracts only on a short-term basis, and the firm can undertake a location-specific investment. If in equilibrium relocation is permanently averted, then there are no future transfer payments. But this implies the firm cannot have an incentive to relocate in the future. Tom guarantee the latter, the initial contract has to provide string investment incentives. In the extreme, averting relocation with the firm’s possibility of investing becomes more costly than in the hypothetical case without an opportunity to invest

On the (Ir)Relevance of Fee Structures in Certification

Restrictions on certifiers’ fee structures are irrelevant for maximizing their profits and trade efficiency, and for the implementability of (monotone) distributions of rents. The irrelevance results exploit that certification schemes involve two substitutable dimensions—the fee structure and the disclosure rule—and adaptations in the disclosure dimension can mitigate restrictions on the fee dimension. While restrictions on fee structures do affect market transparency, it has no impact on economic efficiency or rent distributions

Sweet Lemons: Mitigating Collusion in Organizations

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 is also implementable when this information is private and collusion is possible. To implement a given SCF we propose a one-sided mechanism that endogenously creates private information for the supervisor vis-à-vis the agent, and conditions both players′ payoffs on this endogenous information. We show that in such a mechanism all collusive side-bargaining fails, similar to the trade failure in Akerlof′s (1970) car market and in models of bilateral trade

Informational opacity and honest certification

This paper studies the interaction of information disclosure and reputational concerns in certification markets. We argue that by revealing less precise information a certifier reduces the threat of capture. Opaque disclosure rules may reduce profits but also constrain feasible bribes. For large discount factors a certifier is unconstrained in the choice of a disclosure rule and full disclosure maximizes profits. For intermediate discount factors, only less precise, such as noisy, disclosure rules are implementable. Our results suggest that contrary to the common view, coarse disclosure may be socially desirable. A ban may provoke market failure especially in industries where certifier reputational rents are low

Incomplete contracts in dynamic procurement

We analyze the problem of a buyer who purchases a long-term project from one of several suppliers. A changing state of the world influences the costs of the suppliers. Complete contracts conditioning on all future realizations of the state are infeasible. We show that contractual incompleteness comes without a cost. The buyer achieves the same surplus with complete and incomplete contracts. The key insight is that the allocation prescribed by optimal complete contracts is sequentially optimal with incomplete contracts if the buyer does not receive too much information ex-interim. We show that the English auction restricts the information optimally

Optimal incentive contracts to avert firm relocation

A unilateral policy intervention by a country (such as the introduction of an emission price) can induce firms to relocate to other countries. We analyze a dynamic game where a regulator offers contracts to avert relocation of a firm in each of two periods. The firm can undertake a location-specific investment (e.g., in abatement capital). Contracts can be written on some contractible productive activity (e.g., emissions), but the firm's investment is not contractible. A moral hazard problem arises under short-term contracting that makes it impossible to implement outcomes with positive transfers in the second period. The regulator resorts to high-powered incentives in the first period. The firm then overinvests and a lock-in effect prevents relocation in both periods. Paradoxically, the distortion in the firstperiod contract can be so severe that higher transfers are needed to avert relocation compared to a (hypothetical) situation without the investment opportunity

Sequential procurement with limited commitment

We analyze the problem of a buyer who chooses a supplier for a long-term relationship via an auction. The buyer lacks commitment to not renegotiate the terms of the contract in the long run. Thus, suppliers are cautious about the information revealed during the auction. We show theoretically and experimentally that first-price auctions perform poorly in terms of efficiency and buyer surplus. Suppliers may pool on a high bid to conceal information. Second-price auctions retain their efficient equilibrium and generate substantial surplus for the buyer. We demonstrate that optimal mechanisms require concealing the winning bid with a strictly positive probability

Mediated Audits

I study the optimal audit mechanism when the principal cannot commit to an audit strategy. Invoking a relevation principle, the agent reports her type to a mediator whi assigns contracts and recommends the principla whether to audit. For each reported type the mediator randomizes over a base-contract and the audit contract, accompanied by a recommendation to audit. For large penalties the optimal mechanism uses strictly more contracts than types and cannot be implemented via offering a menu of contracts. The analysis provides a proper benchmark for studying auditing under limited commitment and sheds new light on the usefulness of mediation in contracting and on the design of optimal mechanisms

Optimal incentive contracts to avert firm relocation

A unilateral policy intervention by a country (such as the introduction of an emission price) can induce firms to relocate to other countries. We analyze a dynamic game where a regulator offers contracts to avert relocation of a firm in each of two periods. The firm can undertake a location-specific investment (e.g., in abatement capital). Contracts can be written on some contractible productive activity (e.g., emissions), but the firm's investment is not contractible. A moral hazard problem arises under short-term contracting that makes it impossible to implement outcomes with positive transfers in the second period. The regulator resorts to high-powered incentives in the first period. The firm then overinvests and a lock-in effect prevents relocation in both periods. Paradoxically, the distortion in the firstperiod contract can be so severe that higher transfers are needed to avert relocation compared to a (hypothetical) situation without the investment opportunity