scholarly journals Abstention in Elections with Asymmetric Information and Diverse Preferences

1999 ◽  
Vol 93 (2) ◽  
pp. 381-398 ◽  
Author(s):  
Timothy J. Feddersen ◽  
Wolfgang Pesendorfer
Keyword(s):  
Asymmetric Information ◽  
Private Information ◽  
Positive Fraction ◽  
Biased Distribution

We analyze a model of a two-candidate election with costless voting in which voters have asymmetric information and diverse preferences. We demonstrate that a strictly positive fraction of the electorate will abstain and that, nevertheless, elections effectively aggregate voters' private information. Using examples, we show that more informed voters are more likely to vote than their less informed counterparts. Increasing the fraction of the electorate that is informed, however, may lead to higher levels of abstention. We conclude by showing that a biased distribution of information can lead to a biased voting population but does not lead to biased outcomes.

scholarly journals The Incentive Model in Supply Chain with Trade Credit and Default Risk

Complexity ◽  
2019 ◽  
Vol 2019 ◽  
pp. 1-11
Author(s):  
Hong Cheng ◽  
Yingsheng Su ◽  
Jinjiang Yan ◽  
Xianyu Wang ◽  
Mingyang Li
Keyword(s):  
Supply Chain ◽  
Asymmetric Information ◽  
Moral Hazard ◽  
Private Information ◽  
Default Risk ◽  
Trade Credit ◽  
Uncertain Demand ◽  
Market Demand ◽  
Incentive Contract ◽  
Risk Neutral

Trade credit is widely used for its advantages. However, trade credit also brings default risk to the manufacturer due to the uncertain demand. And moral hazard may aggravate the default risk. The purpose of this paper is to investigate the role of moral hazard in trade credit and explore incentive contract under uncertain demand and asymmetric information. We consider a two-echelon supply chain consisting of a risk-neutral retailer ordering a single product from a risk-neutral manufacturer. Market demand is stochastic and is influenced by retailer’s sales effort which is his private information. Incentive theory is used to develop the principal-agent model and get the incentive contract from the manufacturer’s perspective. Results show that the retailer will reduce his effort level to get more profit and the manufacturer’s profit will be reduced, in the case of asymmetric information. Facing this result, the manufacturer will reduce the order quantity in incentive contract to lessen his losses. Numerical examples are provided to illustrate all these theoretical results and to draw managerial insights.

Strategic Interaction and Interstate Crises: A Bayesian Quantal Response Estimator for Incomplete Information Games

2008 ◽  
Vol 16 (3) ◽  
pp. 250-273 ◽  
Author(s):  
Justin Esarey ◽  
Bumba Mukherjee ◽  
Will H. Moore
Keyword(s):  
Asymmetric Information ◽  
Incomplete Information ◽  
Learning Process ◽  
Private Information ◽  
Statistical Treatment ◽  
Quantal Response ◽  
Crisis Bargaining ◽  
Incomplete Information Games ◽  
Information Characteristics ◽  
Information Games

Private information characteristics like resolve and audience costs are powerful influences over strategic international behavior, especially crisis bargaining. As a consequence, states face asymmetric information when interacting with one another and will presumably try to learn about each others' private characteristics by observing each others' behavior. A satisfying statistical treatment would account for the existence of asymmetric information and model the learning process. This study develops a formal and statistical framework for incomplete information games that we term the Bayesian Quantal Response Equilibrium Model (BQRE model). Our BQRE model offers three advantages over existing work: it directly incorporates asymmetric information into the statistical model's structure, estimates the influence of private information characteristics on behavior, and mimics the temporal learning process that we believe takes place in international politics.

scholarly journals Coordination and Private Information Revelation

Games ◽  
2018 ◽  
Vol 9 (3) ◽  
pp. 64
Author(s):  
Debdatta Saha ◽  
Prabal Roy Chowdhury
Keyword(s):  
Asymmetric Information ◽  
Private Information ◽  
Existence Result ◽  
Coordination Game ◽  
Information Revelation ◽  
Coordination Failure ◽  
Strategic Uncertainty ◽  
Full Disclosure ◽  
Two Agents ◽  
Battle Of The Sexes

This paper examines a persuasion game between two agents with one-sided asymmetric information, where the informed agent can reveal her private information prior to playing a Battle-of-the-Sexes coordination game. There is a close connection between the extent of information revelation and the possibility of coordination failure; while, in the absence of any coordination failure, there exist equilibria with full disclosure, in the presence of strategic uncertainty in coordination there exists an equilibrium with no information revelation. We provide a purification argument for the non-existence result, as well demonstrate that it is robust to several extensions, including both-sided asymmetric information and imprecise information revelation.

