Economics - Research Publications
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ItemInefficient policies and incumbency advantage( 2007-06)We study incumbency advantage in a dynamic game with incomplete information between an incumbent and a voter. The incumbent knows the true state of the world, e.g., the severity of an economic recession or the level of criminal activities, and can choose the quality of his policy. This quality and the state of the world determine the policy outcome, i.e., the economic growth rate or the number of crimes committed. The voter only observes the policy outcome and then decides whether to reelect the incumbent or not. Her preferences are such that she would reelect the incumbent under full information if and only if the state of the world is above a given threshold level. In equilibrium, the incumbent is reelected in more states of the world than he would be under full information. In particular, he chooses inefficient policies and generates mediocre policy outcomes whenever the voter's induced belief distribution will be such that her expected utility of reelecting the incumbent exceeds her expected utility of electing the opposition candidate. Hence, there is an incumbency advantage through ine±cient policies. We provide empirical evidence consistent with the prediction that reelection concerns may induce incumbents to generate mediocre outcomes
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ItemFalse alarm? terror alerts and reelection( 2007)We study a game with asymmetric information to analyze whether an incumbent can improve his reelection prospects using distorted terror alerts. The voters’ preferred candidate depends on the true terror threat level, and the voters are rational and therefore aware of the incumbent’s incentive to distort alerts. In equilibrium, a moderately “Machiavellian” incumbent reports low and high threat levels truthfully, but issues the same distorted alert for a range of intermediate threat levels. He thereby ensures his reelection for some threat levels at which he would not be reelected under full information.
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ItemMARKET MAKING OLIGOPOLY*(Wiley, 2008-06)This paper analyzes price competition between market makers who set costly capacity constraints before they intermediate between producers and consumers. The unique equilibrium outcome with pure strategies at the capacity stage is the Cournot outcome. The paper thus provides a rationale for Cournot‐type competition between market makers. This contrasts with previous findings in the literature, where due to the absence of capacity constraints that are set ex ante the Bertrand result typically obtains.
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ItemLearning, public good provision, and the information trap(ELSEVIER SCIENCE SA, 2008-06)