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This paper argues that in housing transaction with asymmetric information, sellers may signal their private information with special design of listing prices. We build a cheap-talk signalling model in which sellers strategically choose round number listing prices to signal their weakness, i.e. they are willing to accept lower prices in order to sell their houses more quickly. Using housing market transaction data in Beijing, we find that round number listings sell 0.13% lower and 0.086 months sooner than precise ones. We also show that these results are unlikely to be driven by housing unobserved attributes or round number self-attractiveness. In addition, we find that as the roundness of listing price increases, the signalling effects become more pronounced. Our results present empirical evidence that signalling helps improve negotiation efficiency under asymmetric information. [ABSTRACT FROM AUTHOR]

Existing literature shows that a ban on child labour may be self-enforcing under the extreme assumption that, above the subsistence level, no amount of consumption can compensate parents for the disutility of child labour. The present paper shows that a partial ban may be self-enforcing also in a more general model where education is an alternative to work, and the disutility of child labour can be compensated by higher present consumption or future income, but a total ban may not. It also shows that, in the absence of informational asymmetries, child labour can be eliminated and a first best achieved if the ban is combined with a credit-backed policy including a subsidy to parents, and a tax on skilled adults. A first best is out of reach if the use children make of their time when they are neither at school, nor working in the labour market is private information, because the policy maker then faces an incentive-compatibility constraint. The second-best policy reduces child labour, but not to zero. [ABSTRACT FROM AUTHOR]

We develop a dynamic investment model with loan guarantees wherein insurers face information disadvantages and learn about borrower quality. Borrowers signal their qualities through investment timing, which is characterized by the investment threshold and elapsed time. We derive the conditions for separating or pooling equilibria. We show that the separating investment threshold is constant and determined mainly by the maximum threshold preventing mimicry. If project risk is higher (lower) than the market growth rate, the pooling investment threshold declines (increases) with elapsed time, and learning enhances (reduces) the willingness of high‐quality borrowers to wait. Learning alleviates adverse selection and reduces guarantee costs. These effects are more pronounced with a greater uncertainty of the insurer on borrower quality. We reveal dual effects of waiting. The worse the market prospect, the higher the value of waiting in pooling outcomes. Fee‐for‐guarantee swaps are superior to equity‐for‐guarantee swaps in environments with marked information asymmetry. [ABSTRACT FROM AUTHOR]

In this paper, we take a mechanism design approach to optimal assignment problems with asymmetrically informed buyers. In addition, the surplus generated by an assignment of a buyer to a seller may be adversely affected by externalities generated by other assignments. The problem is complicated by several factors. Buyers know their own valuations and externality costs but do not know this same information for other buyers. Buyers also receive private signals correlated with the state and, consequently, the implementation problem exhibits interdependent valuations. This precludes a naive application of the VCG mechanism and to overcome this interdependency problem, we construct a two-stage mechanism. In the first stage, we exploit correlation in the firms signals about the state to induce truthful reporting of observed signals. Given that buyers are honest in stage 1, we then use a VCG-like mechanism in stage 2 that induces honest reporting of valuation and externality functions. [ABSTRACT FROM AUTHOR]

We develop a model of investor information choices and asset prices in which the availability of information about fundamentals is time-varying and responds to investor demand for information. A competitive research sector produces more information when more investors are willing to pay for that research. This feedback, from investor willingness to pay for information to more information production, generates two regimes in equilibrium, one having high prices and low volatility, the other the opposite. The low-price, high-volatility regime is associated with greater information asymmetry between informed and uninformed investors. Information dynamics move the market between regimes, creating large price drops even with no change in fundamentals. In our calibration, the model suggests an important role for information dynamics in financial crises. This paper was accepted by Kay Giesecke, finance. Supplemental Material: The online appendix and data are available at https://doi.org/10.1287/mnsc.2021.01213. [ABSTRACT FROM AUTHOR]

This paper investigates how private information affects the joint determination of the payment method and the bid premium in M&As. The focus is on the uncertainty of the stand‐alone valuations of the firms involved in the transaction induced by their opacity. First, we model M&A negotiations as a signalling game with two‐sided private information and derive correlations between firm opacity and bid characteristics from equilibrium analysis. Then, we analyze a sample of U.S. deals, using an index based on market measures of adverse selection to quantify firm opacity. We find that the likelihood of stock offers and the bid premium increase with the target's opacity, while more opaque bidders are associated with fewer stock offers and smaller bid premiums. [ABSTRACT FROM AUTHOR]

