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Essays on microeconomic theory

Tokis, Konstantinos (2018) Essays on microeconomic theory. PhD thesis, London School of Economics and Political Science.

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Identification Number: 10.21953/lse.d78gikl9dfoa


This thesis contains three essays in Microeconomic Theory. Chapter 1 studies the incentives of a seller to voluntarily disclose or sell information about a buyer to a third party. While there are obvious benefits to sharing information with other sellers, there is also an incentive cost which is due to her learning about the buyer through her own trade with him. To study this trade-off we analyse a model in which a buyer interacts sequentially with two sellers, each of whom makes a take-it-or-leave-it offer. The buyer learns his valuation for the good of each seller sequentially but these might be correlated. We model information disclosure using Bayesian persuasion. Chapter 2 provides various extensions of the model presented in Chapter 1. Chapter 3 provides empirical evidences that demonstrate that the investors of a fund update their opinion on the fund manager’s ability faster during bear markets. We build a theoretical model to demonstrate a channel which would result on this empirical observation. We consider a continuum of potential investors who allocate funds in two consecutive periods between a manager and a market index. The manager’s alpha, defined as her ability to generate idiosyncratic returns, is her private information and it is either high or low. In each period, the manager receives a private signal on the potential performance of her alpha, and she also obtains some public news on the market’s condition. In Chapter 4 we demonstrate that the relative job security that CEOs enjoy can be partly attributed to the high sophistication of the managerial labour market. To do this we build a theoretical model in which a representative investor proposes a contract to a manager, which also specifies the conditions of his termination. Production is a function of the manager’s effort and ability, both of which are his private information. The former is a choice variable, whereas the latter follows a Geometric Brownian motion. The manager’s post-termination payoff is generated by an exogenous managerial labour market, and it is equal to his expected ability. The market learns his ability with some given probability, which we interpret as its sophistication. Otherwise, it forms its posterior based on his termination time.

Item Type: Thesis (PhD)
Additional Information: © 2018 Konstantinos Tokis
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Supervisor: Razin, Ronny

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