Nicolas Melissas
Published Papers
1. Herd Behaviour as an Incentive Scheme, Economic Theory, 26 (3), October 2005, pp. 517 - 536
Abstract
We introduce herding in a model subject to
public-good problems. We show how herding, by reducing free-rider problems, may
increase efficiency.
2.
Informational
Cascades Elicit Private Information,
(Joint with Olivier Gossner) International
Economic Review, 47
(1), February 2006, pp. 297 - 325
Abstract
We introduce cheap talk in a dynamic investment model with
information externalities. We first show how social learning adversely affects
the credibility of cheap talk messages. Next, we show how an informational
cascade makes truthtelling incentive compatible. A separating equilibrium only
exists for high surplus projects. Both an investment subsidy and an investment
tax can increase welfare. The more precise the sender's information, the higher
her incentives to truthfully reveal her private information.
3.
Equilibria
in a Dynamic Global Game: The Role of Cohort Effects,
(Joint with Paul Heidhues)
Economic Theory,
28
(3), August 2006, pp. 531 -
557
Abstract
We
introduce strategic waiting in a global game setting with irreversible
investment. Players can wait in order to make a better informed decision. We
allow for cohort effects and discuss when they arise endogenously in technology
adoption problems with positive contemporaneous network effects. Formally,
cohort effects lead to intra-period network effects being greater than
inter-period network effects. Depending on the nature of the cohort effects, the
dynamic game may or may not satisfy dynamic increasing differences. If it does,
our model has a unique rationalizable outcome. Otherwise, there exist parameter
values for which multiple equilibria arise because players have a strong
incentive to invest at the same point in time others do.
4a. Corruption, Extortion, and the Boundaries of the Law: The One-Monitor Case, (Joint with Svetlana Andrianova) September 2006
4b.
Corruption, Extortion and the Boundaries
of the Law, (Joint with Svetlana Andrianova),
Journal of Law, Economics
&
Organization,
25 (2), October
2009, pp. 442-471
Abstract
In both papers we consider a set-up in which a principal must decide whether or not to legalise a socially undesirable activity. The law is enforced by a monitor who may be bribed to conceal evidence of the offense and who may also engage in extortionary practices. In the latter paper we analyse a two-monitor set-up (the second monitor is honest and monitors the first one) with bounded punishments. In the former paper we analyse a one-monitor set-up with unbounded punishments and we also look at the case in which the monitor needs the consent (and the active participation) of the agent to create fake evidence of wrongdoing (this case is not present in our two-monitor set-up). Our most interesting results are summarised in the latter paper. In particular, we show that: (i) the principal may legalise the activity even if it is a very harmful one, (ii) the principal may declare the activity illegal knowing that the monitor will abuse the law to extract bribes out of innocent people, and (iii) our model offers a novel rationale for legalising possession and consumption of drugs while continuing to prosecute drug dealers. Our one-monitor set-up provides a pedagogical explanation behind result (i).
Work-in-Progress
1. Bidding and Drilling on Offshore Wildcat Tracts, mimeo, March 2009
Abstract
I study a two-stage bidding drilling game. If a firm drills, her neighbor learns the state of the world. Depending on parameter values, there either exists a separating, or there exist two types of semi-separating equilibria. In the first one, a low-type player sometimes submits a ``high" bid to influence her neighbor's drilling decision. In the second one, a high-type player sometimes submits a ``low" bid. In this equilibrium bids are used as a coordination device: If player i bid ``low" while player -i bid ``high", player i waits while player -i drills. Normative and positive implications are discussed.
2. On Bid Disclosure in OCS Wildcat Auctions, mimeo, October 2011
Abstract
Two players first bid for offshore tracts---below which oil and gas may be present---and next time their drilling decisions. High types bid more aggressively if the auctioneer discloses bids as this gives them useful information about the profitability of drilling. Low types may also prefer the auctioneer to disclose bids as it sometimes facilitates coordination: If Player two finds out that Player one bid ``low", she might conclude that Player one will not drill. This induces Player two to drill first. Low types, however, may also fear that the disclosure of their ``low" bids reduces the other player's incentives to drill. In that case they bid more aggressively if the auctioneer does not disclose bids. If players are sufficiently patient and if the ex ante profitability of drilling is ``high", it is optimal to disclose bids. Otherwise, it may be optimal not to disclose them.
3. Rational Exuberance, (Joint with Paul Heidhues), mimeo, August 2011
Abstract
We study a two-player investment game with information externalities. Necessary and sufficient conditions for a unique switching equilibrium are provided. When public news indicates that the investment opportunity is very profitable, too many types are investing early and investments should therefore be taxed. Conversely, any positive investment tax is suboptimally high if the public information is sufficiently unfavorable.
Last Updated: November 2011