Papers by eloisa campioni
Social Science Research Network, Nov 23, 2005
This paper discusses the relationship between firms' access to credit market and business fluctua... more This paper discusses the relationship between firms' access to credit market and business fluctuations in a sequential Neo-Austrian economy. Existence of cycles reflects a fundamental distortion in the intertemporal structure of production, that is a lack of coordination between utilization of productive capacity and construction of new machines. The role of credit market institutions is to sustain viability of the economy along an out-of-equilibrium transition. Allowing for a high degree of price flexibility turns out not to be a general response to boosts in capital accumulation and employment. When we focus on an irreversible, offequilibrium dynamics the coordination of policy interventions becomes a relevant tool to govern fluctuations.
RePEc: Research Papers in Economics, Mar 1, 2005
This paper studies the relationship between competition and incentives in an economy with financi... more This paper studies the relationship between competition and incentives in an economy with financial contracts. We concentrate on non-exclusive credit relationships, those where an entrepreneur can simultaneously accept more than one contractual offer. Several homogeneous lenders compete on the contracts they offer to finance the entrepreneur's investment project. We model a common agency game with moral hazard, and characterize its equilibria. As expected, notwithstanding the competition among the principals (lenders), non-competitive outcomes can be supported. In particular, positive profit equilibria are pervasive. We then provide a complete welfare analysis and show that all equilibrium allocations turn out to be constrained Pareto efficient.
SSRN Electronic Journal, 2017
We set up an experimental coordination game among bank depositors à la Diamond and Dybvig (1983).... more We set up an experimental coordination game among bank depositors à la Diamond and Dybvig (1983). We elicit subjects' financial literacy and study the impact of revealing this information on the coordination problem typical of this game with multiple equilibria. We find that when no information is revealed the likelihood of runs increases with bank size, while when information on financial literacy is disclosed it increases in small banks and decreases in large ones. Over all banks' dimensions, the probability of coordinating on the inefficient equilibrium is lower when the average financial literacy revealed to the group is higher.
Economics Letters
We study competing-mechanism games, in which multiple principals contract with multiple agents. W... more We study competing-mechanism games, in which multiple principals contract with multiple agents. We reconsider the issue of non-existence of an equilibrium as first raised by Myerson (1982). In the context of his example, we establish the existence of a perfect Bayesian equilibrium. We clarify that Myerson (1982)'s non-existence result is an implication of the additional requirement he imposes, that each principal selects his preferred continuation equilibrium in the agents' game.
SSRN Electronic Journal, 2021
SSRN Electronic Journal
We study competing-mechanism games, in which several principals contract with several privately i... more We study competing-mechanism games, in which several principals contract with several privately informed agents. We show that enabling principals to engage into private disclosures-whereby a principal sends to the agents contractible private signals about how her decisions rule will respond to the agents' messages-can significantly affect the predictions of such games. Our first result is that equilibrium outcomes and payoffs of games without private disclosures need no longer be supported once private disclosures are allowed for. This challenges the robustness of the folk theorems a la Yamashita (2010). Our second result is that allowing for private disclosures may generates equilibrium outcomes that cannot be supported in any game without private disclosures, no matter how rich the message spaces are. This challenges the canonicity of the universal mechanisms of Epstein and Peters (1999). These findings call for a novel approach to the analysis of competing-mechanism games.
SSRN Electronic Journal
We study competing-mechanism games under exclusive competition: principals first simultaneously p... more We study competing-mechanism games under exclusive competition: principals first simultaneously post mechanisms, after which agents simultaneously choose to participate and communicate with at most one principal. In this setting, which is common to competing-auction and competitive-search applications, we develop two complete-information examples that question the relevance of the folk theorems for competing-mechanism games documented in the literature. The first example shows that there can exist pure-strategy equilibria in which some principal obtains a payoff below her min-max payoff, computed over all principals' decisions. Thus folk-theoremlike results may have to involve a bound on principals' payoffs that depends on the spaces of messages available to the agents, and not only on the players' actions. The second example shows that even this nonintrinsic approach is misleading when agents' participation decisions are strategic: there can exist incentive-feasible allocations in which principals obtain payoffs above their min-max payoffs, computed over arbitrary spaces of mechanisms, but which cannot be supported in equilibrium.
SSRN Electronic Journal
We study games in which several principals design incentive schemes in the presence of privately ... more We study games in which several principals design incentive schemes in the presence of privately informed agents. Competition is exclusive: each agent can participate with at most one principal, and principal-agents corporations are isolated. We analyze the role of standard incentive compatible mechanisms in these contexts. First, we provide a clarifying example showing how incentive compatible mechanisms fail to completely characterize equilibrium outcomes even if we restrict to pure strategy equilibria. Second, we show that truth-telling equilibria are robust against unilateral deviations toward arbitrary mechanisms. We then consider the single agent case and exhibit sufficient conditions for the validity of the revelation principle.
