Questions tagged [asymmetric-information]
The asymmetric-information tag has no usage guidance.
55 questions
-1
votes
0
answers
18
views
What would you pay for insider information, given sufficient signals? [closed]
Firstly, no this is not an insider trader. It's a genuine hypothetical I am asking to conduct social / quantitative research about insider trading and the minimum viable information necessary. I ...
0
votes
1
answer
26
views
Market signaling with a national exam
Question:
Consider an economy with a competitive labour market in which firms pay a wage equal to the expected productivity of the employee. There are two types of employees: Good (with a productivity ...
- 25
0
votes
0
answers
20
views
Papers on signalling + validation?
Looking to see if there's any game theory literature in which 2+ players play a game of incomplete information. One set of (informed) players gives Spence-like signals to the uninformed player(s). The ...
1
vote
0
answers
67
views
Asymmetric Information in the Labor Market
In Greenwald's paper "Adverse Selection in the Labour Market", he argued that there exists an asymmetric information problem in labor market where firms tend to keep workers who are more ...
- 305
2
votes
1
answer
239
views
Information asymmetry and market failure
Markets with information asymmetry frequently result in a loss of efficiency relative to perfect information, see e.g.; moral hazard.
Yet I have seen the claim
Information asymmetry isn't a market ...
- 29.7k
3
votes
1
answer
63
views
Banerjee and Duflo - Do Firms Want to Borrow More? - Theoretical model
I am reading Banerjee and Duflo's (2014) seminal paper on credit constraints faced by firms in India.
In their theoretical model (see page 11, namely figure 1), they show that, if firms are credit not ...
- 165
1
vote
1
answer
96
views
Definition of information structure in an incomplete information game
I try to understand the model in this paper, pages 48-49. (Bergemann, D., & Morris, S. (2019). Information design: A unified perspective. Journal of Economic Literature, 57(1), 44–95. https://doi....
- 113
1
vote
0
answers
56
views
In a standard labor market signaling game, which weak Perfect-Bayesian equilibria (PBE) are actually sequential equilibria?
In a standard labor market signaling game with two types, the only "sensible" equilibria are the least-cost separating equilibria; as such these are the equilibria that survive a standard ...
- 141
1
vote
1
answer
209
views
Understanding How to Counter the Winner's Curse
In both popular level books on economics/rationality/etc., and videos of actual economics lectures, I keep running into the suggestion to bid in a common value auction as though victory is already ...
- 455
2
votes
2
answers
117
views
What are some market-based solutions to the problem of information asymmetry posed by experience goods and credence goods?
I would like to know how the market, if left to itself (i.e. no government intervention allowed), would solve the problem of information asymmetry in experience goods as well as credence goods. What ...
- 413
1
vote
2
answers
68
views
In games of Bayesian Persuasion, under what conditions is Receiver better off than under uninformative signals?
I've been working through a few Bayesian Persuasion (BP) models à la Kamenica and Gentzkow (2011), and a feature that seems to arise often is that commitment to a persuasion mechanism is Pareto ...
- 11
1
vote
0
answers
30
views
Information Asymmetry in capital markets: EU ad-hoc announcements/8-K filings in other countries
In many countries, companies whose securities are traded on a stock exchange are subject to an ad-hoc disclosure requirement. This ad-hoc announcement publication duty refers to the obligation to ...
- 11
1
vote
1
answer
295
views
The intuitive criterion
I have asked a similiar question before, but I would very much appreciate if someone would say if my reasoning in this particular case is correct.
Consider the down below:
For part a) I have found ...
- 169
1
vote
1
answer
546
views
How to understand the intuitive criterion
I am studying for my exam in MicroEconomics 2 which involves game theory and I have trouble with understanding the intuitive criterion and how to use it. Consider the down below signalling game.
...
- 169
1
vote
1
answer
31
views
Walsh, Monetary Policy Book, Page 329....How come lender's return in case of default is that?
I was trying to understand the model of credit on page 328 of Carl Walsh's Monetary Policy and Theory Book.
"Loans are, however, characterized by more than just their interest rate. For example, ...
3
votes
2
answers
56
views
Signalling in a moral hazard contract with informed principals (that know their own type before contracting)
I was studying Laffont & Martimort textbook for a paper, but their section on moral hazard contract with informed principals assumes that the principal only knows his own type after contracting.
...
