Jeroen M. Swinkels

The Loser's Curse and Information Aggregation in Common Value Auctions

We consider an auction in which k identical objects of unknown value are auctioned off to n bidders. The k highest bidders get an object and pay the k+1st bid. Bidders receive a signal that provides information about the value of the object. We characterize the unique symmetric equilibirum of this auction. We then consider a sequence of auctions Ar with nr bidders and kr objects. We show that price converges in probability to the true value of the object if and only if both kr-->infinity and nr--kr-->infinity, i.e., the number of objects and the number of bidders who do not receive an object in equilibrium go to infinty.

Communication and equilibrium in discontinuous games of incomplete information

This paper offers a new approach to the study of economic problems usually modeled as games of incomplete information with discontinuous payoffs. Typically, the discontinuities arise from indeterminacies (ties) in the underlying problem. The point of view taken here is that the tie-breaking rules that resolve these indeterminacies should be viewed as part of the solution rather than part of the description of the model. A solution is therefore a tie-breaking rule together with strategies satisfying the usual best-response criterion. When information is incomplete, solutions need not exist; that is, there may be no tie-breaking rule that is compatible with the existence of strategy profiles satisfying the usual best-response criteria. It is shown that the introduction of incentive compatible communication (cheap talk) restores existence.

Evolutionary stability with equilibrium entrants

Abstract The strategy that upsets a potential evolutionarily stable strategy may in itself be very unstable, or may differ from the candidate strategy only in irrelevant ways. This paper develops a solution concept addressing these difficulties. We lood for a set of Nash equilibria such that small groups of entrants whose members are satisfied with their entry cannot take the population out of the set. Such a set is robust to the iterated removal of weakly dominated strategies, depends only on the reduced normal form, and has the never a weak best response property. For generic two person extensive form games, such sets generate payoffs consistent with proper equilibria.

Viscous Population Equilibria

Viscosity in a biological population is the tendency of individuals to have a higher rate of interactions with their closer relatives than with similar numbers of more distantly related individuals. This paper presents a simple method of equilibrium analysis to predict the effect of viscosity in biological games. Taking the limit as viscosity goes to zero, a set of fluid population equilibria is defined. The set of fluid population equilibria is nonempty and includes all evolutionary stable strategies.

Moral Hazard with Bounded Payments

We study the moral hazard problem with general upper and lower constraints M on compensation. We characterize the optimal contract and show existence and uniqueness. When minimizing costs for given effort, a principal harmed by M will pay according to M on some range of outcomes; when M reflects limited liability or a minimum wage, the contract is option-like. When the principal also chooses effort, a principal harmed by M might nonetheless never pay according to M. This cannot occur if the cost of inducing effort in the standard principal-agent problem is convex, for which we provide sufficient conditions related to the informativeness of outcome about effort.

Education Signalling with Preemptive Offers

We analyse a version of Spences job market signalling model in which firms can make job offers before workers complete their education. Workers cannot commit to turning down such offers. Offers are private, so that workers are unable to use one firms offer in an attempt to elicit better offers from other firms. In the unique sequential equilibrium outcome of the model with unproductive education, there is no wasteful education. When education is productive, the standard model predicts that more able individuals become overeducated to separate themselves from less able workers. In our model, less able workers become overeducated to (partially) pool with more able workers. The pooling mutes the incentives of high ability workers, who in consequence actually choose to become undereducated. We examine the robustness of our result to modifications to the basic model.

Extensive Form Reasoning in Normal Form Games

There is a tension between a belief in the strategic relevance of information sets and subgames and a belief in the sufficiency of the reduced normal form. The authors identify a prope rty of extensive form information sets and subgames termed strategic independence. Strategic independence is captured by the reduced norm al form and can be used to define normal form information sets and subgames. The authors prove a close relationship between these norma l form structures and their extensive form namesakes. They then motiva te and implement solution concepts corresponding to subgame perfection, sequential equilibrium, and forward induction entirely in the reduce d normal form. Copyright 1993 by The Econometric Society.

Evolution and strategic stability: From maynard smith to kohlberg and mertens☆

Abstract A simple and intuitive condition on a set of strategy profiles guarantees that the set has a strategically stable subset. The condition arises naturally in evolutionary contexts.

On the Analysis of Asymmetric First Price Auctions

We provide new tools for studying asymmetric first price auctions, connecting their equilibria to the ρ-concavity of the underlying type distributions, and showing how one can use surplus expressions for symmetric auctions to bound equilibrium behavior in asymmetric auctions. We apply these tools to studying procurement auctions in which, as is common in practice, one seller is given an advantage, reflecting for example better reliability or quality. We show conditions under which for any given first price handicap auction, there exists a superior second price auction with bonuses.

Near-Optimality of Second Price Mechanisms in a Class of Asymmetric Auctions

Consider a setting with n sellers having i.i.d. costs with log-concave density f from cumulative F, and a buyer who puts a premium [Delta]i on procuring from seller i. We show how for any given [Delta]1,...,[Delta]n, a simple second price bonus auction can be chosen which comes surprisingly close to giving the auctioneer the same surplus as an optimal mechanism. The bonuses depend only on the magnitude and monotonicity of the slope of virtual costs given F. We show that these in turn depend only on fairly coarse information about F. We explore how this result generalizes to asymmetrically distributed costs.