We present a competitive matching model in which indivisible assets are reallocated among many traders. The model has three features: (i) traders are heterogeneous in their prospects as buyers, sellers, and also in their stand-alone values with endowed assets, (ii) buyers do not know true values of assets sold, (iii) sellers can disclose values of their assets by paying fees. Despite its complexity, the model admits closed-form solutions. Two main results emerge. First, if full Disclosure is facilitated by a monopolist, it captures a large fraction of the welfare gains. Second, adding the option of minimum disclosure, when combined with a cap regulation on price-dependent fees for full disclosure, significantly weakens the monopolist's power. [ABSTRACT FROM AUTHOR]

Copyright of International Journal of Disciplines Economics & Administrative Scienves Studies is the property of International Journal of Disciplines in Economics & Administrative Sciences Studies and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

This paper presents a model of an executive administration that decides whether to mandate benefit-cost analysis (BCA) of newly proposed regulations. A regulator has private information about the social benefit of a new rule but may differ from the executive's preferences for regulation. BCA, which provides a noisy signal of the rule's social benefit, is most valuable when the executive is regulation neutral. Extremely regulation-averse administrations may be harmed by BCA unless they can bias it. Our results are consistent with use of BCA by U.S. presidential administrations since Reagan. [ABSTRACT FROM AUTHOR]

The observed money demand in the U.S. had a stable negative relation with the interest rate up until the 1990s. After this period, this relation fell apart and has never been restored. We show that the central bank's ability to gather information, referred to as market intelligence (MI), matters to generate an upward‐sloping money demand curve. We calibrate the model to the U.S. data for the period from 1990 to 2019 and show that MI helps to match the money demand. We also show that it is beneficial for the society, since it mitigates the inefficiency associated with asymmetric information. [ABSTRACT FROM AUTHOR]

We examine the licensing decision of a non-producer innovator with a new technology that enables the manufacture of a saleable product. The technology is licensed and each user privately knows its innovation-related production cost, whereas the licensor only knows, with a certain probability, that this cost may be low (the user is efficient) or high (the user is inefficient). When a single licence is granted through separating contracts, only the contract intended for the inefficient user involves a per-unit royalty, but when two licences are granted through separating contracts, the contracts intended for the inefficient and efficient users both feature a per-unit royalty. However, screening is less likely as the number of licences increases, to the point that the licensor does not screen users when granting three licences. Additionally, whereas the diffusion of the innovation is socially insufficient under symmetric information, with asymmetric information it may be socially optimal. Finally, when licensing with contracts involving an ad-valorem royalty is also feasible the licensor finds it less attractive than licensing with a per-unit royalty. [ABSTRACT FROM AUTHOR]

This article investigates whether sustainability labels for mutual funds in Europe provide consistent signals regarding funds' sustainable characteristics. Specifically, we assess the alignment of signals conveyed by third-party and self-declared labels. Among the first typology, we consider labels sponsored by government and nonprofit organizations (GNPOs) alongside Environmental, Social, and Governance (ESG) ratings from commercial data vendors. The latter category includes the Sustainable Finance Disclosure Regulation (SFDR) classification and an ESG-related name. Our findings indicate that equity funds with GNPO labels are more likely to exhibit top-tier ESG ratings and alignment with self-declared sustainability signals, namely Article 9 of SFDR and fund names. Furthermore, holding government and multiple GNPO labels is linked to other signals indicating higher sustainability standards. In addition, funds tend to experience an improvement in Morningstar globes after receiving a GNPO label, consistent with GNPO labels signaling funds of the high-quality type. The results regarding label alignment in fixed-income funds are less conclusive. Our findings underscore the need for credible signals in view of the growing number of sustainability labels available to investors. [ABSTRACT FROM AUTHOR]

Algorithm Decision Making (ADM) systems designed to augment or automate human decision-making have the potential to produce better decisions while also freeing up human time and attention for other pursuits. For this potential to be realised, however, algorithmic decisions must be sufficiently aligned with human goals and interests. We take a Principal-Agent (P-A) approach to the questions of ADM alignment and trust. In a broad sense, ADM is beneficial if and only if human principals can trust algorithmic agents to act faithfully on their behalf. This mirrors the challenge of facilitating P-A relationships among humans, but the peculiar nature of human-machine interaction also raises unique issues. The problem of asymmetric information is omnipresent but takes a different form in the context of ADM. Although the decision-making machinery of an algorithmic agent can in principle be laid bare for all to see, the sheer complexity of ADM systems based on deep learning models prevents straightforward monitoring. We draw on literature from economics and political science to argue that the problem of trust in ADM systems should be addressed at the level of institutions. Although the dyadic relationship between human principals and algorithmic agents is our ultimate concern, cooperation at this level must rest against an institutional environment which allows humans to effectively evaluate and choose among algorithmic alternatives. [ABSTRACT FROM AUTHOR]

