Colloquium in Applied Micro Theory, Spring 08

Colloquium in Micro Theory, Spring 2008

Time and place: 11:00-12:00 Thursday, 1027 IAB
Professors: Bernard Salanie and Patrick Bolton
If you would like to make a presentation, please contact: Anne Jirapattanakul

23 January No Meeting

30 January Laurent Lamy will present:
Competition between auction houses: a shill bidding perspective
The analysis of the English auction with participation costs is utterly modified if the seller is unable to commit not to participate. In the independent private value model, we characterize the full set of equilibria that are symmetric among buyers and with a strategic seller being able to bid in the same way as any buyer through a shill bidding activity. The set of implementable participation cutoffs is severely limited by the shill bidding activity. The optimal reserve price and related comparative statics on revenue and welfare are derived. Imperfect Bertrand competition between auction houses is analyzed. Under small shill bidding costs the seller may prefer to contract with auction houses with higher fees since they are making the shill bidding activity more costly.
Click here to see the paper

7 February No Meeting

14 February No Meeting

21 February David Lopez Rodriguez: will present
Size and Scope of Government: Ideology versus Strategy
A two-party model of electoral competition is built to analyze the impact of ideological and strategic factors on fiscal policy. I extend the basic framework of probabilistic voting introducing ideological preferences for the provision of collective goods. The intensity of these preferences and the degree of political opportunism will determine the optimal size and composition of public spending under different governments. Additionally, I discuss which groups are more targeted with pork-barrel spending.

28 February Pierre Fleckinger will present
On Correlation and Competition under Moral Hazard
This paper reexamines the issue of competitive versus collective incentives in a multiagent moral hazard framework. A detailed analysis of an information structure allowing both variance to change with effort levels and correlation to change with efforts pairs provides new results. The baseline fact is that under (some notion of) complementarity the optimal scheme is collective, while it is competitive under substitutability. It is then shown that the widespread idea that the principal should use all the more competitive schemes that the equilibrium outcomes are more correlated is not a generic insight. This is so because correlation levels varying with effort pairs can create informational complementarities, and can thereby plead for joint performance evaluation. When the agents are risk-averse, that informational effect has to be traded off against the agents' insurance concerns. The optimal scheme is then either competitive or mixed, a contractual form surprisingly missing in the optimal contracting literature. Mixed schemes can be interpreted as the use of aggregate profit sharing in combination with selective firings or promotions.

6 March Yun Kyung Kim: will present
Managers-led firms and collusive behaviors
The collusion theory in long-run oligopolies within a discounted repeated game framework has been a critical issue in micro economics not only for its theoretical importance but also for explanations on the real world economy. The relationship between collusive behaviors and corporate governance, especially managers' incentives, is also examined because managers make a price/output decision. In this presentation, I would like to see how managers' incentives are considered in the product market competition from previous studies and to discuss how it can be developed further.

13 March Heriberto Tapia will present:
Bounded Inequality with Private Information: The Role of Unobservable Investment
This paper extends the discussion on the optimal distribution of wealth in a dynamic context with hidden information, by adding the assumption of non-observable investment. The optimal wealth distribution is bounded in this case, where the promised utility to the agent must, simultaneously, punish cheating in the problem of hidden information and reward effort in the problem of hidden action.

27 March Raicho Bojilov will present:
Risk-Sharing Regimes
This research project considers the development of a framework for the analysis of risk-sharing arrangements under arbitrary deviations. There is a finite number of identical, infinitely lived, and risk-averse individuals. The income process is publicly observed, i.i.d. over time and across individuals, and income cannot be transfered over time and across states. The individuals are allowed to form finite size risk-sharing arrangements, such that after no history a subgroup of the population finds it profitable to form a new risk-sharing arrangement. The proposed solution of the problem is based on a concept called risk-sharing regime, which specifies how in each state the population organizes into coalitions to share risk. A definition of stable risk-sharing regime is provided, along with a proof of existence. The presentation will end with a discussion on the characterization of the solution and how the solution relates to the past literature on renegotiation-proof equilibria.

