Common Value Auctions with Insider Information

Bidding is studied in first-price common value auctions where an insider is better informed than other bidders (outsiders) about the value of the item. With inexperienced bidders, having an insider does not materially reduce the severity of the winner's curse compared to auctions with a symmetric information structure (SIS). In contrast, super-experienced bidders, who have largely overcome the winner's curse, satisfy the comparative static predictions of equilibrium bidding theory: (i) average seller's revenue is larger with an insider than in SIS auctions, (ii) insiders make substantially greater profits, conditional on winning, than outsiders, and (iii) insiders increase their bids in response to more rivals. Further, changes in insiders' bids are consistent with directional learning theory (Selten and Buchta (1994)).     

Information in Securities Markets: Kyle Meets Glosten and Milgrom

This paper analyzes models of securities markets with a single strategic informed trader and competitive market makers. In one version, uninformed trades arrive as a Brownian motion and market makers see only the order imbalance, as in Kyle (1985). In the other version, uninformed trades arrive as a Poisson process and market makers see individual trades. This is similar to the Glosten–Milgrom (1985) model, except that we allow the informed trader to optimize his times of trading. We show there is an equilibrium in the Glosten–Milgrom‐type model in which the informed trader plays a mixed strategy (a point process with stochastic intensity). In this equilibrium, informed and uninformed trades arrive probabilistically, as Glosten and Milgrom assume. We study a sequence of such markets in which uninformed trades become smaller and arrive more frequently, approximating a Brownian motion. We show that the equilibria of the Glosten–Milgrom model converge to the equilibrium of the Kyle model.     

Actor-Relational Planning in Deprived Areas: Challenges and Opportunities in Luchtbal Antwerpen,Belgium

In this article, we report and discuss our experience with actor-relational approaches (ARA) in the regeneration of a postwar housing estate in Luchtbal, Antwerp, Belgium. ARA are informed by post-structuralist ideas of space, complexity theory, and actor network theory. Although ARA itself is not new, the application of ARA to deprived area's such as Luchtbal is novel. We report how the approach has been elaborated, its process and outcome. We conclude with our evaluation from an insider's perspective.     

Entry and Exit in OTC Derivatives Markets

We develop a parsimonious model to study the equilibrium and socially optimal decisions of banks to enter, trade in, and possibly exit, an OTC market. Although we endow all banks with the same trading technology, banks' optimal entry and trading decisions endogenously lead to a realistic market structure composed of dealers and customers with distinct trading patterns. We decompose banks' entry incentives into incentives to hedge risk and incentives to make intermediation profits. We show that dealer banks enter more than is socially optimal. In the face of large negative shocks, they may also exit more than is socially optimal when markets are not perfectly resilient.     

A Probabilistic Dealing Strategy

A probabilistic dealing strategy is proposed which allows all premium brands in an established market to earn nonnegative profits without cooperation. Following the strategy, brands take turns attracting deal-responsive customers. Relative to a reactive competitive strategy, the proposed strategy improves the positions of all premium brands. With use of the strategy, average deal sizes are positively related to a brand's market share, the proportion of quality conscious customers, the proportion of informed customers, the span of regular prices in a market, and the range of customers' acceptable prices.     

Competing Mechanisms in a Common Value Environment

Consider strategic risk‐neutral traders competing in schedules to supply liquidity to a risk‐averse agent who is privately informed about the value of the asset and his hedging needs. Imperfect competition in this common value environment is analyzed as a multi‐principal game in which liquidity suppliers offer trading mechanisms in a decentralized way. Each liquidity supplier behaves as a monopolist facing a residual demand curve resulting from the maximizing behavior of the informed agent and the trading mechanisms offered by his competitors. There exists a unique equilibrium in convex schedules. It is symmetric and differentiable and exhibits typical features of market‐power: Equilibrium trading volume is lower than ex ante efficiency would require. Liquidity suppliers charge positive mark‐ups and make positive expected profits, but these profits decrease with the number of competitors. In the limit, as this number goes to infinity, ask (resp. bid) prices converge towards the upper (resp. lower) tail expectations obtained in Glosten (1994) and expected profits are zero.     

