Bidding and Drilling on Offshore Wildcat Tracts

I study a game in which firms first bid on wildcat tracts and then time their drilling decisions. In an equilibrium bids are used as a coordination device: if player i bid low while player -i bid high, player i waits while player -i drills. This equilibrium is consistent with the empirical findings of Hendricks and Porter (1996). Firms know that by bidding "low" they can be allocated the right to free-ride. This induces "optimistic" firms to submit "low" bids. Nonetheless, this equilibrium need not reduce expected revenues as compared to the benchmark case in which one abstracts from signalling issues.Information externality, auctions, oil exploration

On Bid Disclosure in OCS Wildcat Auctions

I study a game in which two players first bid for offshore tracts (below which oil and gas may be present) and next time their drilling decisions. High types bid more aggressively if the auctioneer discloses bids as this gives them useful information about the profitability of drilling. A low type fears that the disclosure of her "low" bid reduces the other player's incentive to drill. Hence, they bid more aggressively if the auctioneer does not disclose bids. If players are sufficiently patient, it is optimal to disclose bids. Otherwise, it may be optimal not to disclose them.Information Externality, Oil Exploration, Waiting, War of attrition

Herd Behaviour as an Incentive Scheme

This paper presents a model of technology invention in an emerging market. Managers wait and adopt the standard technology in the hope to free-ride on the effort level of another manager who may invent a superior technology. The more managers who adopt the standard technology, the more their successors believe that probably the superior technology doesn't exist. As this hampers the successors' incentives to innovate, herding in my model reduces the scope of strategic waiting.

Technology Adoption, Social Learning, and Economic Policy

We study a two-player dynamic investment model with information externalities and provide necessary and sufficient conditions for a unique switching equilibrium. When the public information is sufficiently high and a social planer therefore expects an investment boom, investments should be taxed. Conversely, any positive investment tax is suboptimally high if the public information is sufficiently unfavorable.We also show that an investment tax may increase overall investment activity

Equilibria in a Dynamic Global Game: The Role of Cohort Effects

We introduce strategic waiting in a global game setting with irreversible investment. Players can wait in order to make a better informed decision. We allow for cohort effects and discuss when they arise endogenously in technology adoption problems with positive contemporaneous network effects. Formally, cohort effects lead to intra-period network effects being greater than inter-period network effects. Depending on the nature of the cohort effects, the dynamic game may or may not satisfy dynamic strategic complementarity. If it does, our model has a unique rationalizable outcome. Otherwise, there exists parameter values for which multiple equilibria arise because player have a strong incentive to invest at the same point in time others do. ZUSAMMENFASSUNG - (Gleichgewichte in einem Dynamischen Globalen Spiel: Die Rolle von Kohorteneffekten) Koordinationsspiele haben typischerweise multiple Nashgleichgewichte mit sich selbsterfüllenden Erwartungen. Die Theorie der globalen Spiele führt Unsicherheit und private Informationen in statischen Koordinationsspielen ein und zeigt die Bedingungen auf, unter denen dies zu einem eindeutigen Gleichgewicht führt. In diesem Beitrag untersuchen wir ein Zweiperiodenspiel, in welchem die Spieler eine irreversible Investitionsentscheidung mit einer positiven Netwerkexternalität treffen. In der ersten Periode wählen die Spieler, ob sie sofort investieren oder auf bessere Informationen über das Projekt warten. Wir zeigen, dass Kohorteneffekte bei Technologiewahlproblemen mit positiven Netzwerkexternalitäten auftreten und untersuchen ihre Auswirkungen. Kohorteneffekte führen dazu, dass die Intraperioden-Netzwerkeffekte größer sind als die Interperioden-Netzwerkeffekte. Aus technischer Sicht bestimmen die Kohorteneffekte, ob das globale Spiel die Eigenschaft der dynamischen strategischen Komplemantarität erfüllt. Diese Eigenschaft wiederum impliziert, dass unser Modell eine eindeutige rationalisierbare Lösung hat. Ist diese Eigenschaft nicht erfüllt, so hat jeder Spieler einen hohen Anreiz zum gleichen Zeitpunkt wie die andern Spieler zu investieren. In diesem Fall exstieren Parameterwerte für welche unser Spiel multiple Nashgleichgewichtslösungen hat.Global Game, Strategic Waiting, Coordination, Strategic Complementarities, Period-specific Network Effects, Equilibrium Selection