3 April Anne Jirapattanakul will present:
An Auction with Asymmetrically Informed Bidders
Bidders may vary in their knowledge of valuations. Some may know their values perfectly while don't. I analysed the case of asymmetrically informed bidders under the auction with endogenous entry setting. Optimal reserve price and entry fee for social welfare as well as for seller's revenue will be analysed.

10 April Marcos Yamada Nakaguma will present:
Endogenous Institutions and Constitutional Design
This research attempts to contribute to a better understanding of the factors that determine and shape the emergence of institutions. We study this question in the context of the constitutional choice between two main forms of government organization: the parliamentary and the presidential regimes. We use city-level data on the Brazilian Plebiscite of 1993, which allowed citizens to choose between these two types of regimes. Preliminary results show that populations with excluded access to the judicial system tended to prefer the presidential regime for its greater levels of political accountability and control.

17 April Fang He will present:
Intra-district School Choice and School Segregation
School choice and segregation have come to the forefront of US education policy with the recent Supreme Court ruling barring the use of race in school assignment. I attempt to address the effects of intra-district school choice on school segregation with a theoretical model. This model builds upon Sethi and Somanathan (2004) but introduces a new type of peer effects. In this presentation, I will explore equilibria that lead to student decisions characterized by stratification by ability.

24 April Takakazu Honryo: will present
Game Theoreric Determination of Competition Policies in a Dynamic General Equilibrium
This study attempts to develop an way to analyze games between governments in which thier payoffs are determined in a dynamic general equilibrium fashion. As an example, this study constructs a game between two countries in which the countries strategically choose their competition policies once and for all, in which their welfares are represented as a discounted sum of future utilities. This study demonstrates that in a Nash equilibrium, one country maintains perfect competition in its domestic market and the other country tolerates anti-competitive practices in its domestic market. I further discuss about the possible extension to a case in which the governments` strategies are Marcov.

1 May Carlos Perez: will present
Capital structure, regulation and the design of entry
I study the financial contracting between the insider equity holders and external investors of a firm subject to industrial regulation in some of its activities. Specifically, I examine how the choice of capital structure conditions the regulatory policy via its effect on the distribution of control rights.A regulator willing to ensure the continuation of activities of the firm will adapt its regulation according to industry conditions and characteristics of the control group of the firm. The policies under study include production quotas and entry policy over the unregulated sector of the industry.

