Communication, Feedbacks and Repeated Moral Hazard with Short-lived Buyers by In-Uck Park

Join us for another event in the Microeconomics Research Seminar Series, Autumn Term 2024.

In-Uck Park., from the School of Economics, University of Bristol, will present their research on Communication, Feedbacks and Repeated Moral Hazard with Short-lived Buyers.

Abstract

We show that experience good sellers facing myopic buyers can solve the inherent moral hazard problem by communicating their observation of quality before trade, provided that communication is part of their public track record. Such cheap-talk communication, if trusted, allows market prices to reflect the actual value created, thus providing an immediate reward for the seller’s effort which complements the conventional, reputational incentives. Pre-trade communication achieves maximal efficiency when truthful and the full efficiency as the noise in the seller’s observation vanishes. We fully characterize the conditions for communication to improve efficiency and the extent to which it does so.

This seminar will be held in the Economics Common Room on Monday 21 October 2024 at 4.00pm. This event is open to all levels of study and is also open to the public.

To register your place and gain access to the webinar, please contact the seminar organisers.

This event is part of the Microeconomics Research Seminar Series.