《管理经济学》研究生课件IPPTChap012

1、Chapter 12The Economics of InformationMcGraw-Hill/IrwinCopyright 2014 by The McGraw-Hill Companies, Inc. All rights reserved.Chapter OutlineThe mean and the varianceUncertainty and consumer behaviorRisk aversionConsumer searchUncertainty and the firmRisk aversionProducer searchProfit maximizationUnc

2、ertainty and the marketAsymmetric informationSignaling and screeningAuctions Types of auctionsInformation structuresOptimal bidding strategies for risk-neutral biddersExpected revenues in alternative types of auctions12-2Chapter OverviewIntroductionIn Chapter 11 we examined various pricing strategie

3、s that would permit firms with market power to enhance profits over charging a single, per-unit price.Most of our development of managerial economics has assumed that both consumers and firms were endowed with perfect information. Chapter 12 focuses on how imperfect information and uncertainty impac

4、ts:Consumers decisions and behaviorsFirms decisions and behaviorsMarkets efficiency and functioning12-3Chapter OverviewMeasuring Uncertain OutcomesA variable that measures the outcome of an uncertain event is called a random variable.Probabilities can be attached to different values of a random vari

5、able that denote the chance that a value occurs.Information about uncertain outcomes can be summarized by the mean (or, expected value) and variance of a random variable.12-4The Mean and the VarianceMeasuring Uncertain Outcomes: Mean12-5The Mean and the VarianceMeasuring Uncertain Outcomes: Variance

6、 and Standard Deviation12-6The Mean and the VarianceAttitudes Toward Risk12-7Uncertainty and Consumer BehaviorManagerial Decisions with Risk Averse Consumers: Product QualityRisk analysis can used to examine situations where consumers are uncertain about product quality.Consider a consumer who regul

7、arly uses Brand X. If a new product enters the market, Brand Y, under what conditions will the consumer be willing to try the new product?Issues to overcome and consider:Relative certainty about Brand X.At equal prices among other things, a risk averse consumer will continue to purchase Brand X, sin

8、ce a risk averse consumer prefers the sure thing (Brand X) to a risky prospect (Brand Y).Two tactics can be employed to induce a risk averse consumer to try a new product:Lower the price of Brand Y.Try to convince consumer the new products quality is higher than the old product.12-8Uncertainty and C

9、onsumer BehaviorConsumer Search12-9Uncertainty and Consumer BehaviorConsumer Search12-10Uncertainty and Consumer BehaviorOptimal Search Strategy12-11Uncertainty and Consumer BehaviorPriceReservation price:Price at which a consumeris indifferent between purchasing at that price and searching for a lo

10、wer price.Expected benefits and costsAcceptance Price RegionRejection Price RegionConsumers Search Rule12-12Uncertainty and Consumer BehaviorIncreasing Cost of Search12-13Uncertainty and Consumer BehaviorPriceExpected benefits and costsDue to Increasein search costs.Managers Risk AttitudesWhile mana

11、ger must understand the impact of uncertainty on consumer behavior, uncertainty also impacts the managers input and output decisions.Managers risk profiles:Risk averse: a manager who prefers a risky project with a lower expected value if the risk is lower than a project with a higher expected value.

12、Risk loving: manager who prefers a risky project with higher expected value and higher risk to one with lower expected value and lower risk.Risk neutral: manager interested in maximizing expected profits; the variance of profits does not impact a risk-neutral managers decisions.12-14Uncertainty and

13、the FirmManagers Risk Attitudes In Action: ProblemA risk-averse manager is considering two projects. The first project involves expanding the market for bologna; the second involves expanding the market for caviar. There is a 10 percent chance of recession and a 90 percent chance of an economic boom

14、. The following table summarizes the profits under the different scenarios. Which project should manager undertake, and why?a12-15Uncertainty and the FirmProjectBoom (90%)Recession (10%)MeanStandard DeviationBologna-$10,000$12,000-$7,800$6,600Caviar20,000-8,00017,2008,400Joint10,0004,0009,4001,800Sa

15、fe (T-Bill)3,0003,0003,0000Managers Risk Attitudes In Action: AnswerManagers should not invest in T-BillsThe joint project is assured of making at least $4,000, which is greater than $3,000 under the T-Bill scenario. Since the expected returns of the bologna project are negative, neither a risk-neut

16、ral nor a risk-averse manager would choose to undertake this project.The manager should adopt either the caviar project or the joint project. Which project will depend on his or her risk preferences.12-16Uncertainty and the FirmProjectBoom (90%)Recession (10%)MeanStandard DeviationBologna-$10,000$12

17、,000-$7,800$6,600Caviar20,000-8,00017,2008,400Joint10,0004,0009,4001,800Safe (T-Bill)3,0003,0003,0000Managers Risk Attitudes and DiversificationNotice from the previous problem that by investing in multiple projects, the manager may be able to reduce risk. The process of potentially reducing risk by

18、 investing in multiple projects is called diversification.Whether it is optimal to diversify depends on a managers risk preferences and the incentives provided to the manager to avoid risk.12-17Uncertainty and the FirmProducer SearchWhen producers are uncertain about the prices of inputs, an optimiz

19、ing firm will use optimal search strategies.These strategies mimic consumer search previously developed.12-18Uncertainty and the FirmProfit Maximization and Uncertainty12-19Uncertainty and the FirmProfit Maximization and Uncertainty In Action: Problem12-20Uncertainty and the FirmProfit Maximization

