efficient and durable decision rules with incomplete information we compare six concepts of efficiency for economies with incomplete information depending on the stage at which individuals welfare is evaluated and on whether incentive constraints are recognized an example is shown in which an incentive efficient decision rule may be unanimously rejected by the individuals in the economy we define durable decision rules which can resist such unanimous rejection and show that efficient durable decision rules exist

reciprocal relationships and mechanism design we study an incomplete information game in which players can coordinate their actions by contracting among themselves we model this relationship as a reciprocal contracting procedure where each player has the ability to make commitments contingent on the other players commitments we differ from the rest of the literature on reciprocal contracting by assuming that punishments cannot be enforced in the event that cooperation breaks down we fully characterize the outcomes that can be supported as perfect bayesian equilibrium outcomes in such an environment we use our characterization to show that the set of supportable outcomes with reciprocal contracting is larger than the set of outcomes available in a centralized mechanism design environment in which the mechanism designer is constrained by his inability to enforce punishments against non participants the difference stems from the players ability in our contracting game to convey partial information about their types at the time they offer contracts we discuss the implications of our analysis for modelling collusion between multiple agents interacting with the same principal

ricirms as a strategic tool for small and medium tourism enterprises abstract the small and medium tourism enterprises smtes which dominate the international tourism market face difficulties in gaining access to crss because of their size structural functional problems following a brief analysis of smtes based on research undertaken at the aegean islands greece it is proposed that regional integrated computer information reservation management systems ricirmss can be utilized as a strategic tool for the development of both the smte and the destination managed by a regional tourism committee the ricirms should attempt to maximize the long term business revenues for the smtes of the area satisfy the needs of the more demanding tourist and increase the benefits of tourism for the local area furthermore ricirmss may be utilized to integrate the tourism products of the destination diagonally and also to force smtes to cooperate with each other in order to achieve economies of scope synergies and system gains it is concluded that smtes and destinations which do not develop ricirmss may find themselves at a competitive disadvantage as they will be unable to satisfy the needs of tourism demand and supply for the next century

bonus culture competitive pay screening and multitasking to analyze the impact of labor market competition on the structure of compensation we embed multitasking and screening within a hotelling framework competition for talent leads to an escalation of performance pay shifting effort away from long term investments risk management and cooperation efficiency losses can exceed those from a single principal who dulls incentives to extract rents as competition intensifies monopsonistic underincentivization of low skill agents first decreases and then gives way to growing overincentivization of high skill ones aggregate welfare is thus hill shaped while inequality tends to rise monotonically bonus caps can help restore balance in incentives but may generate other distortions

contracts as a barrier to entry it is shown that an incumbent seller who faces a threat of entry into his or her market will sign long term contracts that prevent the entry of some lower cost producers even though they do not preclude entry completely moreover when a seller possesses superior information about the likelihood of entry it is shown that the length of the contract may act as a signal of the true probability of entry

information revelation incentives and the value of a real option the real options approach to capital budgeting focuses on valuing benefits of project flexibility this paper presents an incentive consideration in such valuation operating flexibility not only allows a firm to change course in response to new information but also allows interested observers to make inferences based on the change in course or lack thereof such information conveyance through refined operating choices can alter observers incentives as a result an option to delay may prove valuable because it allows a firm to prolong informational advantages

the licensing of patents under asymmetric information abstract this paper seeks to explain the use of royalty payments rather than fixed fees in the licensing of patents by the presence of asymmetric information the licensee is assumed to know the value of the patent and makes a single offer of a contract to the licensor it is shown that there is a unique equillibrium satisfying cho and kreps intuitive criterion qualitative properties of the equilibrium contract are derived by considering a continuum of types

belief based refinements in signalling games abstract there are many economic problems which when modelled as games of incomplete information give rise to many sequential equilibria severely limiting the usefulness of the model there has recently been a large literature devoted to refining the set of equilibria in order to reduce this multiplicity by restricting the set of admissible disequilibrium beliefs this paper argues that the logical foundations of some refinements and the equilibria they focus on are problematic and further proposes an alternative refinement that avoids the difficulties we also provide an existence theorem covering a broad class of signalling games often studied in economics journal of economic literature classification numbers c72 c70 d82