Several features of automotive procurement distinguish it from the prototypical supply chain in the academic literature: pass-through pricing that reimburses suppliers for raw material costs, market frictions that prohibit cost transparency and imbue suppliers with pricing power, and contractual commitments that span multiple production periods. In this context, we formalize a procurement model by considering an automaker that buys components from an upstream supplier to assemble cars over several production periods in an environment where period demands and raw material costs are both stochastic. Our paper clarifies how information asymmetry and market factors that amplify or weaken this asymmetry affect the firms' procurement protocol preferences. Then, using proprietary contract and supplier data from BMW, we empirically validate this model and show that it reflects BMW's reality: the factors that should theoretically go into automotive procurement decisions do so. Our analysis also reveals that existing contracting protocols in this context are not optimal for procurement under asymmetric information, and so we propose an alternative contracting method. We calibrate our model and estimate an automaker's performance improvement from this optimal contract over the status quo. This paper was accepted by Vishal Gaur, operations management. Supplemental Material: The data files and online appendices are available at https://doi.org/10.1287/mnsc.2023.4880. [ABSTRACT FROM AUTHOR]

We assess optimal deterministic nonlinear income taxation in a Mirrlees economy with a continuum of risk‐averse agents whose utilities are quasilinear in labor. A weak redistribution motive makes random taxes more likely socially dominated by the deterministic policy where after‐tax income lotteries are replaced with their certainty equivalents. [ABSTRACT FROM AUTHOR]

Using annual time series data for India, this research paper examines the presence of asymmetric cointegration and asymmetric causality between financial development and poverty reduction using nonlinear autoregressive distributed lag (NARDL) model and asymmetric causality test. The empirical findings support the existence of asymmetries in the short-run as well as long-run between poverty and financial development. The asymmetry reveals that negative financial development shocks leave a more profound impact on poverty alleviation than their positive equivalents. The result emanating from asymmetric causality test reveal a unidirectional asymmetric causality between negative shocks in financial development and poverty. Moreover, expansionary policies of financial development are found to serve as catalysts to spur poverty alleviation while contractionary policies of financial sector are found to exacerbate poverty in an asymmetric and nonlinear fashion. The findings of Wald's test also confirm the presence of asymmetric effects in the poverty-finance nexus. The asymmetric cumulative dynamic multipliers used to examine the behaviour of asymmetries and adjustments with respect to time lend credence to the results calculated using NARDL estimator and therefore demonstrate their robustness. The present study divulges the need for investigating asymmetry in finance-poverty nexus in order to draw policy-relevant conclusions. The authors conclude that financial development serves as a panacea and antidote to the scourge of extreme poverty in India. We recommend regulation of informal sources of credit, financial inclusion of poor, credit boost to small and medium enterprises employing rural poor and channelization of credit to productive sectors with high employment elasticity to be persistently encouraged for poverty alleviation in India. [ABSTRACT FROM AUTHOR]

We introduce a model of (platform‐mediated) many‐to‐many matching in which agents' preferences are both vertically and horizontally differentiated. We first show how the model can be used to derive the profit‐maximizing matching plans under customized pricing. We then investigate the implications for targeting and welfare of uniform pricing (be it explicitly mandated or induced by privacy regulation), preventing the platform from conditioning prices on agents' profiles. The model can be applied to study ad exchanges, online retailing, and media markets. [ABSTRACT FROM AUTHOR]

AbstractThis study examines the potential of public e-procurement to serve as a means to counteract corruption in Somalia. Coupled with Generalized Linear Regression (GLM), survey research design is employed to investigate the dynamics between different e-procurement components and factors associated with corruption, such as monopoly power, asymmetric information, transparency, and accountability. The research focuses on ministries and government departments in Mogadishu, encompassing all 25 federal ministries in the sample. The findings reveal that public e-procurement is linked to a reduction in monopoly power, indicating a decline in the influence of single suppliers in the market. Additionally, e-procurement diminishes asymmetric information in the procurement process, promoting fairness and equal access to information for all stakeholders. The study further confirmed a positive relationship between e-procurement adoption and heightened transparency and accountability within public procurement processes. The implications of these findings are significant for policymakers, underscoring the value of investing in e-procurement infrastructure to foster integrity, operational efficiency, and public trust in the realm of public procurement. [ABSTRACT FROM AUTHOR]

