heterogeneity and peer effects in mutual fund proxy voting this paper studies voting in corporate director elections we construct a comprehensive data set of 2 058 788 mutual fund votes over a two year period we find systematic heterogeneity in voting some funds are consistently more management friendly than others we also establish the presence of peer effects a fund is more likely to oppose management when other funds are more likely to oppose it all else being equal we estimate a voting model whose supermodular structure allows us to compute social multipliers due to peer effects heterogeneity and peer effects are as important in shaping voting outcomes as firm and director characteristics

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

equilibrium characterization of networks under conflicting preferences in this work we characterize equilibrium introduced in configurations for networks with conflicting preferences we use the model hernandez et al 2013 to study the effect of three main factors the strength of individual preferences the level of integration in the network and the intensity of conflict in the population our aim is to understand how likely is it that social outcomes are either those in which preferences dominate choices or those in which some individuals sacrifice their preferences to achieve consensus with others our results show that the stronger individual preferences the harder to achieve consensus in choices however in cases where the payoff ratio is less extreme full coordination consensus is always an equilibrium finally if the level of conflict is low individual preferences become less relevant and all players choosing what they prefer is not an equilibrium anymore

term premiums in bond returns abstract this paper examines expected returns on u s treasury bills and on u s government bond portfolios expected bill returns are estimated from forward rates and from sample average returns both estimation methods indicate that expected returns on bills tend to peak at eight or nine months and never increase monotonically out to twelve months reliable inferences are limited to treasury bills and thus to maturities up to a year the variability of longer term bond returns preempts precise conclusions about their expected returns

uniform selection in global games abstract this paper brings together results which are required in order to extend the global games approach to settings where the game structure is endogenous more precisely it shows that the selection argument of carlsson and van damme global games and equilibrium selection econometrica 61 5 1993 989 1018 holds uniformly over appropriately controlled families of games those results also give proper justification for the inversion of limits which is often implicit in applied work taking comparative statics on the selected risk dominant equilibrium

how are derivatives used evidence from the mutual fund industry we investigate investment managers use of derivatives by comparing return distributions for equity mutual funds that use and do not use derivatives in contrast to public perception derivative users have risk exposure and return performance that are similar to nonusers we also analyze changes in fund risk in response to prior fund performance changes in risk are substantially less severe for funds using derivatives consistent with the explanation that managers use derivatives to reduce the impact of performance on risk we provide new evidence regarding the implications of cash flows and managerial gaming for the relation between performance and risk

communication in cournot oligopoly abstract this paper studies communication in a static cournot duopoly model under the assumption that the firms have unverifiable private information about their costs we investigate the conditions under which the firms cannot transmit any information through cheap talk and show that when these conditions are violated it may be possible to construct informative cheap talk equilibria if the firms can communicate through a third party communication can be informative even when informative cheap talk is impossible we exhibit a simple mediated mechanism that ensures informative communication and interim pareto dominates the uninformative equilibrium for the firms

existence of equilibrium in large double auctions abstract we show the existence of a pure strategy symmetric increasing equilibrium in double auction markets with correlated conditionally independent private values and many participants the equilibrium we find is arbitrarily close to fully revealing as the market size grows our results provide strategic foundations for price taking behavior in large markets

aggregate comparative statics abstract in aggregative games each player s payoff depends on her own actions and an aggregate of the actions of all the players many common games in industrial organization political economy public economics and macroeconomics can be cast as aggregative games this paper provides a general and tractable framework for comparative static results in aggregative games we focus on two classes of games 1 aggregative games with strategic substitutes and 2 nice aggregative games where payoff functions are continuous and concave in own strategies we provide simple sufficient conditions under which positive shocks to individual players increase their own actions and have monotone effects on the aggregate the results are illustrated with applications to public good provision contests cournot competition and technology choices in oligopoly