- 61
1
vote
1
answer
590
views
Exchange Houses game - Bayesian Game
Can anyone help me understand how to solve this type of asymmetric information Bayesian game?
So the game is a different version of the Tadelis 'trading house games'. It involves 2 players
that each ...
- 11
1
vote
2
answers
122
views
How to find $\phi$, that denotes the correlation of signals among informed traders?
Since I do not have an answer on Quantitative Finance in my question I cross-post here the problem to tag some other categories
The following assumptions are part of the paper of Back, Chao and ...
- 498
4
votes
1
answer
134
views
Adverse Selection: Positive Selection of Worker Types (Mas-Collel)
I'm reviewing some question from Mas-Collel and I am stuck on a chapter 13 question related to adverse selection.
Consider a model of positive selection in which there are workers of two possible ...
2
votes
0
answers
177
views
Some questions about Kyle's model in Continuous Auctions and Insider Trading (1985)
I was trying to understand Kyle'e Theorem 1 in page $1319$ in Continuous Auctions and Insider Trading
in 1985. As we can see by the proof, this factor $\beta=\frac{1}{2\lambda}$ refers to the ...
- 498
2
votes
1
answer
516
views
Pooling equilibrium in akerlof's lemon market with certification cost
Consider a market for 300 used cars where 1/3 of all cars are good quality cars and the rest are bad quality cars. All these cars are owned by (potential) sellers to begin with and each seller owns ...
1
vote
1
answer
57
views
Informed traders do know the cross section of the privately known signal between each other
I am having the following setup of privately known signals and I am trying to understand an assumption. Here, I quote the setup.
Consider two agents idexed by $i=\{1,2\}$ and each one observes some ...
- 969
2
votes
1
answer
86
views
Signalling Game, Multiple Signals
I am solving a three-stage game in a supply chain with one buyer and one supplier. The supplier has private information on its production capacity. The supplier also has the option to sell to the ...
- 33
0
votes
1
answer
108
views
Some basic questions on infromation asymmetry
How does asymmetric information and bid-ask spread are connected? For instance, economic theory tells us that, the more the problem of information asymmetry, the higher the spread is. What is the ...
- 498
1
vote
2
answers
752
views
What is the implicaiton of agent risk neutrality in moral hazard?
I heard that risk-neutrality of agent in moral hazard imply that the action associated with first-best and the one associated with second-best will be the same. Is it true and why is it so?
Are there ...
- 392
2
votes
1
answer
167
views
What does "steep incentive contract" mean in the context of adverse selection?
This term was mentioned in a slide and when I looked online, the only thing which I could find talking about this is this paper.
For example,in the cost-plus-incentive contract
$$x(T, c) = a(T) - a'...
- 392
4
votes
2
answers
114
views
What does commitment in adverse selection mean?
In this slide deck, p15. it says
"The revelation principle requires that the principal can fully commit to the terms of the contract. If this is not the case, an indirect mechanism, which allows for ...
- 392
1
vote
1
answer
60
views
Examples of firms having private information about negative event
as the title says, I am searching for examples where a firm incurs a negative event, for instance, a stockout, a supply chain glitch or investments that went wrong. In the best case the firm was in ...
- 105
1
vote
0
answers
65
views
Is Bayes correlated equilibrium relevant for dynamic games?
Consider the following classification of solution concepts
...
- 265
2
votes
0
answers
40
views
How far must one reason up the belief hierarchy?
In games of imperfect information, one must reason about the belief on the state of nature, the beliefs of other player's beliefs of their beliefs, and so on. This is referred to as the belief ...
- 265
7
votes
1
answer
117
views
Robust asymmetric information?
Bergeman and Morris (2014) explain how the concept of Bayesian Correlated equilibrium contains all the robust predictions in games of incomplete information. In particular, their question is what are ...
- 4,208
6
votes
1
answer
924
views
Definition of Bayesian Nash equilibrium
I have a basic doubt on the definition of Bayesian Nash equilibrium.
Consider the following game:
1) $N$ players.
2) Each player $i$ has a type, assigned by nature and denoted by $\epsilon_i$.
...
- 378
3
votes
1
answer
746
views
Insurance and Hirshleifer effect
I am trying to understand the statmement that 'public information kills insurance opportunity' -- referred to as Hirshleifer effect. Does it (in general) lead to some undesirable outcomes? Could you ...
