Knowing Versus Telling Private Information About a Rival

As part of a broad competitive intelligence strategy, firms expect to acquire information about their rivals’ customers and production processes. In this study, we examine the firms’ incentives to disclose this information. We find that firms adopt a policy of disclosing their information regardless of whether it concerns a rival’s customers or production costs or whether the firms are Cournot or Bertrand competitors. Firms that have private information about their rivals tell. Their willingness to disclose private information about their rivals contrasts with the results in the literature when the firm has information about itself. This literature shows that the chosen disclosure policy depends on whether information is about the firm’s own payoffs or industry demand and whether the firms’ strategies are substitutes or complements.disclosure policy, voluntary disclosure, asymmetric information, Cournot competition, Bertrand competition

Non-Market Clearing Prices in a Dynamic Oligopoly with Incomplete Information

The major criticisms of the work on disequilibrium macroeconomics are that (1) one is unable to explain why firms set non-market clearing prices and given that they have done so (2) do the prices adjust through time to equilibrate the market and if so, how. In this paper, I provide a simple model which illustrates that the following intuition may provide a partial answer to both criticisms. The basic idea is that firms may learn about the market in which they compete by observing their own sales. If their own sales provide additional information and if that information is valuable, then the firm may use non-market clearing prices to acquire this information. This possibility may arise because the firm may be unable to infer whether demand was just sufficient to buy all that were for sale at the price he was charging or whether the firm could have raised its price and still sold every unit it had produced. If the demand states are correlated, then this information has value as the firm can make more informed choices in the future. The model provided shows that this intuition is supportable as an potential, partial explanation for non-market clearning pricing and provides a (potentially) over simple explanation of the adjustment process to equilibrating prices in the future.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100665/1/ECON013.pd

Why Are Buyers Represented by Seller's Agents When Buying a House?

Our purpose is to provide an explanation for the existence of such contracts because this contract is uniformly used in the United States, Canada and Japan and has been for quite some time. At the same tie, an institution that represents the buyer's interests has not emerged. As with any long-lived, widely used institution, there is reason to believe that it serves a useful purpose which cannot be served by an alternate institution in which the buyer is represented by his own agent.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100732/1/ECON019.pd

Controlling the Game: Political Sponsors and Bureaus

In this paper, we intend to reexamine the foundations of the received theory of bureau behavior. We will provide arguments that suggest the political sponsor is not exploited by the bureau's application of its monopoly power. Instead, we argue that the sponsor may foster competition within or among the bureaus he controls thereby mitigating the bureau's monopoly power.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100787/1/ECON024.pd

Equilibrium with Debt and Equity Financing of New Projects: Why More Equity Financing Occurs When Stock Prices are High

In this paper we analyze the manager's financing decision for a new project. We give the manager a choice between financing with debt or equity, or foregoing the project. Our purpose is to provide a signaling model in which debt, equity and foregoing are actually observed in the unique equilibrium and the financing mode provides information to the investors about the quality of the new project to be financed.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100720/1/ECON018.pd

Carrot and Yardstick Regulation: Enhancing Market Performance with Output Prizes

The fundamental objective of most regulatory mechanisms is to expand output at a sufficiently low cost to consumers. Many useable mechanisms, such as Loeb and Magat's, require detailed demand information and substantial profit recapture by the regulator in order to achieve this objective. We present an apparently unexplored alternative approach--inducing competition among firms for shares of a monetary reward. Payments to a firm for output expansion thus depend on both its own behavior and the actions of other firms, which can even be firms in unrelated industries. We show that in a wide variety of circumstances, the resultant increase in consumer surplus exceeds the reward. Hence, even with no profit recapture, our approach can lead to Pareto improvements.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100698/1/ECON016.pd

Can the Private Provision of Public Goods be Efficient?---Some Experimental Evidence

The received theory on public goods asserts that private provision of them is at best inefficient and at worst virtually non-existent due to the severity of the free rider problem. This assertion has received additional theoretical and experimental support recently. However, in a recent paper, Bagnoli and Lipman [1986] have studied a simple contribution game in which all of the proper equilibria in pure strategies are Pareto efficient and all strongly, individually rational Pareto efficient outcomes can be supported as a proper equilibrium in pure strategies. Our purpose in this paper is to report on some experimental evidence that supports the conclusion reached in Bagnoli and Lipman.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100776/1/ECON023.pd

Courtship as a Waiting Game

In most times and places, women on average, marry older men. We suggest a partial explanation. If the economic roles of males are more specialized than those of females, the desirability of a female as a mate may become evident at an earlier age than is the case for males. Males with good prospects will wait until their economic success is revealed before choosing a bride. Those with poor prospects try to marry young. In equilibrium, the most desirable young females choose successful older males. The less desirable young females have no better option than to marry available young males.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/101090/1/ECON075.pd

Successful Takeovers without Exclusion

While most takeover models assume atomistic stock-holders, we analyze a single-raider model with finitely many stockholders. Because the raider can always make some stockholders pivotal, he can overcome the free-rider problem identified by Grossman and Hart (1980) and others in atomistics-stockholder models and profitably take over even without exclusion. One might expect that it would be harder for the raider to make stockholders of more widely held firms pivotal and that exclusion would thus become necessary; however, the infinite-stockholder game cannot yield this conclusion. We also consider the limit of the finite-stockholder game and give conditions under which exclusion is unnecessary. Finally, we show that exclusion leads to the possibility of inefficient takeovers.Center for Research on Economic and Social Theory, Department of Economics, University of Michiganhttp://deepblue.lib.umich.edu/bitstream/2027.42/100765/1/ECON022.pd