Jul 10, 2012 Filed in:
NewsFor the 2012–2013 school year, I am visiting
Microsoft Research New England. I’m looking forward to lots of productive interactions with the permanent researchers, postdocs, and other visitors!
Tags: Microsoft
Apr 01, 2012 Filed in:
PublicationsPublished in The Review of Economic Studies, 79(2):778–811, April 2012.
Abstract: The game-theoretic literature on collusion has been hard pressed to explain why a cartel should engage in price wars, without resorting to either impatience, symmetry restrictions, inability to communicate, or failure to optimize. This paper introduces a new explanation that relies on none of these assumptions: if the cartel's member firms have private information about their costs, price wars can be optimal in the face of complexity. Specifically, equilibria that are robust to payoff-irrelevant disruptions of the information environment generically cannot attain or approximate efficiency. An optimal robust equilibrium must allocate market shares inefficiently, and may call for price wars under certain conditions. For a two-firm cartel, cost interdependence is a sufficient condition for price wars to arise in an optimal robust equilibrium. That optimal equilibria are inefficient generically applies not only to collusion games, but also to the entire separable payoff environment (Chung & Ely 2006)—a class that includes most typical economic models.Free-access link to published version
Tags: Collusion, Price wars, Repeated games, Private information, Mechanism design, Ex post incentive compatibility, Folk theorem
Jan 16, 2012 Filed in:
Working papersWith Kareen Rozen
Abstract: We study optimal contracting in teams with peer monitoring and moral hazard, featuring stylized aspects of production environments with complex tasks. Agents have many opportunities to shirk, task-level monitoring is needed to provide useful incentives, and because it is difficult to write individual performance into formal contracts, incentives are provided informally, using wasteful sanctions like guilt and shame, or slowed promotion.
These features give rise to optimal contracts with “empty promises” and endogenous supervision structures. Agents optimally make more promises than they intend to keep, leading to the concentration of supervisory responsibility in the hands of one or two agents.
Working paper 1/16/2012
Tags: Contracts, Moral hazard, Mechanism design, Peer monitoring, Partnership, Teams, Principal-Agent, Bounded memory, Cooperation
