Relative Performance Evaluation
|
|
- Shanna Mitchell
- 5 years ago
- Views:
Transcription
1 Relative Performance Evaluation Ram Singh Department of Economics March, 205 Ram Singh (Delhi School of Economics) Moral Hazard March, 205 / 3
2 Model I Multiple Agents: Relative Performance Evaluation Relative Performance Evaluations are widely used when individual performances can be observed: Question At School: In grading, ranking etc. At Work: In promotions, hiring and firing, etc. In Sports: In declaring winner, runners-up etc. Is relative performance evaluation efficient? Should the wage/reward be based only on the absolute value of the output, or also on the relative ranking of performances? Consider: One Principal and Two agents and Two outputs Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
3 Model II Two agents produce Two (possibly different) individually observable outputs Principal is Risk-neutral but agents are Risk-averse with CARA preferences The production technology: Q = q + q 2, where q (e, ɛ, ɛ 2 ) = e + ɛ + αɛ 2 q 2 (e 2, ɛ, ɛ 2 ) = e 2 + ɛ 2 + αɛ where ɛ and ɛ 2 are iid with ɛ i N(0, σ 2 ). Three cases: α = 0: Technologically independent outputs α > 0: Positively correlated outputs α < 0: Negatively correlated outputs Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
4 Model III Principal is risk-neutral. V (q, q 2, w) = E[q + q 2 w w 2 ] Agents are risk-averse. u i (w i, e) = e r i (w i ψ i (e)), r i > 0, where r i = u i u i > 0, i.e., CARA, and ψ i (e) = 2 c ie 2 is the (money) cost of effort e by agent i. e is not contractible but q i s are. For simplicity assume: r = r 2 = r, and c = c 2 = c, as a result, ψ (.) = ψ 2 (.) = ψ(.) = 2 ce2 Linear Contracts: w (q, q 2 ) = t + s q + s q 2 w 2 (q, q 2 ) = t 2 + s 2 q 2 + s 2 q Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
5 Model IV Multiple Agents: Relative Performance Evaluation s = 0 and s 2 = 0 will imply no relative performance evaluation. When is it optimum to have s 0 and s 2 0? Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
6 Model V Second Best: The principal will solve max E( q i w i ) s i, s i,t i However, since the agents are assumed to be identical, for each agent the principal solves max s i, s i,t i E(q i w i ) say s.t. max E(q w ) s, s,t E(u (w, e )) = E( e r(w ψ(e )) ) e r( w) = u( w) (IR) e = arg max E( e r(w ψ(e)) ) e (IC) Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
7 Model VI e is the effort chosen by first agent. Let s define Note that: ŵ (e) }{{} certainty equivalent wage e rŵ (e) = E( e r(w ψ (e)) ) =. }{{} expected wage. }{{} effort cost. }{{} risk premium Therefore, w (q, q 2 ) = t + s q + s q 2 = t + s (e + ɛ + αɛ 2 ) + s (e 2 + ɛ 2 + αɛ ) = t + s e + s e 2 + s (ɛ + αɛ 2 ) + s (ɛ 2 + αɛ ) Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
8 Model VII Var[w (q, q 2 )] = Var[s (ɛ + αɛ 2 ) + s (ɛ 2 + αɛ )], i.e., = Var[(s + α s )ɛ + ( s + αs )ɛ 2 ], i.e., = σ 2 [(s + α s ) 2 + ( s + αs ) 2 ]. The two agents will choose efforts independently in a N.E. For given e 2 opted by the second agent, the certainty equivalent payoff of the first agent is a function of his effort level e and is given by ŵ (e) = E(w (q, q 2 )) 2 ce2 rσ2 2 [(s + α s ) 2 + ( s + αs ) 2 ], i.e., in view of w (q, q 2 ) = t + s q + s q 2 ; q (e, ɛ, ɛ 2 ) = e + ɛ + αɛ 2, and q 2 (e 2, ɛ, ɛ 2 ) = e 2 + ɛ 2 + αɛ, we have E(w (q, q 2 )) = t + s e + s e 2. Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
9 Model VIII Therefore, ŵ (e) = t + s e + s e 2 2 ce2 rσ2 2 [(s + α s ) 2 + ( s + αs ) 2 ] () So, given e 2, the agent will solve max {t + s e + s e 2 e 2 ce2 rσ2 2 [(s + α s ) 2 + ( s + αs ) 2 ]} (2) That is, e SB solves the following foc e SB = s c (3) Now from () and (3), we get ŵ (e SB ) = t + s2 2c + s s 2 rσ2 c 2 [(s + α s ) 2 + ( s + αs ) 2 ] (4) Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