who matters in coordination problems we consider a common investment project that is vulnerable to a self fullling coordination failure and hence is strategically risky based on their private information agents who have heterogeneous investment incentives form expectations or sentiments about the project s outcome we nd that the sum of these sentiments is constant across dierent strategy proles and it is independent of the distribution of incentives as a result we can think of sentiment as a scarce resource divided up among the dierent payo types applying this nding we show that agents who benet little from the project s success have a large impact on the coordination process the agents with small benets invest only if their sentiment towards the project is large per unit investment cost as the average sentiment is constant a subsidy decreasing the investment costs of these agents will free up a large amount of sentiment provoking a large impact on the whole economy intuitively these agents insensitive to the project s outcome and hence to the actions of others are inuential because they modify their

special repo rates this article provides the causes and symptoms of special repo rates in a competitive market for repurchase agreements a repo rate is in effect an interest rate on loans collateralized by a specific instrument a special is a repo rate significantly below prevailing market riskless interest rates this article shows that specials can occur when those owning the collateral are inhibited whether from legal or institutional requirements or from frictional costs from supplying collateral into repurchase agreements specialness increases the equilibrium price for the underlying instrument by the present value of savings in borrowing costs associated with the repo specials this article characterizes competitive repurchase or repo markets and the equilibrium relationship between repo rates and the underlying cash market prices repurchase markets are often called financing markets since they are effectively vehicles for collateralized borrowing that are often used to finance the purchase of the underlying collateral this article provides causes and effects of specials meaning specific repo rates significantly below prevailing market interest rates for loans of similar maturity and credit risk the example of united states treasury instruments is emphasized because of the extensive use of the treasury repo market as a means of hedging against or speculating on changes in u s interest rates and because of the high incidence of specials in treasury repo rates numerous specific instru

heterogeneous expectations and bond markets this paper presents a dynamic equilibrium model of bond markets in which two groups of agents hold heterogeneous expectations about future economic conditions the heterogeneous expectations cause agents to take on speculative positions against each other and therefore generate endogenous relative wealth fluctuation the relative wealth fluctuation amplifies asset price volatility and contributes to the time variation in bond premia our model shows that a modest amount of heterogeneous expectations can help explain several puzzling phenomena including the excessive volatility of bond yields the failure of the expectations hypothesis and the ability of a tent shaped linear combination of forward rates to predict bond returns the author 2009 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

robust comparative statics in large dynamic economies we consider infinite horizon economies populated by a continuum of agents subject to idiosyncratic shocks this framework contains models of saving and capital accumulation with incomplete markets in the spirit of works by bewley aiyagari and huggett models of entry exit and industry dynamics in the spirit of hopenhayn s work and dynamic models of occupational choice and search models as special cases robust and easy to apply comparative statics results are established with respect to exogenous parameters as well as various kinds of changes in the markov processes governing the law of motion of the idiosyncratic shocks

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

multiple bgps in a growth model with habit persistence this paper establishes multiple balanced growth paths in an otherwise standard competitive growth model without externality or distortions and with households preference dependent upon how his her consumption compares to a habit stock formed by his her own past consumption the key feature in our model is that consumption forms habits in combination with existing habits this model establishes multiple equilibria because habit persistence induces an internal intertemporal complementarity effect among consumption flows with current consumption reinforcing future consumption as a result there exist two balanced growth paths with one path exhibiting low consumption and habits and high economic growth and the other path exhibiting high consumption and habits and low growth that is not necessarily a development trap both steady states are saddles but global indeterminacy arises where a high balanced growth path co exists with a low balanced growth path where the two equilibrium paths cannot be pareto ranked and history need not matter for the selection of the equilibrium path

blockbusting brokers and the dynamics of segregation abstract the paper presents a dynamic model of neighborhood segregation where fee motivated real estate brokers match sellers optimally either to minority or to white buyers in an initially all white neighborhood real estate brokers thus either keep the neighborhood in a steady state white equilibrium or trigger racial transition by matching sellers to minority buyers a process called blockbusting racial transition leads to a higher rate of property turnover in the neighborhood once the fraction of minorities has reached a tipping point but racial transition also leads to lower prices and this is the trade off faced by a broker the model shows that with multiple brokers blockbusting profit per broker is lower as brokers free ride on each other s groundbreaking efforts the model predicts that racial transition will happen in the neighborhood when i the number of brokers is limited ii racial preferences lie in an intermediate range iii the arrival rate of offers is intermediate otherwise real estate brokers steer white households toward white buyers

