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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 ...
Herr K.'s user avatar
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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 ...
Walrasian Auctioneer's user avatar
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&...
Bayesian's user avatar
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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 ...
Regio's user avatar
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5 votes
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Market for lemons derivation

Given type-1 traders' marginal utility for numeraire $M$ and car quality $x$, a type-1 trader will supply a car only if the car's measure of quality $x$ (privately known) is less than or equal to the ...
Kenneth Rios's user avatar
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5 votes
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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 ...
luchonacho's user avatar
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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 ...
Michael Greinecker's user avatar
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 ...
BKay's user avatar
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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. ...
Michael Greinecker's user avatar
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 ...
Herr K.'s user avatar
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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. ...
Bayesian's user avatar
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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 $v_i$ ...
Regio's user avatar
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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 \...
Hunger Learn's user avatar
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 ...
Herr K.'s user avatar
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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 ...
Rumi's user avatar
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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 ...
got trolled too much this week's user avatar
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 ...
Bayesian's user avatar
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2 votes
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Equilibria in Signaling and Screening

The difference between signaling and screening stems from the fundamental difference in bargaining power- who offers the contract for which her utility is the highest. While in screening the uniformed ...
Bayesian's user avatar
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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/...
c4sadler's user avatar
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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 ...
Michael Greinecker's user avatar
2 votes
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Informed traders do know the cross section of the privately known signal between each other

Yes, that assumption just means that every informed agent knows the true distributions where signals come from (i.e. roughly speaking, they know the parameters that define them). The terminology "...
Regio's user avatar
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2 votes
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Signalling Game, Multiple Signals

From the perspective of the buyer, he is receiving 1 two-dimensional signal. After observing a combination of the wholesale price and limit order, the buyer can update their beliefs about the supplier'...
Regio's user avatar
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2 votes

How to understand the intuitive criterion

First, you also have to check all possible separating equilibria. You only checked (MSc,BSc), not (BSc,MSc) with all possible reactions of the receiver. No separating equilibrium exists here. The ...
Bayesian's user avatar
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2 votes

The intuitive criterion

We cannot judge if your answer is correct because we don't see the game tree. First, I would not say that "we can rule out this equlibrium as a possible pooling PBE by the intuitive criterion&...
Bayesian's user avatar
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2 votes

What are some market-based solutions to the problem of information asymmetry posed by experience goods and credence goods?

The common trait for both of these goods is that the "utility" is unobservable beforehand and only realized post-consumption (experience) or possible not observable at all (credence). Based ...
qwerty's user avatar
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2 votes
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Definition of information structure in an incomplete information game

In the usual formulation of games of incomplete information and in mechanism design, types represent both everything that enters a player's payoff function that is not an action and the information ...
Michael Greinecker's user avatar
2 votes
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Market signaling with a national exam

I think your reasoning is correct. There is no need to have an ''expected pay'' as in a separating equilibrium, everyone ''knows'' that good types will take the test and bad types will not. The only ...
tdm's user avatar
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1 vote
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Some basic questions on infromation asymmetry

You want to look at a previous post: Imperfect vs incomplete information . Basically complete information relates to the assumption that players have common knowledge about the game and the utility ...
Regio's user avatar
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