10 Model IX Now, in view of e SB = s c, the P s problem can be written as s.t. max { s t, s,s c (t + s2 c + s s 2 c )} ŵ = t + s2 2c + s s 2 rσ2 c 2 [(s + α s ) 2 + ( s + αs ) 2 ] = w (5) Using the value of t from (5) and ignoring w, the P s problem can be rewritten as max{ s s,s c s2 2c rσ2 2 [(s + α s ) 2 + ( s + αs ) 2 ]} Remark: Note: For given s, optimizing the above w.r.t. s is equivalent to solving min{ rσ2 s 2 [(s + α s ) 2 + ( s + αs ) 2 ]} Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
11 Model X Multiple Agents: Relative Performance Evaluation So, for given s, s SB solves the following the following foc 2α = ( + α 2 )s (6) s SB In view of (6), the P s problem reduces to So, the s SB solves the following foc max{ s s c s2 2c rσ2 ( α 2 ) 2 2 s2 ( + α 2 ) } s SB + α 2 = + α 2 + rcσ 2 ( α 2 ) 2 (7) Ram Singh (Delhi School of Economics) Moral Hazard March, 205 / 3
12 Model XI Multiple Agents: Relative Performance Evaluation Remark From (6) note that α = 0 s SB = 0 and α = 0 s SB. That is, +rcσ 2 if the outputs are technologically independent than relative performance evaluation is not optimum. Why? = α > 0 s SB < 0, i.e., an agent is penalized[rewarded] when the other individual s performance is higher[lower]. However, α < 0 s SB > 0. In this case, an agent is compensated[penalized] when the other agent s performance is higher [lower]. Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
13 Model XII Remark From (6), (α ) [ s SB = s SB ] and from (7), (α ) [ssb = ]. When α =, there is a common shock affects the two performances. In this case, the relative performance evaluation allows filtering out of the common shock. Therefore, the FB can be implemented even with risk-averse agents. Question Suppose α =. Can the agents collude and choose e = 0 each? Ram Singh (Delhi School of Economics) Moral Hazard March, / 3
Linear Contracts. Ram Singh. February 23, Department of Economics. Ram Singh (Delhi School of Economics) Moral Hazard February 23, / 22
Ram Singh Department of Economics February 23, 2015 Ram Singh (Delhi School of Economics) Moral Hazard February 23, 2015 1 / 22 SB: Linear Contracts I Linear Contracts Assumptions: q(e, ɛ) = e + ɛ, where
More informationMoral Hazard: Characterization of SB
Moral Hazard: Characterization of SB Ram Singh Department of Economics March 2, 2015 Ram Singh (Delhi School of Economics) Moral Hazard March 2, 2015 1 / 19 Characterization of Second Best Contracts I
More informationMoral Hazard in Teams
Moral Hazard in Teams Ram Singh Department of Economics September 23, 2009 Ram Singh (Delhi School of Economics) Moral Hazard September 23, 2009 1 / 30 Outline 1 Moral Hazard in Teams: Model 2 Unobservable
More information1. Linear Incentive Schemes
ECO 317 Economics of Uncertainty Fall Term 2009 Slides to accompany 20. Incentives for Effort - One-Dimensional Cases 1. Linear Incentive Schemes Agent s effort x, principal s outcome y. Agent paid w.
More informationLEN model. And, the agent is risk averse with utility function for wealth w and personal cost of input c (a), a {a L,a H }
LEN model The LEN model is a performance evaluation frame for dealing with unbounded performance measures. In particular, LEN stands for Linear compensation, negative Exponential utility, and Normally
More information1 Moral Hazard: Multiple Agents 1.1 Moral Hazard in a Team
1 Moral Hazard: Multiple Agents 1.1 Moral Hazard in a Team Multiple agents (firm?) Partnership: Q jointly affected Individual q i s. (tournaments) Common shocks, cooperations, collusion, monitor- ing.