Corruption, Extortion, and the Boundaries of the Law

We consider a set-up in which a principal must decide whether or not to legalise a socially undesirable activity. The law is enforced by a monitor who may be bribed to conceal evidence of the offence and who may also engage in extortionary practices. The principal only declares the activity illegal if the activity if "very harmful" and if the private benefit (received by the agent if she breaks the law) is "high". We present comparative static results and highlight policy implications.Moral Hazard, Collusion, Non-contractive Output, Rewards and Punishments

Informational Cascades Elicit Private Information

We introduce cheap talk in a dynamic investment model with information externalities. We first show how social learning adversely affects the credibility of cheap talk messages. Next, we show how an informational cascade makes thruthtelling incentive compatible. A separating equilibrium only exists for high surplus projects. Both an investment subsidy and an investment tax can increase welfare. The more precise the sender's information, the higher her incentives to truthfully reveal her private information.Cheap Talk, Information Externality, Informational Cascades, Social Learning, Herd Behaviour

Technology Adoption, Social Learning, and Economic Policy

We study a two-player dynamic investment model with information externalities and provide necessary and sufficient conditions for a unique switching equilibrium. When the public information is sufficiently high and a social planer therefore expects an investment boom, investments should be taxed. Conversely, any positive investment tax is suboptimally high if the public information is sufficiently unfavorable.We also show that an investment tax may increase overall investment activity.Information Externality; Strategic Waiting; Delay; Information Cascade; Investment Boom; Optimal Taxation

Gurus, Opinion Polls and Social Learning

This paper analyzes cheap talk in an investment model with information externalities. In contrast to Gossner and Melissas (2006), I allow for (i) competition effects, (ii) positive network externalities and (iii) more than one interviewed player. In the presence of competition effects, a player will never truthfully reveal her information about the realized state of the world. In the presence of positive network externalities, however, there exists a parameter range where, under mild additional conditions, the unique equilibrium is the separating one. Finally, using numerical computations, I show that for a sufficiently large number of interviewed players there exists a separating equilibrium in my entire parameter range.Cheap Talk,Information Externality, Social Learning, Herd Behaviour

Informational cascades elicit private information

"Wir modellieren eine zweistufige dynamische Investitionsentscheidung mit Informationsexternalitäten und 'Cheap Talk'. Dabei können wir zunächst zeigen, dass die Glaubwürdigkeit von 'Cheap Talk'-Aussagen darunter leidet, wenn die Investitionsentscheidung von solchen Informationen beeinflusst wird, die sich eher aus dem Handeln der Mitakteure als durch ihre verbalen Bekundungen ableiten. Dann zeigen wir, dass Informationskaskaden, die alle Akteure dieselbe Handlung aufgrund öffentlicher Information ohne Berücksichtigung ihrer privaten Informationen ausführen lassen, dazu führen, das Offenbaren der wahren Präferenzen der Investoren – optimistisch oder pessimistisch - anreizkompatibel zu machen. Vergleicht man Projekte mit niedrigen und hohen Überschüssen, existiert ein Trenngleichgewicht nur bei letzteren, so dass glaubwürdige Kommunikation eher über Worte als über Taten funktioniert. Will ein sozialer Planer die Investitionsentscheidungen beeinflussen, kann er sowohl durch eine Subventionierung als auch durch eine Besteuerung der Investitionen die Wohlfahrt vergrößern." (Autorenreferat)"We introduce cheap talk in a dynamic investment model with information externalities. We first show how social learning adversely affects the credibility of cheap talk messages. Next, we show how an informational cascade makes thruthtelling incentive compatible. A separating equilibrium only exists for high surplus projects. Both an investment subsidy and an investment tax can increase welfare. The more precise the sender's information, the higher her incentives to truthfully reveal her private information." (author's abstract