Publications by year
In Press
Choo L, Kaplan T, Zultan R (In Press). Manipulation and (mis)trust in prediction markets. Management Science
Kaplan T, Wettstein D (In Press). Two-Stage Contests with Preferences over Style. Economic Theory
2022
Roulston M, Kaplan T, Day B, Kaivanto K (2022). Prediction-market innovations can improve climate-risk forecasts.
NATURE CLIMATE CHANGE,
12(10), 879-880.
Author URL.
DOI.
Kaplan T, Sela A (2022). Second-Price Auctions with Private Entry Costs.
Games,
13(5), 62-62.
Abstract:
Second-Price Auctions with Private Entry Costs
We study asymmetric second-price auctions under incomplete information. The bidders have two potentially different, commonly known, valuations for the object and private information about their entry costs. The seller, however, does not benefit from these entry costs. We calculate the equilibrium strategies of the bidders and analyze the optimal design for the seller in this environment in terms of expected entry and the number of potential bidders.
Abstract.
DOI.
2021
Fischer S, Güth W, Kaplan TR, Zultan R (2021). AUCTIONS WITH LEAKS ABOUT EARLY BIDS: ANALYSIS AND EXPERIMENTAL BEHAVIOR.
Economic Inquiry,
59(2), 722-739.
Abstract:
AUCTIONS WITH LEAKS ABOUT EARLY BIDS: ANALYSIS AND EXPERIMENTAL BEHAVIOR
In sequential first- and second-price private value auctions, second movers are informed about the first movers' bid with commonly known probability. Equilibrium bidding in first-price auctions is mostly unaffected, but there are multiple equilibria in second-price auctions affecting comparative statics across price rules. We show experimentally that informational leaks in first-price auctions qualitatively confirm the theoretical predictions. In second-price auctions, we analyze and experimentally confirm the existence of focal equilibria, and provide evidence for individual consistency in equilibrium selection. (JEL D44, C72, C91).
Abstract.
DOI.
Chakravarty S, Choo L, Fonseca MA, Kaplan TR (2021). Should regulators always be transparent? a bank run experiment.
European Economic Review,
136Abstract:
Should regulators always be transparent? a bank run experiment
We study, using laboratory experiments, the extent to which disclosure policies about the financial health of a bank affect the likelihood of a bank run. We consider two disclosure regimes, full disclosure and no disclosure, under two scenarios: one in which the bank is on average financially solvent and another in which the bank is on average insolvent. When the bank is on average insolvent, the full disclosure regime reduces the expected likelihood of runs. In contrast, when the bank is on average solvent, the full disclosure regime increases the expected likelihood of runs. We also find that disclosing identical information when depositors’ expectations are low versus high (good versus bad news) leads to behavioural differences only indirectly through their beliefs about the other depositor's actions. Our findings show that instituting a policy of greater banking transparency is not always beneficial.
Abstract.
DOI.
Gyoshev SB, Kaplan TR, Szewczyk SH, Tsetsekos GP (2021). Why do investment banks buy put options from companies?.
Journal of Corporate Finance,
67Abstract:
Why do investment banks buy put options from companies?
Companies have collected billions in premiums from privately sold put options written on their own stock. It is puzzling that counterparties, investment banks, would agree to make such transactions with better-informed companies which have extraordinary ability to time the market as documented by Jenter et al. (2011). To resolve this puzzle, we develop a model that shows that investment banks, by offering to buy put options from better-informed parties, receive private information about issuing companies. Our model also incorporates the practice of firms (such as Microsoft) of sometimes repurchasing their own put options and thus providing additional private information to investment banks. Empirically, we find support for our theory from an abnormal 9% increase in the stock prices and a 40% increase in the trading volumes around the put sales. Examination of 13D filings reveals that trading by upper management insiders cannot completely account for the change in volume.
Abstract.
DOI.
2020
Chakravarty S, Kaplan T, Mustafee N (2020). Altering Wait Time Information to Reduce A&E Overcrowding.