collusion under asymmetric information when applied to groups the revelation principle postulates a bayesian nash behavior between agents their binding agreements are unenforceable or the principal can prevent them at no cost we analyze instead a mechanism design problem in which the agents can communicate between themselves and collude under asymmetric information we characterize the set of implementable collusion proof contracts both when the principal offers anonymous and nonanonymous contracts after having isolated the nexi and the stakes of collusion we proceed to a normative analysis perform some comparative statics discuss our concept of collusion proofness and provide some insights about transaction costs in side contracting

the principal agent relationship with an informed principal ii common values in many circumstances a principal may have relevant private information when she proposes a contract to an agent we analyze such a principal agent relationship as a noncooperative game the principal proposes a contract which is accepted or rejected by the agent who for most of our analysis has no private information the contract is executed if accepted otherwise the reservation allocation takes effect this allocation may be determined by a pre existing contract which the principal by her proposal is attempting to renegotiate or it may simply be the no trade point in this paper we assume that the principal s information directly affects the agent s payoff before solving the game we discuss pareto efficiency with asymmetric information we define an incentive compatible allocation to be weakly interim efficient wie if there exists no alternative incentive compatible allocation that both parties prefer for all possible beliefs that the agent might have about the principal s private information type we show that any wie allocation is interim efficient ie for some beliefs the rothschild stiglitz wilson rsw allocation relative to the reservation allocation l is the allocation that maximizes the payoff of each type of principal within the class of incentive compatible allocations that guarantee the agent at least the utility he gets from a irrespective of his beliefs about the principal s type the equilibrium set of the contract proposal game consists of the allocations that weakly pareto dominate the rsw allocation thus there is a unique equilibrium outcome if and only if the latter is ie and the equilibrium outcome is the rsw allocation itself after characterizing the equilibrium allocations we study those that are renegotiation proof when either the principal or the agent leads the renegotiation we then compare our contract proposal game which is a signaling model with its screening counterpart we conclude by extending our results to the case in which the agent as well as the principal has private information under the assumption of quasi linear preferences

project options valuation with net present value and decision tree analysis real options analysis roa has been developed to correctly value projects with inherent flexibility including the possibility to abandon defer expand contract or switch to a different project roa allows computing the correct discount rate using the replicating portfolio technique or risk neutral probability method we propose an alternative approach for valuing real options based on the certainty equivalent version of the net present value formula which eliminates the need to identify market priced twin securities in addition our approach can be extended to the case of multinomial trees a useful tool for modeling uncertainty in projects we introduce within decision tree analysis dta a method to derive the different discount rates that prevail at different chance nodes we illustrate the valuation method with an application presented in a scenario approach to capacity planning eppen g d martin r k schrage l e 1989 a scenario approach to capacity planning operations research 37 4 in which the authors state that for the capacity configuration investment decision studied at general motors there is no scientific way to determine the appropriate discount rate based on estimated demand our method allows deriving the scientifically correct discount rates a major result of the analysis is that the discount rates are endogenously derived from the project structure and its behavior in light of prevailing market conditions instead of being exogenously imposed c 2006 elsevier b v all rights reserved

post fordism and flexibility the travel industry polyglot abstract theorists argue that leisure and travel related activities have become increasingly commodified reflecting the broader evolution of a postmodern culture of consumption this paper argues that these developments have produced a travel industry complex characterized by a polyglot of varying production processes each placing a premium on flexible forms of accumulation focusing on certain key sectors of the travel industry the paper examines how partly because of new information technologies each element of the travel industry polyglot appears to have been affected by flexible based production strategies such as the externalization of ancillary services the development of interfirm strategic alliances and sophisticated product differentiation through brand segmentation the paper ends with a call for in depth empirical investigations to help develop a superior understanding of how flexible production techniques affect the various components comprising the travel industry

