Guillaume Roger

Media Concentration With Free Entry

This study develops a free-entry model of competition between media firms, characterizes its equilibrium, and establishes that the industry displays a natural tendency to concentrate. A merger of any 2 firms is strictly profit increasing. Therefore, incentives to consolidate, while maintaining distinct, costly locations (i.e., production units or content), exist. This study distinguishes between post-entry and ex ante consolidation and investigates the properties of the post-consolidation equilibrium. Some firms not involved in any merger may be forced to exit. So, although media mergers may not result in shutting down any of the merging outlets, they still may indirectly affect diversity.

A Revelation Mechanism for Soft Information under Moral Hazard

This paper constructs a revelation mechanism to address a problem of moral hazard under soft information. The agent alone observes the stochastic outcome of her action, which she reports to the principal. Therefore the principal also faces a problem of ex post adverse selection. Economically relevant restrictions induces constraints on the principal’s choice of mechanism and the Revelation Principle fails to apply. Specifically, a direct mechanism induces some pooling, which does not replicate the allocation obtained using a larger message space. Pooling also weakens the ex ante incentives. The Revelation Principle is extended to obtain type separation. A better audit relaxes frictions.

Participation in moral hazard problems

Two principals engage in Hotelling competition for an agents services under incomplete information as to her outside option (location). This renders the agents participation decision probabilistic from the perspective of each principal. Regardless of the market structure at equilibrium the optimal contract features a trade-off between participation probability and incentives. Rent and effort are inversely related and non-monotonic in the agents transport cost and so in market structures; they increase (decrease) with competition. Uncertainty as to the agents location may increase or decrease the rent compared to full information. This correspondingly harms or benefits principals.

Moral Hazard with Discrete Soft Information

I study a simple model of moral hazard with soft information. The risk-averse agent takes an action and she alone observes the stochastic outcome; hence the principal faces a problem of ex post adverse selection. With limited instruments, the principal cannot solve these two problems independently. To accommodate ex post information revelation, he must distort the transfer schedule, as compared to the standard moral hazard problem. Then effort is implemented for a smaller set of parameters than in the standard problem. These results are robust and suggest high-power contracts may have to be revisited when information is soft.