scholarly journals Just Enough or All: Selling a Firm

2016 ◽  
Vol 8 (3) ◽  
pp. 223-256 ◽  
Author(s):  
Mehmet Ekmekci ◽  
Nenad Kos ◽  
Rakesh Vohra
Keyword(s):  
Private Information ◽  
Cash Flows ◽  
Private Benefits ◽  
One Dimensional ◽  
Optimal Mechanism

We consider the problem of selling a firm to a single buyer. The buyer privately knows post-sale cash flows and the benefits of control. Unlike the case where buyer's private information is one-dimensional, the optimal mechanism is a menu of tuples of cash-equity mixtures. When the seller wants to screen finely with respect to the private benefits, he makes an offer for the smallest fraction of the company that facilitates the transfer of control. When he wants to screen finely with respect to cash flows, he makes an offer for all the shares of the company. (JEL D21, D82, G32, G34)

Optimal Retirement Policies with Present-Biased Agents

2020 ◽  
Author(s):  
Pei Cheng Yu
Keyword(s):  
Private Information ◽  
Hyperbolic Discounting ◽  
Time Inconsistency ◽  
Retirement Savings ◽  
Present Bias ◽  
Optimal Mechanism ◽  
Savings Accounts ◽  
The Government ◽  
Social Security Benefits ◽  
Retirement Policies

Abstract This paper incorporates quasi–hyperbolic discounting into a Mirrlees taxation model to study the design of retirement policies for present-biased agents. I show that the government can improve the screening of productivity by exploiting time inconsistency. This is done by providing commitment to sophisticated agents and taking advantage of the incorrect beliefs of naïve agents. This can be achieved even if the degrees of present bias and sophistication are private information. I also demonstrate how the government can implement the optimal mechanism using retirement savings accounts and social security benefits.

scholarly journals The Existence of Equilibrium Asset Price Under Diverse Information

2005 ◽  
Vol 7 (3) ◽  
pp. 351
Author(s):  
R. Agus Sartono
Keyword(s):  
Private Information ◽  
Rational Expectation ◽  
Asset Price ◽  
Weighted Average ◽  
Cash Flows ◽  
Existence Of Equilibrium ◽  
Risky Assets ◽  
Market Depth ◽  
Expectation Model ◽  
Informed Traders

We investigate the effects of diverse information on the price of risky assets in rational expectation model. The expected cash flows innovation is considered as private information where informed trader knows it. It is assumed that the high informed trader has smaller variance error regarding the cash flows innovation than the low informed trader and uninformed traders. We found that the cash flow innovation influences the demand of informed trader. The market depth is a linear function of the demand of uninformed trader and weighted average of total variance error of information. Our finding supports previous research done by Spiegel and Subrahmanyam (1992).Our model shows that the more diverse the information, the higher the lambda coefficient which means the market becomes less liquid. The models consistent with Miller (1977) who found that the bigger the gap of private information is, the less liquid the market will be. If both informed traders have the same information they will demand the same amount of risky asset and it turns out to be similar as in the Kyle (1985) model.

scholarly journals Dynamic Delegation of Experimentation

2016 ◽  
Vol 106 (8) ◽  
pp. 1969-2008 ◽  
Author(s):  
Yingni Guo
Keyword(s):  
Poisson Process ◽  
Private Information ◽  
Prior Belief ◽  
Optimal Mechanism ◽  
Dynamic Relationship ◽  
Total Freedom