collusion and signaling in auctions with interdependent values abstract the standard approach to collusion in auctions posits an uninformed disinterested third party who prior to the auction designs and implements a collusive mechanism in environments where collusion agreements are likely to be both proposed and executed by the involved parties this approach may neglect information leakages from simply a proposal to collude we consider a model of collusion where one informed bidder proposes to another as in es and schummer 2004 we allow for general interdependent values and affiliated signals in contrast to third party modeling approaches collusion is inefficient from both a social perspective except for the case of pure common values and from the perspective of the ring both bidders are better off than without colluding but the surplus extracted from the seller is distributed asymmetrically between the bidders the potential for information leakage from proposing is bad for low types who reveal that they are weak competitors but is advantageous for high types because they are able to signal their strength we identify a so called briber s curse whereby acceptance of a proposal causes the proposer to downgrade her expected value for the object when there is additional competition in the form of bidders outside of the cartel the briber s curse significantly harms cartel profits and raises seller revenues

matching markets with adverse selection abstract this paper considers a market with adverse selection in the spirit of rothschild and stiglitz quart j econ 90 1976 629 the major departure from existing approaches is that we model a decentralized market that is open ended and constantly refilled by new participants e g by new workers and firms in the case of a labor market the major novelty of this approach is that the distribution of types in the market becomes an endogenous variable which is jointly determined with equilibrium contracts as frictions become small we show that the least cost separating contracts are always supported as an equilibrium outcome regardless of the distribution of types among entrants moreover we derive conditions under which this outcome is also unique

mandated countertrade as a strategic commitment abstract mandated countertrade is a policy to restrict unilateral imports a country s government thereby in effect commits domestic firms not to purchase from a foreign trading partner unless there are reciprocal sales we argue that the policy may be a rational response to fundamental contracting failures our key assumption being that sellers are incompletely informed about buyers valuations in line with observed practices the analysis suggests that an optimal mandated countertrade policy will target high mark up imports and low mark up exports implications for global welfare are ambiguous and depend upon the extent of a double coincidence of wants

incentives in principal agent relationships this article identifies some of the major issues that have been examined in the literature on incentives the article begins by discussing the frictions that lie at the heart of incentive problems next the principal s optimal response to these frictions is explored taking as given the characteristics of the agents with whom the principal interacts in a nonrepeated setting the design of individualized contracts contests and tournaments is analyzed then the principal s task of selecting the best agent is addressed and repeated agency relationships are considered

valuation of project portfolios an endogenously discounted method abstract real options analysis roa has been developed to value assets in which managerial flexibilities create significant value the methodology is ideal for the valuation of projects in which frequent adjustments e g investment deferral project scope changes etc are necessary in response to the realization of market and technological uncertainties however roa has no practical application when valuing portfolios of multiple concurrent projects sharing resources as the size of the problem grows exponentially with the number of projects and the length of the time horizon in this paper an extension of roa suitable for the valuation of project portfolios with substantial technological uncertainty e g r d portfolios is proposed the method exploits the distributed decision making strategy encountered in most organizations to decompose the portfolio valuation problem into a decision making sub problem and a set of single project valuation sub problems that can be sequentially solved discrete event simulation is used for the first sub problem while a tailored roa based strategy is used for the set of valuation sub problems a case study from the pharmaceutical industry is used to compare the decision tree analysis dta method and the proposed method

a non cooperative bargaining theory with incomplete information verifiable types abstract we consider a non cooperative sequential bargaining game with incomplete information where two players negotiate for mechanisms with ex post verifiable types at the interim stage we prove the existence of a stationary sequential equilibrium of the bargaining game where the ex post nash bargaining solution with no delay is asymptotically implemented with probability one further the ex post nash bargaining solution is a unique outcome of a stationary equilibrium under the property of independence of irrelevant types iit whereby the response of every type of a player is independent of allocations proposed to his other types and under a self selection property of their belief

mechanism design by an informed principal private values with transferable utility we provide a solution to the informed principal problem in the independent private values setting with monetary transfers the principal s private information creates signaling considerations that may distort the implemented allocation we show that there is no distortion all principal types implement an allocation that is optimal for the principal ex ante before he she learns his her type as an application we consider settings with linear utility for bilateral exchange in which the principal is one of the traders the solution is a combination of a participation fee a buy out option for the principal and a resale stage with posted prices

