Tsinghua_2005MBA_Lecture_15(Markets with asymmetric ination)(ppt 85页)(英文).ppt

1、,Lecture 15,Markets with Asymmetric Information,Lecture 15,Slide 2,Topics to be Discussed,Quality Uncertainty and the Market for Lemons Market Signaling Moral Hazard The Principal-Agent Problem,Lecture 15,Slide 3,Topics to be Discussed,Managerial Incentives in an Integrated Firm Asymmetric Informati

2、on in Labor Markets: Efficiency Wage Theory,Lecture 15,Slide 4,Introduction,We will study how imperfect information influences resource allocation and the price system.,Lecture 15,Slide 5,Example: “Lemons” Problem,In June, 1999, I was a visiting scholar in University of Sydney. I bought a heater at

3、the price of $40. When I leave the Sydney, I want to sell the heater to the second-hand store. Can you guess how much the store want to pay me for the heater? (note: The heater is good in quality),Lecture 15,Slide 6,Example: “Lemons” Problem,The store only wanted to pay me only $2 for the heater. Wh

4、y?,Lecture 15,Slide 7,Explanations for the lemon,A lemons problem arises due to asymmetric information about product quality. For example, in the used heater market buyers determine the prices they are willing to pay according to their belief regarding the average quality of the heaters offered for

5、sale. Sellers, in contrast, know the quality of their heaters and base the asking prices on the quality of the individual heaters to be sold. In this framework, the seller of the highest quality heater will never be able to get a price which properly reflects that quality. As a result, this seller w

6、ill not offer her heater for sale in the market. But now, the seller of the second highest quality heater will not be able to get a price that reflects the quality of the heater she is offering, and will also withdraw it from the market. This process may continue until only the lowest quality heater

7、s are offered in the market.,Lecture 15,Slide 8,Quality Uncertaintyand the Market for Lemons,The lack of complete information when purchasing a used car increases the risk of the purchase and lowers the value of the car.,Lecture 15,Slide 9,The Market for Used Cars Assume Buyers and sellers can disti

8、nguish between high and low quality cars There will be two markets,Quality Uncertaintyand the Market for Lemons,The Lemons Problem,PH,PL,QH,QL,Lecture 15,Slide 11,The Market for Used Cars With asymmetric information: Low quality goods drive high quality goods out of the market. The market has failed

9、 to produce mutually beneficial trade. Too many low and too few high quality cars are on the market. Adverse selection occurs; the only cars on the market will be low quality cars.,Quality Uncertaintyand the Market for Lemons,Lecture 15,Slide 12,Example,There are 100 used cars available for sale in

10、the town of Manchester. The owners of the low-quality used cars value their cars at $4,000, while the high-quality car owners value their cars at $8,000. There are 100 potential buyers who value low-quality cars at $5,000 and high-quality cars at $10,000. The price a buyer is willing to pay is a fun

11、ction of the average quality of a car they expected to be offered on the market: they have no information on car quality, and therefore buyers expect there to be a 50 percent chance that a car is a lemon (low-quality). We can conclude that: a) Buyers are willing to pay 7,500, and only low-quality ca

12、rs will be offered for sale; b) Buyers are willing to pay 7,500, and both types of cars will be offered for sale; c) Buyers are willing to pay 5,000, and only low-quality cars will be offered for sale; d) Buyers are willing to pay 10,000, and both types of cars will be offered for sale; e) Buyers ar

13、e willing to pay10,000, and only high-quality cars will be offered for sale;,Lecture 15,Slide 13,Implications of Asymmetric Information,Medical Insurance Question Is it possible for insurance companies to separate high and low risk policy holders? If not, only high risk people will purchase insuranc

14、e. Adverse selection would make medical insurance unprofitable.,The Market for Insurance,Lecture 15,Slide 14,Implications of Asymmetric Information,Automobile Insurance Questions What impact does asymmetric information and adverse selection have on insurance rates and the delivery of automobile acci

15、dent insurance? How can the government reduce the impact of adverse selection in the insurance industry?,The Market for Insurance,Lecture 15,Slide 15,Implications of Asymmetric Information,The Market for Credit Asymmetric information creates the potential that only high risk borrowers will seek loan

16、s. Question How can credit histories help make this market more efficient and reduce the cost of credit?,Lecture 15,Slide 16,Implications of Asymmetric Information,The Importance of Reputation and Standardization Asymmetric Information and Daily Market Decisions Retail sales Antiques, art, rare coin