Digital finance represents a novel financial service leveraging advanced technologies such as cloud computing, big data, and artificial intelligence. These technologies significantly impact the enhancement of financial services for the real economy and the attainment of high-quality economic development. Despite extensive macro-level studies, there remains a dearth of specific investigations into how micro-level digital finance influences the highquality development of enterprises. Additionally, the role of financial regulation in the evolution of digital finance and its impact on the high-quality development of enterprises warrant further exploration. This study empirically examines the mechanisms and pathways through which regional digital financial development facilitates the high-quality development of entities, utilizing annual data from Shanghai and Shenzhen A-share listed entities spanning 2013 to 2021. Employing a fixed effect model alongside the construction of high-quality enterprise development and digital financial development indices, the research demonstrates a significant positive correlation between digital finance development and the high-quality development of physical enterprises. This conclusion remains robust after addressing endogeneity concerns and conducting various robustness tests. For mechanism analysis, regional digital finance development mitigates information asymmetry between enterprises and capital suppliers, alleviates financing constraints, and fosters technological innovation among enterprises, thereby promoting high-quality development. Heterogeneity analysis reveals differential effects across industries and regions, with pronounced impacts observedin the secondary industry, the tertiary industry, and in sectors undergoing rapid technological evolution, as well as the first-tier cities of the digital economy and the eastern and central regions where digital technology is more concentrated. Furthermore, the study identifies three primary pathways through which digital finance drives high-quality enterprise development: enterprise innovation and development, shared development, and coordinated development. While green and open development are recognized as crucial, their full potential remains unrealized, highlighting opportunities for optimization. Moreover, employing a threshold effect model, the study underscores the indispensable role of effective financial supervision in realizing the high-quality development potential of digital finance-enabled enterprises. This paper contributes to the existing literature in three areas: first, by introducing the urban digital financial development index and the enterprise high-quality development index; second, by exploring the mechanisms of digital finance's impact on high-quality enterprise development from both external constraints and internal optimization perspectives; and third, by conducting a comprehensive examination of the effectiveness, impact, and regulatory framework supporting the implementation pathways of digital finance in promoting high-quality enterprise development. Ultimately, this research illuminates the relationship between the virtual economy and the real economy, informing targeted digital financial promotion and financial supervision policies. Such insights enable government and regulatory bodies to provide tailored policy support to enterprises across different regions and industries, facilitating their pursuit of high-quality development and enhancing the symbiotic relationship between digital finance and the real economy. [ABSTRACT FROM AUTHOR]

The health sector is one of the markets where asymmetric information is most intense. In the health sector, the increase in the perception of uncertainty, the decrease in the sense of satisfaction, the increase in insecurity, the increase in economic losses and the lack of information needs are mostly caused by asymmetric information. Today, the change of expectations in health services after the pandemic has put the economy of the countries in a difficult situation. For this reason, the increase in technical knowledge in the health sector, which causes economic losses, has led to an increase in studies that emphasize the importance and research of the asymmetric information problem. In this study, the effects and size of asymmetric information in the health sector in the province of Kütahya were investigated by survey data on 400 individuals residing in Kütahya who went to the hospital at least once between 2021 and 2022. Five factors that affect/determine asymmetric information have been identified, and it has been found that the level of satisfaction varies according to gender, and the need for satisfaction and information varies according to marital status. According to the ANOVA results, there is a significant relationship between the need for information and age, income level, occupational groups, education level; between satisfaction and income level and the preferred hospital type, and also between trust and income level. [ABSTRACT FROM AUTHOR]

The author develops a bilateral Nash bargaining model under value uncertainty and private/asymmetric information, combining ideas from axiomatic and strategic bargaining theory. The solution to the model leads organically to a two-tier stochastic frontier (2TSF) setup with intra-error dependence. The author presents two different statistical specifications to estimate the model, one that accounts for regressor endogeneity using copulas, the other able to identify separately the bargaining power from the private information effects at the individual level. An empirical application using a matched employer–employee data set (MEEDS) from Zambia and a second using another one from Ghana showcase the applied potential of the approach. [ABSTRACT FROM AUTHOR]

