COLLEGE ADMISSIONS AND THE ROLE OF INFORMATION: AN EXPERIMENTAL STUDY*

Three well‐known matching mechanisms designed to solve the college admissions problems are analyzed in the experimental laboratory in different informational settings. We observe that when the level of information is significantly increased, the proportion of schools and teachers that submit their true preferences decreases. This affects largely the efficiency and stability of the Gale–Shapley and the Boston mechanisms. The TTC mechanism is less sensitive to information and outperforms the other two mechanisms in terms of efficiency and stability, and it is as successful as them in extracting private information.     

DYNAMIC INCENTIVE CONTRACTS WITH UNCORRELATED PRIVATE INFORMATION AND HISTORY-DEPENDENT OUTCOMES*

In previous papers on dynamic incentive contracts, the dynamic structure of the principal-agent relationship arises exclusively from the ability of the principal to learn about the hidden information over time. In this paper we deal with a different source of dynamics, which is considered standard in all areas of economics other than the information literature: we study situations where current opportunities depend on past and current actions, notwithstanding any information conveyed by the actions. Standard examples include investment, "Learning by doing", and R&D. In order to focus on this neglected source of dynamics, we restrict our attention to situations involving asymmetric information in each period, but without any intertemporal informational correlation, so that no dynamic effect arises directly from informational asymmetrie. This makes comparisons with static results both easier and more interesting.     

INFORMATIONAL CASCADES ELICIT PRIVATE INFORMATION*

We introduce cheap talk in a dynamic investment model with information externalities. We first show how social learning adversely affects the credibility of cheap talk messages. Next, we show how an informational cascade makes truth‐telling incentive compatible. A separating equilibrium only exists for high‐surplus projects. Both an investment subsidy and an investment tax can increase welfare. The more precise the sender's information, the higher her incentives to truthfully reveal her private information.     

THE CURSE OF WINDFALL GAINS IN A NON RENEWABLE RESOURCE OLIGOPOLY*

In this paper, we consider oligopolistic equilibria in subgame‐perfect strategies in continuous time, and investigate the effect of stock discovery on the profits of non‐identical natural resource oligopolists. We show that a uniform addition to all stocks does not necessarily increase the discounted sum of profits of all firms.     

DISTRIBUTING THE GAINS FROM TRADE WITH INCOMPLETE INFORMATION*

We argue that the incomplete information which the government has about domestic agents means that tariffs become an optimal instrument to protect them from import competition. Using a model where agents have private information about their endowments, we solve for the optimal government policy subject to the political constraint of ensuring Pareto gains from trade, the incentive compatibility constraint, and the government's budget constraint. We find that the optimal policy takes the form of nonlinear tariffs. These tariffs are never complete, in the sense of bringing prices back to their initial level, but always allow some individuals to be strictly better off than at the initial prices.     

JOB MARKET SIGNALLING WITH TWO DIMENSIONS OF PRIVATE INFORMATION

We study an extension of job market signalling by introducing another dimension of private information. When two dimensions of attribute are intertwined in parameterizing preferences, the single crossing property no longer holds globally. In seeking the equilibrium prediction, the intuitive criterion and then the more stringent perfect sequentiality refinement are applied. The result depends on the extent to which the second characteristic affects the ability of education to signal. If the effect is mild, the equilibrium acquired is comparable to the separating outcome of the unidimensional benchmark. Otherwise, pooling must occur. This demonstrates that the problem of information transmission is more acute in a multidimensional environment.     

THE EFFECTIVENESS OF PRIVATE BENEFITS IN FUNDRAISING OF LOCAL CHARITIES*

This article provides an empirical analysis of the role that private benefits play in explaining charitable donations to large cultural and environmental organizations. We develop a multiple discrete choice model with differentiated products. We estimate the model using a unique data set of donor lists for the 10 largest cultural and environmental charitable organizations in the Pittsburgh metropolitan area. We find that some private benefits such as invitations to private dinner parties and special events are effective tools for fundraising. Our policy simulations suggests that the composition of private benefits has a potentially large impact on donor behavior.     

ENDOGENOUS PUNISHMENTS IN AGENCY WITH VERIFIABLE EX POST INFORMATION*

The article studies an adverse selection model in which a contractible, imperfect signal on the agent's type is revealed ex post. The agent is wealth constrained, which implies that the maximum penalty depends on the contracted transaction (e.g., the volume of trade). First, we show that the qualitative effects of the signal can be unambiguously tied to the nature of the problem (e.g., whether the agent is in a “buyer” or a “seller” position). Second, the distortions caused by informational asymmetries may become more severe although more information is now available. Finally, the signal can actually serve to increase the agent's informational rents.     

MANAGED TRADE WITH IMPERFECT INFORMATION*

This article illustrates the importance of imperfect information in self‐enforcing trade agreements. It shows that expected welfare is higher with current period uncertainty, and a high level of uncertainty may even undermine the need for a safeguard clause. These results were derived by extending the seminal paper by Bagwell and Staiger (The American Economic Review 80 (1990), 779–95) to account for current period uncertainty.     

DYNAMIC TRADING IN A DURABLE GOOD MARKET WITH ASYMMETRIC INFORMATION*

We analyze a dynamic version of the Akerlof–Wilson “lemons” market in a competitive durable good setting. There is a fixed set of sellers with private information about the quality of their wares. The price mechanism sorts sellers of different qualities into different time periods—prices and average quality of goods traded increase over time. Goods of all qualities are traded in finite time. Market failure arises because of the waiting involved—particularly for sellers of better quality. The equilibrium path may exhibit intermediate breaks in trading.     

