Lars Stole

Impetuous Youngsters and Jaded Old-Timers: Acquiring a Reputation for Learning

This paper examines individual decision making when decisions reflect on peoples ability to learn. We address this problem in the context of a manager making investment decisions on a project over time. We show that in an effort to appear as a fast learner, the manager will exaggerate his own information; but ultimately, he becomes too conservative, being unwilling to change his investments on the basis of new information. Our results arise purely from learning about competence rather than concavity or convexity of the rewards functions. We relate our results to the existing psychology literature concerning cognitive dissonance reduction.

Intra-firm Bargaining under Non-binding Contracts

We present a new methodology for studying the problem of intra-firm bargaining, based on the notion that contracts cannot commit the firm and its agents to wages and employment. We develop and analyse a general non-cooperative multilateral bargaining framework between the firm and its employees and consider outcomes which are immune to renegotiations by any party. Equilibrium firm profits are characterizable as both a weighted average of a neo-classical (non-bargaining) firms profits and a generalization of Shapley value for a corresponding cooperative game. Furthermore, the resulting payoffs induce economically significant distortions in the firms input and organizational-design decisions.

The Economics of Multidimensional Screening

This chapter, which corresponds to an invited lecture at the Seventh World Congress of the Econometric Society, surveys recent theoretical developments in the use of multidimensional screening models in such applications as contract theory and pricing strategies.

Price Discrimination and Competition

This chapter surveys the developments in price discrimination theory as it applies to imperfectly competitive markets. Broad themes and conclusions are discussed in the areas of first-, second- and third-degree price discrimination, pricing under demand uncertainty, bundling and behavior-based discrimination.

Organizational Design and Technology Choice under Intrafirm Bargaining: Comment

The authors consider a wide number of applications of an intrafirm bargaining game within organizations where employees and the firm engage in wage negotiations. Under their presumption that contracts cannot bind employees to the organization, the resulting stable wage and profit profiles give rise to an objective function for the firm that places weight on inframarginal profits in an economically significant manner. The authors in turn employ this methodology to explore applications of organizational design, hiring and capital decisions, training and cross-training, the importance of labor and asset specificity, managerial hierarchies, preferences for unionization, responses to competition, and internal capital budgeting. Copyright 1996 by American Economic Association.

Contractual Externalities and Common Agency Equilibria

This paper characterizes the equilibrium sets of common agency games with direct externalities between principals when they compete with nonlinear prices. Direct externalities arise when the contracting variable of one principal directly affects the other principals payoff. First, we characterize the set of pure-strategy, symmetric equilibria under complete information of an intrinsic common agency game. This set of equilibria is large because of the presence of price-output offers by the principals that are unchosen by the agent in equilibrium. Equilibria exist in which principals offer out-of-equilibrium price-output choices to the agent and induce aggressive, low-price behavior corresponding to marginal-cost pricing in the extreme case. We then show that this equilibrium set of outputs is robust to the possibility that agent refuses any of the offered contracts; the case of delegated agency. Second, we introduce asymmetric information in order to rationalize existing nonlinear pricing contracts. The introduction of asymmetric information has the effect of restricting the set of equilibrium outputs of the intrinsic common agency game.

The Non-Monetary Nature of Gifts

This paper addresses the prevalence of non-monetary gifts over more highly valued and e

Information Expropriation and Moral Hazard in Optimal Second-Source Auctions

cient monetary transfers in social relationships. We demonstrate that under a wide variety of circumstances, ine

Restricting the Means of Exchange within Organizations

cient non-monetary gifts will be o!ered by a donor in lieu of cash in order to signal the donors quality of information about the recipients preferences. This result emerges because gift giving is ine

Representing equilibrium aggregates in aggregate games with applications to common agency

cient relative to cash, and not because of any arbitrary assumptions regarding communication. In particular, the donor has available the strategy of o!ering cash and saying what he would have purchased. Nonetheless, there is still an important equilibrium role for buying gifts. 2001 Elsevier Science B.V. All rights reserved. JEL classixcation: A13; D10; D64; D82; Z1