I study a dynamic relationship where a principal delegates experimentation to an agent. Experimentation is modeled as a one-armed bandit that yields successes following a Poisson process. Its unknown intensity is high or low. The agent has private information, his type being his prior belief that the intensity is high. The agent values successes more than the principal does, so prefers more experimentation. The optimal mechanism is a cutoff rule in the belief space: the cutoff gives pessimistic types total freedom but curtails optimistic types’ behavior. Pessimistic types overexperiment while the most optimistic ones underexperiment. This delegation rule is time consistent. (JEL D23, D82, D83, O30)

scholarly journals Markets with Multidimensional Private Information

2018 ◽  
Vol 10 (2) ◽  
pp. 250-274 ◽  
Author(s):  
Veronica Guerrieri ◽  
Robert Shimer
Keyword(s):  
Private Information ◽  
Price Formation ◽  
Signaling Game ◽  
Equilibrium Path ◽  
One Dimensional ◽  
Pareto Efficient ◽  
Efficient Allocations ◽  
Asset Quality ◽  
Separating Equilibrium

This paper explores price formation when sellers are privately informed about their preferences and the quality of their asset. There are many equilibria, including a semi-separating one in which each seller's price depends on a one-dimensional index of her preferences and asset quality. This multiplicity does not rely on off-the-equilibrium path beliefs and so is not amenable to standard signaling game refinements. The semi-separating equilibrium may not be Pareto efficient, even if it is not Pareto dominated by any other equilibrium. Instead, efficient allocations may require transfers across uninformed buyers, inconsistent with any equilibrium. (JEL D11, D52, D82)

Agency Conflicts and the Marginal Value of Capital Expenditure in Australian Listed Companies

2021 ◽  
Vol 24 (01) ◽  
pp. 2150001
Author(s):  
James Butchers ◽  
Gurmeet Singh Bhabra ◽  
Harjeet Singh Bhabra ◽  
Anindya Sen
Keyword(s):  
Capital Expenditure ◽  
Listed Companies ◽  
Cash Flows ◽  
Shareholder Wealth ◽  
Free Cash Flow ◽  
Capital Investments ◽  
Agency Conflicts ◽  
Private Benefits ◽  
Marginal Value ◽  
Free Cash Flow Hypothesis

We examine the value implications of Jensen’s free cash flow hypothesis for a sample of Australian listed companies. Consistent with the US evidence in Masulis, R, C Wang and F Xie (2009). Agency problems at dual-class companies. Journal of Finance, 64(4), 1697–1727, we find that the marginal value of corporate capital expenditures in Australian listed companies is inversely related to the magnitude of agency conflicts arising out of the use of free cash flows. Our results suggest that firms where managers have a greater ability to extract private benefits and are therefore more likely to maximize their own private benefits rather than shareholder wealth will suffer from a lower perceived valuation of their capital investments. Our findings are robust to alternative proxies for relative cash flows and growth opportunities and also hold over multiple sub-periods and industry groupings.

A New Block Cipher System Using Cellular Automata and Ant Colony Optimization (BC-CaACO)

2018 ◽  
Vol 12 (4) ◽  
pp. 54-67
Author(s):  
Charifa Hanin ◽  
Fouzia Omary ◽  
Souad Elbernoussi ◽  
Khadija Achkoun ◽  
Bouchra Echandouri
Keyword(s):  
Information Security ◽  
Cellular Automata ◽  
Ant Colony Optimization ◽  
Private Information ◽  
Block Cipher ◽  
Ant Colony ◽  
One Dimensional ◽  
Information Confidentiality ◽  
And Diffusion ◽  
Confusion And Diffusion

The communication of private information is very dangerous, since unauthorized entities can intercept it. Thus, encryption is one of the principal information security solutions that helps keep information confidentiality. This latter can be satisfied by the use of various encryption techniques, namely block cipher. In this paper, the authors propose a novel block cipher using reversible and irreversible one-dimensional cellular automata (CA) with an ant colony optimization (ACO)-based S-box in order to establish more confusion. The obtained experimental results confirm that the designed cipher resists against statistical attacks, and it has both good confusion and diffusion comparing to the existent classical symmetric cryptosystems.

scholarly journals A note on credit derivatives and m&a transactions: Announcement and anticipation effects