More informationGame Theory, Information, Incentives
Game Theory, Information, Incentives Ronald Wendner Department of Economics Graz University, Austria Course # 320.501: Analytical Methods (part 6) The Moral Hazard Problem Moral hazard as a problem of
More informationGeneral idea. Firms can use competition between agents for. We mainly focus on incentives. 1 incentive and. 2 selection purposes 3 / 101
3 Tournaments 3.1 Motivation General idea Firms can use competition between agents for 1 incentive and 2 selection purposes We mainly focus on incentives 3 / 101 Main characteristics Agents fulll similar
More informationEC476 Contracts and Organizations, Part III: Lecture 2
EC476 Contracts and Organizations, Part III: Lecture 2 Leonardo Felli 32L.G.06 19 January 2015 Moral Hazard: Consider the contractual relationship between two agents (a principal and an agent) The principal
More informationWhat happens when there are many agents? Threre are two problems:
Moral Hazard in Teams What happens when there are many agents? Threre are two problems: i) If many agents produce a joint output x, how does one assign the output? There is a free rider problem here as
More informationOrganization, Careers and Incentives
Organization, Careers and Incentives Chapter 4 Robert Gary-Bobo March 2018 1 / 31 Introduction Introduction A firm is a pyramid of opportunities (Alfred P. Sloan). Promotions can be used to create incentives.
More informationHidden information. Principal s payoff: π (e) w,
Hidden information Section 14.C. in MWG We still consider a setting with information asymmetries between the principal and agent. However, the effort is now perfectly observable. What is unobservable?
More informationGame Theory and Economics of Contracts Lecture 5 Static Single-agent Moral Hazard Model
Game Theory and Economics of Contracts Lecture 5 Static Single-agent Moral Hazard Model Yu (Larry) Chen School of Economics, Nanjing University Fall 2015 Principal-Agent Relationship Principal-agent relationship
More informationModule 8: Multi-Agent Models of Moral Hazard
Module 8: Multi-Agent Models of Moral Hazard Information Economics (Ec 515) George Georgiadis Types of models: 1. No relation among agents. an many agents make contracting easier? 2. Agents shocks are
More informationUniversity of Warwick, EC9A0 Maths for Economists Lecture Notes 10: Dynamic Programming
University of Warwick, EC9A0 Maths for Economists 1 of 63 University of Warwick, EC9A0 Maths for Economists Lecture Notes 10: Dynamic Programming Peter J. Hammond Autumn 2013, revised 2014 University of
More informationMoral Hazard. EC202 Lectures XV & XVI. Francesco Nava. February London School of Economics. Nava (LSE) EC202 Lectures XV & XVI Feb / 19
Moral Hazard EC202 Lectures XV & XVI Francesco Nava London School of Economics February 2011 Nava (LSE) EC202 Lectures XV & XVI Feb 2011 1 / 19 Summary Hidden Action Problem aka: 1 Moral Hazard Problem
More information1. The General Linear-Quadratic Framework
ECO 317 Economics of Uncertainty Fall Term 2009 Slides to accompany 21. Incentives for Effort - Multi-Dimensional Cases 1. The General Linear-Quadratic Framework Notation: x = (x j ), n-vector of agent
More informationMoral Hazard. Felix Munoz-Garcia. Advanced Microeconomics II - Washington State University
Moral Hazard Felix Munoz-Garcia Advanced Microeconomics II - Washington State University Moral Hazard Reading materials: Start with Prajit Dutta, Chapter 19. MWG, Chapter 14 Macho-Stadler and Perez-Castrillo,
More informationEconomics 385: Suggested Solutions 2
Economics 385: Suggested Solutions 2 7 March, 2007 Signalling Question 1 (Discrete Action Set) (a) In the separating equilibrium, e (10) = e 1. The high type needs to obtain enough education to separate
More informationSome Notes on Moral Hazard
Some Notes on Moral Hazard John Morgan University of California at Berkeley Preliminaries Up until this point, we have been concerned mainly with the problem of private information on the part of the agent,
More informationAlmost essential: Consumption and Uncertainty Probability Distributions MICROECONOMICS
Prerequisites Almost essential: Consumption and Uncertainty Probability Distributions RISK MICROECONOMICS Principles and Analysis Frank Cowell July 2017 1 Risk and uncertainty In dealing with uncertainty
More informationCompetitive Equilibria in a Comonotone Market
Competitive Equilibria in a Comonotone Market 1/51 Competitive Equilibria in a Comonotone Market Ruodu Wang http://sas.uwaterloo.ca/ wang Department of Statistics and Actuarial Science University of Waterloo
More informationEconomics 385: Homework 2
Economics 385: Homework 2 7 March, 2007 Signalling The following questions concern variants of Spence s education model. Unless other stated, the utility of type θ who take e years of education and is