Unreliable suppliers may pose a substantial threat to supply chains, especially when they hold private information of their reliability. We consider a dyadic supply chain where the information of supplier reliability (in the form of random production yield) is asymmetric. We propose a new mechanism-design model and derive the buyer's optimal procurement contract menu offered to suppliers with private information. We prove that the contract menu is as simple as offering two different inflated order amounts and setting the procuring price sufficiently low to let the suppliers earn zero reservation profits. These results are derived analytically under uniform distribution. We test them numerically under beta distribution and find them hold as well. However, the informational rent will become positive when the supplier's reservation profit is positive. Positive informational rent is also found when we consider another structure of the supplier's production cost. This paper provides some new insights into supply chain management under asymmetric information of uncertain supply. [ABSTRACT FROM AUTHOR]

Economic theory predicts that bond insurance lowers issuers' financing costs by resolving asymmetric information and mitigating credit risk. With comprehensive data over the last 36 years, we find increasingly diminished empirical support for these models. The value of insurance in resolving asymmetric information beyond that resolved by credit ratings and other observable bond characteristics is economically minimal. The average gross value of insurance ranges from 4 to 14 bps when bond insurers offer Aaa-rated coverage. However, this gross value becomes insignificant after 2008 when Aaa-rated insurance no longer exists. Evidence suggests that the lack of insurance benefit in the postcrisis period is attributable to the deteriorated creditworthiness of insurance companies. Examining noninterest saving explanations for the continued use of insurance in the no-Aaa insurance market, we find evidence that issuers purchase insurance out of habit (with insurance value most diminished for habitual purchasers with low governance quality) and for the convenience it affords in default, but no evidence that insurance improves secondary market liquidity. This paper was accepted by Gustavo Manso, finance. Supplemental Material: The data files and online appendix are available at https://doi.org/10.1287/mnsc.2023.4813. [ABSTRACT FROM AUTHOR]

As a knowledge-intensive financial enterprise, intellectual capital can play a significant driving role in enhancing the value of financial enterprises. Especially in the current unstable and complex international financial market, it is necessary for financial enterprises to actively consider the advantages of intellectual capital to shape their competitive edge and maximize profit value. However, it is also important to consider the issue of asymmetric information within the financial system, particularly the attitudes and behaviors in the strategic interactions between governments and financial enterprises. Therefore, this paper took the strict logical structure and analytical method of game theory as an effective analytical tool to solve the problem of asymmetric information in the economy and to use the asymmetric information game method to construct a mathematical model of intellectual capital in order to cope with the mistrust in the game process. Based on game theory, this paper systematically analyzed the factors influencing intellectual capital and constructed mathematical models of game theory for adverse selection ex-ante and moral hazard ex-post, analyzing strategic behavior. The research results indicated that, from the perspectives of market reactions and financing constraints, there is an issue of information asymmetry between the government and financial enterprises. The paper also presents viable strategic recommendations for alleviating information asymmetry and achieving coordinated allocation of information resources between government and enterprises.

This paper investigates the government subsidy programmes for a bioenergy supply chain composed of a power plant and farmers who privately know their quality information of bioenergy. The government offers two types of subsidy programmes to increase the supply of bioenergy: Agriculture Quantity Coverage (AQC) programme that pays the farmers subsidies based on the quantity of bioenergy, and Price Loss Coverage (PLC) programme that is triggered when the market price of bioenergy falls below a reference price. With AQC programme, when the quantity of bioenergy is large, farmers may get more subsidies but the wholesale price of bioenergy would decrease, thus hurting the farmers' payoffs. By contrast, with PLC programme, the farmers can get more subsidies with a lower wholesale price, which also undermines the farmers' profitability. In equilibrium, the government prefers the AQC programme when the cost of the non-bioenergy is high, or the cost of the non-bioenergy is low and the government's subsidy payment coefficient in the PLC programme is high. Moreover, social welfare is higher with the PLC programme than that with the AQC programme when the cost of the non-bioenergy is high and the subsidy payment coefficient is low, and is lower otherwise. [ABSTRACT FROM AUTHOR]

Copyright of Contemporary Accounting Research is the property of Canadian Academic Accounting Association and its content may not be copied or emailed to multiple sites or posted to a listserv without the copyright holder's express written permission. However, users may print, download, or email articles for individual use. This abstract may be abridged. No warranty is given about the accuracy of the copy. Users should refer to the original published version of the material for the full abstract. (Copyright applies to all Abstracts.)