Abstract:
Altering Wait Time Information to Reduce A&E Overcrowding
A&E overcrowding is an important problem since many are not seen in a sufficiently quick time. There is evidence that the situation can be improved without adding additional resources by diverting would-be A&E patients to alternative centres of urgent care, for example, Minor Injury Units (MIUs). The aim of this paper is to investigate how access to information on waiting times may influence decision making. We collect laboratory data where subjects are offered a choice between receiving treatment at A&E and MIU. The subjects face a random delay at the A&E but a known wait at the MIU. We manipulate the information that the subjects receive from the probabilities (risk) of the different waiting times at the A&E from known probabilities to merely a vague indication of the waiting time (ambiguity). We find that subjects demonstrate a strong preference for the A&E. Subjects display risk neutrality for the A&E waiting time but are ambiguity averse when waiting times are relatively short and ambiguity-seeking when waiting times are relatively long. This indicates that perhaps partial revelation of waiting times may be optimal. Our research will inform stakeholder decision-making at the operational level (such as individual UK National Health Service (NHS) Trusts) about strategy regarding the release of timing information.
Abstract.
2019
Choo L, Kaplan TR, Zultan R (2019). Information aggregation in Arrow–Debreu markets: an experiment.
Experimental Economics,
22(3), 625-652.
Abstract:
Information aggregation in Arrow–Debreu markets: an experiment
Studies of experimental and betting markets have shown that markets are able to efficiently aggregate information dispersed over many traders. We study information aggregation in Arrow–Debreu markets using a novel information structure. Compared to previous studies, the information structure is more complex, allows for heterogeneity in information among traders—which provides insights into the way in which information is gradually disseminated in the market—and generates situations in which all traders hold identical beliefs over the traded assets’ values, thus providing a harsh stress test for belief updating. We find little evidence for information aggregation and dissemination in early rounds. Nonetheless, after traders gain experience with the market mechanism and structure, prices converge to reveal the true state of the world. Elicited post-market beliefs reveal that markets are able to efficiently aggregate dispersed information even if individual traders remain uninformed, consistent with the marginal trader hypothesis.
Abstract.
DOI.
2018
Kaplan TR, Ruffle BJ, Shtudiner Z (2018). Cooperation through coordination in two stages.
Journal of Economic Behavior and Organization,
154, 206-219.
Abstract:
Cooperation through coordination in two stages
Efficient cooperation often requires coordination, such that exactly one of two players takes an available action. If the decisions whether to pursue the action are made simultaneously, then neither or both may acquiesce leading to an inefficient outcome. However, inefficiency may be reduced if players move sequentially. We test this experimentally by introducing repeated two-stage versions of such a game where the action is individually profitable. In one version, players may wait in the first stage to see what their partner did and then coordinate in the second stage. In another version, sequential decision-making is imposed by assigning one player to move in stage one and the other in stage two. Although there are fewer cooperative decisions in the two-stage treatments, we show that overall subjects coordinate better on efficient cooperation and on avoiding both acquiescing. Yet, only some pairs actually achieve higher profits, while the least cooperative pairs do worse in the two-stage games than their single-stage counterparts. For these, rather than facilitating coordination, the additional stage invites unsuccessful attempts to disguise uncooperative play, which are met with punishment.
Abstract.
DOI.
Mu D, Kaplan TR, Dankers R (2018). Decision Making with Risk-Based Weather Warnings.
International Journal of Disaster Risk Reduction,
30, Part A, 59-73.
DOI.
Chakravarty S, Kaplan TR, Myles G (2018). When costly voting is beneficial.
Journal of Public Economics,
167, 33-42.
Abstract:
When costly voting is beneficial
We present a costly voting model in which each voter has a private valuation for their preferred outcome of a vote. When there is a zero cost to voting, all voters vote and hence all values are counted equally regardless of how high they may be. By having a cost to voting, only those with high enough values would choose to incur this cost. We show that, by adding this cost, welfare may be enhanced even when the cost of voting is wasteful. Such an effect occurs when there is both a large enough density of voters with low values and the expected value of voters is high enough.
Abstract.
DOI.
2017
Cole M, Davies R, Kaplan TR (2017). Protection in Government Procurement Auctions.
Journal of International Economics,
106, 134-142.
Abstract:
Protection in Government Procurement Auctions
Discrimination against foreign bidders in procurement auctions has typically been achieved by price preferences. We demonstrate that in the bidding game, each level of protection via a price preference can be achieved by an equivalent tariff. When government welfare depends only on net expenditures, this equivalence carries over to the government's decision. As such, this equivalence provides a justification that agreements to eliminate price preferences to be taken in tandem with agreements to lower tariffs; e.g. the Government Procurement Agreement (GPA) in the broader context of the WTO.
Abstract.
DOI.
