ERN: SearchPub Date : 2018-03-12DOI: 10.2139/ssrn.3138516
Julius Tennert
{"title":"Learning in Funding Relationships: Are VCs Really Different?","authors":"Julius Tennert","doi":"10.2139/ssrn.3138516","DOIUrl":"https://doi.org/10.2139/ssrn.3138516","url":null,"abstract":"The purpose of this paper is to examine how learning about an entrepreneurial project is impacted by asymmetric information. In this paper, a unique data set about entrepreneurial firm’s planned capital appropriation is presented to estimate the effect of new information on entrepreneurial firm’s valuation. It is demonstrated that only precise and unbiased information allows for early identification. \u0000of promising projects. However, it is found that entrepreneurs try to manipulate information disclosed to the VC to ensure continuation of the project. This paper is the first to show empirical evidence for these theories.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"16 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-03-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126584178","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2018-03-05DOI: 10.2139/ssrn.3134924
J. van den Berghe
{"title":"An Intuitive Explanation of Rocket and Feather Effects","authors":"J. van den Berghe","doi":"10.2139/ssrn.3134924","DOIUrl":"https://doi.org/10.2139/ssrn.3134924","url":null,"abstract":"Searching consumers, uncertain about price distribution in a market, will learn about this distribution through prices they observe. Firms will be able to use these learning effects to increase markups. Because the price distribution varies more in times when input costs are volatile, consumers often begin with a weaker prior due to high volatility and will learn more from the price. This volatility effect speeds price increases when costs increase, but slows price decreases when costs decrease. This offers a unique explanation to the empirical puzzle of why prices increase more quickly with cost increases and decrease more slowly with cost decreases.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"19 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-03-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117018346","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2018-03-01DOI: 10.2139/ssrn.3140231
Yuta Kittaka
{"title":"Multiproduct Firms, Consumer Search, and Demand Heterogeneity","authors":"Yuta Kittaka","doi":"10.2139/ssrn.3140231","DOIUrl":"https://doi.org/10.2139/ssrn.3140231","url":null,"abstract":"This study constructs a consumer search model in which some consumers search for multiple products, whereas others search for a single product. A price difference arises because of a difference in the price elasticity for each group. We show that a positive demand shock to one of the products decreases the price of another product, whereas it increases its own price, and a negative correlation between the demands for each product strengthens these tendencies. Both prices decrease, however, following a positive demand shock when the demands for each product are positively correlated. We also show that multiproduct firms set a relatively high price for a more demanded product, as such a product's price tends to be more elastic with respect to search costs. A price difference between products increases as the demand gap between products increases or as economies of scale in search increase.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"131242702","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2018-03-01DOI: 10.2139/ssrn.3161174
Ludmila Matysková
{"title":"Bayesian Persuasion with Costly Information Acquisition","authors":"Ludmila Matysková","doi":"10.2139/ssrn.3161174","DOIUrl":"https://doi.org/10.2139/ssrn.3161174","url":null,"abstract":"A sender who chooses a signal to reveal to a receiver can often influence the receiver’s subsequent actions. Is persuasion more difficult when the receiver has her own sources of information? Does the receiver benefit from having additional information sources? We consider a Bayesian persuasion model extended to a receiver’s endogenous acquisition of information under an entropy-based cost commonly used in rational inattention. A sender’s optimal signal can be computed from standard Bayesian persuasion subject to an additional constraint: the receiver never gathers her own costly information. We further determine a finite set of the sender’s signals satisfying the additional constraint in which some optimal signal must be contained. The set is characterized by linear conditions using the receiver’s utility and information cost parameters. The new method is also applicable to a standard Bayesian persuasion model and can simplify, sometimes dramatically, the search for a sender’s optimal signal (as opposed to a standard concavification technique used to solve these models). We show that the ‘threat’ of additional learning weakly decreases the sender’s expected equilibrium payoff. However, the outcome can be worse not only for the sender, but also for the receiver.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122936329","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2018-02-08DOI: 10.2139/ssrn.2732751
Shouyong Shi, A. Delacroix
{"title":"Should Buyers or Sellers Organize Trade in a Frictional Market?","authors":"Shouyong Shi, A. Delacroix","doi":"10.2139/ssrn.2732751","DOIUrl":"https://doi.org/10.2139/ssrn.2732751","url":null,"abstract":"To answer the question in the title, this article characterizes the socially efficient organization of the market with search frictions. The efficient organization depends on the relative elasticity in the supply between the two sides of the market, the costs of participating in the market and organizing trade, and the (a)symmetry in matching. We also show that the social optimum can be implemented by a realistic market equilibrium where the organizers set up trading sites to direct the other side’s search. The results provide a unified explanation for why trade has often been organized by sellers in the goods market, by buyers (firms) in the labor market, and by both sides in the asset market. The analysis also sheds light on how the efficient market organization can change with innovations such as e-commerce and just-in-time production.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"4 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"117077357","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2018-02-01DOI: 10.1111/roie.12303
Onur A. Koska, Ngo van Long, F. Stähler
{"title":"Foreign Direct Investment as a Signal","authors":"Onur A. Koska, Ngo van Long, F. Stähler","doi":"10.1111/roie.12303","DOIUrl":"https://doi.org/10.1111/roie.12303","url":null,"abstract":"This paper models oligopolistic competition among potential multinational firms in an environment of firm heterogeneity, incomplete information on costs, and strategic interactions. We show that foreign direct investment is more likely if it can serve as a signal of productivity in an environment of incomplete information as firms would like to avoid sending a low productivity signal. Our model shows that this effect is strong enough such that foreign direct investment can be an optimal foreign entry mode even if trade costs are zero.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"238 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116171172","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2018-01-08DOI: 10.2139/ssrn.3100314