heterogeneous network games conflicting preferences abstract in many economic situations a player pursues coordination or anti coordination with her neighbors on a network but she also has intrinsic preferences among the available options we here introduce a model which allows to analyze this issue by means of a simple framework in which players endowed with an idiosyncratic identity interact on a social network through strategic complements or substitutes we classify the possible types of nash equilibria under complete information finding two thresholds for switching action that relate to the two player setup of the games this structure of equilibria is considerably reduced when turning to incomplete information in a setup in which players only know the distribution of the number of neighbors of the network for high degrees of heterogeneity in the population the equilibria is such that every player can choose her preferred action whereas if one of the identities is in the minority frustration ensues

purification of bayes nash equilibrium with correlated types and interdependent payoffs abstract we establish purification results for bayes nash equilibrium in a large class of bayesian games with finite sets of pure actions we allow for correlated types and interdependent payoffs and for type dependent feasible action sets the latter feature allows us to prove existence and purification results for pure bayes nash equilibria in undominated strategies we give applications to auctions global games and voting to illustrate the usefulness of our results

multiple bgps in a growth model with habit persistence a comment recently in this journal chen 2007 analyzes a model of an economy without distortions in which rational forward looking households care about how their current consumption compares with their own past consumption chen claims the existence of two saddle point stable balanced growth paths in this comment i show that the claim is incorrect there is a unique saddle point stable balanced growth path and no global indeterminacy

technology adoption hysteresis and absence of lock in we introduce a simple model of technology adoption with overlapping generations of players technologies generate network effects and players are both backward and forward looking we use results from the supermodular games literature to guarantee equilibrium existence and uniqueness in line with the empirical literature the equilibrium adoption path exhibits hysteresis and technologies cannot lock in we characterize the expected time of adoption which can be seen as a measure of technology dominance

inflation bets on the long bond the liquidity premium theory of interest rates predicts that the treasury yield curve steepens with inflation uncertainty as investors demand larger risk premiums to hold long term bonds by using the dispersion of inflation forecasts to measure this uncertainty we find the opposite since the prices of long term bonds move more with inflation than short term ones investors also disagree and speculate more about long maturity payoffs with greater uncertainty shorting frictions measured by using treasury lending fees then lead long maturities to become overpriced and the yield curve to flatten we estimate this inflation betting effect using time variation in inflation disagreement and treasury supply

promises and conventions an approach to pre play agreements abstract i analyze how informal agreements can be sustained by moral emotions with regard to a large class of two player games specifically i assume that people feel guilty if they breach an agreement and that the guilt increases according to the degree of the harm inflicted on the other a central insight is that it is easier to sustain efficient informal agreements if actions are strategic complements than if they are strategic substitutes i complement this general insight by studying two specific cases where negotiators face uncertainty about the breach of the agreement i show that while the optimal agreement in a game with strategic substitutes must compromise on surplus maximization and efficiency the optimal agreement in a game with sufficiently strong strategic complements tends to maximize both the surplus and the probability of compliance especially if the game is symmetric

equilibrium in sealed high bid auctions there is a voluminous theoretical literature on sealed high bid auctions auctions in which bids are sealed and the high bidder pays his bid see for example vickrey 1961 myerson 1981 riley and samuelson 1981 milgrom and weber 1982 matthews 1983 maskin and riley 1984 holt 1980 cox smith and walker 1988 a critical property on which this literature relies is the existence of equilibrium in which buyers bidding strategies are monotonic in their types this enables the analyst to perform comparative statics as the distribution of types changes and to compare the welfare properties of the high bid auction with those of other auction institutions one case in which the existence of monotonic equilibrium is readily established is that in which buyers types are distributed smoothly independently and symmetrically in this case there exists a symmetric equilibrium one in which all bidders share the same bidding behaviour as a function of their valuations and this bid function is the solution to a first order differential equation