A Patent System with a Contingent Delegation Fee under Asymmetric Information

2012 ◽  
Vol 12 (1) ◽  
Author(s):  
Weonseek Kim ◽  
Bonwoo Koo
Keyword(s):  
Asymmetric Information ◽  
Objective Function ◽  
Private Information ◽  
Lower Cost ◽  
Innovation Process ◽  
Patent System ◽  
Patent Office ◽  
Second Stage ◽  
Contingent Fee ◽  
Control Loss

Abstract Under the framework of a two-stage innovation process in which the first-stage innovation is commercialized by multiple firms at the second stage, this study proposes an optimal patent system for efficient commercialization by a lower cost firm when the R&D costs are private information. Under the existing patent system of granting patents sequentially to successful innovators, the commercialization can be achieved by an inefficient firm (called control loss) and duplicative R&D efforts may occur through competitive innovation race. This study shows that the problems of control loss and duplicative R&D efforts can be prevented if the patent office grants a patent with a mandatory contingent delegation fee only to the first innovator. A carefully designed contingent fee function can induce the first innovator to internalize the patent office’s objective function, leading to efficient commercialization by a lower cost firm.

scholarly journals Information mirages and financial contagion in an asset market experiment

2015 ◽  
Vol 42 (6) ◽  
pp. 1029-1055 ◽  
Author(s):  
Charles Noussair ◽  
Yilong Xu
Keyword(s):  
Asymmetric Information ◽  
Private Information ◽  
Relevant Information ◽  
The Other ◽  
Asset Markets ◽  
Financial Contagion ◽  
Systematic Effect ◽  
Inside Information ◽  
True Nature ◽  
Content Type

Purpose – The purpose of this paper is to consider whether asymmetric information about correlations between assets can induce financial contagion. Contagion, unjustified by fundamentals, would arise if participants react in one market to uninformative trades in the other market that actually convey no relevant information. The authors also consider whether the market accurately disseminates insider information about fundamental value correlations when such information is indeed present. Design/methodology/approach – The authors employ experimental asset markets to answer the research questions. The experimental markets allow participants to simultaneously trade two assets for multiple rounds. In each round, a shock occurs, which either have an idiosyncratic effect on the shocked asset, or a systematic effect on both assets. Half of the time, there exist insiders who know the true nature of the shock and how it affects the value of the other asset. The other half of the time, no agent knows whether there is a correlation between the assets. In such cases, there is the potential for the appearance of information mirages. Uninformed traders, in either condition, do not know whether or not there exist insiders, but can try to infer this from the market activity they observe. Findings – The results of the experiment show that when inside information about the nature of the correlation between assets does exist, it is readily disseminated in the form of market prices. However, when there is no private information (PI), mirages are common, demonstrating that financial contagion can arise in the absence of any fundamental relationship between assets. An analysis of individual behavior suggests that some unprofitable decisions appear to be related to an aversion to complex distributions of lottery payoffs. Originality/value – The study focusses on one of the triggers of unjustified financial contagion, namely, asymmetric information. The authors have studied financial contagion in a controlled experimental setting where the authors can carefully control information, and specify the fundamental interdependence between assets traded in different markets.

scholarly journals The Reward-Penalty Mechanism in a Closed-Loop Supply Chain with Asymmetric Information of the Third-Party Collector

2021 ◽  
Vol 2021 ◽  
pp. 1-20
Author(s):  
Wenbin Wang ◽  
Jia Lv ◽  
Ni An ◽  
Jie Guan ◽  
Shiyuan Quan
Keyword(s):  
Supply Chain ◽  
Asymmetric Information ◽  
Private Information ◽  
Closed Loop ◽  
Third Party ◽  
Closed Loop Supply Chain ◽  
Effort Level ◽  
The Third ◽  
The Third Party ◽  
Buy Back

This paper investigates the reward-penalty mechanism (RPM) implemented by the government in a closed-loop supply chain (CLSC) with asymmetric information. The manufacturer produces and sells products to consumers, while the collection of waste electrical and electronic equipment (WEEE) is delegated to the third-party collector, the one who has private information about the collection effort level. An information screening contract for the manufacturer is put forward to obtain the private information from the third-party collector, which is composed of buy-back price and franchise fee. By utilizing principal-agent theory, two cases are mainly examined including the CLSC without the RPM and the CLSC with the RPM. The results demonstrate that (i) the information screening contract is effective in capturing the collector’s collection effort level, (ii) raising the buy-back price to motivate the third-party collector is confirmed to perform well on enhancing the collection quantity from consumers, (iii) H-type collector collects more WEEEs and earns more profits than L-type collector, and (iv) the RPM improves the collection quantity of the enterprise and reaps more environmental benefits. The numerical results verify the validity of the contract and the feasibility of the RPM.

Flinder Valves and Controls Inc.