8 May Canceled

23 January	No Meeting
30 January	Laurent Lamy will present: Competition between auction houses: a shill bidding perspective The analysis of the English auction with participation costs is utterly modified if the seller is unable to commit not to participate. In the independent private value model, we characterize the full set of equilibria that are symmetric among buyers and with a strategic seller being able to bid in the same way as any buyer through a shill bidding activity. The set of implementable participation cutoffs is severely limited by the shill bidding activity. The optimal reserve price and related comparative statics on revenue and welfare are derived. Imperfect Bertrand competition between auction houses is analyzed. Under small shill bidding costs the seller may prefer to contract with auction houses with higher fees since they are making the shill bidding activity more costly. Click here to see the paper
7 February	No Meeting
14 February	No Meeting
21 February	David Lopez Rodriguez: will present Size and Scope of Government: Ideology versus Strategy A two-party model of electoral competition is built to analyze the impact of ideological and strategic factors on fiscal policy. I extend the basic framework of probabilistic voting introducing ideological preferences for the provision of collective goods. The intensity of these preferences and the degree of political opportunism will determine the optimal size and composition of public spending under different governments. Additionally, I discuss which groups are more targeted with pork-barrel spending.
28 February	Pierre Fleckinger will present On Correlation and Competition under Moral Hazard This paper reexamines the issue of competitive versus collective incentives in a multiagent moral hazard framework. A detailed analysis of an information structure allowing both variance to change with effort levels and correlation to change with efforts pairs provides new results. The baseline fact is that under (some notion of) complementarity the optimal scheme is collective, while it is competitive under substitutability. It is then shown that the widespread idea that the principal should use all the more competitive schemes that the equilibrium outcomes are more correlated is not a generic insight. This is so because correlation levels varying with effort pairs can create informational complementarities, and can thereby plead for joint performance evaluation. When the agents are risk-averse, that informational effect has to be traded off against the agents' insurance concerns. The optimal scheme is then either competitive or mixed, a contractual form surprisingly missing in the optimal contracting literature. Mixed schemes can be interpreted as the use of aggregate profit sharing in combination with selective firings or promotions.
6 March	Yun Kyung Kim: will present Managers-led firms and collusive behaviors The collusion theory in long-run oligopolies within a discounted repeated game framework has been a critical issue in micro economics not only for its theoretical importance but also for explanations on the real world economy. The relationship between collusive behaviors and corporate governance, especially managers' incentives, is also examined because managers make a price/output decision. In this presentation, I would like to see how managers' incentives are considered in the product market competition from previous studies and to discuss how it can be developed further.
13 March	Heriberto Tapia will present: Bounded Inequality with Private Information: The Role of Unobservable Investment This paper extends the discussion on the optimal distribution of wealth in a dynamic context with hidden information, by adding the assumption of non-observable investment. The optimal wealth distribution is bounded in this case, where the promised utility to the agent must, simultaneously, punish cheating in the problem of hidden information and reward effort in the problem of hidden action.
27 March	Raicho Bojilov will present: Risk-Sharing Regimes This research project considers the development of a framework for the analysis of risk-sharing arrangements under arbitrary deviations. There is a finite number of identical, infinitely lived, and risk-averse individuals. The income process is publicly observed, i.i.d. over time and across individuals, and income cannot be transfered over time and across states. The individuals are allowed to form finite size risk-sharing arrangements, such that after no history a subgroup of the population finds it profitable to form a new risk-sharing arrangement. The proposed solution of the problem is based on a concept called risk-sharing regime, which specifies how in each state the population organizes into coalitions to share risk. A definition of stable risk-sharing regime is provided, along with a proof of existence. The presentation will end with a discussion on the characterization of the solution and how the solution relates to the past literature on renegotiation-proof equilibria.
3 April	Anne Jirapattanakul will present: An Auction with Asymmetrically Informed Bidders Bidders may vary in their knowledge of valuations. Some may know their values perfectly while don't. I analysed the case of asymmetrically informed bidders under the auction with endogenous entry setting. Optimal reserve price and entry fee for social welfare as well as for seller's revenue will be analysed.
10 April	Marcos Yamada Nakaguma will present: Endogenous Institutions and Constitutional Design This research attempts to contribute to a better understanding of the factors that determine and shape the emergence of institutions. We study this question in the context of the constitutional choice between two main forms of government organization: the parliamentary and the presidential regimes. We use city-level data on the Brazilian Plebiscite of 1993, which allowed citizens to choose between these two types of regimes. Preliminary results show that populations with excluded access to the judicial system tended to prefer the presidential regime for its greater levels of political accountability and control.
17 April	Fang He will present: Intra-district School Choice and School Segregation School choice and segregation have come to the forefront of US education policy with the recent Supreme Court ruling barring the use of race in school assignment. I attempt to address the effects of intra-district school choice on school segregation with a theoretical model. This model builds upon Sethi and Somanathan (2004) but introduces a new type of peer effects. In this presentation, I will explore equilibria that lead to student decisions characterized by stratification by ability.
24 April	Takakazu Honryo: will present Game Theoreric Determination of Competition Policies in a Dynamic General Equilibrium This study attempts to develop an way to analyze games between governments in which thier payoffs are determined in a dynamic general equilibrium fashion. As an example, this study constructs a game between two countries in which the countries strategically choose their competition policies once and for all, in which their welfares are represented as a discounted sum of future utilities. This study demonstrates that in a Nash equilibrium, one country maintains perfect competition in its domestic market and the other country tolerates anti-competitive practices in its domestic market. I further discuss about the possible extension to a case in which the governments` strategies are Marcov.
1 May	Carlos Perez: will present Capital structure, regulation and the design of entry I study the financial contracting between the insider equity holders and external investors of a firm subject to industrial regulation in some of its activities. Specifically, I examine how the choice of capital structure conditions the regulatory policy via its effect on the distribution of control rights.A regulator willing to ensure the continuation of activities of the firm will adapt its regulation according to industry conditions and characteristics of the control group of the firm. The policies under study include production quotas and entry policy over the unregulated sector of the industry.
8 May	Canceled