As a knowledge-intensive financial enterprise, intellectual capital can play a significant driving role in enhancing the value of financial enterprises. Especially in the current unstable and complex international financial market, it is necessary for financial enterprises to actively consider the advantages of intellectual capital to shape their competitive edge and maximize profit value. However, it is also important to consider the issue of asymmetric information within the financial system, particularly the attitudes and behaviors in the strategic interactions between governments and financial enterprises. Therefore, this paper took the strict logical structure and analytical method of game theory as an effective analytical tool to solve the problem of asymmetric information in the economy and to use the asymmetric information game method to construct a mathematical model of intellectual capital in order to cope with the mistrust in the game process. Based on game theory, this paper systematically analyzed the factors influencing intellectual capital and constructed mathematical models of game theory for adverse selection ex-ante and moral hazard ex-post, analyzing strategic behavior. The research results indicated that, from the perspectives of market reactions and financing constraints, there is an issue of information asymmetry between the government and financial enterprises. The paper also presents viable strategic recommendations for alleviating information asymmetry and achieving coordinated allocation of information resources between government and enterprises. [ABSTRACT FROM AUTHOR]

Maintaining good ratings increases the profits of sellers on online platforms. We analyze the role of strategic pricing for ratings management in a setting where a monopolist sells a good of unknown quality. Higher prices reduce the value for money, which on average worsens reviews. However, higher prices also induce only those consumers with a strong taste for the product to purchase, which on average improves reviews. Our model flexibly parametrizes the two effects. This parametrization can rationalize the observed heterogeneity in the relationship between reviews and prices. Based on an analytic characterization of the optimal dynamic pricing strategy, we study a platform's choice of the sensitivity of its rating system to incoming reviews. The optimal sensitivity depends on the effect of prices on reviews and on how the platform weighs consumers and sellers in its objective. Although sellers always benefit from more sensitivity, consumers may suffer from higher prices and from slower learning from reviews due to endogenously emerging price and rating cycles. This paper was accepted by Kartik Hosanagar, information systems. Funding: This work was supported by the Deutsche Forschungsgemeinschaft [CRC TR 224, Project C3]. Supplemental Material: The online appendix is available at https://doi.org/10.1287/mnsc.2023.4771. [ABSTRACT FROM AUTHOR]

This paper offers a game-theoretic model of a firm that raises funds for financing an innovative business project and chooses between ICO (initial coin offering) and equity financing. The model is based on information problems associated with both ICO and equity financing well-documented in the literature. Several new features are introduced, for example, information complexity, which is analyzed along with a more traditional imperfect information and an asymmetric information approach. The model provides several implications that have not yet been tested. For example, we find that the message complexity can be beneficial for firms conducting ICOs. Also, high-quality projects can use ICO as a signal of quality. Thirdly, the average size of projects undertaking equity financing is larger than that of firms conducting ICO. [ABSTRACT FROM AUTHOR]

Akerlof's seminal model on asymmetric information forms the basis for a broad range of regulatory interventions aimed at addressing the adverse effects of unequal information between transacting parties. While a groundbreaking model of the effects of information asymmetries in markets, Akerlof's model does not examine why information asymmetries emerge. This article argues that an examination of the underlying drivers and origins of information asymmetries revitalises the policy rationale for regulatory intervention. [ABSTRACT FROM AUTHOR]

In dyadic ultimatum bargaining proposers, who are privately informed about the pie size, can exploit their "moral wiggle room" by engaging in unfairness which is unobservable by responders. Our setup instead assumes better informed responders and, as a consequence, limits ultimatum power and questions conflict resolution via acceptance of ultimatum proposals. In addition to testing the game theoretic solution, based on common opportunism, we assess whether two different market framings boost benchmark behavior. Our results confirm nearly universal responder opportunism. Although the benchmark proposer demand is modal, proposer choices display substantial variation, even in later rounds and even in the range in which lower demands would let both parties expect to earn more. Nevertheless, such inefficiently large demands become less frequent across rounds. Our results also show that market framing is insignificant and more so in later rounds. [ABSTRACT FROM AUTHOR]

We explore how credit market frictions matter for the coessentiality of money and credit. Limited commitment calls for credit limits that are tailored according to borrowers' productivity. Under an adverse selection problem caused by asymmetric information, however, lenders impose the credit limit of the low‐productivity borrower onto the high‐productivity borrower. If productivities differ sufficiently between borrowers, the high‐productivity borrower is credit‐constrained and is willing to hold money to compensate for the deficiency of their credit limit, whereas the low‐productivity borrower is not. This implies the coessentiality of money and credit in the sense that their simultaneous use improves welfare. [ABSTRACT FROM AUTHOR]