Andrew Kloosterman, Stephen Paul
{"title":"Ultimatum Game Bargaining in a Partially Directed Search Market","authors":"Andrew Kloosterman, Stephen Paul","doi":"10.2139/ssrn.3100314","DOIUrl":"https://doi.org/10.2139/ssrn.3100314","url":null,"abstract":"Abstract We investigate a partially directed search and bargaining market with a laboratory experiment. First, sellers post intervals of possible surplus splits (i.e. the payoffs that would result from posting possible prices) that direct buyers to approach them. Second, after matching occurs, final surpluses are determined by ultimatum game bargaining. We investigate the interaction between bargaining and competition in the preliminary search stage, with a focus on how preferences for fair bargaining outcomes affect search. The main results confirm that behavior in the ultimatum game is consistent with preferences for fair outcomes, and the main effect on search is to drive up the posted buyer surplus lower bounds above the competitive equilibrium towards more equal surplus splits. Our main treatment variable is the number of buyers in the market, and when the number of buyers is increased, lower bounds and ultimatum offers to buyers decrease. This is consistent with fairness perceptions being influenced by competition.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"82 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-01-08","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"125453882","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2017-12-01DOI: 10.3386/w24109
Lea Cassar, Stephan Meier
{"title":"Intentions for Doing Good Matter for Doing Well: The (Negative) Signaling Value of Prosocial Incentives","authors":"Lea Cassar, Stephan Meier","doi":"10.3386/w24109","DOIUrl":"https://doi.org/10.3386/w24109","url":null,"abstract":"Prosocial incentives and Corporate Social Responsibility (CSR) initiatives are seen by many firms as an effective way to motivate workers. Recent empirical results seem to support the expectation that prosocial incentive, e.g. in the form of a charitable donations by the firm, can increase effort and motivation - sometimes even better than monetary incentives. We argue that the benefits crucially depend on the perceived intention of the firm. Workers use prosocial incentives as a signal about the firm's type and if used instrumentally in order to profit the firm, they can backfire. We show in an experiment in collaboration with an Italian firm, that monetary and prosocial incentives work very differently. While monetary incentives used instrumentally increase effort, instrumental charitable incentives backfire compared to non-instrumental incentives. This is especially true for non-prosocially-motivated workers who do not care about the prosocial cause but use prosocial incentives only as a signal about the firm. The results contribute to the understanding of the limits of prosocial incentives by focusing on their signaling value to the agent about the principal's type.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"3 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-12-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"116981479","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2017-11-04DOI: 10.2139/ssrn.3118423
Sergiy Verstyuk
{"title":"Thinking on Their Feet: Along Main Street","authors":"Sergiy Verstyuk","doi":"10.2139/ssrn.3118423","DOIUrl":"https://doi.org/10.2139/ssrn.3118423","url":null,"abstract":"This paper considers the problem of learning and decision-making in a dynamic stochastic economic environment by agents subject to information processing constraints. An agent endogenously chooses to operate in terms of a simplified model of the economy, which implies: a delayed, if at all, updating of the estimates of evolving states/random variables’ conditioning parameters; as well as the entropy reduction, or even its complete “folding” that drops the less important variables from the agent’s approximating model. Specifically, parameter learning is implemented relying on computational complexity theory, which produces a constrained version of the standard Kalman filter. The latter leads to a less than one-for-one reaction to the newly observed information, without the need to postulate e.g. habit formation; which is responsible for an underreaction to permanent parameter changes (“stickiness”), as well as for an overreaction to transitory shocks (“overshooting”). In a standard stochastic growth model with government transfers, such agents may fail to realize that a fiscal expansion now necessitates a compensatory fiscal contraction later, which implies the effectiveness, in certain sense, of the fiscal stimulus policy (albeit at the expense of efficiency losses) and a violation of the Ricardian equivalence. Numerical simulations suggest high fiscal multipliers, with the effects relatively stronger at times of economic recession. Being the outcomes of endogenous choices of rational agents, these results are immune to the Lucas critique.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"51 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133819843","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
ERN: SearchPub Date : 2017-10-20DOI: 10.2139/ssrn.3057869
Chia-Hui Chen, J. Ishida
{"title":"A War of Attrition with Experimenting Players","authors":"Chia-Hui Chen, J. Ishida","doi":"10.2139/ssrn.3057869","DOIUrl":"https://doi.org/10.2139/ssrn.3057869","url":null,"abstract":"A standard incomplete-information war of attrition is extended to incorporate experimentation and private learning. We obtain a characterization of all equilibria in this extended setup and use this setup to illuminate a tradeoff between short-run and long-run gains of experimentation. The extension yields qualitative impacts on the strategic nature of the problem. The option value of experimentation serves as a credible commitment device to stay in the game, which is instrumental in inducing the other player to concede earlier. As a direct consequence, there may be an equilibrium in which the strictly less efficient player can get the better end of the deal, implying that slow learning can be a blessing in this type of competition. Our analysis gives insight into why an apparently inferior technology often survives in many standards competitions and more broadly offers implications for technology adoption and industry dynamics. We also show that there is a non-degenerate set of parameters that can support the Pareto-efficient allocation as an equilibrium outcome whereas it is never possible in the standard setup.","PeriodicalId":153208,"journal":{"name":"ERN: Search","volume":"65 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2017-10-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122813680","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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