More informationMoral Hazard: Hidden Action
Moral Hazard: Hidden Action Part of these Notes were taken (almost literally) from Rasmusen, 2007 UIB Course 2013-14 (UIB) MH-Hidden Actions Course 2013-14 1 / 29 A Principal-agent Model. The Production
More informationOptimal Incentive Contract with Costly and Flexible Monitoring
Optimal Incentive Contract with Costly and Flexible Monitoring Anqi Li 1 Ming Yang 2 1 Department of Economics, Washington University in St. Louis 2 Fuqua School of Business, Duke University May 2016 Motivation
More informationTeoria das organizações e contratos
Teoria das organizações e contratos Chapter 6: Adverse Selection with two types Mestrado Profissional em Economia 3 o trimestre 2015 EESP (FGV) Teoria das organizações e contratos 3 o trimestre 2015 1
More informationScreening. Diego Moreno Universidad Carlos III de Madrid. Diego Moreno () Screening 1 / 1
Screening Diego Moreno Universidad Carlos III de Madrid Diego Moreno () Screening 1 / 1 The Agency Problem with Adverse Selection A risk neutral principal wants to o er a menu of contracts to be o ered
More informationContracts in informed-principal problems with moral hazard
Contracts in informed-principal problems with moral hazard Nicholas C Bedard January 20, 2016 Abstract In many cases, an employer has private information about the potential productivity of a worker, who
More informationLabor Economics, Lectures 5 and 6: Career Concerns and Multitasking
Labor Economics, 14.661. Lectures 5 and 6: Career Concerns and Multitasking Daron Acemoglu MIT November 9 and 13, 2018 Daron Acemoglu (MIT) Moral Hazard November 9 and 13, 2018 1 / 63 Introduction Introduction
More informationMinimum Wages and Excessive E ort Supply
Minimum Wages and Excessive E ort Supply Matthias Kräkel y Anja Schöttner z Abstract It is well-known that, in static models, minimum wages generate positive worker rents and, consequently, ine ciently
More informationMicroeconomics. 3. Information Economics
Microeconomics 3. Information Economics Alex Gershkov http://www.econ2.uni-bonn.de/gershkov/gershkov.htm 9. Januar 2008 1 / 19 1.c The model (Rothschild and Stiglitz 77) strictly risk-averse individual
More informationLecture 5: Labour Economics and Wage-Setting Theory
Lecture 5: Labour Economics and Wage-Setting Theory Spring 2017 Lars Calmfors Literature: Chapter 7 Cahuc-Carcillo-Zylberberg: 435-445 1 Topics Weakly efficient bargaining Strongly efficient bargaining
More informationThis is designed for one 75-minute lecture using Games and Information. October 3, 2006
This is designed for one 75-minute lecture using Games and Information. October 3, 2006 1 7 Moral Hazard: Hidden Actions PRINCIPAL-AGENT MODELS The principal (or uninformed player) is the player who has
More informationLecture Notes 10: Dynamic Programming
University of Warwick, EC9A0 Maths for Economists Peter J. Hammond 1 of 81 Lecture Notes 10: Dynamic Programming Peter J. Hammond 2018 September 28th University of Warwick, EC9A0 Maths for Economists Peter
More informationGame Theory. Monika Köppl-Turyna. Winter 2017/2018. Institute for Analytical Economics Vienna University of Economics and Business
Monika Köppl-Turyna Institute for Analytical Economics Vienna University of Economics and Business Winter 2017/2018 Static Games of Incomplete Information Introduction So far we assumed that payoff functions
More informationMoral Hazard: Part 1. April 9, 2018
Moral Hazard: Part 1 April 9, 2018 Introduction In a standard moral hazard problem, the agent A is characterized by only one type. As with adverse selection, the principal P wants to engage in an economic
More informationAdvanced Microeconomics
Advanced Microeconomics ECON5200 - Fall 2012 Introduction What you have done: - consumers maximize their utility subject to budget constraints and firms maximize their profits given technology and market
More informationEquilibrium in Factors Market: Properties
Equilibrium in Factors Market: Properties Ram Singh Microeconomic Theory Lecture 12 Ram Singh: (DSE) Factor Prices Lecture 12 1 / 17 Questions What is the relationship between output prices and the wage
More informationReciprocity in the Principal Multiple Agent Model
WORKING PAPER NO. 314 Reciprocity in the Principal Multiple Agent Model Giuseppe De Marco and Giovanni Immordino May 2012 University of Naples Federico II University of Salerno Bocconi University, Milan
More informationOnline Appendix for Dynamic Procurement under Uncertainty: Optimal Design and Implications for Incomplete Contracts
Online Appendix for Dynamic Procurement under Uncertainty: Optimal Design and Implications for Incomplete Contracts By Malin Arve and David Martimort I. Concavity and Implementability Conditions In this
More informationAP Exercise 1. This material is created by and is for your personal and non-commercial use only.
