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SUMMARY:Markets versus Mechanisms
DTSTART:20170929T103000
DTEND:20170929T120000
DTSTAMP:20260406T222240Z
UID:e1db40496c65d807f4f89529ab202136e746197477afdd972081f336
CATEGORIES:Conferences - Seminars
DESCRIPTION:Christopher HENNESSY (London Business School)\n\nWe demonstrat
 e limitations on the use of direct revelation mechanisms (DRMs) by corpor
 ations inhabiting economies with securities markets. Posting a standard DR
 M in an environment with a securities market endogenously increases the r
 eservation value of the informed agent. If the informed agent rejects said
  DRM\, then she convinces the market that she is uninformed\, and she can 
 trade aggressively sans price impact\, generating large (off-equilibrium) 
 trading gains. Due to this endogenous reservation value effect\, using a D
 RM to screen out uninformed agents may be impossible. Even when screening 
 is possible\, refraining from posting a mechanism and instead relying on m
 arkets for information is optimal if the endogenous reservation value effe
 ct is sufficiently large. Finally\, even if posting a DRM dominates rely
 ing on markets\, outcomes are improved by introducing a search friction\, 
 which randomly limits the agent's ability to observe the DRM.\n 
LOCATION:UNIL\, Extranef\, room 126 https://planete.unil.ch/plan/?local=EX
 T-126
STATUS:CONFIRMED
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