The energy transition requires the deployment of risky research and development programs, most of which are partially financed by public funding. Recent recovery plans, associated with the COVID‐19 pandemic and the energy transition, increased the funding available to finance innovative low‐carbon projects and called for an economic evaluation of their allocation. This paper analyzes the potential benefit of using repayable advance: a lump‐sum payment to finance the project that is paid back in case of success. The relationship between the state and innovative firms is formalized in the principal‐agent framework. Investing in an innovative project requires an initial observable capital outlay. We introduce asymmetric information on the probability of success, which is known to the firm but not to the state agency. The outcome of the project, if successful, delivers a private benefit to the firm and an external social benefit to the state. In this context a repayable advance consists in rewarding failure. We prove that it is a superior strategy in the presence of pure adverse selection. We investigate under what conditions this result could be extended in the presence of moral hazard. Implications for green industrial policy are discussed. [ABSTRACT FROM AUTHOR]

This paper examines remanufacturing decisions in the context of outsourcing, which have important implications for environmental and economic sustainability. Specifically, we model the competition between an experienced Original Equipment Manufacturer (OEM) and an emerging Independent Remanufacturer (IR). The OEM can decide the manufacturing quantities of a brand-new product, and the IR can collect the OEM's used products and remanufacture them for resale. The information structure is asymmetric, as only the OEM knows the market size. We identify the equilibrium quantities of both firms, which are shown to be strongly influenced by the IR's cost efficiency and the consumers' willingness to pay for the IR's products. Asymmetric information also plays an important role. Is it always better to hide information? Interestingly, the OEM makes the most profit when the IR has full information on the market size. We find that when the market size is high, the OEM's and IR's production and encroachment decisions are the same as when both parties have equal information. The OEM also does not benefit from hiding market information from the IR when the market size is low. Indeed, if the IR's cost efficiency is moderate and the market size is low, the OEM's profits are actually hurt by hiding market information. Here, the diminished profits from hiding market information arises from the OEM's substantially reduced production quantity to prevent IR encroachment. The OEM's production quantity is higher if the OEM shares market information and the IR encroaches on the market. Thus, by sharing information, the OEM's benefit gained from increased production quantity outweighs the cost of losing its monopoly. Additionally, consumer surplus increases when the IR engages in remanufacturing, while social surplus increases only when either the OEM's or IR's product is strongly favored. Even if the IR does not engage in remanufacturing, the resulting OEM monopoly can still lead to a higher environmental impact under certain market conditions. This arises when the OEM lowers production quantities when the IR encroaches on the market, thereby improving the overall environmental impact. Therefore, policymakers seeking to improve environmental and economic sustainability by encouraging IRs must consider these complex competition dynamics and consumer preferences, as they indirectly influence OEMs' production decisions. [ABSTRACT FROM AUTHOR]

Discussions of the environmental impact that revolve around monetary incentives and other easy-to-measure factors are important, but they neglect culture. Pro-environmental values will be crucial when facing sustainability challenges in the Anthropocene, and demand among green consumers is arguably critical to incentivise sustainable production. However, owing to asymmetric information, consumers might not know whether the premium they pay for green production is well-spent. Reliable monitoring of manufacturers is meant to solve this problem. To see how this might work, we develop and analyse a game theoretic model of a simple buyer–seller exchange with asymmetric information, and our analysis shows that greenwashing can exist exactly because reliable monitoring co-exists with unreliable monitoring. More broadly, promoting pro-environmental values among consumers might even amplify the problem at times because a manufacturer with significant market power can exploit both consumer preferences for sustainability and trustworthy monitoring to gouge prices and in extreme cases green wash in plain sight. We discuss several strategies to address this problem. Promoting accurate beliefs and a large-scale behavioural change based on pro-environmental values might be necessary for a rapid transition to a sustainable future, but recent evidence from the cultural evolution literature highlights many important challenges. This article is part of the theme issue 'Evolution and sustainability: gathering the strands for an Anthropocene synthesis'. [ABSTRACT FROM AUTHOR]

This paper is the first to investigate the relationship between the energy efficiency of dwellings, measured by the energy performance certificate (EPC), and utility cost inclusion in rental prices. First, we investigate potential drivers behind the decision to include utility costs in rents. We find that labeled dwellings are more likely to include utility costs and that this likelihood is higher among energy-effi- cient dwellings than among inefficient dwellings. Next, we surprisingly find that utility costs seem to be under-capitalized in energy-inefficient dwellings. These results are confirmed with the counterfactual decomposition approach. Overall, the findings indicate that the EPC labeling policy may be important for both landlord and tenant decision-making and may enhance market efficiency. [ABSTRACT FROM AUTHOR]