2017 ◽  
pp. 1-14
Author(s):  
Michael J. Schill
Keyword(s):  
Asymmetric Information ◽  
Private Information ◽  
Chief Executive Officers ◽  
Chief Executive ◽  
Unique Element ◽  
Case Discussion ◽  
International Corporation ◽  
Usual Case ◽  
Executive Officers ◽  
Case Design

Set in May 2008, this case reflects the separate perspectives of chief executive officers Tom Eliot and Bill Flinder as they approach the negotiations of RSE International Corporation to acquire Flinder Valves and Controls Inc. The task for the student is to complete a valuation analysis of the target and buyer and to negotiate a price and exchange ratio with the counterparty. The intent of the case design is for students to be organized into teams and assigned to play the part of either Flinder Valves or RSE International in the negotiation. The case provides supplementary private information for each side of the transaction. Therefore, a unique element of the case is negotiating the terms of acquisition in an environment of asymmetric information. The case is relatively simple and provides a first exercise in the negotiation of an acquisition. It could also be taught in the usual case-discussion fashion instead of the intended joint-negotiation exercise.

Debt Maturity and Asymmetric Information: Evidence from Default Risk Changes

2013 ◽  
Vol 48 (3) ◽  
pp. 789-817 ◽  
Author(s):  
Vidhan K. Goyal ◽  
Wei Wang
Keyword(s):  
Asymmetric Information ◽  
Private Information ◽  
Default Risk ◽  
Important Determinant ◽  
Debt Maturity ◽  
Short Term ◽  
Information Models ◽  
Asset Volatility ◽  
Distance To Default

AbstractAsymmetric information models suggest that a borrower’s choice of debt maturity depends on its private information about its default probabilities, that is, borrowers with favorable information prefer short-term debt while those with unfavorable information prefer long-term debt. We test this implication by tracing the evolution of debt issuers’ default risk following debt issuances. We find that short-term debt issuance leads to a decline inborrowers’ asset volatility and an increase in their distance to default. The opposite is true for long-term debt issues. The results suggest that borrowers’ private information about their default risk is an important determinant of their debt maturity choices.

Neutral Bargaining in Financial Over-The-Counter Markets

2019 ◽  
Vol 109 ◽  
pp. 539-544 ◽  
Author(s):  
Jin Yeub Kim
Keyword(s):  
Asymmetric Information ◽  
Private Information ◽  
Asset Prices ◽  
Bargaining Solution ◽  
Asset Valuation ◽  
Over The Counter ◽  
Asset Quality

I study bargaining over prices between two investors in financial over-the-counter markets with asymmetric information. I focus on environments in which an asset owner has private information about both her liquidity state and asset quality, and so a buyer is uncertain about the owner's true motive for selling--whether it is because of a liquidity need or because of a low asset valuation. I apply the concept of neutral bargaining solution to characterize the prices at which the investors trade with each other. I illustrate the implications for asset prices in over-the-counter markets where private information may be prevalent.

Stability of Equilibrium Prices in a Dynamic Duopoly Bertrand Game with Asymmetric Information and Cluster Spillovers

2021 ◽  
Vol 31 (16) ◽  
Author(s):  
Jianjun Long ◽  
Hua Zhao
Keyword(s):  
Nash Equilibrium ◽  
Asymmetric Information ◽  
Private Information ◽  
Substitution Rate ◽  
Marginal Cost ◽  
Product Substitution ◽  
Equilibrium Prices ◽  
Adaptive Expectation ◽  
Bertrand Game ◽  
Dynamic Duopoly

Bounded rationality, asymmetric information and spillover effects are widespread in the economic market, and had been studied extensively in oligopoly games, but few references discussed incomplete information in a duopoly market with rationality expectations. Considering the positive externalities brought by the spillover effect between enterprises in a cluster, a duopoly Bertrand game with bounded rationality and asymmetric information is proposed in this paper. In our model, a firm with private information, high or low marginal cost, is introduced. Interestingly, our theoretical analysis reveals that: (1) In a dynamic duopoly Bertrand game with perfect rationality and asymmetric information, the equilibrium price is positively correlated with product substitution rate and the probability of a high marginal cost, while it is negatively correlated with the cluster spillover. (2) In a dynamic duopoly Bertrand game with asymmetric information and adaptive expectation adopted by both firms, the Nash equilibrium prices are always asymptotically stable. (3) In a dynamic duopoly Bertrand game with heterogenous expectation and asymmetric information, where two firms use adaptive expectation and boundedly rational expectation respectively, the Nash equilibrium prices are locally stable under certain conditions. Furthermore, results indicate that, high product substitution rate or large probability of high marginal cost for firm 2 with private information may make the market price unstable, bifurcating or even falling into chaos, while high technology spillover is conducive to stabilize the market by contrast. It is also shown that the chaos can be controlled by a hybrid control strategy with the state variables feedback and parameter variation. Our research has an important theoretical and practical significance to the price competition in oligopoly markets.

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