Huseyin Yildirim

Why charities announce donations: a positive perspective

Charities frequently announce contributions of donors as they accrue. Doing so induces donors to play a sequential-move rather than simultaneous-move game. We examine the conditions under which a charity prefers such sequential play. It is known that if donors only value contributions through their effect on the total provision of a public good, then the charity will not announce contributions sequentially. However, with more general utility functions that include additional effects such as warm-glow or snob appeal, the charity may benefit from announcing contributions.

Contests with multiple rounds

This paper studies contests where players have the flexibility to add to their previous efforts after observing their rivals’ most recent effort in an intermediate stage. It is found that (1) contrary to previous findings, the Stackelberg outcome where the underdog leads and the favorite follows cannot be an equilibrium. (2) There are multiple subgame perfect equilibria all occurring on the underdog’s usual one-shot reaction function in-between and including the one-shot Cournot–Nash and Stackelberg outcome with the favorite leading. (3) The total equilibrium effort is typically greater than or equal to what a one-shot Cournot–Nash play would predict; and (4) in settings where players can choose whether or not to disclose their early actions to the rival, both the favorite and the underdog disclose in equilibrium. Applications in sports, lobbying, and R&D races are discussed.

Public information and electoral bias

We present a theory of voting that predicts that elections are more likely to be close, and voter turnout is more likely to be high when citizens possess better public information about the composition of the electorate. These findings suggest that providing more information to potential voters about aggregate political preferences (e.g., through pre-election polls or expert forecasts) may undermine the democratic process. Our analysis reveals that if the distribution of political preferences is common knowledge, then the unique type-symmetric equilibrium leads to a stark neutrality result in which each alternative is equally likely to win the election. By contrast, when citizens are ignorant about the preference distribution, the majority is more likely to win the election and expected voter turnout is lower. Welfare is, therefore, unambiguously higher when citizens possess less information about the preference distribution.

Proposal power and majority rule in multilateral bargaining with costly recognition

This paper studies a sequential bargaining model in which, as in the rent-seeking literature, agents expend resources to be the proposer, and agreement requires affirmative votes of either all agents or a subset of them. By focusing on the Stationary Subgame Perfect Equilibrium, it is found that (1) under the unanimity voting rule, all agents expend the same amount of resources, regardless of their time preferences. (2) Under a nonunanimity rule however, more patient agents expend greater resources, and are thus more likely to propose. Yet, they can end up with a lower payoff than less patient agents. (3) While, under the unanimity rule, the social cost decreases in group heterogeneity, it can increase under a nonunanimity rule. (4) Bargaining as a coalition pays off only if the coalition is large enough. (5) When the surplus is endogenous to the group, groups that require more consensus in their distribution are more likely to expand; and (6) when bargaining delays are possible, costly recognition induces agents to reach an agreement too soon from the social standpoint, even under the unanimity rule..

Managing Dynamic Competition

In many important high-technology markets, including software development, data processing, communications, aeronautics, and defense, suppliers learn through experience how to provide better service at lower cost. This paper examines how a buyer designs dynamic competition among rival suppliers to exploit learning economies while minimizing the costs of becoming locked in to one producer. Strategies for controlling dynamic competition include the handicapping of more efficient suppliers in procurement competitions, the protection and allocation of intellectual property, and the sharing of information among rival suppliers. (JEL C73, D44, L10)

On the Endogeneity of Cournot-Nash and Stackelberg Equilibria: Games of Accumulation

Abstract We characterize equilibria of games with two properties: (i) Agents have the opportunity to adjust their strategic variable after their initial choices and before payoffs occur; but (ii) they can only add to their initial amounts. The equilibrium set consists of just the Cournot–Nash outcome, one or both Stackelberg outcomes, or a continuum of points including the Cournot–Nash outcome and one or both Stackelberg outcomes. A simple theorem that uses agents’ standard one-period reaction functions and the one-period Cournot–Nash and Stackelberg equilibria delineates the equilibrium set. Applications include contribution, oligopoly, and rent-seeking games.

Learning by Doing and Dynamic Regulation

From experience, regulated monopolists learn to employ cost-reducing innovations. We characterize the optimal regulation of an innovating monopolist with unknown costs. Regulatory policy is designed to minimize current costs of service while encouraging development of cost-saving innovations. We find that under optimal regulation, (i) innovation is encouraged by light-handed regulation allowing the monopolist to earn greater information rents while providing greater service, (ii) innovation occurs in the absence of long-term agreements when private information is recurring, and (iii) innovation is more rapid in a durable franchise, and the regulator prefers durable franchises for exploiting learning economies.

A unified analysis of rational voting with private values and group-specific costs

We provide a unified analysis of the canonical rational voting model with privately known political preferences and costs of voting. Focusing on type-symmetric equilibrium, we show that for small electorates, members of the minority group vote with a strictly higher probability than do those in the majority, but the majority is strictly more likely to win the election. As the electorate size grows without bound, equilibrium outcome is completely determined by the individuals possessing the lowest cost of voting in each political group. We relate our equilibrium characterization to Myersons Poisson games, and examine the potential uniqueness of equilibrium.

On the Role of Confidentiality and Deadlines in Bilateral Negotiations

The preference between public and private negotiations for a buyer who sequentially visits two sellers is examined. It is shown that the buyer (weakly) prefers private negotiations so as to create strategic uncertainty about the trade history. With substitute goods, such uncertainty is valuable only when price offers have short deadlines that prevent a head-to-head competition. With complementary goods, strategic uncertainty is valuable to the extent that price coordination becomes a concern for sellers, which is likely to be the case when sellers possess high bargaining powers; their price offers have short deadlines; and/or goods are weak complements. Sellersʼ strategic deadline choices as well as their incentives to disclose information about negotiations are also investigated.

Information, Competition, and the Quality of Charities

Drawing upon the all-pay auction literature, we propose a model of charity competition in which informed giving alone can account for the significant quality heterogeneity across similar charities. Our analysis identifies a negative effect of competition and a positive effect of informed giving on the equilibrium quality of charity. In particular, we show that as the number of charities grows, so does the percentage of charity scams, approaching one in the limit. In light of this and other results, we discuss the need for regulating nonprofit entry and conduct as well as promoting informed giving.