Lucia Quesada

Intermediaries, Credibility and Incentives to Collude

A seller contracts and potentially colludes with a certification intermediary. We investigate the intermediarys incentives to collude, her pricing strategy, and the extent to which buyers rely on the intermediarys announcements. The probability of collusion is an endogenous variable, determined by the intermediarys pricing strategy. The extent to which the market relies on the intermediarys reports, the certification price and the intermediarys profit decrease as the intermediary becomes less patient. By making certification mandatory, the intermediary loses her ability to screen out low-quality sellers, which increases the probability of collusion.

A Not so Short Note on the Informed Principal With Independent Private Values

We revisit the private value informed principal model as introduced in Maskin and Tirole (1990). We improve on their model in two dimensions. First, we show that their results about efficiency and uniqueness of the equilibrium still hold in a context in which the principal is constrained to design mechanisms that do not involve third parties Second, we give conditions under which the equilibrium allocation is deterministic. This allows us to fully characterize the equilibrium outcome and show that for all types of principal the equilibrium allocation shares the same properties as the standard uninformed-principal/informed-agent model: No distortion for the good type of agent and downward distortion elsewhere. However, in contrast with the standard case, distortions are affected by the degree of risk aversion of the agent in opposite ways for different types of principal. As a subproduct, we characterize any interim incentive efficient allocation, as long as the principals incentive constraints do not bind.

Regulation Under External Credit Constraints: Theoretical Analysis and a CGE Illustration

We investigate the interactions between optimal regulation and external credit constraints. When part of a regulated firm is owned by foreign investors, a credit-constrained country who wants to send profits abroad has to generate enough surplus in the trade account in order to compensate capital outflows. We show that the credit constraint translates into a constraint of maximum profits for the regulated firm. Overall efficiency in the regulated sector is reduced to maintain incentive compatibility in such a way that the production profile is not continuous. Manipulating the exchange rate may help relaxing the credit constraint. With a CGE model we verify the significance of our results for a real economy.