options in the real world lessons learned in evaluating oil and gas investments many firms in the oil and gas business have long used decision analysis techniques to evaluate exploration and development opportunities and have looked at recent development in option pricing theory as potentially offering improvements over the decision analysis approach unfortunately it is difficult to discern the benefits of the options approach from the literature on the topic most of the published examples greatly oversimplify the kinds of projects encountered in practice and comparisons are typically made to traditional discounted cash flow analysis which unlike the option pricing and decision analytic approaches does not explicitly consider the uncertainty in project cash flows in this paper we provide a tutorial introduction to option pricing methods focusing on how they relate to and can be integrated with decision analysis methods and describe some lessons learned in using these methods to evaluate some real oil and gas investments

the strategic role of tourism trade fairs in the new age of tourism abstract tourism trade fairs have played an important role in the industry facilitating the sales function of companies in the fordian phase of tourism in the new age of tourism their mission is more complex they contribute systematically to the competitiveness of companies and clusters strengthening their information function this article examines the implications for tourism company policies in this new age as well as the current and potential contribution of tourism trade fairs to improving each one of porter s competitive factors demand input factors supporting industry and company structure finally the article recommends strategic guidelines for the development of tourism trade fairs and for optimizing participation in these events

signaling and the design of delegated management contracts for public utilities this article analyzes the shape of contracts between local governments and the contractors they hire to run public facilities on their behalf governments are privately informed about the quality of the facility while risk neutral contractors undertake a non verifiable operating eort the design of the contract signals the quality of the facility in such a way that the better this quality the greater the share of operating risk kept by the government this feature reduces the agent s marginal incentives creating a trade o between signaling and moral hazard we provide extensions of our framework in several directions allowing for risk aversion on the agent s side double moral hazard and political delegation the model is supported by some stylized facts from the water industry

informed principal problem with moral hazard risk neutrality and no limited liability abstract we consider a principal agent moral hazard problem with risk neutral parties and no limited liability in which the principal has private information the principal s private information creates signaling considerations that may distort the implemented outcome these distortions can explain e g efficiency wages beaudry 1994 and muted incentives inderst 2001 we show that in a large class of environments these distortions vanish if the principal is allowed to offer sufficiently rich contracts

incentive schemes as a signaling device abstract this paper considers a model of moral hazard where the principal has private information for instance in an organizational setting the firm may be better informed about the profitability of a sales area for which it seeks to employ a new sales representative we show how this information asymmetry may lead to a game of signaling which can mute incentives

comparing allocations under asymmetric information coase theorem revisited abstract this paper investigates the robustness of coase theorem under asymmetric information we identify the conditions under which the same allocation is attained as an equilibrium in a bilateral trade model no matter which informed or uninformed party has the bargaining power to make a contract offer

on the role of commitment in a principal agent relationship with an informed principal abstract in many circumstances a principal who has private information when contracting with an agent may perform some further action simultaneously with or after the agent s choice of an action we analyze such a principal agent relationship with an informed principal as a noncooperative game and distinguish two extensive form games first the principal can commit to his subsequent action at the time of contracting second the principal s announcement for his action is not binding at the time of performance we show that commitment by the principal leads to separation and no commitment leads to pooling journal of economic literatureclassification numbers c72 d82

monopoly with incomplete information recent theoretical research on principal agent relationships has emphasized incentive problems that arise when the parties involved are constrained by either asymmetric information or their inability to monitor each other s actions here we concentrate on the former constraint and consider the case of a single principal the monopolist the main contribution is to show that under a separability assumption strong conclusions can be drawn about the nature of optimal incentive schemes although the primary focus is on optimal quantity discounts in a monopolized market the results also shed light on related topics such as optimal income taxation and commodity bundling

incentive compatibility in signaling games with a continuum of types on donne deux resultats utiles pour demontrer l existence et pour caracteriser des equilibres de separation dans des jeux de signalement

interim third party selection in bargaining abstract third party intervention can reduce the risk of conflict in situations where the bargaining failure is due to asymmetric information in this paper i consider the selection of a third party in a two person bargaining problem where each disputant has private information about its relative strength or weakness for a class of problems i find that the disputants choose the third party that is best for the strong type but worst for the weak type due to the incentive of each disputant to avoid seeming weak to their adversary the selected third party s intervention entails a higher ex ante chance of conflict than intervention by any other alternative this paper shows how the process of interim third party selection can have important consequences for the outcome of a third party intervention in bargaining