2015
Brams SJ, Kaplan TR, Kilgour DM (2015). A Simple Bargaining Mechanism that Elicits Truthful Reservation Prices.
Group Decision and Negotiation,
24(3), 401-413.
Abstract:
A Simple Bargaining Mechanism that Elicits Truthful Reservation Prices
We describe a simple 2-stage mechanism whereby for two bargainers, a Buyer and a Seller, it is a weakly dominant strategy to report their true reservation prices in the 1st stage. If the Buyer reports a higher reservation price than the Seller, then the referee announces that there is a possibility for trade, and the bargainers proceed to make offers in a 2nd stage. The average of the 2nd-stage offers becomes the settlement if they both fall into the interval between the reported reservation prices; if only one offer falls into this interval, it is the settlement, but it is implemented with probability $$\frac{1}{2}$$12; if neither offer falls into the interval, there is no settlement. Comparisons are made with other bargaining mechanisms.
Abstract.
DOI.
Kaplan TR, Zamir S (2015). Advances in Auctions.
,
4(1), 381-453.
Abstract:
Advances in Auctions
As a selling mechanism, auctions have acquired a central position in the free market economy all over the globe. This development has deepened, broadened, and expanded the theory of auctions in new directions. This chapter is intended as a selective update of some of the developments and applications of auction theory in the two decades since Wilson (1992) wrote the previous Handbook chapter on this topic.
Abstract.
DOI.
Kaplan TR, Zamir S (2015). Chapter 7 Advances in Auctions. In (Ed)
, 381-453.
DOI.
Marimo P, Kaplan TR, Mylne K, Sharpe M (2015). Communication of uncertainty in temperature forecasts.
Weather and Forecasting,
30(1), 5-22.
Abstract:
Communication of uncertainty in temperature forecasts
Experimental economics is used to test whether undergraduate students presented with a temperature forecast with uncertainty information in a table and bar graph format were able to use the extra information to interpret a given forecast. Participants were asked to choose the most probable temperature-based outcome between a set of "lotteries." Both formats with uncertainty information were found on average to significantly increase the probability of choosing the correct outcome. However, in some cases providing uncertainty information was damaging. Factors that influence understanding are statistically determined. Furthermore, participants who were shown the graph with uncertainty information took on average less response time compared to those who were shown a table with uncertainty information. Over time, participants improve in speed and initially improve in accuracy of choosing the correct outcome.
Abstract.
DOI.
Kaplan TR, Wettstein D (2015). The optimal design of rewards in contests.
Review of Economic DesignAbstract:
The optimal design of rewards in contests
Using contests to generate innovation has been and is widely used. Such contests often involve offering a prize that depends upon the accomplishment (effort). Using an all-pay auction as a model of a contest, we determine the optimal reward for inducing innovation. In a symmetric environment, we find that the reward should be set to (Formula presented.) where c is the cost of producing an innovation of level x and (Formula presented.) is the weight attached by the designer to the sum of efforts. In an asymmetric environment with two firms, we find that it is optimal to set different rewards for each firm. There are cases where this can be replicated by a single reward that depends upon accomplishments of both contestants.
Abstract.
DOI.
2014
Chakravarty S, Fonseca MA, Kaplan TR (2014). An Experiment on the Causes of Bank Run Contagions.
European Economic Review,
72, 39-51.
DOI.
Kaplan TR, Zamir S (2014). Multiple equilibria in asymmetric first-price auctions.
Economic Theory Bulletin,
3(1), 65-77.
DOI.
2013
Navon D, Kaplan TR, Kasten R (2013). Egocentric framing--One way people may fail in a switch dilemma: Evidence from excessive lane switching. Acta psychologica, 144, 604-616.
Chakravarty S, Kaplan T (2013). Optimal allocation without transfer payments.
Games and Economic Behavior,
77(1), 1-20.
Abstract:
Optimal allocation without transfer payments
Often an organization or government must allocate goods without collecting payment in
return. This may pose a difficult problem either when agents receiving those goods have
private information in regards to their values or needs. In this paper, we find an optimal
mechanism to allocate goods when the designer is benevolent. While the designer cannot
charge agents, he can receive a costly but wasteful signal from them. We find conditions
for cases in which ignoring these costly signals by giving agents equal share (or using
lotteries if the goods are indivisible) is optimal. In other cases, those that send the highest
signal should receive the goods; however, we then show that there exist cases where
more complicated mechanisms are superior. Also, we show that the optimal mechanism
is independent of the scarcity of the goods being allocated.