Price Manipulation and Quasi‐Arbitrage

In an environment where trading volume affects security prices and where prices are uncertain when trades are submitted, quasi‐arbitrage is the availability of a series of trades that generate infinite expected profits with an infinite Sharpe ratio. We show that when the price impact of trades is permanent and time‐independent, only linear price‐impact functions rule out quasi‐arbitrage and thus support viable market prices. When trades have also a temporary price impact, only the permanent price impact must be linear while the temporary one can be of a more general form. We also extend the analysis to a time‐dependent framework.     

Insider Trading,Stochastic Liquidity,and Equilibrium Prices

We extend Kyle's (1985) model of insider trading to the case where noise trading volatility follows a general stochastic process. We determine conditions under which, in equilibrium, price impact and price volatility are both stochastic, driven by shocks to uninformed volume even though the fundamental value is constant. The volatility of price volatility appears ‘excessive’ because insiders choose to trade more aggressively (and thus more information is revealed) when uninformed volume is higher and price impact is lower. This generates a positive relation between price volatility and trading volume, giving rise to an endogenous subordinate stochastic process for prices.     

多基本面下异质交易者竞争及流动性分析

假设风险资产出清价值由多个基本面组成，比较分析了同质与异质信息结构下交易者策略的相互作用及对市场的影响。结果发现：交易者人数增加所导致的竞争会提高市场流动性及市场信息效率，同时对同质交易者产生挤出效应和对异质交易者产生促进效应；异质知情交易者在私人信息质量方面的竞争则会加剧市场信息不对称程度，降低市场流动性；异质交易者间通过信息质量的竞争决定收益分配。理论上，市场流动性存在最佳状态。     

Why Competition from a Multi‐Channel E‐Tailer Does Not Always Benefit Consumers*

Empirical studies have delivered mixed conclusions on whether the widely acclaimed assertions of lower electronic retail (e‐tail) prices are true and to what extent these prices impact conventional retail prices, profits, and consumer welfare. For goods that require little in‐person pre‐ or postsales support such as CDs, DVDs, and books, we extend Balasubramanian's e‐tailer‐in‐the‐center, spatial, circular market model to examine the impact of a multichannel e‐tailer's presence on retailers' decisions to relocate, on retail prices and profits, and consumer welfare. We demonstrate several counter‐intuitive results. For example, when the disutility of buying online and shipping costs are relatively low, retailers are better off by not relocating in response to an e‐tailer's entry into the retail channel. In addition, such an entry—a multichannel strategy—may lead to increased retail prices and increased profits across the industry. Finally, consumers can be better off with less channel competition. The underlying message is that inferences regarding prices, profits, and consumer welfare critically depend on specifications of the good, disutility and shipping costs versus transportation costs (or more generally, positioning), and competition.     

知情交易概率与风险定价——基于不同PIN测度方法的比较研究

分别采用EKOP模型、VPIN模型和VWPIN模型测度了中国证券市场个股的知情交易概率,并实证检验了知情交易概率因子在资产定价中的作用.研究结果表明,基于物理时间和交易量加权的VWPIN模型结合了经典EKOP模型和VPIN模型的优点,可以更简单地估计个股日内任意时间窗口下的信息不对称程度.进一步,关于资产定价的检验结果表明,在控制相关影响因素之后,采用VWPIN模型估计得到的知情交易概率因子与个股收益率之间呈现显著的正相关性,符合理论预期.     

How Should a Firm Manage Deteriorating Inventory?