contract negotiation and the coase conjecture a strategic foundation for renegotiation proof contracts what does contract negotiation look like when some parties hold private information and negotiation frictions are negligible this paper analyzes this question and provides a foundation for renegotiation proof contracts in this environment the model extends the framework of the coase conjecture to situations in which the quantity or quality of the good is endogenously determined and to more general environments in which preferences are nonseparable in the traded goods as frictions become negligible all equilibria converge to a unique outcome which is separating efficient and straightforward to characterize

contract theory and implications for perennial energy crop contracting abstract this article provides an overview of modern contract theory and discusses the implications of the theory for contracting for perennial dedicated energy crops we discuss some of the unique challenges of contracting for dedicated energy crops used for the production of advanced biofuels and survey some of the relevant concepts and research from the contract theory literature to address these challenges we focus primarily on the mechanism design or complete contracts approach to contracting which involves optimizing some objective function e g profits costs etc with respect to contract terms subject to important incentive constraints the solution to these optimization problems typically highlight important tradeoffs that a contract designer needs to consider in order to maximize profits and or minimize costs

adverse selection and renegotiation in procurement as was shown by dewatripont optimal long term contracts are generally not sequentially optimal the parties ex post renegotiate them to their mutual advantage this paper fully characterizes the equilibrium of a simple two period procurement situation and studies the extent to which renegotiation reduces ex ante welfare i a central result is that like in the non commitment case the second period allocation is optimal for the principal conditionally on his posterior beliefs about the agent ii the first period allocation exhibits an increasing amount of pooling when the discount factor grows iii with a continuum of types it is never optimal to induce full separation the paper also analyzes whether renegotiated long term contracts yield outcomes resembling those under either unnegotiated long term contracts or a sequence of short term contracts and it links the analysis with the multiple unit durable good monopoly problem

signaling quality with increased incentives previous work on informed principal problems with moral hazard suggested that the principal should signal project quality by retaining a larger share of the project and hence lowering incentives for the agent we show that this view is incomplete if project quality and effort are complements and effort is more valuable for high quality projects a principal with a high quality project may separate from a principal with a low quality project by increasing incentives for the agent this holds with a risk neutral agent who is protected by limited liability as well as with a risk averse agent and unlimited liability a dynamic version of our model in which the agent learns project quality in later periods provides an explanation for the use of initially reduced royalty rates in business format franchising contracts

valuing risky projects option pricing theory and decision analysis in the academic literature and professional practice there are a number of alternative and apparently competing methods for valuing risky projects in this paper we compare and contrast three different approaches risk adjusted discount rate analysis option pricing analysis and decision analysis focusing on the last two we show that in contrast to some of the claims made in the real options literature when both option pricing and decision analysis methods are correctly applied they must give consistent results we also explore ways in which option pricing and decision analysis methods can be profitably integrated in particular we show how option pricing techniques can be used to simplify decision analysis when some risks can be hedged by trading and conversely how decision analysis techniques can be used to extend option pricing techniques to problems with incomplete securities markets

fixed equilibrium rationalizability in signaling games abstract this paper studies equilibrium refinements in signaling games through an examination of rationalizability in derived games obtained by replacing the equilibrium path with a sure outcome that yields the equilibrium payoff to all players the informed player chooses between the sure payoff and sending an out of equilibrium signal from the original game whether or not the strategy of choosing the sure payoff is rationalizable is related to the iterated intuitive condition divinity when the original game is viewed as having imperfect incomplete information our results also demonstrate the significance of testing out of equilibrium signals as a set rather than individually

contract renegotiation and coasian dynamics consider a long term relationship between a seller and a buyer whose valuation for a per period service or a durable good is private as trade progresses the valuation will be partially revealed and it may be impossible for the parties to commit ex ante not to take advantage of this we analyse this situation first by supposing that the parties can sign a sequence of short term contracts and secondly by supposing that they can sign a long term contract but cannot commit not to renegotiate it later we find a close relationship in the second case between the optimal long term contract and the non commitment outcome in the standard coasian durable good model our results also have implications for hidden information principal agent models

