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Essays in Information Economics and Market Structure

Uthemann, A; (2015) Essays in Information Economics and Market Structure. Doctoral thesis , UCL (University College London). Green open access

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Abstract

This thesis analyses three distinct economic problems through the common lens of informational asymmetries. In each chapter we show how market behaviour is best understood as the outcome of differentially informed market participants interacting with each other within the rules specified by the respective market under consideration. Chapter 2 provides an explanation for the variety of contracts offered by competitive firms for seemingly identical products or services, e.g. in mobile communication or personal banking. We show that firms’ menu of tariffs can be understood as screening devices for consumers with mistaken beliefs about their future demand. We furthermore show that while competition between firms prevents firms from exploiting their customers’ limited cognitive ability, competition is not able to correct the inefficiency caused by customers making suboptimal choices. Chapter 3 studies the effect of a financial transaction tax on the trading of a security. We construct a market microstructure model and estimate it using intraday transaction data for a stock traded on the NYSE (Ashland Inc.). The estimates are then used to simulate how a financial transaction tax would impact volume, spreads and informational efficiency in the asset market under consideration. Chapter 4 constructs a model of observational learning with payoff externalities that provides a justification for the use of short term debt in the financing of investment projects. While financing with debt that is subject to roll over risk is often seen as a source of instability, potentially triggering investor runs on financially sound institutions, we show that it can play an important role in facilitating the revelation of privately held information about future performance of the investment.

Type: Thesis (Doctoral)
Title: Essays in Information Economics and Market Structure
Open access status: An open access version is available from UCL Discovery
Language: English
UCL classification: UCL > Provost and Vice Provost Offices
UCL > Provost and Vice Provost Offices > UCL SLASH
UCL > Provost and Vice Provost Offices > UCL SLASH > Faculty of S&HS > Dept of Economics
URI: https://discovery.ucl.ac.uk/id/eprint/1468998
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