1 AP Exercise 1 Question 1 In which of the following situations, does the list of numbers involved make an arithmetic progression, and why? (i) The taxi fare after each km when the fare is Rs 15 for the
More informationLecture Notes on Solving Moral-Hazard Problems Using the Dantzig-Wolfe Algorithm
Lecture Notes on Solving Moral-Hazard Problems Using the Dantzig-Wolfe Algorithm Edward Simpson Prescott Prepared for ICE 05, July 2005 1 Outline 1. Why compute? Answer quantitative questions Analyze difficult
More informationGame Theory Correlated equilibrium 1
Game Theory Correlated equilibrium 1 Christoph Schottmüller University of Copenhagen 1 License: CC Attribution ShareAlike 4.0 1 / 17 Correlated equilibrium I Example (correlated equilibrium 1) L R U 5,1
More information"A Theory of Financing Constraints and Firm Dynamics"
1/21 "A Theory of Financing Constraints and Firm Dynamics" G.L. Clementi and H.A. Hopenhayn (QJE, 2006) Cesar E. Tamayo Econ612- Economics - Rutgers April 30, 2012 2/21 Program I Summary I Physical environment
More informationLecture Notes - Dynamic Moral Hazard
Lecture Notes - Dynamic Moral Hazard Simon Board and Moritz Meyer-ter-Vehn October 27, 2011 1 Marginal Cost of Providing Utility is Martingale (Rogerson 85) 1.1 Setup Two periods, no discounting Actions
More informationMicroeconomic Theory (501b) Problem Set 10. Auctions and Moral Hazard Suggested Solution: Tibor Heumann
Dirk Bergemann Department of Economics Yale University Microeconomic Theory (50b) Problem Set 0. Auctions and Moral Hazard Suggested Solution: Tibor Heumann 4/5/4 This problem set is due on Tuesday, 4//4..
More informationThe Principal-Agent Problem
Andrew McLennan September 18, 2014 I. Introduction Economics 6030 Microeconomics B Second Semester Lecture 8 The Principal-Agent Problem A. In the principal-agent problem there is no asymmetric information
More informationKnightian uncertainty and moral hazard
Journal of Economic Theory 146 (2011) 1148 1172 www.elsevier.com/locate/jet Knightian uncertainty and moral hazard Giuseppe Lopomo a, Luca Rigotti b,, Chris Shannon c a Fuqua School of Business, Duke University,
More information1 Uncertainty. These notes correspond to chapter 2 of Jehle and Reny.
These notes correspond to chapter of Jehle and Reny. Uncertainty Until now we have considered our consumer s making decisions in a world with perfect certainty. However, we can extend the consumer theory
More informationA Theory of Financing Constraints and Firm Dynamics by Clementi and Hopenhayn - Quarterly Journal of Economics (2006)
A Theory of Financing Constraints and Firm Dynamics by Clementi and Hopenhayn - Quarterly Journal of Economics (2006) A Presentation for Corporate Finance 1 Graduate School of Economics December, 2009
More informationA New Class of Non Existence Examples for the Moral Hazard Problem
A New Class of Non Existence Examples for the Moral Hazard Problem Sofia Moroni and Jeroen Swinkels April, 23 Abstract We provide a class of counter-examples to existence in a simple moral hazard problem
More informationECO421: Moral hazard. Marcin P ski. March 26, 2018
ECO421: Moral hazard Marcin P ski March 26, 2018 Plan Introduction Worker Inventor CEO Grades VP Teacher (multi-tasking) Eciency wages Introduction Moral hazard Moral hazard: two agents with misaligned
More informationOptimal contract under adverse selection in a moral hazard model with a risk averse agent
Optimal contract under adverse selection in a moral hazard model with a risk averse agent Lionel Thomas CRESE Université de Franche-Comté, IUT Besanon Vesoul, 30 avenue de l Observatoire, BP1559, 25009
More informationInformed Principal in Private-Value Environments
Informed Principal in Private-Value Environments Tymofiy Mylovanov Thomas Tröger University of Bonn June 21, 2008 1/28 Motivation 2/28 Motivation In most applications of mechanism design, the proposer
More informationMicroeconomics II Lecture 4: Incomplete Information Karl Wärneryd Stockholm School of Economics November 2016