20、and Uncertainty In Action: Answer12-21Uncertainty and the FirmAsymmetric InformationUncertainty can profoundly impact markets abilities to efficiently allocate resources.Some markets are characterized by individuals who have better information than others.Implication: Those individuals with the leas

21、t information may choose not to participate in a market.When some people have better information than others in a market, the information people have is called asymmetric information.There are two specific manifestations related to asymmetric information in markets:Adverse selectionMoral hazard12-22

22、Uncertainty and the MarketAsymmetric Information: Adverse SelectionAdverse selection refers to situations where individuals have hidden characteristics and in which a selection process results in a pool of individuals with undesirable characteristics.In this context, a hidden characteristic is somet

23、hing that one party to a transaction knows about itself but which are unknown by the other party.12-23Uncertainty and the MarketAsymmetric Information: Moral HazardMoral hazard refers to a situation where one party to a contract takes a hidden action that benefits his or her at the expense of anothe

24、r party.In this context, a hidden action is an action taken by one party in a relationship that cannot be observed by the other party.One way to mitigate the moral hazard problem is an incentive contract.12-24Uncertainty and the MarketSignalingAnother way to mitigate the problem of moral hazard is s

25、ignaling, which is an attempt by an informed party to send an observable indicator of his or her hidden characteristics to an uninformed party.For signaling to be effective it must be:observable by the uninformed party.a reliable indicator of the unobservable characteristic(s) and difficult for part

26、ies with other characteristics to easily mimic.12-25Uncertainty and the MarketScreeningA final way to mitigate the moral hazard problem is by screening, which is an attempt by an uninformed party to sort individuals according to their characteristics.Screening may be achieved through a self-selectio

27、n device.A self-selection device is a mechanism in which informed parties are presented with a set of options, and the options they choose reveal their hidden characteristics to an uninformed party.12-26Uncertainty and the MarketTypes of AuctionsAn auction is a mechanism where potential buyers compe

28、te for the right to own a good, service, or, more generally, anything of value.Sellers participating in an auction offer an item for sale, and wish to obtain the highest price.Buyers participating in an auction seek to obtain the item at the lowest possible price.Bidders risk preferences can affect

29、bidding strategies and the expected revenue a seller receives. Four basic auction types:English (ascending-bid)First-price, sealed-bidSecond-price, sealed-bidDutch (descending-bid)12-27AuctionsDifferences Among Auctions TypesThe timing of bidder decisions (simultaneously or sequentially)The amount t

30、he winner is required to pay.12-28AuctionsEnglish AuctionAn English auction is an ascending sequential-bid auction in which bidders observe the bids of others and decide whether or not to increase the bid. The auction ends when a single bidder remains; this bidder obtains the item and pays the aucti

31、oneer the amount of the bid.Bidders continually obtain information about one anothers bids.Bidder who values the item the most will win.12-29AuctionsFirst-Price, Sealed-Bid AuctionA first-price, sealed-bid auction is a simultaneous-move auction in which bidders simultaneously submit bids to an aucti

32、oneer. The auctioneer awards the item to the highest bidder, who pays the amount bid.Bidders obtain no information about one anothers bids.Bidder who values the item the most will win.12-30AuctionsSecond-Price, Sealed-Bid AuctionA second-price, sealed-bid auction is a simultaneous-move auction in wh

33、ich bidders simultaneously submit bids to an auctioneer. The auctioneer awards the item to the highest bidder, who pays the amount bid by the second-highest bidder.Bidders obtain no information about one anothers bids.Bidder who values the item the most will win, but pays the second-highest bid.12-3

34、1AuctionsDutch AuctionA Dutch auction is a descending sequential-bid auction in which the auctioneer beings with a high asking price and gradually reduces the asking price until one bidder announces a willingness to pay that price for the item.Bidders obtain no information about one anothers bids th

35、roughout the auction process.Bidder who values the item the most will win and pay the amount of his or her bid.12-32AuctionsStrategic Equivalence of Dutch and First-Price AuctionsThe Dutch and first-price, sealed-bid auctions are strategically equivalent; that is, the optimal bids by participants ar

36、e identical for both types of auctions.12-33AuctionsInformation StructuresWhile the four auction types differ with respect to the information bidders have about the bids of other bidders, bidders also have different information structures about the value of their own bids.Perfect informationIndepend

37、ent private valuesAffiliated (or correlated) value estimatesSpecial case: common-value auctions12-34AuctionsOptimal Bidding Strategies for Risk-Neutral Bidders An optimal bidding strategy for risk-neutral bidders is a strategy that maximizes a bidders expected profit.Optimal bids depends on the type

38、 of rmation available to bidders at the time of bidding.12-35AuctionsStrategies for Independent Private Value Auctions12-36AuctionsStrategies for Independent Private Value Auctions In Action: Problem12-37AuctionsStrategies for Independent Private Value Auctions In Action: Answer12-38AuctionsStrategi

39、es for Correlated Values AuctionsBidders do not know their own valuations for an item, nor others valuations.Implication: makes bidders vulnerable to the winners curse, which is the “bad news” conveyed to the winner that his or her estimate of the items value exceeds the estimates of all other bidders.To avoid the winners curve in a common-val