39 research outputs found
On Seller Estimates and Buyer Returns
This paper revisits recent empirical research on buyer credulity in arts auctions and auctions for assets in general. We show that elementary results in auction theory can fully account for some stylized facts on asset returns that have been held to suggest that sellers of assets can exploit buyers by providing biased estimates of asset values. We argue that, rather than showing that buyers are credulous, the existing evidence can serve as an indirect test of the rationality assumptions underlying auction theory
On Seller Estimates and Buyer Returns
This paper revisits recent empirical research on buyer credulity in arts auctions and auctions for assets in general. We show that elementary results in auction theory can fully account for some stylized facts on asset returns that have been held to suggest that sellers of assets can exploit buyers by providing biased estimates of asset values. We argue that, rather than showing that buyers are credulous, the existing evidence can serve as an indirect test of the rationality assumptions underlying auction theory.Auctions; information disclosure; seller manipulation; buyer credulity
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Rational Disinhibition and Externalities in Prevention
This article studies a model of disease propagation in which rational and forwardâlooking individuals can control their exposure to infection by engaging in costly preventive behavior. Equilibrium outcomes under decentralized decision making are characterized and contrasted to the outcomes chosen by a social planner. In general, individuals overexpose themselves to infection, leading to suboptimally high disease prevalence. The model is applied to study the welfare effects of preexposure prophylaxis, which reduces transmission between serodiscordant couples and causes disinhibition. It is shown that a decrease in the induced infection risks increases disease prevalence and can lead to decreases in overall welfare
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The economics of vaccination.
The market for vaccinations is widely believed to be characterized by market failures, because individuals do not internalize the positive externalities that their vaccination decisions may confer on other individuals. Francis (1997) provided a set of assumptions under which the equilibrium vaccination pattern is socially optimal. We show that his conditions are not necessary for the welfare theorem to hold but that in general, the market yields inefficiently low vaccination uptake. Equilibrium non-optimality may obtain if (i) agents can recover from infection, (ii) vaccines are imperfect, (iii) individuals are ex ante heterogeneous, (iv) vaccination timing is inflexible or (v) the planning horizon is finite. Apart from the case with heterogeneity, inefficiencies result from the presence of strategic interaction.This is the author's accepted manuscript. It will be under embargo until 9/8/15. The final published version is in the Journal of Theoretical Biology published by Elsevier here: http://www.sciencedirect.com/science/article/pii/S002251931400451
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Dynamic limit pricing
I study a multi-period model of limit pricing under one-sided incomplete information. I characterize pooling and separating equilibria and their existence, and determine when these involve limit pricing. For some parameter constellations, the unique equilibrium surviving a D1 type refinement involves immediate separation on monopoly prices. For others, there are limit price equilibria surviving the refinement in which different types may initially pool and then (possibly) separate. Separation involves setting prices such that the inefficient incumbent's profits from mimicking are negative. As the horizon increases or as firms become more patient, limit pricing becomes increasingly difficult to sustain in equilibrium
Studies in the dynamics of contracts and markets
The present thesis studies two distinct issues, namely merger waves and optimal contracts for delivery in settings with time to build. The first part of the thesis proposes a theoretical explanation for the occurrence of merger waves. Mergers and acquisitions (M&A) come in waves, a fact that has puzzled economists as far back as the 1950's. Accordingly, there exists a vast empirical literature studying the time-series properties of M&A activity, and numerous studies devoted to identifying correlation between M&A activity and economic and financial variables. A review of merger theory is presented in the first chapter. In the second chapter, a formal model is developed that incorporates both dependenceo f the merger decisiono n macroeconomic variables and strategic interaction between firms. Specifically, a model is set up in which a number of acquiring firms compete over time for a small number of target firms. In each period, an acquirer may either attempt a takeover, or postpone the takeover decision. By delaying a takeover attempt, the acquiring firm may gain from more favourable future market conditions. On the other hand, postponement of the takeover involves the risk of preemption from rivals. This tradeoff leads to equilibria in which all acquirers simultaneously seek to merge. An extension of the model into one of incomplete information (i. e. a setting in which there is strategic uncertainty) allows one to pin down a unique perfect Bayesian equilibrium, and thus the expected timing of the merger wave. The second part of the thesis studies contractual relationships between economic agents in situations where there is time to build. Specifically, it seeks to analyse how delivery time is determined under asymmetric information. In order to do this, two different models are presented, each one focusing on a separate issue. The first is a continuous time adverse selection model in which a principal hires an agent to complete a project, but where the agent's ability is private information and unknown to the principal. Furthermore, the principal is unable to monitor the agent's rate of effort or progress on the project. In this setting the optimal contract is derived and characterised. The main finding is that the principal can use completion time to screen agents of different efficiency. The optimal contract thus specifies wages as a function of completion time in a way that optimally trades off efficiency with informational rents. It turns out that the optimal contract has the most efficient agent deliver at the efficient point in time, paying him large informational rents. For less efficient agents, the optimal contract stipulates inefficient delay in delivery time, with the most inefficient agent receiving no informational rents, The second model is one of dynamic moral hazard, in which the agent's effort is unobservableto the principal. In order to complete the project, the agent must successfully complete a sequence of distinct tasks in a fixed pre-specified order. Whether or not a task is completed depends on the agent's effort. In this setting, different contracts are analysed. Namely, the cases of observable effort and unobservable effort with spot contracting are characterised, The analysis shows that under both scenarios, project delays are most likely to occur in early stages of development, and are related directly to the power of the offered incentive scheme. Last, contracts with commitment on the part of the principal are discussed
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Waning Immunity and the Second Wave: Some Projections for SARS-CoV-2
This paper offers projections of future transmission dynamics for SARS-CoV-2 in an SEIRS model with demographics and waning immunity. In a stylized optimal control setting calibrated to the USA, we show that the disease is endemic in steady state and that its dynamics are characterized by damped oscillations. The magnitude of the oscillations depends on how fast immunity wanes. The optimal social distancing policy both curbs peak prevalence and postpones the infection waves relative to the uncontrolled dynamics. Last, we perform sensitivity analysis with respect to the duration of immunity, the infection fatality rate and the planning horizon