Microeconomics II Lecture 4: Incomplete Information Karl Wärneryd Stockholm School of Economics November 2016 1 Modelling incomplete information So far, we have studied games in which information was complete,
More informationCollusion, Delegation and Supervision with Soft Information
Collusion, Delegation and Supervision with Soft Information Antoine Faure-Grimaud Jean-Jacques Laffont and David Martimort Revised: February 4, 2003 Abstract This paper shows that supervision with soft
More informationContracts, Risk-Sharing, and Incentives
Contracts, Risk-Sharing, and Incentives Bruno Van der Linden Université catholique de Louvain January 25, 2011 (ESL-UCL) 1 / 102 Introduction The labour relationship: Generally a long-term one The labour
More informationAdvanced Microeconomics II
Advanced Microeconomics Auction Theory Jiaming Mao School of Economics, XMU ntroduction Auction is an important allocaiton mechanism Ebay Artwork Treasury bonds Air waves ntroduction Common Auction Formats
More informationMechanism design and allocation algorithms for energy-network markets with piece-wise linear costs and quadratic externalities
1 / 45 Mechanism design and allocation algorithms for energy-network markets with piece-wise linear costs and quadratic externalities Alejandro Jofré 1 Center for Mathematical Modeling & DIM Universidad
More informationRecitation 7: Uncertainty. Xincheng Qiu
Econ 701A Fall 2018 University of Pennsylvania Recitation 7: Uncertainty Xincheng Qiu (qiux@sas.upenn.edu 1 Expected Utility Remark 1. Primitives: in the basic consumer theory, a preference relation is
More information(a) Output only takes on two values, so the wage will also take on two values: z(0) = 0 0 z(0) 0. max s(d)z { d. n { z 1 0 (n + d) 2.
Steve Pischke/Jin Li Labor Economics II Problem Set Answers. An Agency Problem (a) Output only takes on two values, so the wage will also take on two values: z( ) z 0 z The worker s problem: z(0) 0 0 z(0)
More informationx ax 1 2 bx2 a bx =0 x = a b. Hence, a consumer s willingness-to-pay as a function of liters on sale, 1 2 a 2 2b, if l> a. (1)
Answers to Exam Economics 201b First Half 1. (a) Observe, first, that no consumer ever wishes to consume more than 3/2 liters (i.e., 1.5 liters). To see this, observe that, even if the beverage were free,
More informationHybrid All-Pay and Winner-Pay Contests
Hybrid All-Pay and Winner-Pay Contests Seminar at DICE in Düsseldorf, June 5, 208 Johan N. M. Lagerlöf Dept. of Economics, U. of Copenhagen Email: johan.lagerlof@econ.ku.dk Website: www.johanlagerlof.com
More informationUNIVERSITY OF CALGARY. Three Essays in Structural Estimation: Models of Matching and Asymmetric Information. Liang Chen A THESIS
UNIVERSITY OF CALGARY Three Essays in Structural Estimation: Models of Matching and Asymmetric Information by Liang Chen A THESIS SUBMITTED TO THE FACULTY OF GRADUATE STUDIES IN PARTIAL FULFILLMENT OF
More informationModels of Wage Dynamics
Models of Wage Dynamics Toshihiko Mukoyama Department of Economics Concordia University and CIREQ mukoyama@alcor.concordia.ca December 13, 2005 1 Introduction This paper introduces four different models
More informationChoice under Uncertainty
In the Name of God Sharif University of Technology Graduate School of Management and Economics Microeconomics 2 44706 (1394-95 2 nd term) Group 2 Dr. S. Farshad Fatemi Chapter 6: Choice under Uncertainty
More informationA note on the take-it-or-leave-it bargaining procedure with double moral hazard and risk neutrality
A note on the take-it-or-leave-it bargaining procedure with double moral hazard and risk neutrality A. Citanna HEC - Paris; and GSB - Columbia University, NY September 29, 2003 In this note we study a
More informationAsymmetric Information in Economic Policy. Noah Williams
Asymmetric Information in Economic Policy Noah Williams University of Wisconsin - Madison Williams Econ 899 Asymmetric Information Risk-neutral moneylender. Borrow and lend at rate R = 1/β. Strictly risk-averse
More informationInterbank Lending and Systemic Risk