- 167
7
votes
2
answers
733
views
Market for lemons derivation
Akerlof's 1970 paper models the utility of two trading groups as
$$
U_1 = M + \sum_{i=1}^n x_i \\
U_2 = M + \sum_{i=1}^n \frac{3}{2} x_i
$$
where $M$ is the consumption of good other than cars, $x_i$ ...
- 181
2
votes
2
answers
338
views
Asymmetric information assumption
This question isn't about asymmetric information per se but rather one of the assumptions. Consider a market for second hand cars; there are lemons (low-quality cars) and plums (high-quality cars).
...
- 661
0
votes
3
answers
118
views
Looking for a term that explains market participants that lie about their participation to gain access to said market
I'm Looking for a term that explains the behavior of a market participants that will lie or exaggerate how much or what they offer in order to gain access to a market that would otherwise be ...
- 61
7
votes
1
answer
151
views
Common knowledge in model formulation and solution
Economics models usually assume that the structure of the economy is common knowledge among agents.
Mathematically, an event is common knowledge if it lies in the meet of all agents' information ...
- 2,619
2
votes
1
answer
970
views
Recent economics theories that involve differential topology?
The original development of general equilibrium theories involved differential topology.
I wonder if there are any recently developed theories, in any field of economic theories, that utilize ...
- 2,084
1
vote
1
answer
113
views
What is one dimensional, ordered type?
I am reading papers about moral hazard. What is one dimensional, ordered type $\theta\in\Theta$?
What is one dimensional, not ordered type $\theta\in\Theta$?
Could you please give an example?
...
- 2,084
1
vote
2
answers
103
views
Literature request: Any articles on the signalling theory / game theory / asymmetric information of the firms' recruiting process?
I'd like to read more about the recruiting process of firms. Signalling theory and game theory can be a useful tool to better understand this phenomena.
For example:
Applicants, who ask for higher ...
- 1,044
0
votes
1
answer
171
views
What are some applications of Akerlof's 'lemons' in goods and services markets?
How can the idea of Akerlof's 'lemons' be applied to goods and services markets (that doesn't include second-hand cars)?
- 25
1
vote
1
answer
156
views
Can lying be disincentivized without serious curtailments of free speech?
In the new age of Alternate Facts, one might argue that many actors personally benefit hugely from lying, at the expense of other sectors of society.
Economically speaking you might argue that this is ...
- 301
4
votes
1
answer
803
views
Equilibria in Signaling and Screening
I am now studying the Spence's job market model using both signaling and screening.
It turns out that, when a worker's reservation value = 0 (she can get 0 if she does not get employed), then both ...
- 63
3
votes
1
answer
180
views
Moral hazard with linear effort and two possible outcomes
Suppose you have a risk averse principal and a risk averse agent with utility functions $v(q_i - w_i)$ and $u(w_i)$, respectively, where $i = \{H,L\}$, and $q$ is output and $w$ is the wage. The ...
2
votes
1
answer
363
views
difference between screening game and moral hazard game
What is the difference between screening game and moral hazard game?
I know that in screening game, TYPE is not known by the principal, while in moral hazard game, EFFORT is not observed by the ...
- 151
8
votes
1
answer
545
views
LEN-Model equivalency
Starting position is a principal-agent-model with incomplete information (moral hazard) and the following properties:
Agent utility: $u(z)=-e^{(-r_az)}$
Principal utility: $B(z)=-e^{(-r_pz)}$
Effort ...
- 287
5
votes
1
answer
86
views
Evidence that open source production processes increase efficiency and/or consumer surplus?
Is there peer reviewed evidence that open source production processes increase efficiency and/or consumer surplus? It seems that the first theorem of welfare economics requires complete markets which ...
- 191
2
votes
0
answers
405
views
Which economic game theory model is most similar to poker?
Propeties the model should have:
Well motivated: the game is actually is a plausible model of a real world situation. Maybe with some parameters learnt from data.
Complete: it is a complete game ...
- 21
5
votes
3
answers
153
views
Is there an economic reason why employees don't share salary information with each other?
In Western society, one's salary is often a taboo topic and people tend to not tell other people what they earn.
In China by contrast, I have been told that asking one's salary is fairly normal ...
- 2,036
1
vote
1
answer
86
views
Is the lack of information on customer behaviour good for banks?
Discussing chapter 18 on Microeconomic Theory Basic Principles and Extensions - Nicholson and Snyder book - regarding Asymmetric information a student raise an interesting point of view regarding the ...
- 133