Browsing by Subject "Asymmetric Information"

Now showing 1 - 4 of 4
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    Economics of Water Pollution: Permit Trading, Reliability of Pollution Control, and Asymmetric Information
    (2017-06) Wang, Zhiyu
    This dissertation analyzes three aspects of the economics of water pollution and is organized in three essays. The first essay examines permit trading in water pollution where pollution is different in the persistence of environmental damage. The second essay examines the problem of reliably meeting a water quality standard under environmental uncertainty. The third essay considers the problem of reliably meeting a water quality standard under asymmetric information. The first essay analyzes how to properly design water pollution permit trading with pollutants which are non-uniformly mixed across space and have different persistence in environmental damages. The efficient solution to water pollution abatement involves integrating the difference in the environmental persistence caused by pollutants and setting trading ratios in permit trading accordingly. The second essay analyzes the problem of meeting a water quality standard with a certain degree of reliability given environmental stochasticity, where the distribution of environmental stochasticity is unknown. The essay develops the use of a reliability target that caps the probability of not attaining the target in any period at α, where 1− α is the level of reliability. A single-tailed version of Chebyshev’s inequality is used that measures the maximum probability of being in the right tail of the probability distribution. The essay also examines a margin of safety in Total Maximum Daily Loads (TMDL) and concludes that if a given level of reliability is desirable, the margin of safety should vary with the level of TMDL. The third essay considers the problem of reliably achieving a water quality standard where water pollution is generated by multiple sources and there is asymmetric information. Asymmetric information comes from privately observable actions like fertilizer application and private information on profits. This essay develops a Vickery-Clark-Groves (VCG) subsidy auction and incorporates a fine/reward scheme based on whether the water quality standard is met. This subsidy auction can achieve an efficient solution to the problem of achieving a reliability standard under asymmetric information.
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    Essays in macroeconomic labor markets.
    (2012-08) Michaud, Amanda Marie
    In this thesis I study labor market dynamics in a macroeconomic context. The first chapter infers a theory of employment using the differences in wage and employment outcomes of job changers. This theory is used to understand differences in levels of unemployment and predict the effect of policy prohibiting employment discrimination against the unemployed. The second chapter examines the evolution of employment volatility relative to output in the US over the past half century. I find the increase is driven by certain demographic subgroups that can be thought of as highly skilled. I use this variation to see if a theory of increased skill transferability can account for the overall macro increase in relative employment volatility. The final chapter, joint with Jacek Rothert, proposes a link between government housing policy and savings in China. We construct a model of learning by doing in exports and find that optimal government policy restricting residential construction raises employment and output in the tradeable sector. This produces both a current account surplus and can be rationalized as benevolent because of the growth externality in learning by doing.
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    Information Acquisition and Revelation in the Financial Markets
    (2018-06) Chu, Yinxiao
    Information plays an important role in financial markets. In this dissertation, first, we consider how traders choose different information. Second, we ask when traders acquire information under competition. Finally, we analyze how ambiguous information affects traders' incentives to trade and reveal their private information. There is information not only about the payoff but also concerning the supply and demand of an asset. In Chapter 1, we study how traders choose to process different information while asset prices are conveying some information. We show that traders decide to process different types of information depends on their initial belief and the informativeness of asset prices. In particular, when the return to each type of information is increasing, traders choose to learn only one type of information. Those who have more precise initial belief about the asset payoff (supply) choose to learn more about the asset payoff (supply). In Chapter 2, we study when traders decide to acquire information under competition. Traders consider two effects of competition in information acquisition: one is that an informed trader's profitability is affected by the presence of another informed trader, the other is the spillover of the information from the informed trader to the uninformed. We show that, when the former effect dominates, then traders tend to acquire information earlier. If the otherwise, then traders tend to delay their information acquisition. In Chapter 3, we study traders' behavior when information is ambiguous, which gives rise to multiple probability models to describe uncertainty. We demonstrate that ambiguity will reduce traders' incentive to trade and reveal their private information. When there is a moderate level of ambiguity, informed traders start to trade randomly, whereas they trade for sure when there is no or a little uncertainty. When ambiguity is sufficiently large, informed traders choose not to trade any more, and no additional information will be revealed in the market.
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    Two Essays in Dynamic Learning under Information Asymmetry
    (2021-06) Yu, Fangyuan
    In real world markets with asymmtric information, making decisions take time. In the real estatemarket, it takes time for the seller to find a potential buyer in the market and potential buyer can learn through the listing time; in the Venture Capital industry, VCs also spend a lot of time learning about the potential startup before make their financing decision. In these environments, timing decision features dynamic learning, and it can reveal information about the underlying house quality or the profitability of the startup. In my dissertation, I explicitly take the dynamic learning into consideration, and investigate how does the dynamic learning over time affect the agents’ behavior. In the first essay ”Dynamic Adverse Selection and Asset Sales”, I present a dynamic adverse selection model in the decentralized market with bilateral trading. Investors meet in decentralized market to trade heterogeneous assets under asymmetric information. The cream-skimming effect emerges due to the heterogeneous sophistication among buyers, where the low-type seller strategically forgoes trading opportunities with gains from trade in order to take advantage of the unsophisticated investors in the market. When the market is pessimistic, time to sale increases in asset quality, heterogeneous sophistication improves market liquidity; when the market is optimistic, time to sale decreases in asset quality, cream-skimming incentive endogenously occurs, which reduces the trading efficiency. The implications and predictions on initial public offerings, real estate market are discussed in the paper. In the second essay ”Secret Scouting”, coathored with Xuelin Li, we consider the dynamic learning model in Venture Capital industry when there is asymmetric information about the profiability of the startups among VCs. We find that VCs prefer secrecy when searching for targets. As a result, only the investments in viable startups are disclosed, but the failed ones are discarded silently. We extend the standard preemption game to explain the efficiency loss and the individual rationale of doing so. We show that secrecy creates pessimism. Compared to the fully disclosing case, VCs will stop hunting for startups too early in an initially promising industry. This could happen even if no technology failures are observed in realization. However, hiding failures becomes a dominant strategy when the return of the VC industry is right-skewed. VCs use secret scouting to make the competitors believe that the industry is a dead end and reduce the preemption threats.