The Resource Optimal contracts with non-bayesian agents, Sarah Auster

Optimal contracts with non-bayesian agents, Sarah Auster

Label
Optimal contracts with non-bayesian agents
Title
Optimal contracts with non-bayesian agents
Statement of responsibility
Sarah Auster
Creator
Contributor
Subject
Language
eng
Summary
This thesis investigates how the theoretical predictions of traditional economic models change when the assumption of Bayesian decision making is relaxed. Bayesian decision theory assumes that decision makers are able to perfectly describe their state space and assign a single prior to every possible event. The theory of unawareness relaxes the rst assumption by allowing decision makers to be aware of some contingencies and unaware of others. The theory of ambiguity relaxes the second assumption and allows decision makers to prefer known risks over unknown risks. The rst chapter of this thesis analyzes the e ect of ambiguity on bilateral trade in the presence of private information. It demonstrates that in an environment with adverse selection as in Akerlof's (1970) market for lemons, screening the informed party hedges against ambiguity. It further shows that the presence of ambiguity can be both bene cial or harmful for trade. If the adverse selection problem is su ciently severe, more ambiguity surprisingly leads to more trade and thereby increase surplus. Using these results, a nancial market application demonstrates that ambiguity may help to explain why some assets are optimally traded over-the-counter rather than on traditional exchanges, and suggests that opacity may be essential to sustain such trade. The second chapter of this thesis introduces asymmetric awareness into a classical principal-agent model with moral hazard, and shows how unawareness can give rise to incomplete contracts.1 The paper investigates the optimal contract between a fully aware principal and an unaware agent, where the principal can enlarge the agent's awareness strategically. When proposing the contract, the principal faces a tradeo between participation and incentives: leaving the agent unaware allows the principal to exploit the agent's incomplete understanding of the world, relaxing the participation constraint, while making the agent aware enables the principal to use the revealed contingencies as signals about the agent's action choice, relaxing the incentive constraint. The optimal contract reveals
Member of
Cataloging source
IT-FiEUI
http://library.link/vocab/creatorName
Auster, Sarah
Date time place
Defence date: 25 September 2014
Dissertation note
Thesis (Ph. D.)--European University Institute (ECO), 2014.
Index
no index present
Literary form
non fiction
Nature of contents
theses
http://library.link/vocab/relatedWorkOrContributorName
European University Institute
Series statement
  • EUI PhD theses
  • EUI theses
http://library.link/vocab/subjectName
  • Contracts
  • Bayesian statistical decision theory
Label
Optimal contracts with non-bayesian agents, Sarah Auster
Link
http://hdl.handle.net/1814/32933
Instantiates
Publication
Note
Examining Board: Professor Piero Gottardi, EUI, Supervisor; Professor Árpád Ábrahám, EUI; Professor Ludovic Renou, University of Essex; Professor Jean Marc Tallon, Paris School of Economics
Bibliography note
Includes bibliographical references (pages 101-102)
Carrier category
volume
Carrier category code
  • nc
Carrier MARC source
rdacarrier.
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent.
Control code
FIEb17604527
Dimensions
30 cm.
Extent
vi, 71 pages
Media category
unmediated
Media MARC source
rdamedia.
Media type code
  • n
System control number
(OCoLC)914479290
Label
Optimal contracts with non-bayesian agents, Sarah Auster
Link
http://hdl.handle.net/1814/32933
Publication
Note
Examining Board: Professor Piero Gottardi, EUI, Supervisor; Professor Árpád Ábrahám, EUI; Professor Ludovic Renou, University of Essex; Professor Jean Marc Tallon, Paris School of Economics
Bibliography note
Includes bibliographical references (pages 101-102)
Carrier category
volume
Carrier category code
  • nc
Carrier MARC source
rdacarrier.
Content category
text
Content type code
  • txt
Content type MARC source
rdacontent.
Control code
FIEb17604527
Dimensions
30 cm.
Extent
vi, 71 pages
Media category
unmediated
Media MARC source
rdamedia.
Media type code
  • n
System control number
(OCoLC)914479290

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