the value of information in a principal agent model with moral hazard the ex post contracting case abstract in a principal agent model with moral hazard a signal about the principal s technology the stochastic mapping from the agent s action to the outcome is observed before the contract is offered the signal is either uninformative null information informative and observed only by the principal private information or also observed by the agent public information we show that from an ex ante standpoint before the signal is observed i the agent prefers private to both null and public information ii the principal sometimes prefers null to both private and public information and iii when the principal prefers public to null information she prefers public to private information whereas the agent prefers private to public information in this last situation we also show that iv for any separating equilibrium with private information there exists a contract with public information that both strictly prefer

informed principal moral hazard and the value of a more informative technology we analyze a principal agent model with moral hazard in which the principal has private information about the technology we characterize perfect bayesian equilibria of the contracting game that possess the following properties i a principal with a more informative technology ends up earning less profits than a principal with a less informative one does ii compared to the complete information case the actions implemented by the privately informed principal can be distorted iii the agent can end up being better off when the principal has private information

moral hazard in corporate investment and the disciplinary role of voluntary capital rationing this paper compares three capital budgeting rules the npv rule a high hurdle rate and capital rationing and explains why some firms may voluntarily impose capital rationing under both capital rationing and a high hurdle a restrictive investment criterion is used to control managerial shirking however implementation of these budgeting rules requires a mechanism to prevent the firm from expanding the investment scale ex post capital rationing in the form of a predetermined fixed budget differs from the high hurdle rate rule in that the former requires the firm to overcome the cost of raising additional capital before making further investment

loan commitments and the debt overhang problem the debt overhang problem is shown to arise in the context of an entrepreneurial project that requires a sequence of investments financed by an outside lender the entrepreneur not internalizing losses accruing to the lender which financed the initial investments may inefficiently cancel the project and instead pursue an outside opportunity it is shown that loan commitments contracts that allow the entrepreneur to borrow a variable amount at a set interest rate in return for a fixed fee are the optimal financial contracts in this setting strictly dominating standard debt the existence of the fixed fee allows loan commitments to set a relatively low interest rate improving the entrepreneur s incentives to continue the project the paper specifies the optimal contract fully derives robust comparative statics properties using an extension of milgrom and roberts 1994 and extends the results to more realistic settings e g allowing the market risk free rate to be stochastic

the financing of innovation learning and stopping we consider the financing of a research project under uncertainty about the time of completion and the probability of eventual success we distinguish between two financing modes namely relationship financing where the allocation decision of the entrepreneur is observable and arm s length financing where it is unobservable we find that equilibrium funding stops altogether too early relative to the efficient stopping time in both financing modes the rate at which funding is released becomes tighter over time under relationship financing and looser under arm s length financing the tradeoff in the choice of financing modes is between lack of commitment with relationship financing and information rents with arm s length financing

uncertainty and stepwise investment we analyze the optimal investment strategy of a firm that can complete a project either in one stage at a single freely chosen time point or in incremental steps at distinct time points the presence of economies of scale gives rise to the following trade off lumpy investment has a lower total cost but stepwise investment gives more flexibility by letting the firm choose the timing individually for each stage our main question is how uncertainty in market development affects this trade off the answer is unambiguous and in contrast with a conventional real options intuition higher uncertainty makes the single stage investment more attractive relative to the more flexible stepwise investment strategy

signalling and renegotiation in contractual relationships this paper examines how the possibility of renegotiation affects contractual outcomes in signaling games when an infinite number of rounds of renegotiations are allowed before contracts are executed the main results of the paper are 1 contracts may still contain distortions 2 the popular efficient separating equilibrium outcome is never an equilibrium outcome with renegotiation 3 incentive compatibility constraints can be generalized to incorporate renegotiation 4 equilibrium outcomes can be separating and nevertheless depend on the uninformed player s prior and 5 renegotiation in signaling games may lead to outcomes similar to equilibrium outcomes of screening games in which multiple contract purchases are allowed copyright 1993 by the econometric society