INCOMPLETE INFORMATION GAMES WITH MULTIPLE PRIORS*

We present a model of incomplete information games, where each player is endowed with a set of priors. Upon arrival of private information, it is assumed that each player “updates” his set of priors to a set of posterior beliefs, and then evaluates his actions by the most pessimistic posterior beliefs. So each player's preferences may exhibit aversion to ambiguity or uncertainty. We define a couple of equilibrium concepts, establish existence results for them, and demonstrate by examples how players’ views on uncertainty about the environment affect the strategic outcomes.     

ON MAJORITARIAN BARGAINING WITH INCOMPLETE INFORMATION*

This article studies a finite horizon version of Baron and Ferejohn's (American Political Science Review 83 (1989), 1181–206) majoritarian bargaining with incomplete information. Of many findings, we show that (i) allowing for delay can be optimal for a proposer; (ii) the revelation of a type depends on two conflicting concerns, the “offer” concern à la Spence's signaling (the higher the type the better) and the “coalition inclusion” concern in a majority consent (the lower the type the better); and (iii) players take actions to distinguish themselves via delay, but separating equilibria often fail to exist due to incapability or unprofitability of exercising delay.     

THE GENDER GAP IN PRIVATE PENSIONS

In many western countries, older women receive considerably less private pension income than older men on average. We analyse this differential in Britain, examining differences between the sexes both in private pension coverage and in pension income conditional on receipt. Using regression‐based decompositions, we show that both gender gaps are associated mainly with differences in returns to personal characteristics rather than with differences in personal characteristics per se.     

PRIVATE PROVISION OF PUBLIC GOODS AND INFORMATION DIFFUSION IN SOCIAL GROUPS

I describe a dynamic model of costly information sharing where private information affecting collective‐value actions is transmitted by social proximity. Individuals make voluntary contributions toward the provision of a pure public good, and information transmission about quality of provision is a necessary condition for collective provision to take place in a stationary equilibrium. I show that unlike in the case of private goods, better informed individuals face positive incentives to incur a cost to share information with their neighbors and that these incentives are stronger and provision of the pure public good greater the smaller are individuals' social neighborhoods.     

CORRUPTION IN PUBLIC CONTRACTING AUCTIONS: THE ROLE OF TRANSPARENCY IN BIDDING PROCESSES

ABSTRACT ** :  The paper discusses corruption in public auctions and the role of transparency as a tool to prevent it. First, we analyse where corruption occurs, emphasizing the importance of considering the whole process, from deciding whether to contract-out to implementing the contract. We then analyse the effects of corruption on public auctions and argue that corruption undermines their stated aims. Second, we discuss the ways transparency can mitigate corruption and possible trade-offs regarding competition and efficiency. As an instrument, we focus on the Integrity Pact, a tool developed by Transparency International, and analyse cases in Argentina (school supplies) and Colombia (telecommunications), where transparency helped to prevent corruption and collusion and, furthermore, was able to enhance competition. We conclude with some policy implications.     

THE INFORMATION TECHNOLOGY REVOLUTION AND THE PUZZLING TRENDS IN TOBIN'S AVERAGE q*

The market value of U.S. corporations declined by 50% during 1973–74 and stagnated for the following 15 years. This abrupt decline in market valuations coincided with two technology shocks: (1) the start of the information technology revolution and (2) a sudden slowdown in productivity growth. I use general equilibrium theory to quantify the macroeconomic and asset price implications of these two shocks. The information technology revolution and the productivity slowdown make the theory consistent with the trends of key macroeconomic aggregates from the mid‐1970s to the 1990s, and can also account for most of the drop in market values.     

SUBSTITUTION AND COMPLEMENTARITY IN THE CREATION AND COMMUNICATION OF AUSTRALIAN UNIVERSITY RESEARCH*

The generation of research is one of the major functions of the university sector. In most disciplines, journal articles continue to be the main outlet for the communication of research findings. However, in Australia, government induced distortions have rewarded refereed conference papers an equal status to refereed journal papers. The aim of this paper is to explore the association between research published in journals and research published in conference proceedings. We use a panel dataset of the research output of 36 Australian universities, for the period 1995–2004. Cobb‐Douglas research production functions are estimated, as well as a system of research production functions that allows for simultaneity. The results indicate that journals and conferences are contemporaneous substitutes – an expansion in conference publications displaces journal publications. There is also a ‘DEST effect’. On average, conference papers are not converted into subsequent journal papers. The DEST effect is found also through analysis of the publication histories of 152 business and law academics. Postgraduate enrolments are shown to contribute only to conferences and have no effect on journal publications. Research income has a positive effect on both conferences and journal publications.     

ALTRUISM,EGOISM, AND THE ROLE OF SOCIAL CAPITAL IN THE PRIVATE PROVISION OF PUBLIC GOODS*

The economic approach to understanding human behavior has encountered serious difficulties when attempting to explain the private provision of public goods, such as voting and charitable contributions to large organizations. To gain insights into these important issues, this study takes an interdisciplinary approach. The individual is modeled formally in terms of dual egoistic/altruistic utilities, and the recursive relation between altruism and the existence and production of social capital is developed. The model is analyzed as a non-cooperative game between the egoistic and altruistic selves. The socialized rational actor that results from the combination of social capital, dual utilities, and non-cooperative behavior resolves a number of public goods paradoxes. Comparative statics and the dynamics of social capital formation are explored.