SSRN Electronic Journal, 2000
SSRN Electronic Journal, 2000
ABSTRACT This paper studies the relationship between competition and incentives in an economy wit... more ABSTRACT This paper studies the relationship between competition and incentives in an economy with financial contracts. We concentrate on a credit market where an entrepreneur can simultaneously accept more than one contractual offer. Several homogeneous lenders compete on the contracts they offer to finance the entrepreneur's investment project. We model a common agency game with non-exclusive contracting and moral hazard, and characterize its equilibria. In the contract includes an investment amount, a repayment and a monitoring decision. As expected, notwithstanding the competition among the principals (lenders), non-competitive allocations emerge at equilibrium. In particular, positive profit equilibria are pervasive. We then characterize the constrained utility possibility set, and observe that for the special case when no-monitoring is allowed, all the equilibrium payoffs of the decentralized game are second-best efficient. Contractual externalities do not affect welfare. These equilibria correspond to those already analyzed in Parlour and Rajan (2001). When monitoring is available, competition is more intense. We show that there exists a profit equilibrium which is now second-best inefficient.
ABSTRACT The interaction between optimal contractual design and macroeconomic aspects of economic... more ABSTRACT The interaction between optimal contractual design and macroeconomic aspects of economic systems is a sensitive issue for contemporary economics, in particular within the framework of the incentive theory. Information problems are crucial for incentives. Typically, in the credit markets lender-borrower interactions are affected by incentive problems and financial intermediation can be helpful. This work deals with financial markets, contracts and asymmetric information, with particular attention on how incentives and competition model the structure of the credit markets when the entrepreneur can simultaneously contract with more than one lender. In these cases we examine the implications of strategic competition on contracts among loans suppliers. Dealing with economies affected by information incompleteness or imperfection, competition on contracts delivers externalities among the players in the credit markets that can be responsible for inefficient outcomes. The issue of whether there could be any welfare-enhancing role of policy intervention, to improve on market outcomes is also analyzed.
In this paper we analyze the credit channel of monetary policy in a context of strategic competit... more In this paper we analyze the credit channel of monetary policy in a context of strategic competition among financiers. We propose a simple model of credit financing where lenders are heterogeneous and compete on the loan contracts they offer. We show that competition threat sustains positive-profit equilibria for the active lender. There also exists a zero-profit equilibrium defining the threshold between the region where market-type of financing is adopted and that where bank financing is chosen. In terms of monetary policy, the basic predictions of the credit channel of monetary policy are confirmed. We are able to characterize how the contractual conditions of access to external funds change for borrowers with different internal equity and how monetary policy intervention affects the competitiveness in the credit market.
Structural Change and Economic Dynamics, 2007
This paper discusses the relationship between firms' access to credit market and business fluctua... more This paper discusses the relationship between firms' access to credit market and business fluctuations in a sequential Neo-Austrian economy. Existence of cycles reflects a fundamental distortion in the intertemporal structure of production, that is a lack of coordination between utilization of productive capacity and construction of new machines. The role of credit market institutions is to sustain viability of the economy along an out-of-equilibrium transition. Allowing for a high degree of price flexibility turns out not to be a general response to boosts in capital accumulation and employment. When we focus on an irreversible, offequilibrium dynamics the coordination of policy interventions becomes a relevant tool to govern fluctuations.
Abstract: We consider multiple-principal multiple-agent models of moral hazard: Principals compet... more Abstract: We consider multiple-principal multiple-agent models of moral hazard: Principals compete through mechanisms in the presence of agents who take unobservable actions. In this context, we provide a rationale for restricting principals to make use of simple ...
We consider multiple-principal multiple-agent games of incomplete information. In this context, w... more We consider multiple-principal multiple-agent games of incomplete information. In this context, we show that restricting principals to propose truth-telling direct mechanisms is problematic: the best reply of a single principal to a given array of offers proposed by his rivals cannot always be represented through truth-telling mechanisms. We then show that if contracts are exclusive, truth-telling direct mechanisms are able to characterize best replies. This provides a rationale for the use of truth-telling direct mechanisms in the situation in which each agent can contract with at most one principal, that has been postulated in most economic applications.
Games and Economic Behavior, 2010
In multiple-principal multiple-agent models of moral hazard, we provide sufficient conditions for... more In multiple-principal multiple-agent models of moral hazard, we provide sufficient conditions for the outcomes of pure-strategy equilibria in direct mechanisms to be preserved when principals can offer indirect communication schemes. The conditions include strong robustness in the direct mechanism game, as developed in the literature on competing mechanisms by and Han (2007a), and a no-correlation property we define. We provide a rationale for restricting attention to take-it or leave-it offers, as is typically done in applications. We show via examples that it is necessary to allow direct mechanisms to be stochastic and to include private recommendations from principals to agents to preserve the corresponding equilibrium outcomes, and that the no-correlation condition is tight.
In this note we consider a basic property of common agency models: pure strategy equilibria of ga... more In this note we consider a basic property of common agency models: pure strategy equilibria of games where principals compete in direct mechanisms are robust to the possibility that principals might deviate and use more complex indirect mechanisms to design their contracts. We show that this property can be generalized to multi-principal multi-agent models.
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Papers by eloisa campioni