Interbank Lending and Systemic Risk Rochet Tirole April 2, 2012 Overview Theory of decentralized interbank lending based on peer monitoring Illustrate commitment problem for central bank in decision to
More informationAsset Pricing under Asymmetric Information Strategic Market Order Models
Kyle Asset Pricing under Asymmetric Strategic Market Order Models Markus K. Brunnermeier Princeton University August 17, 2007 Kyle A of Market Microstructure Models simultaneous submission of demand schedules
More information1. The General Linear-Quadratic Framework
ECO 37 Economics of Uncertainty Fall Term 009 Notes for lectures Incentives for Effort - Multi-Dimensional Cases Here we consider moral hazard problems in the principal-agent framewor, restricting the
More informationONLINE ONLY APPENDIX. Endogenous matching approach
ONLINE ONLY APPENDIX Endogenous matching approach In addition with the respondable risk approach, we develop in this online appendix a complementary explanation regarding the trade-off between risk and
More informationInvestor s Increased Shareholding due to Entrepreneur Manager Collusion
Investor s Increased Shareholding due to Entrepreneur Manager Collusion Özgün Atasoy Sabancı University Mehmet Barlo Sabancı University August, 2007 Abstract This study presents an investor/entrepreneur
More informationMoral Hazard and Persistence
Moral Hazard and Persistence Hugo Hopenhayn Department of Economics UCLA Arantxa Jarque Department of Economics U. of Alicante PRELIMINARY AND INCOMPLETE Abstract We study a multiperiod principal-agent
More informationTHE UTILITY PREMIUM. Louis Eeckhoudt, Catholic Universities of Mons and Lille Research Associate CORE
THE UTILITY PREMIUM Louis Eeckhoudt, Catholic Universities of Mons and Lille Research Associate CORE Harris Schlesinger, University of Alabama, CoFE Konstanz Research Fellow CESifo * Beatrice Rey, Institute
More informationLecture Notes - Dynamic Moral Hazard
Lecture Notes - Dynamic Moral Hazard Simon Board and Moritz Meyer-ter-Vehn October 23, 2012 1 Dynamic Moral Hazard E ects Consumption smoothing Statistical inference More strategies Renegotiation Non-separable
More informationBanks, depositors and liquidity shocks: long term vs short term interest rates in a model of adverse selection
Banks, depositors and liquidity shocks: long term vs short term interest rates in a model of adverse selection Geethanjali Selvaretnam Abstract This model takes into consideration the fact that depositors
More informationThe WhatPower Function à An Introduction to Logarithms
Classwork Work with your partner or group to solve each of the following equations for x. a. 2 # = 2 % b. 2 # = 2 c. 2 # = 6 d. 2 # 64 = 0 e. 2 # = 0 f. 2 %# = 64 Exploring the WhatPower Function with
More informationMoral Hazard: Part 2. April 16, 2018
Moral Hazard: Part 2 April 16, 2018 The basic model: A is risk neutral We now turn to the problem of moral hazard (asymmetric information), where A is risk neutral. When A is risk neutral, u (t) is linear.
More informationFundamentals in Optimal Investments. Lecture I
Fundamentals in Optimal Investments Lecture I + 1 Portfolio choice Portfolio allocations and their ordering Performance indices Fundamentals in optimal portfolio choice Expected utility theory and its
More informationUNIVERSITY OF WISCONSIN DEPARTMENT OF ECONOMICS MACROECONOMICS THEORY Preliminary Exam August 1, :00 am - 2:00 pm
UNIVERSITY OF WISCONSIN DEPARTMENT OF ECONOMICS MACROECONOMICS THEORY Preliminary Exam August 1, 2017 9:00 am - 2:00 pm INSTRUCTIONS Please place a completed label (from the label sheet provided) on the
More informationMathematics for Economics and Finance
Mathematics for Economics and Finance Michael Harrison and Patrick Waldron B 375482 Routledge Taylor & Francis Croup LONDON AND NEW YORK Contents List of figures ix List of tables xi Foreword xiii Preface
More informationContract Theory - Intro. Roman Inderst
1 Contract Theory - Intro Roman Inderst 2017 2 Overview Focus is contract theory. We explore a principal - agent setting, with core applications to firm - consumer, firm - worker and lender - borrower.
