Essays on Dynamic Games with Incomplete Information

• Main Author: Moroni Ulloa, Sofia Joana
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01-01-2015
• Subjects: Economic theory
• ISBN: 9781321953411; 1321953410

In this thesis I study the role of incomplete information in various dynamic interactions. Chapter 1 studies how to provide incentives for a team of workers to work in an innovative project that has uncertain feasibility. The project may have multiple stages or milestones that must be completed for the project to yield all of its profits. I model this setting as sequence of exponential bandits. I show that the optimal contract pays a bonus to agents who succeed at each stage and that workers who succeed get rewarded with better job assignments in future stages. Surprisingly the contract may offer asymmetric assignments even though the workers are all identical. In Chapter 2 with Jeroen Swinkels we analyze a class of examples of non-existence of an optimal contract in a simple moral hazard problem. In contrast to the Mirrlees example, unbounded likelihood ratios on the signal technology are not central. The examples center on the behavior of the utility function as it diverges to negative infinity. When existence fails we characterize the limit of near optimal contracts. In joint work with Alejandro Jofre and Andrea Repetto, Chapter 3 studies a repeated moral hazard interaction between a principal and an agent in which the agent has reference-dependent preferences. The agent is loss averse with the reference given by the previous period's consumption. We show that optimal contracts are in line with commonly observed wage patterns. In particular, contracts must pay the reference wage to the agent for an interval of outcomes. Thus, in contrast with the case without loss aversion, wages exhibit persistence. There is a positive probability that the agent receives the same wage period by period. We also analyze the agent's incentives to save or borrow under these preferences and show that the principal may not have to restrict savings in order to implement the optimal contract. In Chapter 4 I analyze an auction with a deadline in which the players receive stochastic opportunities to place their bids. The purpose of the model is to capture the key features of online auctions in which players place proxy bids, such as eBay. The main result of this chapter is that the possibility of shill bidders or players who bid incrementally leads players to engage in late bidding or sniping, a practice that is commonly observed in online auctions. Chapter 5 is concerned with existence of trembling hand perfect equilibria in a setting in which players move at random opportunities. I show existence for a general class of games with incomplete information, unobserved actions and unobserved timings of moves. Existence of Perfect Bayesian Equilibria and Nash Equilibria is guaranteed as well.