Two bookmakers compete in Bertrand fashion while setting odds on the outcomes of a sporting contest where an influential punter (or betting syndicate) may bribe some player(s) to fix the contest. Zero profit and bribe prevention may not always hold together. When the influential punter is quite powerful, the bookies may coordinate on prices and earn positive profits for fear of letting the 'lemons' (i.e., the influential punter) in. On the other hand, sometimes the bookies make zero profits but also admit match-fixing.
Incomplete information about (independent) private valuations of charities by potential donors provides an important strategic rationale for announcement of donations during fundraising drives and explains why donors may add to their initial contributions after learning about contributions made by others. In a two-stage fundraising drive where potential donors may contribute at either or both stages, it is shown that under certain conditions, announcement of contributions generates higher expected total contribution. Contribution announcement plays a similar positive role even when the charity acquires information about donor valuations prior to actual fundraising and can take actions to mitigate incomplete information among donors.Following the devastation caused by tsunami over large parts of South East Asia on December 26, 2004, the world's leading countries got together to help the millions affected by the event. The pledges made by governments of various countries rose to over $8 billion quickly, by January 12, 2005.1 The US government had first pledged $15 million, then increased it to $35 million and, later on, increased the amount to $350 million.2 A report in the International Herald Tribune soon announced, ÔJapan's pledge made the US package the second-largest promised so farÕ.3 The same report also noted an increase of pledge by Taiwan from an initial figure of $5 million to a subsequent $50 million. Some of the other countries similarly adjusted their pledges upwards. 4,5The above episode is one illustration of the fact that in a large number of fundraising drives by charities and other non-profit organisations, individual donors may contribute multiple times (often, by adding to their pledges) as they learn about the contributions made by other donors. Announcement of contributions appears to increase the incentive for donors to add to their contributions and contribute higher total amounts to the charity than they would had they not learnt about the contributions made by others. This is somewhat paradoxical as ÔconventionalÕ analysis of strategic voluntary contribution to public goods suggests that announcement of contributions ought to increase the incentive of early donors to free-ride on later donors and, to that extent, have a negative impact on the funds raised; further, donors ought to have no incentive to contribute early and repeatedly.In this article, we argue that incomplete information about the independent private valuation of charities by individual donors explains why announcement of donations can * We are grateful to two anonymous referees and the editor, Leonardo Felli, for raising important questions and providing constructive suggestions that made the current version of this article possible. We remain solely responsible for any shortcomings.1 http://www.news24.com/News24/World/Tsunami_Disaster/0,,2-10-1777_1646450,00.html. 2
A partially informed expert, A, strategically transmits information to a principal, P. The residual uncertainty faced by the expert effectively causes the bias between P and A to be random, with two consequences. First, by misreporting, A is likely to induce a decision choice by P, after the resolution of the residual uncertainty, that is either close to A's ideal position or too far from it, whereas truthful reporting keeps such variations "more balanced". A convex loss function of A thus favors truthful reporting. Second, by retaining authority of decision making and communicating with A, P avoids exposure to risks due to residual uncertainty.Better information transmission and the associated insurance benefit thus often imply P preferring control over delegation, despite A having superior information.JEL Classification: C72, D82, D83.Key Words: Authority, Delegation, Effective Bias, Full Revelation, Partially Informed Expert, Strategic Information Transmission, Multidimensional Uncertainty. * We thank Bob Anderson, Ricardo Alonso, Bob Gibbons, Atsushi Kajii and Navin Kartik for their very helpful comments and conversations. This work has also benefited from presentations at various seminars and conferences.
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