a dynamic model of equilibrium selection in signaling markets in his work on signaling spence proposed a dynamic model of a market in which a buyer revises prices in light of experience and in which sellers with private information about their types choose utility maximizing signals given these prices we follow spence s suggestion of introducing perturbations into the resulting dynamic process in a broad class of markets our model selects a separating equilibrium outcome if and only if the equilibrium outcome satisfies a version of the undefeated equilibrium concept whereas a pooling equilibrium outcome is selected if and only if the equilibrium outcome is both undefeated and satisfiesd1

warranties as signals under consumer moral hazard this article examines the use of prices and warranties as signals of product quality to consumers who choose how to maintain their purchases the seller s incentives are strongly affected by the interaction of quality and maintenance in determining product reliability two different assumptions about this interaction are made a separating equilibrium in which high quality is signalled with a low warranty and low price is shown to be possible in both cases

contractual signaling in a market environment abstract we consider a game of signaling where the informed sender proposes a contract which can only be accepted or rejected by the receiver while most of the literature considers a bilaterally monopolistic setting we embed the game in a market environment where a sender may switch to another receiver in case of rejection we analyze how this structural extension can be employed to restrict the set of stationary equilibrium allocations journal of economic literature classification number c78 d82

optimal regulation of multinationals under collusion this paper analyses the optimal collusion proof mechanism for the regulation of multinational firms mnfs in foreign direct investment fdi projects there is a host country with a profitable investment opportunity either a multinational firm mnf or a local firm lf can undertake this project nonetheless due to its firm specific advantage and the mnf has the potential to create a larger surplus the host government faces an informational constraint such that it cannot observe the extra surplus the mnf can generate using this set up karabay 2010 shows that employing foreign ownership restrictions to force a joint venture jv can help the host government to partially overcome its information disadvantage in this paper we extend karabay 2010 by studying the host government s optimal regulatory policy when the mnf and the lf can collude it turns out collusion imposes no cost on the host government and the expected welfare attained in the absence of collusion can still be secured under collusion

resale in second price auctions with costly participation abstract we study sealed bid second price auctions with costly participation and resale each bidder chooses to participate in the auction if her valuation is higher than her optimally chosen participation cutoff if resale is not allowed and the bidder valuations are drawn from a strictly convex distribution function the symmetric equilibrium where all bidders use the same cutoff is less efficient than a class of two cutoff asymmetric equilibria existence of these equilibria without resale is sufficient for existence of similarly constructed two cutoff equilibria with resale moreover the equilibria with resale are more asymmetric and under a sufficient condition more efficient than the corresponding equilibria without resale

interim bayesian persuasion first steps some recent information transmission models kamenica and gentzkow 2011 rayo and segal 2010 view the sender as an information structure designer this view emphasizes a connection between design and information transmission it departs from traditional models of information transmission crawford and sobel 1982 grossman 1981 milgrom 1981 spence 1973 since it assumes that the sender commits to an information system before learning her type so that her choice is by itself uninformative by contrast there is a small but active tradition in mechanism design following myerson 1983 that considers the possibility that a choice of mechanism by an informed principal may be used as a signal by the participants in the mechanism through the study of an example this short paper proposes a modest first step toward building a theory of information structure design by an informed principal i work in a simple framework where a sender whose type is either high or low seeks validation from a receiver who wants to validate high types exclusively the sender chooses an infor mation system i e a conditional distribution of signals for each of her types from a feasible set i allow for potential restrictions on the set of feasible information systems which is important to make bayesian persuasion models more flexible i consider perfect bayesian equilibria of the game in which the sender chooses an information system after learning her type and the receiver chooses whether to validate after observing the signal generated by the information system

integrating the tourism industry problems and strategies this paper addresses two interrelated issues in tourism development horizontal integration within tourism s component sectors and attempts at vertical integration between them the paper employs a conceptual framework adapted from regulation theory to assess the dynamics of these processes particularly in relation to airlines and hotels through examining some of the most important examples of both horizontal and vertical integration it indicates how these have influenced contemporary strategies in the component sectors the paper goes on to illustrate how trends towards fordist organization within airlines have conflicted with post fordist trends in hotel operations to undermine attempts at vertical integration across the tourism industry