Abstract.
Gould ED, Kaplan TR (2013). The peer effect of Jose Canseco: a reply to J. C. Bradbury.
Econ Journal Watch,
10(1), 70-86.
Abstract:
The peer effect of Jose Canseco: a reply to J. C. Bradbury
In this paper, we respond to J. C. Bradbury's critique of our 2011 Labour Economics paper examining the peer effect of Jose Canseco. None of Bradbury's criticisms have any merit, and many reveal a severe misunderstanding of basic econometrics. For example, Bradbury accuses us of not deleting enough years from the sample, not censoring the sample on an outcome measure, and not controlling for average performance measures for each year explicitly when we have already included dummy variables for each year. Bradbury claims that we distort our findings, but he overlooks the parts of our paper that do not fit his thesis. Bradbury reexamines the performance of Canseco's teammates empirically and argues that our results are sensitive. However, this should not be surprising because Bradbury performs a completely different and highly flawed analysis. In particular, he fails to realize that he is estimating very different parameters which are difficult, if not impossible, to interpret. His specification and estimation are based on very restrictive assumptions which are not necessary, nor are they justified or even acknowledged. After examining every one of Bradbury's attacks on our paper, we conclude that none provides a convincing reason to reject our conclusions.
Abstract.
2012
Balkenborg D, Kaplan T, Miller T (2012). A simple economic teaching experiment on the hold-up problem.
Journal of Economic Education,
43(4), 377-385.
Abstract:
A simple economic teaching experiment on the hold-up problem
The hold-up problem is central to the theory of incomplete contracts. This can occur if, after making a sunk investment in a relationship, one party can be taken advantage of by the other party, leading to inefficient underinvestment. The authors describe a simple teaching experiment that illustrates the hold-up problem, and address how to integrate it into a class. © 2012 Copyright Taylor and Francis Group, LLC.
Abstract.
DOI.
Kaplan TR, Zamir S (2012). Asymmetric first-price auctions with uniform distributions: Analytic solutions to the general case.
Economic Theory,
50(2), 269-302.
Abstract:
Asymmetric first-price auctions with uniform distributions: Analytic solutions to the general case
In 1961, Vickrey posed the problem of finding an analytic solution to a first-price auction with two buyers having valuations uniformly distributed on [v{script} 2, v{script} 2] and [v{script} 2, v{script} 2]. To date, only special cases of the problem have been solved. In this paper, we solve this general problem and in addition allow for the possibility of a binding minimum bid. Several interesting examples are presented, including a class where the two bid functions are linear. © 2010 Springer-Verlag.
Abstract.
DOI.
Kaplan TR (2012). Communication of preferences in contests for contracts.
Economic Theory,
51(2), 487-503.
Abstract:
Communication of preferences in contests for contracts
This paper models a contest where several sellers compete for a contract with a single buyer. There are several styles of possible designs with a subset of them preferred by the buyer. We examine what happens when the buyer communicates information about his preferences. If the sellers are unable to change their style, then there is no effect on the welfare of the sellers. If the sellers are able to make adjustments, extra information may either boost or damage the sellers' profits. While the chance that there will be a proposal of a style preferred by the buyer cannot decrease, the buyer's surplus may increase or decrease. © 2010 Springer-Verlag.
Abstract.
DOI.
Kaplan TR, Ruffle BJ (2012). Which Way to Cooperate.
Economic Journal,
122(563), 1042-1068.
Abstract:
Which Way to Cooperate
We introduce a two-player, binary-choice game in which both players have a privately known incentive to enter, yet the combined surplus is highest if only one enters. Repetition of this game admits two distinct ways to cooperate: turn taking and cutoffs, which rely on the player's private value to entry. A series of experiments highlights the role of private information in determining which mode players adopt. If an individual's entry values vary little (e.g. mundane tasks), taking turns is likely; if these potential values are diverse (e.g. difficult tasks that differentiate individuals by skill or preferences), cutoff cooperation emerges. © 2011 the Author(s). The Economic Journal © 2011 Royal Economic Society.
Abstract.
DOI.
2011
Balkenborg D, Ishizaka A, Kaplan T (2011). Does AHP help us make a choice? - an experimental evaluation. JORS (Journal of the Operations Research Society), 62, 1801-1812.
