information transmission cournot and bertrand equilibria we examine how incentives for two duopolists to honestly share information change depending upon the nature of competition cournot or bertrand and the nature of the information structure while in earlier papers uncertainty is about an unknown common demand intercept in the present paper uncertainty is about unknown private costs the different information structure reverses the incentives to share information while with unknown common demand sharing is a dominant strategy with bertrand competition and concealing is a dominant strategy with cournot competition with unknown private costs sharing is a dominant strategy with cournot competition and concealing is a dominant strategy with bertrand competition

information acquisition as business strategy information acquisition activities such as accounting disclosure financial analysis and marketing research are major concerns in moder business administration business enterprises often invest enormous amounts of time and money in obtaining information for the various tasks of decision making a growing literature is devoted to addressing the role of information in the production decision and the market structure however little effort has been devoted to understanding information acquisition as an essential part of business strategy the purpose of this paper is to analyze information gathering as a competition strategy of manufacturing firms and to examine its implications for the welfare of society li mckelvey and page 13 and vives 20 use a two stage game model to study the information acquisition of oligopolistic firms however these authors ignore the strategic aspect of information acquisition in both 13 and 20 firms are symmetric and produce a homogenous good therefore the equilibrium is also symmetric all firms gather the same amount of industrywide information we generalize 13 in several ways we allow firms to produce differentiated products and to use the information they acquire to contest the product market moreover the information in our model can be partly firm specific and partly industry wide we adopt a convex information cost function more general than that of 13 therefore 13 can be interpreted as a special case of the model presented here novshek and sonnenschein 14 gal or 6 vives 19 and li 12 study the possibility of trading or sharing the exogenous industry wide information about demand okada 15 fried 4 li 12 shapiro 18 and seidmann 17 examine the incentive for disclosing exogenous firm specific information about costs in an oligopoly 2 we extend the analysis in this literature

speculative bubbles in bitcoin markets an empirical investigation into the fundamental value of bitcoin amid its rapidly increasing usage and immense public interest the subject of bitcoin has raised profound economic and societal issues in this paper we undertake economic and econometric modelling of bitcoin prices as with many asset classes we show that bitcoin exhibits speculative bubbles further we find empirical evidence that the fundamental price of bitcoin is zero

aggregation of information in large cournot markets consider a homogeneous product market where firms have private information about an uncertain demand parameter and compete in quantities we examine the convergence properties of bayesian cournot equilibria as the economy is replicated and conclude that large cournot or almost competitive markets do not aggregate information efficiently except possibly when the production technology exhibits constant returns to scale even in a competitive market there is a welfare loss with respect to the first best outcome due to incomplete information in general nevertheless a competitive market is efficient taking as given the decentralized private information structure of the economy endogenous and costly information acquisition is examined and seen to imply that the market outcome always falls short of the first best level with decreasing returns to scale the results are also shown to be robust to the addition of extra rounds of competition which allows firms to use the information revealed by past prices explicit closed form solutions yielding comparative static results are obtained for models characterized by quadratic payoffs and affine information structures

costly and bounded rationality in individual and team decision making the savage paradigm of rational decision making under uncertainty has become the dominant model of human behavior in mainstream economics and game theory however under the rubric of bounded rationality this model has been criticized as inadequate form both normative and descriptive viewpoints this paper sketches the historical roots and some current development of this movement distinguishing between attempts to extend the savage paradigm costly rationality and the need for more radical departures truly bounded rationality copyright 2000 by oxford university press

monotone equilibria in bayesian games of strategic complementarities for bayesian games of strategic complementarities we provide a constructive proof of the existence of a greatest and a least bayes nash equilibrium each one in strategies that are monotone in type our main assumptions besides strategic complementarities are that each player s payoff displays increasing differences in own action and the profile of types and that each player s interim beliefs are increasing in type with respect to first order stochastic dominance e g types are affiliated the result holds for general action and type spaces single multi or infinite dimensional continuous or discrete and no prior is assumed we also provide the following comparative statics result the greatest and least equilibria are higher if there is a first order stochastic dominant shift in the interim beliefs we apply this result to strategic information revelation in games of voluntary disclosure

information and the market for lemons this paper revisits akerlofs 1970 classic adverse selection market and asks the following question do greater information asymmetries reduce the gains from trade perhaps surprisingly the answer is no better information on the selling side worsens the buyers curse thus lowering demand but may shift supply as well whether trade increases or decreases depends on the relative sizes of these effects a characteization is given on the other hand improving the buyers information i e making private information public unambiguously improves trade so long as market demand is downward sloping

