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SMU SOE Online Seminar (Mar 10, 2022, 4.00pm-5.30pm):Dynamic Screening with Verifiable Bankruptcy
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TOPIC:
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DYNAMIC SCREENING WITH VERIFIABLE BANKRUPTCY
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ABSTRACT
We consider bankruptcy constraints in an otherwise standard dynamic screening model. We model bankruptcy as a verifiable event that occurs whenever the agent makes a per period loss. This gives rise to less stringent truth-telling constraints, as misreports become verifiable if they force the agent into bankruptcy. We solve for an optimal contract using a new method that ranks contracts in terms of the spread of the distribution of the induced continuation values for the agent. In a setting with continuous types, we derive a regularity condition that ensure that the optimal contract is deterministic.
Keywords: Dynamic Screening, Bankruptcy, Verifiability, Mean Preserving Spread
JEL Codes: D82, H57
Click here to view the speaker's profile.
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This seminar will be held virtually via Zoom. A confirmation email with the Zoom details will be sent to the registered email by 9 March 2022.
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PRESENTER
Daniel Krähmer
University of Bonn
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RESEARCH INTERESTS
Microeconomic Theory
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DATE:
10 March 2022 (Thursday)
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TIME:
4.00pm - 5.30pm
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