Balkenborg D, Ishizaka A, Kaplan T (2011). Influence of aggregation and measurement scale on
ranking a compromise alternative in AHP.
JORS (Journal of the Operations Research Society),
62(4), 700-710.
Abstract:
Influence of aggregation and measurement scale on
ranking a compromise alternative in AHP
Analytic Hierarchy Process (AHP) is one of the most popular multi-attribute decision aid methods. However,
within AHP, there are several competing preference measurement scales and aggregation techniques. In this
paper, we compare these possibilities using a decision problem with an inherent trade-off between two criteria.
A decision-maker has to choose among three alternatives: two extremes and one compromise. Six different
measurement scales described previously in the literature and the new proposed logarithmic scale are considered
for applying the additive and the multiplicative aggregation techniques. The results are compared with the
standard consumer choice theory. We find that with the geometric and power scales a compromise is never
selected when aggregation is additive and rarely when aggregation is multiplicative, while the logarithmic
scale used with the multiplicative aggregation most often selects the compromise that is desirable by consumer
choice theory.
Abstract.
DOI.
Gould ED, Kaplan TR (2011). Learning unethical practices from a co-worker: the peer effect of Jose Canseco.
Labour Economics,
18(3), 338-348.
Abstract:
Learning unethical practices from a co-worker: the peer effect of Jose Canseco
This paper examines the issue of whether workers learn productive skills from their co-workers, even if those skills are unethical. Specifically, we estimate whether Jose Canseco, a star baseball player in the late 1980's and 1990's, affected the performance of his teammates by introducing them to steroids. Using panel data, we show that a player's performance increases significantly after they played with Jose Canseco. After checking 30 comparable players from the same era, we find that no other baseball player produced a similar effect. Furthermore, the positive effect of Canseco disappears after 2003, the year that drug testing was implemented. These results suggest that workers not only learn productive skills from their co-workers, but sometimes those skills may derive from unethical practices. These findings may be relevant to many workplaces where competitive pressures create incentives to adopt unethical means to boost productivity and profits. Our analysis leads to several potential policy implications designed to reduce the spread of unethical behavior among workers. © 2010 Elsevier B.V.
Abstract.
DOI.
Balkenborg D, Kaplan T, Miller T (2011). Teaching Bank Runs with Classroom Experiments.
The Journal of Economic Education,
42(3), 224-242.
Abstract:
Teaching Bank Runs with Classroom Experiments
Once relegated to cinema or history lectures, bank runs have become a
modern phenomenon that captures the interest of students. In this article,
the authors explain a simple classroom experiment based on the
Diamond-Dybvig model (1983) to demonstrate how a bank run—a
seemingly irrational event—can occur rationally. They then present
possible topics for discussion including various ways to prevent bank runs
and moral hazard.
Abstract.
Kilgour DM, Brams SJ, Kaplan TR (2011). Three procedures for inducing honesty in bargaining.
ACM International Conference Proceeding Series, 170-176.
Abstract:
Three procedures for inducing honesty in bargaining
A bargaining procedure, or mechanism, is a set of rules for two bargainers to follow as they make offers in order to reach a mutually satisfactory agreement on, say, a price. The efficiency of a mechanism is the expected surplus it delivers to the bargainers, relative to the surplus that a social planner would deliver, or that the bargainers themselves might achieve if they truthfully revealed their reservation prices. A theoretical limit on this efficiency is known, as is a specific procedure that achieves this maximum. But this procedure induces players to make offers that do not truly reflect their reservation prices. This paper discusses three procedures that induce honest offers, although they necessarily fail to achieve maximum efficiency. Each procedure has its own characteristics and costs, and each may have some uses in particular circumstances. © 2011 ACM.
Abstract.
DOI.
2010
Kaplan TR, Sela A (2010). Effective contests.
Economics Letters,
106(1), 38-41.
Abstract:
Effective contests
We find that two-stage contests could be ineffective, namely, there is a higher chance of low-ability players participating (and winning) than high-ability players. However, imposing a fee on the winner can guarantee that the contest will be effective. (C) 2009 Elsevier B.V. All rights reserved.
Abstract.
DOI.
Chakravarty S, Kaplan TR, Myles GD (2010). The Benefits of Costly Voting.
DOI.
Balkenborg D, Kaplan T (2010). Using Economic Classroom
Experiments.
International Review of Economics Education,
9(2), 99-106.