2016 ◽  
Vol 13 (2) ◽  
pp. 272-279 ◽  
Author(s):  
Margit Hraschek ◽  
Mark Mietzner ◽  
Marcel Tyrell
Keyword(s):  
Multivariate Analysis ◽  
Private Information ◽  
Credit Derivatives ◽  
Information Leakage ◽  
Equity Markets ◽  
Private Benefits ◽  
Regulatory Frameworks ◽  
Anticipation Effect ◽  
Anticipation Effects

This paper analyses CDS and equity markets dynamics of acquiring companies, to explore whether those parties that are involved in M&A transactions are using their access to privileged bank information for private benefits. We find different effects on the CDS and equity markets, primarily because the range of participants on these markets and their regulatory frameworks differ. Our results suggest a stronger anticipation effect and therefore more trading on private information on the CDS market. We posit that this is attributable to its characteristics as an OTC market, and the lack of transparency. Moreover, the results of our multivariate analysis are consistent with the view that certain M&A transactions are especially vulnerable to information leakage in CDS markets.

scholarly journals Optimal Project Selection Mechanisms

2014 ◽  
Vol 6 (3) ◽  
pp. 227-255 ◽  
Author(s):  
Talia Bar ◽  
Sidartha Gordon
Keyword(s):  
Private Information ◽  
Limited Liability ◽  
Project Selection ◽  
Project Managers ◽  
Outside Option ◽  
Optimal Mechanism ◽  
Optimal Value ◽  
Ex Ante ◽  
The Cost ◽  
Selection Mechanisms

We study mechanisms for selecting up to m out of n projects. Project managers' private information on quality is elicited through transfers. Under limited liability, the optimal mechanism selects projects that maximize some function of the project's observable and reported characteristics. When all reported qualities exceed their own project-specific thresholds, the selected set only depends on observable characteristics, not reported qualities. Each threshold is related to (i) the outside option level at which the cost and benefit of eliciting information on the project cancel out and (ii) the optimal value of selecting one among infinitely many ex ante identical projects. (JEL D21, D82, O32)

The Interval Structure of Optimal Disclosure

Econometrica ◽  
2019 ◽  
Vol 87 (2) ◽  
pp. 653-675 ◽  
Author(s):  
Yingni Guo ◽  
Eran Shmaya
Keyword(s):  
Private Information ◽  
Simple Algorithm ◽  
Optimal Mechanism ◽  
Nested Intervals

A sender persuades a receiver to accept a project by disclosing information about a payoff‐relevant quality. The receiver has private information about the quality, referred to as his type. We show that the sender‐optimal mechanism takes the form of nested intervals: each type accepts on an interval of qualities and a more optimistic type's interval contains a less optimistic type's interval. This nested‐interval structure offers a simple algorithm to solve for the optimal disclosure and connects our problem to the monopoly screening problem. The mechanism is optimal even if the sender conditions the disclosure mechanism on the receiver's reported type.

A Folk Theorem for Repeated Elections with Adverse Selection

2014 ◽  
Vol 2 (2) ◽  
pp. 213-242 ◽  
Author(s):  
John Duggan
Keyword(s):  
Adverse Selection ◽  
Private Information ◽  
Incentive Compatibility ◽  
Folk Theorem ◽  
Perfect Bayesian Equilibrium ◽  
Policy Space ◽  
One Dimensional ◽  
Policy Choices ◽  
Bayesian Equilibrium ◽  
Strict Concavity

This article establishes a folk theorem for a model of repeated elections with adverse selection: when citizens (voters and politicians) are sufficiently patient, arbitrary policy paths through arbitrarily large regions of the policy space can be supported by a refinement of perfect Bayesian equilibrium. Politicians are policy motivated (so office benefits cannot be used to incentivize policy choices), the policy space is one-dimensional (limiting the dimensionality of the set of utility imputations), and politicians’ preferences are private information (so punishments cannot be targeted to a specific type). The equilibrium construction relies critically on differentiability and strict concavity of citizens’ utility functions. An extension of the arguments allows policy paths to depend on the office holder's type, subject to incentive compatibility constraints.

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