Firms selling goods whose quality level deteriorates over time often face difficult decisions when unsold inventory remains. Since the leftover product is often perceived to be of lower quality than the new product, carrying it over offers the firm a second selling opportunity, a product line extension to new and unsold units, and the ability to price discriminate. By doing so, however, the firm subjects sales of its new product to competition from the leftover product. We present a two period model that captures the effect of this competition on the firm's production and pricing decisions. We characterize the firm's optimal strategy and find conditions under which the firm is better off carrying all, some, or none of its leftover inventory. We also show that, compared to a firm that acts myopically in the first period, a firm that takes into account the effect of first period decisions on second period profits will price its new product higher and stock more of it in the first period. Thus, the benefit of having a second selling opportunity dominates the detrimental effect of cannibalizing sales of the second period new product.     

基于竞争差分析的占线单向交易策略

针对交易者事先仅知道价格波动范围的占线单向交易问题,基于Savage后悔值准则提出了竞争差分析方法,通过引入一个假想的能够控制价格的“对手”将原来的单人决策问题转化为双人零和博弈问题.与竞争比分析相比,竞争差分析由于目标函数的数学形式更简单,因而可以直接采用逆向归纳法求解获得使最大后悔值(竞争差)最小化的稳健的占线交易策略,并找出对于交易者而言所有可能的最糟糕情况,而不必像竞争比分析那样需要事先猜测最优占线策略的特征;此外,数值模拟结果表明,基于竞争差分析的占线算法更节省计算时间,且在解决收益最大化问题时不像竞争比分析那样过于保守,一般具有更好的期望绩效.     

实报还是谎报——双边信息激励与供应链效率

探讨了双边不对称信息下供应链信息真实分享和谎报对效率的影响。首先,给出完全信息下的最优商品交易量和供应链利润作为比较基准。其次,构建双方信息真实分享的激励模型。研究发现激励双方信息真实共享所需的信息租金降低交易量和供应链利润。再次,构建允许信息谎报的交易量谈判模型。研究发现,供销双方都偏好高报自己的信息类型。个体谎报信息的幅度随着谈判力增加而减小。拥有绝对谈判力的一方不会谎报信息。供应链效率与谎报信息的幅度、成本上界以及销售价格相关。最后,通过数值算例对实报信息和谎报信息下交易量、供应链个体利润及效率进行对比分析。研究结果为管理实践提供一定的洞见:供应链企业是否激励双边信息分享可根据双方成本大小进行选择。     

Corporate Diversification,Information Asymmetry and Insider Trading

The literature suggests that corporate diversification destroys firm value. This value destruction is usually considered to be a consequence of managers' pursuing diversification strategies to benefit themselves rather than to increase firm value. This paper provides evidence that casts doubt on this agency theory‐based explanation for corporate diversification. Evidence based on insider trading suggests that managers themselves consider their diversification strategies to be value‐increasing. Specifically, it is documented that corporate insiders (directors) purchase more of their firms' shares in the open market when corporate diversification is high. Moreover, insiders purchase more when the level of diversification discount is high, suggesting that they disagree with outside investors' undervaluation due to diversification. It is also found that the market reaction to insiders' purchases is positively related to corporate diversification. This result suggests that outsiders consider the amount of favourable information contained in insiders' purchases to increase with the extent of corporate diversification.     

On the evaluation of commonality strategy in product line design: The effect of valuation change and distribution channel structure

This paper investigates a manufacturer's optimal decisions in relation to the adoption of the commonality strategy in a decentralized channel as opposed to a centralized channel. Our model, through valuation premium and discount, captures the possible changes in the perceived quality made by customers as a result of the use of common design in the high-quality and low-quality products. We show that commonality always help reduce the extent of quality distortion encountered by the low-valuation segment, regardless of the channel structure. We also show that the adoption of commonality strategy in a decentralized channel is able to reduce channel efficiency loss, which may lead to improvements in the channel profits even when there is no cost saving associated with the use of common components. The valuation premium and discount are influential on several important measure including optimal quality levels, channel profits, and consumer surplus. Furthermore, we point out an important issue on the coordination between the manufacturer and the retailer that must be addressed if the commonality strategy is to be implemented in a decentralized channel.     

