Search Results
Working Paper
Collusion in Repeated Auctions with Costless Communication
In this paper, we present a model of repeated first-price private value auctions in which the bidders have access to a cheap talk communication mechanism. In this framework, messages allow bidders to transmit their preference rankings over the goods to be auctioned, similar to Pesendorfer (2000). We show that collusion through this static mechanism not only dominates the static bid rotation mechanism presented by McAfee and McMillan (1992), but it is also not strictly dominated by the dynamic bid rotation mechanism presented by Aoyagi (2003). However, we show that asymptotic efficiency of ...
Working Paper
Financing Repeat Borrowers: Designing Credible Incentives for Today and Tomorrow
We analyze relational contracts between a lender and borrower when borrower cash flows are not contractible and the costs of intermediation vary over time. Because lenders provide repayment incentives to borrowers through the continuation value of the lending relationship, borrowers will condition loan repayment on the likelihood of receiving loans in the future. Therefore, the borrower's beliefs about the lender's future liquidity and profitability become an important component of the borrower's repayment decision. Consequently, the possibility of high lending costs in the future weakens ...