Abstract:
Using Economic Classroom
Experiments
Economic classroom experiments are an excellent way to increase student interest,
but getting started may be difficult.We attempt to aid the newcomer by
recommending which experiments to use and describing the current resources
available.
Abstract.
Chakravarty S, Kaplan TR (2010). Vote or Shout.
The B.E. Journal of Theoretical Economics,
10(1).
Abstract:
Vote or Shout
We examine an environment with n voters each with a private value over two alternatives. We compare the social surplus of two mechanisms for deciding: majority voting and shouting, that is, the voter who shouts the loudest (sends the costliest wasteful signal) chooses the outcome. We find that it is optimal to use voting in the case where n is large and value for each particular alternative of the voters is bounded. In for other cases, the superior mechanism is depends upon the order statistics of the distribution of values.
Abstract.
DOI.
2009
Roulston M, Kaplan TR (2009). A laboratory-based study of understanding of uncertainty in 5-day site-specific temperature forecasts. Meteorological Applications, 16(2), 237-244.
Balkenborg D, Kaplan T (2009).
Economic Classroom Experiments., the Economics Network.
DOI.
Kaplan TR, Ruffle BJ (2009). In Search of Welfare-Improving Gifts. European Economic Review, 53(4), 445-460.
2008
Cohen C, Kaplan TR, Sela A (2008). Optimal rewards in contests.
RAND Journal of Economics,
39(2), 434-451.
Abstract:
Optimal rewards in contests
We study all-pay contests with effort-dependent rewards under incomplete information. A contestant's value to winning depends not only on his type but also on the effort-dependent reward chosen by the designer. We analyze which reward is optimal for the designer when his objective is either total effort or highest effort. We find that under certain conditions the optimal reward may either be negative or even decreasing in effort; however, we find no advantage to having multiple rewards.
Abstract.
2006
Kaplan TR, Wettstein D (2006). Caps on Political Lobbying: Comment.
American Economic Review,
96(4), 1351-1354.
DOI.
Chakravarty S, Kaplan TR (2006). Manna from Heaven or Forty Years in the Desert: Optimal Allocation Without Transfer Payments.
DOI.
Kaplan TR, Sela A (2006). Second-price auctions with private entry costs.
SSRN Electronic JournalAbstract:
Second-price auctions with private entry costs
We study asymmetric second-price auctions under incomplete information. The bidders have potentially different, commonly-known, valuations for the object and private information about their entry costs. The seller, however, does not benefit from these entry costs. We calculate the equilibrium strategies of the bidders and analyze the optimal design for the seller in this environment.
Abstract.
DOI.
Kaplan TR (2006). Why Banks Should Keep Secrets.
Economic Theory,
27(2), 341-357.
DOI.
2005
Hvide HK, Kaplan TR (2005). Delegated job design.
SSRN Electronic JournalAbstract:
Delegated job design
We develop a theory of delegation within organizations where agents are privately informed about whether they should be engaged in exploitation or in exploration activities. Excessive delegation lead agents to inefficiently herd into exploration in an attempt to boost their market value. The theory is consistent with both high-delegation practices and practices where agents are assigned to activities. Our main result is that an agent should be delegated more the weaker career concerns, a variable that is made endogenous through the firm's technology and its degree of transparency. The theory sheds light on empirical regularities that are previously unexplained, such as a positive relation between wages and delegation, and delegation being more prevalent in closed environments or environments with long-term employment contracts.
Abstract.
DOI.
2004
Brams SJ, Kaplan TR (2004). Dividing the indivisible - Procedures for allocating cabinet ministries to political parties in a parliamentary system.
Journal of Theoretical Politics,
16(2), 143-173.
Abstract:
Dividing the indivisible - Procedures for allocating cabinet ministries to political parties in a parliamentary system
Political parties in Northern Ireland recently used a divisor method of apportionment to choose, in sequence, ten cabinet ministries. If the parties have complete information about each other's preferences, we show that it may not be rational for them to act sincerely by choosing their most-preferred ministry that is available. One consequence of acting sophisticatedly is that the resulting allocation may not be Pareto-optimal, making all the parties worse off. Another is non-monotonicity - choosing earlier may hurt rather than help a party. We introduce a mechanism, combining sequential choices with a structured form of trading, that results in sincere choices for two parties that avoids these problems. Although there are difficulties in extending this mechanism to more than two parties, other approaches are explored, such as permitting parties to make consecutive choices not prescribed by an apportionment method. But certain problems, such as eliminating envy, remain.