OEM product design in a price competition with remanufactured product

An original equipment manufacturer (OEM) produces new products and often faces a dilemma when determining the level of interchangeability in its product design. The interchangeability is considered as a degree to which the product can be disassembled without force, and thus an increasing degree of interchangeability would decrease the OEM's production cost, but it would also lower a remanufacturer's cost in cannibalizing used items. Decreasing the level of interchangeability to deter the remanufacturer, on the other hand, would simultaneously increase the production costs of the OEM. We thus formulate a two-period supply chain model consisting of two chain members, an OEM and a remanufacturer, to investigate the product design decision of the OEM and both chain members' competitive pricing strategies. We then characterize the equilibrium decisions and profits with regard to costs and consumers' preference for the remanufactured product. We also evaluate a strategic game in which the OEM chooses the degree of interchangeability, and the remanufacturer determines its collection strategy. We find that the product-design strategy is effective for the OEM in competing with the remanufacturer, but it is not necessarily harmful to the remanufacturer.     

Role of Random Capacity Risk and the Retailer in Decentralized Supply Chains with Competing Suppliers

This research considers a supply chain under the following conditions: (i) two heterogeneous suppliers are in competition, (ii) supply capacity is random and pricing is endogenous, (iii) consumer demand, with and without an intermediate retailer, is price dependent. Specifically, we examine how uncertainty in supply capacity affects optimal ordering and pricing decisions, supplier and retailer profits, and the incentives to reduce such uncertainty. When two suppliers sell through a monopolistic retailer, supply uncertainty not only affects the retailer's diversification strategy for replenishment, but also changes the suppliers’ wholesale price competition and the incentive for reducing capacity uncertainty. In this dual‐sourcing model, we show that the benefit of reducing capacity uncertainty depends on the cost heterogeneity between the suppliers. In addition, we show that a supplier does not necessarily benefit from capacity variability reduction. We contrast this incentive misalignment with findings from the single‐supplier case and a supplier‐duopoly case where both suppliers sell directly to market without the monopolistic retailer. In the latter single‐supplier and duopoly cases, we prove that the unreliable supplier always benefits from reducing capacity variability. These results highlight the role of the retailer's diversification strategy in distorting a supplier's incentive for reducing capacity uncertainty under supplier price competition.     

内外部碳配额交易路径下供应链减排决策研究

供应链内外部碳配额交易是碳配额政策下供应链协调碳配额的重要途径,对供应链成员企业碳减排决策产生重要影响。本文以单供应商和单制造商组成的二级供应链为研究对象,在完善的碳配额交易市场情况下,通过构建供应链外部碳交易路径和内外部碳配额交易路径共存的博弈模型,分析了碳配额政策下内外部碳配额交易条件、企业减排策略和利润影响因素。研究结果表明,在外部碳交易路径下,供应链上、下游企业的减排决策相互影响,且当单位碳排放量和碳减排成本系数相等时,上游企业碳减排率是下游企业的两倍;同时进行内外部碳配额交易能降低中间产品批发价格,提高供应链成员企业碳减排率、增加企业利润。算例验证了结论的有效性,并发现企业碳配额和内部碳交易价格在一定区间内才能使内部碳交易达成,此时制造商会分担供应商的碳减排费用。     

Board of directors and insider trading with share repurchase programs

This study examines the relationship between insider trading and board of directors’ characteristics around stock repurchase announcements. It is hypothesized that information disparity between insiders and shareholders from share repurchases announcements creates opportunities for insiders to time their trading. However, there is little evidence on whether board characteristics reduce the probability of insider trading with repurchase announcements. Using data from firms listed on Forbes 500 between 1998 and 2004, we found that insider trading is related to share repurchase announcements. In order to focus on board of directors’ role, we controlled for board characteristics that may change the repurchase decision. Our results provide corroborative evidence of insider net selling around repurchase announcements and the advantages of board characteristics to offset insider trading. In particular, the results suggest that board tenure, directors’ ownership and board directorship change positively insider trading around repurchase announcements. Hence, Securities and Exchange Commission should consider rigorous restrictions on share repurchase announcements and be aware of potential influence of the corporate governance device.