17、s Home repairs Restaurants,Lecture 15,Slide 17,Implications of Asymmetric Information,Question How can these producers provide high-quality goods when asymmetric information will drive out high-quality goods through adverse selection. Answer Reputation,Lecture 15,Slide 18,Implications of Asymmetric

18、Information,Question Why do you look forward to a Big Mac when traveling even though you would never consider buying one at home. Holiday Inn once advertised “No Surprises” to address the issue of adverse selection.,Lecture 15,Slide 19,Lemons in Major League Baseball,Asymmetric information and the m

19、arket for free agents If a lemons market exists, free agents should be less reliable (disabled) than renewed contracts.,Lecture 15,Slide 20,Player Disability,All Players4.7312.55165.4 Renewed players4.769.68103.4 Free agents4.6717.23268.9,Lecture 15,Slide 21,Findings Days on the disabled list increa

20、se for both free agents and renewed players. Free agents have a significantly higher disability rate than renewed players. This indicates a lemons market.,Lemons in Major League Baseball,Lecture 15,Slide 22,Question If you are a team owner, what steps would you take to reduce the asymmetric informat

21、ion for free agents?,Lemons in Major League Baseball,Lecture 15,Slide 23,Market Signaling,The process of sellers using signals to convey information to buyers about the products quality helps buyers and sellers deal with asymmetric information.,Lecture 15,Slide 24,Market Signaling,Strong Signal To b

22、e effective, a signal must be easier for high quality sellers to give than low quality sellers. Example Highly productive workers signal with educational attainment level.,Lecture 15,Slide 25,Market Signaling,A Simple Model of Job Market Signaling Assume Two groups of workers Group I: Low productivi

23、ty-AP a = 0; R = $15,000 R = $10,000 or $20,000, w = 0 R = $40,000; w = $24,000 R = $30,000; Profit = $18,000 Net wage = $2,000,Lecture 15,Slide 69,The Principal-Agent Problem,Incentives in the Principal-Agent Framework Choosing a Wage w = R - $18,000 Net wage = $2,000 High effort,Lecture 15,Slide 7

24、0,The Principal-Agent Problem,Conclusion Incentive structure that rewards the outcome of high levels of effort can induce agents to aim for the goals set by the principals.,Lecture 15,Slide 71,The Principal-Agent Problem,Asymmetric Information and Incentive Design in the Integrated Firm In integrate

25、d firms, division managers have better (asymmetric) information about production than central management,Lecture 15,Slide 72,The Principal-Agent Problem,Asymmetric Information and Incentive Design in the Integrated Firm Two Issues How can central management illicit accurate information How can centr

26、al management achieve efficient divisional production,Lecture 15,Slide 73,The Principal-Agent Problem,Possible Incentive Plans Bonus based on output or profit Will this plan provide an incentive for accurate information?,Lecture 15,Slide 74,The Principal-Agent Problem,Possible Incentive Plans Bonus

27、based on how close the managers get to their forecasts of output and profits Qf = estimate of feasible production level B = bonus in dollars Q = actual output B = 10,000 - .5(Qf - Q) Incentive to underestimate Qf,Lecture 15,Slide 75,The Principal-Agent Problem,Possible Incentive Plans Bonus still ti

28、ed to accuracy of forecast If Q Qf ;B = .3Qf + .2(Q - Qf) If Q Qf ;B = .3Qf - .5(Qf - Q),Lecture 15,Slide 76,Incentive Design in an Integrated Firm,Output (units per year),2,000,4,000,6,000,10,000,0,10,000,20,000,30,000,40,000,Bonus ($ per year),8,000,Lecture 15,Slide 77,Asymmetric Information in La

29、bor Markets: Efficiency Wage Theory,In a competitive labor market, all who wish to work will find jobs for a wage equal to their marginal product. However, most countries economies experience unemployment.,Lecture 15,Slide 78,The efficiency wage theory can explain the presence of unemployment and wa

30、ge discrimination. In developing countries, productivity depends on the wage rate for nutritional reasons.,Asymmetric Information in Labor Markets: Efficiency Wage Theory,Lecture 15,Slide 79,The shirking model can be better used to explain unemployment and wage discrimination in the United States. Assumes perfectly competitive markets However, workers can work or shirk. Since performance information is limited, workers may not get fired.,Asymmetric Information in Labor Markets: Efficiency Wage Theory,Lecture 15,Slide 80,Unemployment