Abstract.
DOI.
Kaplan TR, Ruffle B (2004). The Self-Serving Bias and Beliefs about Rationality.
Economic Inquiry,
42(2), 237-246.
DOI.
2003
Kaplan T, Luski I, Wettstein D (2003). Government policy towards multi-national corporations.
Economics Bulletin,
6(1).
Abstract:
Government policy towards multi-national corporations
We analyze an environment with asymmetric information where a country tries to attract a multi-national corporation. The country can use both taxes and grants to meet its objective of maximizing net revenues. We show that when the country has private information it can often convey it via its choice of a tax-grant pair. When the tax rates are unbounded the country is able to extract the full surplus. The existence of an upper bound can in some cases reduce the payoff to a stronger country.
Abstract.
Kaplan TR, Luski I, Wettstein D (2003). Innovative activity and sunk cost.
International Journal of Industrial Organization,
21(8), 1111-1133.
Abstract:
Innovative activity and sunk cost
We analyze innovative activity in a general framework with time-dependent rewards and sunk costs. When firms are identical, innovation is delayed by an increase in the number of firms or a decrease in the size of the reward. When one firm has higher profit potential, it is more likely to innovate first. Our framework generalizes an all-pay auction; however, we show that under certain conditions there is qualitatively different equilibrium behavior. (C) 2003 Elsevier B.V. All rights reserved.
Abstract.
DOI.
2002
Kaplan TR, Zamir S (2002). A note on revenue effects of asymmetry in private-value auctions.
SSRN Electronic JournalAbstract:
A note on revenue effects of asymmetry in private-value auctions
We formulate a way to study whether the asymmetry of buyers (in the sense of having different prior probability distributions of valuations) is helpful to the seller in private-value auctions (asked first by Cantillon [2001]). In our proposed formulation, this question corresponds to two important questions previously asked: Does a first-price auction have higher revenue than a second-price auction when buyers have asymmetric distributions (asked by Maskin and Riley [2000])? and does a seller enhance revenue by releasing information (asked by Milgrom and Weber[1982])? This is shown by constructing two Harsanyi games of incomplete information each having the same ex-ante distribution of valuations but in one beliefs are symmetric while in the other beliefs are sometimes asymmetric. Our main result is that answers to all three questions coincide when values are independent and are related when values are affiliated.
Abstract.
DOI.
Kaplan TR, Luski I, Sela A, Wettenstein D (2002). All-Pay Auctions with Variable Rewards.
Journal of Industrial Economics,
50(4), 417-430.
DOI.
2000
Kaplan TR (2000). Effective price-matching: a comment.
International Journal of Industrial Organization,
18(8), 1291-1294.
Abstract:
Effective price-matching: a comment
Corts [Economic Lett. 47 (1995) 417] showed that when allowing for price-beating policies in addition to price-matching policies, the competitive outcome prevails in lieu of monopoly pricing. I show by expanding the strategy set further to include effective price strategies, the possibility of monopoly pricing is restored. (C) 2000 Elsevier Science B.V. All rights reserved.
Abstract.
Kaplan TR, Wettstein D (2000). Surplus Sharing with a Two-Stage Mechanism. International Economic Review, 41(2), 339-409.
Kaplan TR, Wettstein D (2000). The Possibility of Mixed-Strategy Equilibria with Constant-Returns-to-Scale Technology under Bertrand Competition. Spanish Economic Review, 2(1), 65-71.
1999
Kaplan TR, Wettstein D (1999). Cost Sharing: Efficiency and Implementation. Journal of Mathematical Economics, 32(4), 489-502.
1998
Kaplan TR, Ruffle BJ (1998). Self-serving bias.
JOURNAL OF ECONOMIC PERSPECTIVES,
12(2), 243-244.
Author URL.
DOI.
1993
Kaplan TR, Dickhaut J (1993). A Program for Finding Nash Equilibria. In Varian HR (Ed) Economic and Financial Modeling with Mathematica, Springer.
Kaplan TR, Mukherji A (1993). Designing an Incentive-Compatible Contract. In Varian HR (Ed)
Economic and Financial Modeling with Mathematica, Springer-Verlag.
Abstract:
Designing an Incentive-Compatible Contract
Abstract.
1992
Kaplan TR, Dickhaut J (1992). A Program for Finding Nash Equilibria. The Mathematica Journal, 1(4), 87-93.