differential interpretation of public signals and trade in speculative markets most models of trade in speculative markets assume that agents interpret public information identically we provide empirical evidence on the relation between the volume of trade and stock returns around public announcements and we argue that the evidence is inconsistent with this assumption we then develop a model of trade around public announcements that incorporates differential interpretations and is consistent with the observed volume return relation then we test the standard model of belief revision underlying most models of trade using stock brokerage research analysts earnings forecasts the hypthesis of identical interpretations seems inconsistent with the forecast revisions in these data

history expectations and leadership in the evolution of social norms we study the evolution of a social norm of cooperation in a dynamic environment each agent lives for two periods and interacts with agents from the previous and next generations via a coordination game social norms emerge as patterns of behaviour that are stable in part due to agents interpretations of private information about the past influenced by occasional commonly observed past behaviours for sufficiently backward looking societies history completely drives equilibrium play leading to a social norm of high or low cooperation in more forward looking societies there is a pattern of reversion whereby play starting with high low cooperation reverts towards lower higher cooperation the impact of history can be countered by occasional prominent agents whose actions are visible by all future agents and who can leverage their greater visibility to influence expectations of future agents and overturn social norms of low cooperation

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

disagreement a la taylor evidence from survey microdata there is a growing interest in studying the disagreement of economic agents most studies however focus on the disagreement regarding one specific variable hereby neglecting that disagreement may be comoving with disagreement on other variables in this paper we explore to which extent disagreement regarding the interest rate is driven by disagreement on inflation and on unemployment this relationship can be motivated by the existence of the taylor rule using micro survey data for both professional forecasters and consumers we provide evidence that disagreement on the future interest rate is mainly driven by disagreement on inflation exploring further determinants we confirm that central bank transparency as well as news on money and credit conditions significantly influence disagreement

endogenous price expectations as reference points in auctions the paper models auctions with bidders who have reference dependent payos the reference point is endogenised as the expected price of the good in the auction the model predicts that in equilibrium bidders both overbid and underbid in comparison to the standard bidding function without reference dependent utility the model predicts that more bidders overbid than underbid and that bidders bid more aggressively as the number of bidders or the reserve price increases finally it is shown perhaps surprisingly that revenue equivalence continues to hold between rst and second price

newsvendor competition under asymmetric cost information abstract we study the newsboy duopoly problem under asymmetric cost information we extend the lippman and mccardle 1997 of competitive newsboy to the case where the two firms are privately informed about their unit costs the market demand is initially split between two firms and the excess demand for each firm is reallocated to the rival firm we show the existence and uniqueness of a pure strategy equilibrium and characterize its structure the equilibrium conditions have an interesting recursive structure that enables an easy computation of the equilibrium order quantities presence of strategic interactions creates incentives to increase order quantities for all firm types except the type that has the highest possible unit cost consequently competition leads to higher total inventory in the industry however contrary to intuition this is only true when the firms are non identical a firm s equilibrium order quantity increases with a stochastic increase in the total industry demand or with an increase in his initial allocation of the total industry demand we demonstrate our model and results in an application in a dual sourcing procurement setting using data that obtained from a large manufacturing company finally we provide a full characterization of the equilibrium of the game for the special case of uniform demand and linear market shares

supermodularity and complementarity in economics an elementary survey the literature on supermodular optimization and games is surveyed from the perspective of potential users in economics this methodology provides a new approach for comparative statics based only on critical assumptions and allows a general analysis of games with strategic complementarities the results are presented in a simplified yet rigourous manner without reference to lattice theory for the special case of one dimensional parameter and actions sets with the emphasis being on wide accessibility detailed applications are presented for well known models of consumer behavior monopoly pass through bertrand and cournot competition strategic r d search and matching wherever appropriate useful tricks for applications and comparative comments are inserted