the impact of globalization on small and medium enterprises new challenges for tourism policies in european countries abstract the pressure of globalization is having a major impact on the small and medium enterprises smes of the european tourism industry globally acting suppliers decreasing transportation costs and emerging new destinations have put pressure on the european smes in traditional destinations as many european countries are economically very dependent on tourism a need for effective policy support arises the paper focuses on the questions what could be done to restore the european tourism industry as a growth engine for income and employment as well as what roles should the government sector and the private sector respectively play the implementation of flexible operating network alliances and holistic destination management techniques geared to meet post modern tourism demand are suggested to alleviate the impacts of globalization on smes

incomplete contracts and signaling this article presents a principal agent model in which asymmetric information leads to contractual incompleteness i show that in the presence of transactions costs incompleteness may act as a signal of the principal s type two types of transactions costs are considered those incurred ex ante drafting costs and those incurred ex post enforcement or verification costs i prove that in the presence of either of these costs asymmetric information leads to more contractual incompleteness than full information does

technical note equivalence of different profitability criteria with the net present value abstract net present value has long been regarded in academic circles as the best criterion for project appraisal however several alternative complementary methods remain popular with practitioners this paper demonstrates that if properly applied several of these standard criteria such as net final value internal rate of return benefit cost ratio profitability index equivalent annuity discounted payback period and average payback period lead to the same investment decision as net present value moreover the paper proves that when choosing between two mutually exclusive projects the application of these criteria to the difference project provides the same ranking as net present value therefore although net present value is regarded as a superior investment criterion any of these popular criteria properly applied serve as well

entrepreneurs and new ideas we study how early stage new ideas are turned into successful businesses even promising ideas can be unprofitable if they fail on one dimension such as technical feasibility correspondence to market demand legality or patentability to screen good ideas the entrepreneur needs to hire experts who evaluate the idea along their dimensions of expertise sharing the idea however creates the risk that the expert would steal it yet the idea thief cannot contact any other expert lest he should in turn steal the idea thus stealing leads to incomplete screening and is unattractive if the information of the other expert is critical and highly complementary in such cases the entrepreneur can form a partnership with the experts thus granting them the advantage of accessing each other s information yet very valuable ideas cannot be shared because it is too tempting to steal them

organic incremental and induced paths to sustainable mass tourism convergence this paper positions sustainable mass tourism smt as the desired and impending outcome for most destinations natural resource scarcity development of green technology climate change awareness the global financial crisis institutionalised environmentalism and internet technology all facilitate the emergence of sustainability as a societal norm that is combining with the longer established norm of growth desirability smt convergence is occurring along three distinctive paths in an evolutionary manner that reflects environmental pragmatism the market driven organic path describes the conventional tourism area life cycle model of butler whilst the regulation driven incremental path entails deliberate alternative tourism dat in which carrying capacities are gradually increased to accommodate higher visitation levels the hybrid induced path describes planned mega resorts conceived as growth poles each model is invested with its own specific planning and management implications

search bargaining and signalling in the market for legal services over the last eight centuries lawyers in common law countries have generally been precluded from buying their clients cases recently a number of economists and lawyers have argued that sale should be allowed so as to eliminate moral hazard particularly when contingent fees are used this argument is based on full information reasoning however if the lawyer has private information about the case value then compensation demands potentially signal this value when the client can search over lawyers we provide a formal model and a family of computational examples that show that allowing possibly partial purchase can reduce expected social efficiency

equilibrium rejection of a mechanism we study a mechanism design problem in which players can take part in a mechanism to coordinate their actions in a default game by refusing to participate in the mechanism a player can revert to playing the default game non cooperatively we show with an example that some allocation rules are implementable only with mechanisms which will be rejected on the equilibrium path in our construction a refusal to participate conveys information about the types of the players this information causes the default game to be played under different beliefs and more importantly under different higher order beliefs than the interim ones we find a lower bound on all the implementable payoffs we use this bound to establish a condition on the default game under which all the implementable outcomes are truthfully implementable without the need to induce rejection of the mechanism