Three Essays On Successive Vertical Oligopolies

Author : Renkun Yang (Ph. D. in economics)
Publisher :
ISBN 13 :
Total Pages : 172 pages
Book Rating : 4.:/5 (131 download)

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Download or read book Essays on Mechanism and Information Design written by Renkun Yang (Ph. D. in economics) and published by . This book was released on 2021 with total page 172 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation contains three chapters bringing together my work in dynamic mechanism design and information design in markets. In Chapter 1 titled "The Termination Clause as a Sequential Screening Device", I investigate the role of termination fees in go-shop provisions in the mergers and acquisition markets. In an environment wherein the buyers' value uncertainty is resolved over time, I find that the seller can screen this private signal by offering a menu of termination contracts. Such a contract resembles the insight of sequential screening: the initial buyer with an optimistic estimate accepts a contract with a high floor price and high termination fee to mitigate future competition; a pessimistic early buyer, in contrast, chooses to stay flexible by accepting a low contract. Moreover, the seller collects more revenue than running a public auction until all bidders are present when the initial signal is sufficiently noisy. Chapter 2 titled "Dynamic Assignment with Limited Commitment" (joint with OSub Kwon) studies a dynamic allocation problem in which transfers are not feasible and the principal cannot commit in the long run. Specifically, an efficiency-maximizing principal (she) decides in each period whether to allocate a good at a fixed cost to the agent (he), whose private value evolves over time. The optimal mechanism in the two-period model has two main features. First, the principal elicits truthful reports in the first period by promising the low type one unit in the second period. Second, to fulfill this promise the principal strategically garbles (without observing) the agent's report. As the time horizon expands, the efficiency loss is backloaded and vanishes in the infinite horizon limit. Chapter 3 titled "Information Design in Vertical Oligopolies" studies a vertical oligopoly model in which two firms compete in quality revelation in the form of Bayesian persuasion before competing in price. I find that in the benchmark model of the covered market, both firms reveal all information in a dominant strategy equilibrium to enlarge (perceived) product differentiation and soften price competition. When a minimum quality standard (MQS) is imposed, the firms pool around the MQS to increase the pass rate and reveal all other states to soften competition in the unique symmetric equilibrium. When extending the model to the uncovered case, the endogenous market share effect renders full revelation non-dominant even without policy intervention. I characterize sufficient conditions for a full information equilibrium and show that competition in general leads to excessive information compared to the social- and consumer-optimal level.