"Informational Robustness of Competitive Equilibria,"
forthcoming Journal of Economic Theory.
(with W. Shafer)
Abstract
| Consider an exchange economy with complete information. We perturb this economy by assuming that each agent's observation about the true state of the world is noisy. The paper investigates the robustness of the equilibria of the complete information economy with respect to incomplete information. That is, we provide conditions under which complete information equilibria are the limit of equilibria of the economies with incomplete information, as the noise in the signal converges to zero. |
"Core Concepts in Economies where Information is Almost Complete,"
forthcoming Economic Theory (with W. Shafer)
Abstract
| The paper analyzes the properties of cores with differential information, as economies converge to complete information. Two core concepts are analyzed: the private core in which agents net trades are measurable with respect to agents' private information, and the incentive compatible core, in which coalitions of agents are restricted to incentive compatible allocations. |
"Optimal Contracts When Enforcement is a Decision Variable,"
forthcoming Econometrica 68, 119-134 (2000) (with A. Villamil).
Abstract
| This paper analyzes choice-theoretic costly enforcement in an intertemporal contracting model with a differentially informed investor and entrepreneur. An intertemporal contract is modeled as a mechanism in which there is limited commitment to payment and enforcement decisions. The goal of the analysis is to characterize the effect of choice-theoretic costly enforcement on the structure of optimal contracts. The paper shows that simple debt is the optimal contract when commitment is limited and costly enforcement is a decision-variable (Theorem 1). In contrast, stochastic contracts are optimal when agents can commit to the ex-ante optimal decisions (Theorem 2). The paper also shows that the Costly State Verification model can be viewed as a reduced form of an enforcement model in which agents choose payments and strategies as part of a Perfect Bayesian Nash Equilibrium. |
"Unimprovable Allocations in Economies with Incomplete
Information,"
forthcoming
Journal of Econ. Theory 87 144-168, (1999)
Abstract
| The paper considers an exchange economy with incomplete information in which agents can retrade goods until all gains from trade are exhausted. Unimprovable allocations are defined to be those allocations from which agents would not wish to deviate either by retrading goods or by revealing further information. The concept of unimprovability is then used to analyze a lemons market and an adverse selection insurance market in which agents can renegotiate after information has been revealed. Finally, unimprovability is compared to different concepts of efficiency and to the concept of durability. Journal of Economic Literature Classification Number: D82. |