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Anna Sanktjohanser, Ph.D.

Toulouse School of Economics, France

Author: Anna Sanktjohanser

Abstract: I consider a repeated game in which, due to imperfect monitoring, no collusion can be sustained.  I add a self-interested monitor who commits to generating an imperfect private signal of firms’ actions and sends a public message. The monitor makes an offer specifying the precision of the signal generated and the amount to be paid in return.  I show that with low monitoring cost, collusive equilibria exist. In the monitor’s favorite collusive equilibrium, firms’ payoffs are decreasing in the discount factor.  My model helps explain the cartel agreements between the mafia and firms in legal industries in Italy and America.

Keywords:  Repeated games, mediation.

JEL codes: C73 (Repeated Games), K21 (Antitrust).

Full Text:  “Endogenous Monitoring in a Partnership Game”

Prof. Johannes Hörner

Toulouse School of Economics, France

Authors: Johannes Hörner and Nicolas S. Lambert

Abstract: Performance evaluation (“rating”) systems not only provide information to users but also motivate the rated worker. This paper solves for the optimal (effort-maximizing) rating within the standard career concerns framework. We prove that this rating is a linear function of past observations. The rating, however, is not a Markov process, but rather the sum of two Markov processes. We show how it combines information of different types and vintages.  An increase in effort may adversely affect some (but not all) future ratings.

Keywords:  Career Concerns; Mechanism Design; Ratings.

JEL codes: C72, C73

Full Text:  “Motivational Ratings”