knowing what others know coordination motives in information acquisition we explore how optimal information choices change the predictions of strategic models when a large number of agents play a game with strategic complementarity information choices exhibit complementarity as well if an agent wants to do what others do they want to know what others know this makes heterogeneous beliefs di cult to sustain and may generate multiple equilibria in models with substitutability agents prefer to difierentiate their information choices we use these theoretical results to examine the role of information choice in recent price setting models and to propose modeling techniques that ensure equilibrium uniqueness

another look at the radner stiglitz nonconcavity in the value of information abstract this paper revisits the well known result of r radner and j stiglitz 1984 in bayesian models of economic theory elsevier amsterdam which shows that under certain conditions the value of information exhibits increasing marginal returns over some range their result assumes that both the number of states and the number of signal realizations are finite assumptions which preclude most analyses of optimal information acquisition we provide sufficient conditions that yield this nonconcavity in the value of information in a general framework the role that these conditions play is clarified and illustrated with several examples we also discuss the robustness of the nonconcavity result and the difficulties involved in getting the value of information to be globally concave journal of economic literature classification number d83

strategic information manipulation in duopolies abstract this paper studies a duopoly market in which firms can draw inferences concerning uncertain market demand from observations of their outputs and market price firms may adjust their outputs away from myopically optimal levels to affect the informativeness of the market price because firms quantities are observed firms can manipulate the extent to which belief revision occurs rather than the direction in which beliefs are revised as in signal jamming models we develop conditions and present examples under which the value of information is positive and negative and under which firms will increase or decrease quantity to manipulate information journal of economic literature classification numbers d80 l13

job tenure and asset holdings the paper examines the impact of housing equity and occupational pension scheme membership on job tenure using job duration data from the 1985 general household survey appropriate hazard functions are constructed and estimated housing equity data is constructed from ghs with appropriate adjustment for selection on house movers housing equity has a negative impact on male job tenure which is more pronounced the longer the job lasts in contrast pension scheme membership raises average tenure in accordance with other studies but the results show variation according to pension scheme characteristics

strategic information revelation we analyze the problem in which agents have non public information and are to play an asymmetric information game the agents may reveal some or all of their information to other agents prior to playing this game revelation is via exogenously specified certifiable statements the equilibria resulting from various revelation strategies are used to determine equilibrium revelation of information sufficient conditions are provided for complete revelation of all private information a number of examples are provided illustrating when revelation will or will not occur in commonly analyzed games many economic problems are characterized by the presence of both strategic behaviour on the part of individuals and by asymmetric information models encompassing both of these characteristics have been used successfully to examine questions in many fields usually using the concept of bayesian nash equilibrium as the solution concept typically the agents information is given exogenously and is fixed throughout the analysis modelling the information structure as static is appropriate for some problems but not for all in particular situations that are inherently dynamic most economic encounters allow for some interchange between the agents before the outcome is settled irrevocably in such circumstances it is possible that at least one or more of the agents possessing non public information may be able to reveal part or all of his information to one or all of the other agents in the economy during the course of their contact to the extent that such a communication is believed by the other agents the priors of the other agents will change and we will have what is in essence a new asymmetric information game new in

continuous stochastic games of capital accumulation with convex transitions abstract we consider a discounted stochastic game of common property capital accumulation with nonsymmetric players bounded one period extraction capacities and a transition law satisfying a general strong convexity condition we show that the infinite horizon problem has a markov stationary subgame perfect equilibrium and that every finite horizon truncation has a unique markovian equilibrium both in consumption functions which are continuous and nondecreasing and have all slopes bounded above by 1 unlike previous results in strategic dynamic models these properties are reminiscent of the corresponding optimal growth model journal of economic literature classification codes c73 o41 q20

the role of the state and the hierarchy of money this paper uses minsky s definition of money as a two sided balance sheet phenomenon to challenge many common positions on the nature evolution and role of money his definition is applied to two opposing theories in the history of monetary debates and it is shown that the chartalists as opposed to the metallists developed a general theory of money that can be applied equally convincingly to the entire era of state money this theory is then used to show that the state s power to make and enforce tax laws renders its money the most acceptable form of debt within what can be considered a hierarchy of monies this leads to some important policy implications as well as a strengthening of the endogenous money position copyright 2001 by oxford university press

