Georg Nöldeke

Option contracts and renegotiation : a solution to the Hold-Up Problem

In this article, we analyze the canonical hold-up model of Hart and Moore under the assumption that the courts can verify delivery of the good by the seller. It is shown that no further renegotiation design is necessary to achieve the first best: simple option contracts, which give the seller the right to make the delivery decision and specify payments depending on whether delivery takes place, allow implementation of efficient investment decisions and efficient trade.

Sequential Investments and Options to Own

Contingent ownership structures are prevalent in joint ventures. We offer an explanation based on the investment incentives provided by such an arrangement. We consider a holdup problem in which two parties make relationship-specific investments sequentially to generate a joint surplus in the future. In our model, the following ownership structure implements first-best investments: one party owns the firm initially, while the other party has the option to buy the firm at a set price at a later date. This result is robust to the possibility of renegotiation and uncertainty.

A Dynamic Model of Equilibrium Selection in Signaling Markets

Abstract In his work on signaling, Spence proposed a dynamic model of a market in which a buyer revises prices in light of experience and in which sellers, with private information about their types, choose utility-maximizing signals given these prices. We follow Spences suggestion of introducing perturbations into the resulting dynamic process. In a broad class of markets, our model selects a separating equilibrium outcome if and only if the equilibrium outcome satisfies a version of the undefeated equilibrium concept, whereas a pooling equilibrium outcome is selected if and only if the equilibrium outcome is both undefeated and satisfies D 1. Journal of Economic Literature Classification Numbers: C70, C72, D82, D83.

Gains from switching and evolutionary stability in multi-player matrix games

In this paper we unify, simplify, and extend previous work on the evolutionary dynamics of symmetric N-player matrix games with two pure strategies. In such games, gains from switching strategies depend, in general, on how many other individuals in the group play a given strategy. As a consequence, the gain function determining the gradient of selection can be a polynomial of degree N-1. In order to deal with the intricacy of the resulting evolutionary dynamics, we make use of the theory of polynomials in Bernstein form. This theory implies a tight link between the sign pattern of the gains from switching on the one hand and the number and stability of the rest points of the replicator dynamics on the other hand. While this relationship is a general one, it is most informative if gains from switching have at most two sign changes, as is the case for most multi-player matrix games considered in the literature. We demonstrate that previous results for public goods games are easily recovered and extended using this observation. Further examples illustrate how focusing on the sign pattern of the gains from switching obviates the need for a more involved analysis.

Optimal bunching without optimal control

Abstract This paper presents simple sufficient conditions under which optimal bunches in adverse-selection principal-agent problems can be characterized without using optimal control theory.

Matching Heterogeneous Agents with a Linear Search Technology

Steady state equilibria in heterogeneous agent matching models with search frictions have been shown to exist in Shimer and Smith (2000) under the assumption of a quadratic search technology. We extend their analysis to the commonly investigated linear search technology.

Existence of Linear Equilibria in the Kyle Model with Multiple Informed Traders

We consider Kyles market order model of insider trading with multiple informed traders and show: if a linear equilibrium exists for two different numbers of informed traders, asset payoff and noise trading are independent and have finite second moments, then these random variables are normally distributed.

A Characterization of the Distributions That Imply Existence of Linear Equilibria in the Kyle-Model

The existence of a linear equilibrium in Kyles model of market making with multiple, symmetrically informed strategic traders is implied for any number of strategic traders if the joint distribution of the underlying exogenous random variables is elliptical. The reverse implication has been shown for the case in which the random variables are independent and have finite second moments. Here we extend this result to the case in which the underlying random variables are not necessarily independent and their joint distribution is determined by its moments.

Variability in group size and the evolution of collective action

Models of the evolution of collective action typically assume that interactions occur in groups of identical size. In contrast, social interactions between animals occur in groups of widely dispersed size. This paper models collective action problems as two-strategy multiplayer games and studies the effect of variability in group size on the evolution of cooperative behavior under the replicator dynamics. The analysis identifies elementary conditions on the payoff structure of the game implying that the evolution of cooperative behavior is promoted or inhibited when the group size experienced by a focal player is more or less variable. Similar but more stringent conditions are applicable when the confounding effect of size-biased sampling, which causes the group-size distribution experienced by a focal player to differ from the statistical distribution of group sizes, is taken into account.

Optimal Bunching without Optimal Control

This paper presents simple sufficient conditions under which optimal bunches in adverse-selection principal-agent problems can be characterized without using optimal control theory.