does monetary policy have asymmetric effects on stock returns this paper investigates whether monetary policy has asymmetric effects on stock returns using markov switching models different measures of a monetary policy stance are adopted empirical evidence from monthly returns on the standard poor s 500 price index suggests that monetary policy has larger effects on stock returns in bear markets furthermore it is shown that a contractionary monetary policy leads to a higher probability of switching to the bear market regime

robust comparative statics for non monotone shocks in large aggregative games a policy change that involves a redistribution of income or wealth is typically controversial affecting some people positively but others negatively in this paper we extend the robust comparative statics result for large aggregative games established by acemoglu and jensen 2010 49th ieee conference on decision and control 3133 3139 to possibly controversial policy changes in particular we show that both the smallest and the largest equilibrium values of an aggregate variable increase in response to a policy change to which individuals reactions may be mixed but the overall aggregate response is positive we provide sufficient conditions for such a policy change in terms of distributional changes in parameters

consensus and uncertainty in economic prediction we define consensus as the degree of agreement among point predictions aimed at the same target by different individuals and uncertainty as the diffuseness of the corresponding probability distributions this distinction is made operational with the aid of the nber asa survey data on matched point and probabilistic forecasts of inflation and the rate of change in gross national product the means of the two sets of forecasts agree closely standard deviations of point forecasts tend to understate uncertainty as measured by standard deviations of the predictive probability distributions however these measures of consensus and uncertainty are on the whole positively correlated there is evidence that expectations of higher inflation generate greater uncertainty about inflation tests also favor the hypothesis that a rise in inflation uncertainty has adverse effects on real growth

monotone comparative statics under uncertainty this paper analyzes monotone comparative statics predictions in several classes of stochastic optimization problems the main results characterize necessary and sufficient conditions for comparative statics predictions to hold based on properties of primitive functions that is utility functions and probability distributions the results apply when the primitives satisfy one of the following two properties i a single crossing property which arises in applications such as portfolio investment problems and auctions or ii log supermodularity which arises in the analysis of demand functions affiliated random variables stochastic orders and orders over risk aversion

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

asset float and speculative bubbles we model the relationship between asset float tradeable shares and speculative bubbles investors with heterogeneous beliefs and short sales constraints trade a stock with limited float because of insider lockups a bubble arises as price overweighs optimists beliefs and investors anticipate the option to resell to those with even higher valuations the bubble s size depends on float as investors anticipate an increase in float with lockup expirations and speculate over the degree of insider selling consistent with the internet experience the bubble turnover and volatility decrease with float and prices drop on the lockup expiration date

monotone equilibria in signaling games abstract we examine the monotonicity of the sender s equilibrium strategy with respect to her type in signaling games we show that when the sender s return from the receiver s action depends on her type the spence mirrlees condition cannot rule out equilibria in which a higher type sender chooses a strictly lower action than a lower type we provide sufficient conditions under which all equilibria are monotone which require that the sender s payoff is decreasing in her action is increasing in the receiver s action and has strictly increasing differences between her type and the action profile we apply our sufficient conditions to education signaling advertising and warranty provision

on the existence of monotone pure strategy perfect bayesian equilibrium in games with complementarities abstract many important economic situations such as auctions and signaling games can be modeled as dynamic games of incomplete information with strategic complementarities of actions and types in this paper we extend the results of athey 2001 and reny 2011 from static bayesian games to dynamic environments with observable actions providing conditions that guarantee the existence of monotone equilibria in types in such games a feature that distinguishes this environment from those of previous results is the endogeneity of beliefs which can complicate continuity of payoffs needed to find a fixed point to address this we perturb the strategies of the game which pins down beliefs while preserving continuity of payoffs we then provide conditions which guarantee that there will exist monotone best replies to monotone strategies of one s opponents in a dynamic environment enabling verification of existence by merely looking at the primitives of the model