We propose an ultimatum bargaining model in which the parties experience an envy-based externality that is private information. Our results indicate that there is a threshold for the proposer's envy which determines whether there will be either a perfectly equitable, certain agreement or an uncertain, inequitable agreement, and that this threshold rises as the distribution of the responder's envy level improves in a first-order stochastic-dominance sense. In addition, conditionally on the scenario ruling out a perfectly equitable agreement, we show that the proposer's envy level plays a dual role: (i) it increases the probability of a negotiation breakdown, and (ii) it constitutes a source of bargaining power. Numerical simulations also allow us to explore some properties of the role played by the responder's envy and by changes in the envy distributions of the two players. Overall, our theoretical results are consistent with the main evidence from ultimatum experiments conducted in behavioral and neuroscience settings. In addition, we provide testable implications of our model for future experiments. • An ultimatum bargaining model with envy and asymmetric information is proposed. • A cutoff for the proposer's envy level determines equitable or inequitable agreements. • This cutoff rises with first-order-stochastic improvements of the responder's envy. • Proposer's envy level increases disagreement probability and confers bargaining power. • Our results are consistent with behavioral evidence and provide testable implications. [ABSTRACT FROM AUTHOR]

A linear‐quadratic optimal control is investigated in this article under the differential privacy (DP) philosophy to trade off the performance and privacy of sensitive information, where the two controllers have asymmetric information structure and some prescribed signal needs to be tracked. Note that the system output and tracking signal are always sensitive and easy to be filched by adversaries; thus the DP methodology is explored to protect them. Under DP Gaussian mechanism, the optimal linear controllers are first studied for finite‐horizon and infinite‐horizon problems. Then, the bounds of mean‐square error of steady‐state Kalman filter estimator is provided, and the DP parameter design will be guided that characterizes the privacy of sensitive information. As the DP Gaussian noise will degrade the controlled performance, the degraded performance is quantitatively calculated. Finally, a numerical example is given that shows the efficiency of obtained results. [ABSTRACT FROM AUTHOR]

We propose a novel framework for investigating learning dynamics on the debt market. Observing a firm's survival of apparently distressed periods, the market eliminates asset value estimates that are too low to be consistent with the observed survival. Therefore, the firm's cost of debt becomes lower for given financials. Relative to a perfect information setting, the firm strategically delays default to benefit from a subsequently lower cost of debt. Default comes as a surprise, as it reveals the currently worst possible asset value as correct. The surprise effect is mitigated for debt with higher performance sensitivity and for lower ex ante information asymmetry. This paper was accepted by Gustavo Manso, finance. Funding: This work was supported by Danmarks Frie Forskningsfond [Grant 0133-00087B], Australian Research Council [Grant DP160104737], the Deutsche Forschungsgemeinschaft [Grant 282079427], Fundamental Research Funds for the Central Universities of China [Grant 18wkpy36], and the Danish Finance Institute (DFI). Supplemental Material: The data files and online appendices are available at https://doi.org/10.1287/mnsc.2022.4632. [ABSTRACT FROM AUTHOR]

The main goal of this paper is to identify and analyze the key mechanisms that can lead to financial contagion and their function in the dissemination of shocks within the financial system. The key mechanisms discussed in the paper include interbank lending, bank runs, asset price contagion, the role of asymmetric information, moral hazard and heard behavior among the investors. By exploring these mechanisms, the paper seeks to enhance the understanding of how shocks are transmitted and intensified within the financial system. To achieve the aim of this paper, secondary research was conducted, utilizing relevant research papers, conference papers, open-access materials, and study reports relating to the research topic. The findings draw attention to the possibility of banking system contagion effects, especially due to interbank credit exposures, which might affect a small number of banks and potentially spread to a large amount of the system. The incidence of bank runs, which are brought on by economic instability and a lack of faith in the banking system, worsens the spread of shocks. Additionally, the spread of contagion, which results in market crashes and price spillovers, can be aided by investor herding behavior and confusion brought on by asymmetric information. [ABSTRACT FROM AUTHOR]

We design a laboratory experiment to study bargaining behaviour when negotiations involve multiple issues. Parties must discover both trading prices and agreement scopes, giving rise to unexplored information structures and bargaining strategies. We find that bargainers often trade the efficient set of issues despite lacking information about individual aspects. However, beneficial agreements critically hinge on integrated negotiations that allow deals on bundles of issues. Moreover, access to more information boosts agreement rates in small-surplus negotiations but can also backfire as it triggers increased risk-taking and conflicting fairness preferences in large-surplus negotiations. Finally, successful negotiations display a specific bargaining convention that emerges endogenously. It involves alternating offers that meet the other side's most recent demand halfway. [ABSTRACT FROM AUTHOR]