More informationThe Firm-Growth Imperative: A Theory of Production and Personnel Management
The Firm-Growth Imperative: A Theory of Production and Personnel Management Rongzhu Ke Hong Kong Baptist University Jin Li London School of Economics Michael Powell Kellogg School of Management Management
More informationMechanism Design in the Presence of Externalities
Mechanism Design in the Presence of Externalities Sebastian Kodritsch London School of Economics and Political Science January 14, 2011 Sebastian Kodritsch (LSE) Mechanism Design in the Presence of Externalities
More informationSupervision, Collusion, and Optimal Contract Design with Costly Information Acquisition
Supervision, Collusion, and Optimal Contract Design with Costly Information Acquisition XiaoGang Che Guanxi Yi PRELIMINARY and INCOMPLETE November 2014 Abstract In this paper, we study the impacts of costly
More informationMulti prizes for multi tasks: externalities and the optimal design of tournaments
Multi prizes for multi tasks: externalities and the optimal design of tournaments Xu Tang Department of Economics, Georgia State University Email: xtang4@gsu.edu Yongsheng Xu Department of Economics, Georgia
More informationExistence and monotonicity of solutions to moral hazard problems
Existence and monotonicity of solutions to moral hazard problems G. Carlier Université Paris Dauphine, CEREMADE, UMR CNRS 7534, Place du Maréchal De Lattre De Tassigny 75775 PARIS CEDEX 16 R.-A. Dana Université
More informationDepartment of Economics, University of California, Davis Ecn 200C Micro Theory Professor Giacomo Bonanno ANSWERS TO PRACTICE PROBLEMS 18
Department of Economics, University of California, Davis Ecn 00C Micro Theory Professor Giacomo Bonanno ANSWERS TO PRACTICE PROBEMS 8. If price is Number of cars offered for sale Average quality of cars
More informationMarket Equilibrium and the Core
Market Equilibrium and the Core Ram Singh Lecture 3-4 September 22/25, 2017 Ram Singh (DSE) Market Equilibrium September 22/25, 2017 1 / 19 Market Exchange: Basics Let us introduce price in our pure exchange
More informationSolution for Problem Set 3
Solution for Problem Set 3 Q. Heterogeneous Expectations. Consider following dynamic IS-LM economy in Lecture Notes 8: IS curve: y t = ar t + u t (.) where y t is output, r t is the real interest rate,
More informationSolving a Dynamic (Stochastic) General Equilibrium Model under the Discrete Time Framework
Solving a Dynamic (Stochastic) General Equilibrium Model under the Discrete Time Framework Dongpeng Liu Nanjing University Sept 2016 D. Liu (NJU) Solving D(S)GE 09/16 1 / 63 Introduction Targets of the
More informationD i (w; p) := H i (w; S(w; p)): (1)
EC0 Microeconomic Principles II Outline Answers. (a) Demand for input i can be written D i (w; p) := H i (w; S(w; p)): () where H i is the conditional demand for input i and S is the supply function. From
More informationOptimal Risk Sharing in the Presence of Moral Hazard under Market Risk and Jump Risk
Optimal Risk Sharing in the Presence of Moral Hazard under Market Risk and Jump Risk Takashi Misumi Hitotsubashi University takashi.misumi@r.hit-u.ac.jp Koichiro Takaoka Hitotsubashi University k.takaoka@r.hit-u.ac.jp
More informationChoice under uncertainty
Choice under uncertainty Expected utility theory The agent chooses among a set of risky alternatives (lotteries) Description of risky alternatives (lotteries) a lottery L = a random variable on a set of
More informationAJAE appendix for Risk rationing and wealth effects in credit markets: Theory and implications for agriculture development
AJAE appendix for Risk rationing and wealth effects in credit markets: Theory and implications for agriculture development Stephen R. Boucher Agricultural and Resource Economics UC-Davis boucher@primal.ucdavis.edu
More informationDecision, Risk and Operations Working Papers Series
Decision, Risk and Operations Working Papers Series The cost of moral hazard and limited liability in the principal-agent problem F. Balmaceda, S. R. Balseiro, J. R. Correa, N. E. Stier-Moses July 2010;
More informationSTRUCTURE Of ECONOMICS A MATHEMATICAL ANALYSIS
THIRD EDITION STRUCTURE Of ECONOMICS A MATHEMATICAL ANALYSIS Eugene Silberberg University of Washington Wing Suen University of Hong Kong I Us Irwin McGraw-Hill Boston Burr Ridge, IL Dubuque, IA Madison,
More information1.1 A Simple Model of Price Discrimination Full Information Benchmark: First-Best Outcome or Perfect Price
Contract Theory Contents 1 Hidden Information: Screening 6 1.1 A Simple Model of Price Discrimination................... 8 1.1.1 Full Information Benchmark: First-Best Outcome or Perfect Price Discrimination.............................
More informationPrincipal - Agent model under screening
Principal - Agent model under screening Microeconomics 2 Presentation: Guillaume Pommey, Slides: Bernard Caillaud Master APE - Paris School of Economics March 9 (Lecture 10 and March 13 (Lecture 11, 2017
More information