optimal research for cournot oligopolists we extend the classical cournot model to take account of uncertainty in either the cost function or the demand function by undertaking research firms can acquire private asymmetric information to help resolve their uncertainty and make a more informed production decision the model is a two stage game in the first stage research levels are chosen and in the second stage conditional on private research outcomes production decisions are made we find that for a linear continuous information structure there is a unique nash equilibrium to the game in the equilibrium there may be an inefficient amount of aggregate research and there may be incomplete pooling as well the model specializes to the classical case when the cost of research is zero and each firm gains essentially the same information by doing an infinite amount of research or when the cost of research is so high no firm undertakes research

endogenous private information structures we formally incorporate the option to gather information into a game and thus endogenize the information structure we ask whether models with exogenous information structures are robust with respect to this endogenization any nash equilibrium of the game with information acquisition induces a nash equilibrium in the corresponding game with an exogenous structure we provide sufficient conditions on the structure of the game for which this remains true when nash is replaced by sequential we characterize the sequential nash equilibria of games with exogenous information structures that can arise as a sequential nash equilibrium of games with endogenous information acquisition

endogenous information acquisition in bayesian games with strategic complementarities abstract this paper studies covert or hidden information acquisition in common value bayesian games of strategic complementarities using the supermodular stochastic order to arrange the structures of information increasingly in terms of preferences we provide novel easily interpretable and verifiable though restrictive conditions under which the value of information is increasing and convex and study the implications in terms of the equilibrium configuration increasing marginal returns to information leads to extreme behavior in that agents opt either for the highest or the lowest quality signal so that the final analysis of this complex game simplifies greatly into that of a two action game this result can rationalize the complete information game as an endogenous outcome finally we also establish that higher quality information leads players to select more dispersed actions in the bayesian game

a new look at optimal growth under uncertainty abstract we consider the discounted optimal growth model under uncertainty and model the stochastic technology as a transition probability mapping inputs into random outputs this formulation allows for weaker assumptions of monotonicity and convexity on the technology associated with second order stochastic dominance and permitting some increasing returns preserving all the conclusions of this model furthermore in this framework the differentiability of the unique optimal policy is obtained in an elementary way from the smoothness of the data our results provide support for the contention that stochastic modeling in economics should be more than a mere extension of the deterministic realm

monopoly competition and information acquisition abstract an incumbent monopolist is uncertain about its linear demand but can acquire public information at a cost we determine how an entry threat affects the firm s information acquisition if returns to scale are constant and the state contingent demands become more dispersed as output increases then entry reduces information acquisition if however either the incumbent or entrant has increasing returns or if the state contingent demands are nonlinear or fail increasing dispersion then entry can increase information finally entry can hurt consumers although entry always increases output it can decrease information consumers sometimes prefer a better informed monopoly to a duopoly

bitcoin and the legitimacy crisis of money the virtual currency and payment project bitcoin intends to challenge the current monetary and payment system that finds itself in a legitimacy crisis in the aftermath of the financial market turmoil of 2008 in examining the governance of the bitcoin system i try to assess its potential to create input and output legitimacy as a payment system and as a monetary system in comparison with current practice

optimal information acquisition for heterogenous duopoly firms abstract this paper analyzes a stochastic duopoly market in which heterogenous firms acquire costly information about the stochastic market demand prior to their production decisions the equilibrium amounts of information acquired by each firm are compared the comparative statics analyses show the differential effects of a change in information cost the degree of uncertainty in the market demand and the demand and cost function parameters journal of economic literature classification numbers d82 l13 l15

