8 votes
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Moral Hazard or Adverse Selection?

The problem you are facing has probably both: Moral Hazard and Adverse Selection. We have hidden action by the doctor (you can't really observe his level of effort during the surgery), therefore we ...
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5 votes
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Definition of Bayesian Nash equilibrium

Bayesian Nash equilibrium is a set of strategies $\{\sigma_i\}$ one for each player and some beliefs $\{\mu_i\}$ also one for each player such that $\sigma_i$ is a best response for player $i$ given ...
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  • 4,158
5 votes
Accepted

What is one dimensional, ordered type?

Judging from the reference you provide, this refers to whether the set $\Theta$ is ordered or not. For example, natural numbers or the alphabet are ordered sets. In the context of moral hazard ...
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  • 8,477
5 votes

Adverse Selection: Positive Selection of Worker Types (Mas-Collel)

In PO, you want all types with opportunity cost $r(\theta)\leq \theta$ to trade, because the firm gets more productivity than the worker has to give up on home productivity ("opportunity cost&...
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  • 5,090
5 votes

How to find $\phi$, that denotes the correlation of signals among informed traders?

A degenerate joint normal is distribution is one in which you cannot find a PDF for the distribution. They assume you can. (The covariance matrix is invertible). Let $f(s_1,s_2\dots,s_n,v)$ be the ...
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5 votes

Signalling in a moral hazard contract with informed principals (that know their own type before contracting)

I'm not sure what exactly you're looking for, but here are some wild guesses: Bolton and Dewatripont (2005) Contract Theory, MIT Press. [Probably Chapters 5 and 6] Maskin and Tirole (1990) "The ...
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5 votes

In games of Bayesian Persuasion, under what conditions is Receiver better off than under uninformative signals?

A receiver can always ignore any additional information and do what they would have done in the absence of informative signals. If they react optimally, they can therefore never be worse off. It is a ...
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4 votes

What is the classic paper that derives borrowing constraints from asymmetric information?

I don't know if you refer to the extensive margin (some borrowers not being able to get credit) or to the intensive margin (one borrower not being able to get as much credit as (s)he wants). If you ...
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  • 101
4 votes

The Backward Bending Supply Curve, Asymmetric Information, and Monopoly

This definitely is not a complete answer. But I can imagine the case of increasing returns to scale. Or natural entry barrier. Increasing returns to scale is often discussed in international trade ...
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4 votes

Evidence that open source production processes increase efficiency and/or consumer surplus?

There is a large economic literature on intellectual property rights. However, the issue seems far from settled on what even the optimal duration for patents are. Note that open source is even a step ...
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  • 1,822
4 votes

Can lying be disincentivized without serious curtailments of free speech?

If free speech is narrowly defined to only include true claims, true and false claims can be perfectly distinguished, the harm of false claims perfectly measured, and all claims are either true or ...
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  • 15.9k
4 votes
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Recent economics theories that involve differential topology?

The main reason differential topology had some success in economics is that supplies powerful methods to show that something holds generically, mainly Sard's theorem and the transversality theorem. ...
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4 votes
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Market for lemons derivation

A type-1 seller will trade her car only if the car's measure of quality $x$ (privately known) is less than or equal to the average car quality in the market, $\mu$. $x \in [0,2]$ since no buyer values ...
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  • 1,189
4 votes
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What is the implicaiton of agent risk neutrality in moral hazard?

It is true that when both principal and agent are risk neutral, the first best can be obtained despite asymmetric information. You should refer to a textbook, such as MWG (ch.14), for the technical ...
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  • 14.7k
4 votes

Signalling in a moral hazard contract with informed principals (that know their own type before contracting)

Contracting with an informed principal is not so easy because the agent can learn about the principal's type from the kind of contract offered. This introduces signaling, which can quickly get messy. ...
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  • 5,090
3 votes

Examples of firms having private information about negative event

Banks that were not bailed out in the 2008 recession and went insolvent i.e. Washington Mutual, IndyMac, Franklin Bank, First National Bank of Nevada e.t.c. You could also look into firms that were ...
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  • 923
3 votes

Robust asymmetric information?

It seems to me based on the 2019 JEL review of the same authors that they had published more-or-less what you ask about in a 2015 paper about monopolies and price discrimination (as an application of ...
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  • 3,728
3 votes
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Asymmetric information assumption

In this setting, both buyers and sellers are usually assumed to be risk neutral. So adding an additional layer of uncertainty over seller's valuation is not really going to change the model's ...
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  • 14.7k
3 votes

Is there an economic reason why employees don't share salary information with each other?

Two remarks: Firstly, there is some research on subjective wellbeing, where a common theme is that people's happiness seems to depend more on a relative comparison of their material wellbeing to that ...
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  • 16.6k
3 votes

Is there an economic reason why employees don't share salary information with each other?

dwjohnston, To answer your question briefly: no, because it is rather a social or psychological matter than it is an economic matter. There is already asked a good question about this subject in The ...
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3 votes
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Derivation on p.99 of Salanie, The Economics of Taxation (2nd edition)

I think it is the chain rule. Let $w'(w) = w$, since we are looking for revealing mechanisms. The condition $$ \frac{\partial V}{\partial w'} (w'(w),w) = 0 $$ holds for all $w$ because the mechanism ...
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3 votes

Derivation on p.99 of Salanie, The Economics of Taxation (2nd edition)

Why are you doing $\frac{\partial^2 V}{\partial w'^2}$ ? Even if it is said that $w^{'}=w$ at the optimum, it should be taken different when you differentiate it for first order conditions. So, you ...
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3 votes

How to find $\phi$, that denotes the correlation of signals among informed traders?

Well, I will try to answer 4. We know that the asset liquidation value $\tilde{v}$ is an affine function of the singals thus we have that $$\tilde{v}=\bar{v}+\sum_{i=1}^{N}\tilde{s}^i\Rightarrow \...
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3 votes

Exchange Houses game - Bayesian Game

The trick with Bayesian games is to recognize that the players learn in equilibrium from the strategies of the other players. That is, you cannot simply take the unconditional expectation of $v_i$ ...
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  • 4,158
2 votes

The Backward Bending Supply Curve, Asymmetric Information, and Monopoly

I don't recognize your moral hazard example, but there are a couple situations where a monopoly is desirable. A monopoly is desirable when the cost of entry is close to zero or good substitutes are ...
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  • 1,152
2 votes

The Backward Bending Supply Curve, Asymmetric Information, and Monopoly

I haven't seen the model you mention (so this answer should be taken with a grain of salt!) but, intuitively, I guess the story would go something like this: Suppose a firm is selling insurance. If ...
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  • 16.6k
2 votes

difference between screening game and moral hazard game

Moral hazard models feature agents' hidden actions (or these actions are not contractible). For example, a manager's contract cannot determine a wage contingent on the manager's effort, only ...
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  • 5,090
2 votes

Literature request: Any articles on the signalling theory / game theory / asymmetric information of the firms' recruiting process?

It sounds like you have a background in game theory. Here is a Game Theory text available for free through RAND if you (or anyone else) wants a refreasher: http://www.rand.org/pubs/commercial_books/...
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  • 147
2 votes
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Common knowledge in model formulation and solution

Two points. Common knowledge is defined by Aumann in terms of partitions, not $\sigma$-algebras. There is generally no natural correspondence between these. The grand state space is trivially common ...
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