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Bulow and Rogoff (1989) proved that, in a competitive financial market, the threat of credit exclusion alone cannot sustain repayment of sovereign debt, as the defaulting government can still enter cash-in-advance insurance contracts. Phan (2016) extended the analysis to the case where the government has some private information about the underlying distribution of future economic shocks. He proved that, in a strategic environment where a sovereign trades with several competing foreign investors, there exists a perfect Bayesian equilibrium with signaling where a high type government repays some positive level of debt while the low type government prefers to default. The objective of this paper is to push forward the analysis in Phan (2016) in several directions. We first make a thorough analysis of the properties of the stationary value function and provide a rigorous proof of existence of a positive self-enforcing and not-too-tight debt limit in the model of Phan (2016). We then show that the repayment incentives at the endogenous debt limit are the same for both types of government. Finally, we refine the equilibrium concept in Phan (2016) by requiring investors' beliefs to be consistent with the government's strategies along the equilibrium path (as in Phan (2016)) but also out-of-equilibrium paths. We show that our refined equilibrium exists only if investors' belief about the government's future income is not too optimistic. ; Bulow and Rogoff (1989) provaram que, em um mercado financeiro competitivo, apenas a ameaça de exclusão de crédito não consegue sustentar dívida, pois o governo inadimplente ainda pode entrar em contratos de seguro "cash in advance". Phan (2016) estende a análise para o caso onde o governo possui alguma informação privada quanto à distribuição futura de dotações. Ele prova que, em um ambiente estratégico onde um soberano troca com vários investidores estrangeiros em competição, existe um equilíbrio Bayesiano perfeito onde repagamento de dívida é sustentado. O objetivo deste artigo é ...

This article considers an asymmetric contest with incomplete information. There are two types of players: informed and uninformed. Each player has a different ability to translate effort into performance in terms of the contest success function. While one player's type is known to both players, the other is private information and known only to the player himself. We compare the Bayesian Nash equilibrium outcome of a one-sided private information contest to the Nash equilibrium with no private information, in which both players know the type of the other player. We show conditions under which uncertainty increases the investment of the uninformed player and the rent dissipation of the contest, while decreasing the expected net payoff of the informed player. In addition, we consider conditions under which the informed player - before knowing his own type - prefers that the uninformed player knows his type. Moreover, we show conditions for the existence/non-existence of equilibrium in a two-stage contest in which the informed player declares his type (or does not declare) in the first stage and in the second stage the two players play according to the information available to them.

AbstractWe study the optimal contracting problem between two firms collaborating on capacity investment with information asymmetry. Without a contract, system efficiency is lost due to the profit‐margin differentials among the firms, demand uncertainty, and information asymmetry. With information asymmetry, we demonstrate that the optimal capacity level is characterized by a newsvendor formula with an upward‐adjusted capacity investment cost, and no first‐best solution can be achieved. Our analysis shows that system efficiency can always be improved by the optimal contract and the improvement in system efficience is due to two factors. While the optimal contract may bring the system's capacity level closer to the first‐best capacity level, it prevents the higher‐margin firm from overinvesting and aligns the capacity‐investment decisions of the two firms. Our analysis of a special case demonstrates that, under some circumstances, both firms can benefit from the principal having better information about the agent's costs. © 2007 Wiley Periodicals, Inc. Naval Research Logistics 54:, 2007