rationalizability learning and equilibrium in games with strategic complementarities we study a rich class of noncooperative games that includes models of oligopoly competition macroeconomic coordination failures arms races bank runs technology adoption and diffusion r d competition pretrial bargaining coordination in teams and many others for all these games the sets of pure strategy nash equilibria correlated equilibria and rationalizable strategies have identical bounds also for a class of models of dynamic adaptive choice behavior that encompasses both best response dynamics and bayesian learning the players choices lie eventually within the same bounds these bounds are shown to vary monotonically with certain exogenous parameters we study the class of noncooperative supermodular games introduced by topkis 1979 and further analyzed by vives 1985 1989 who also pointed out the importance of these games in industrial economics supermodular games are games in which each player s strategy set is partially ordered the marginal returns to increasing one s strategy rise with increases in the competitors strategies so that the game exhibits strategic complementarity 2 and if a player s strategies are multidimensional marginal returns to any one com ponent of the player s strategy rise with increases in the other components this class turns out to encompass many of the most important economic applications of noncooperative game theory in macroeconomics diamond s 1982 search model and bryant s 1983 1984 rational expectations models can be represented as supermodular games in each of these models more activity by some members of the economy raises the returns to increased levels of activity by others in oligopoly theory some models of bertrand oligopoly with differentiated products qualify as supermodu lar games in these games when a firm s competitors raise their prices the marginal profitability of the firm s own price increase rises a similar structure is present in games of new technology adoption such as those of dybvig and spatt 1983 farrell and saloner 1986 and katz and shapiro 1986 when more users hook into a communication system or more manufacturers adopt an interface standard the marginal return to others of doing the same often rises similarly in some specifications of the bank runs model introduced by diamond and dybvig 1983 when more depositors withdraw their funds from a bank it is more worthwhile for other depositors to do the same in the warrant exercise

incentives compensation and social welfare first version received january 1985 final version accepted august 1986 eds alternative wage structures under conditions of moral hazard are analysed from a social welfare standpoint it is argued that ex post equity judgements in an uncertainty context should incorporate a preference for positive correlation of utilities of different individuals in the design of compensation schemes this may give rise to a conflict between ex post equity objectives and the need to provide effort incentives relative performance clauses in compensation schemes that are useful for providing incentives are undesirable from an ex post equity standpoint this is demonstrated by showing a in a context of independent production uncertainties every rankorder tournament is welfare dominated by a set of independent randomized contracts and b welfare optimal compensation schemes in general depend separately on an equity and an incentive component that tend to correlate agent compensations in different directions a central question in welfare economics concerns the design of a system of rewards for productive effort that balances distributive considerations with the provision of effort incentives this issue has usually been studied in the context of a model due to mirrlees 1971 in which the conflict between distribution and incentives arises because the social planner lacks perfect information about the abilities of individuals in this paper we analyse a model in which individual abilities are publicly known a conflict between distribution and incentives arises instead from the existence of uncertainty in production processes and a moral hazard problem stemming from the unobservability of workers effort most analyses of moral hazard have concentrated on the tradeoff between insurance of agents against wage fluctuations and provision of effort incentives the context is generally taken to be a capitalist firm where the self interested planner has a residual claim on workers output in other settings such as public sector or labour managed firms the planner may have preferences over the distribution of ex post welfare among the workers this paper analyses how with such preferences effort incentives under moral hazard are constrained both by insurance and by distributive considerations in section 2 we suggest that a concern for ex post equality of individual welfares can be expressed by a preference for positive correlation among welfare levels we then consider what properties of the ex post welfare function incorporate this preference for correlation welfare functions that are additively separable across individuals are inappropriate no matter how concave with them expected value depends only on the

endogenous information acquisition in coordination games in the context of a beauty contest coordination game in which payoffs 1 depend on the quadratic distance of actions from an unobserved state variable and 2 from the average action players choose how much costly attention to pay to vari 3 ous informative signals each signal has an underlying accuracy how precisely it 4 identifies the state and a clarity how easy it is to understand the unique linear 5 equilibrium has interesting properties the signals which receive attention are the 6 clearest available even if they have poor underlying accuracy the number of sig 7 nals observed falls as the complementarity of players actions rises and if actions 8 are more complementary the information endogenously acquired in equilibrium 9 is more public in nature the consequences of rational inattention constraints on 10

implications of rational inattention abstract a constraint that actions can depend on observations only through a communication channel with finite shannon capacity is shown to be able to play a role very similar to that of a signal extraction problem or an adjustment cost in standard control problems the resulting theory looks enough like familiar dynamic rational expectations theories to suggest that it might be useful and practical while the implications for policy are different enough to be interesting

to each according to markets tournaments and the matching problem with borrowing constraints we compare the performance of markets and tournaments as allocative mechanisms in an economy with borrowing constraints the economy consists of a continuum of individuals who differ in their initial wealth and ability level these must be assigned to a continuum of investment opportunities or inputs of different productivity with perfect capital markets matching is efficient under both mechanisms markets however generate higher aggregate consumption because of the waste associated with the production of signals under tournaments when borrowing constraints are present tournaments dominate markets in terms of matching efficiency and for sufficiently powerful signalling technologies also in terms of aggregate consumption