Kellogg School of Management
Northwestern University
2001 Sheridan Road
Evanston, IL 60208-2013
USA
Email: m-ottaviani AT
northwestern DOT edu
Phone: +1 847-467-0684
Fax: +1 847-467-1777
I also act as co-editor of
the B.E. Journal of Theoretical
Economics, and serve as member of the editorial board of the Review of Economic Studies and the Journal of Prediction
Markets.
This page collects links to
my papers:
Recent Working Papers
Search
Agency, with Tracy
R. Lewis.
How should a principal provide agents with
incentives to conduct sequential search?
Aggregation of Information and Beliefs in
Prediction Markets, with Peter Norman Sørensen.
Equilibrium analysis of a prediction
market when traders have heterogeneous priors and private information. When agents can invest a limited amount of money in
this market (or their absolute risk aversion is decreasing in wealth), the
equilibrium price under-reacts to information.
Noise, Information, and the Favorite-Longshot
Bias in Parimutuel Predictions, with Peter Norman Sørensen, peer reviewed by NAJ Economics 2005, 11:3.
Testable implication for the sign and extent of
favorite-longshot bias depending on the information to
noise ratio present in the market, as affected by the number of bettors, the
number of outcomes, the amount of private information, the level of
participation generated by recreational interest in the event, the divisibility
of bets, the presence of ex post noise, as well as ex ante asymmetries across
outcomes.
The Timing of Parimutuel
Bets, with Peter Norman Sørensen.
Timing of parimutuel
bets driven by two incentives: bettors want to place large early bets to
pre-empt the rivals, but also want to wait to conceal information.
Parimutuel versus Fixed-Odds Markets, with Peter Norman Sørensen.
Comparison of equilibrium outcomes in parimutuel and fixed-odds competitive markets with
privately informed bettors.
Forecasting and Rank-Order Contests, with Peter Norman Sørensen.
Characterization of equilibrium in Hotelling location model with private information, with
applications to strategic forecasting and political economy.
Published Papers
Surprised by the Parimutuel Odds? , with Peter Norman Sørensen, American
Economic Review, forthcoming.
The favorite-longshot
bias observed in parimutuel markets is consistent
with the use of private information by bettors taking simultaneous positions.
The ex post realization of a high market probability indicates favorable information about the occurrence of an
outcome---and the opposite for longshots.
Misselling through Agents, with Roman
Inderst, American Economic Review, forthcoming.
How to incentivize sales agents to sell, but
not to “missell” to customers for whom the product is
unsuitable? Analysis of the internal organization of the
sales process, the commitment effect of transparency of commissions, and the
role for self regulation and policy intervention.
Information Sharing in Common Agency: When is Transparency Good?, with Norbert Maier, Journal of the
European Economic Association, forthcoming.
When should principals dealing with a common
agent share their individual performance measures about the agent's
unobservable effort?
Monopoly Pricing in the Binary Herding Model, with Subir Bose, Gerhard Orosel
and Lise Vesterlund, Economic Theory, November 2008, 37(2): 203–241. [preprint]
Full characterization of monopoly prices and learning
dynamics when buyers have binary signals about the quality of the good sold and
observe the history of past purchases.
The Promise of Prediction Markets,
with Kenneth
J. Arrow, Robert
Forsythe, Michael Gorham,
Robert Hahn,
Robin Hanson, John O. Ledyard, Saul Levmore,
Robert Litan, Paul Milgrom,
Forrest D.
Nelson, George R.
Neumann, Thomas
C. Schelling, Robert J. Shiller, Vernon L. Smith, Erik Snowberg, Cass R. Sunstein, Paul C. Tetlock, Philip E. Tetlock, Hal R. Varian, Justin Wolfers,
and Eric Zitzewitz, Science, 16 May 2008, 320(5878), 877–878. [preprint]
The ability of groups of people to make
predictions is a potent research tool that should be freed of unnecessary
government restrictions.
Bank Mergers and Diversification:
Implications for Competition Policy, with Albert Banal Estanol, European Financial Management, June
2007, 13(3), 578–590.
[preprint]
Risk-averse banks
first merge and then compete in the markets for loans and deposits, in the
presence of interest rate risk and default risk for individual loans. If depositors
have more correlated shocks than borrowers, bank mergers are relatively worse
for depositors than for borrowers.
Credulity, Lies, and Costly Talk, with Navin
Kartik and Francesco Squintani, Journal of
Economic Theory, May 2007, 134 (1), 93–116. [preprint]
Language inflation and
deception result when either the receiver is credulous or the sender finds it
costly to misrepresent information (due to legal, technological, or moral
constraints)—subsumes the first part of working paper “Non-Fully Strategic
Information Transmission.”
Outcome Manipulation in Corporate Prediction Markets, with Peter Norman Sørensen, Journal of the European Economic
Association, Papers and Proceedings, April–May 2007, 5(2–3), 554–563.
Analysis of the amount of outcome manipulation
(and impact on prices) resulting in a simple model of a corporate prediction
market.
Naive Audience and Communication Bias, with Francesco
Squintani, International Journal of Game Theory, December
2006, 35 (1), 129–150. [preprint]
The amount of information that is revealed to
strategic receivers increases in the fraction of naive receivers and in the
informational advantage of the sender, whereas it decreases in level of the
conflict of interest—supersedes the second part of working paper “Non-Fully
Strategic Information Transmission.”
Dynamic Monopoly Pricing
and Herding, with Subir Bose, Gerhard Orosel
and Lise Vesterlund, RAND Journal
of Economics, Winter 2006, 37 (4), 912–930.
Dynamic pricing by a monopolist
selling to buyers who learn from each other’s purchases, with implications for
herd behavior and welfare.
Mergers
with Product Market Risk, with Albert Banal Estanol, Journal of Economics & Management
Strategy, Fall 2006, 15(3), 577–608. [preprint]
Strategic implications of risk sharing in
mergers, with predictions for the method of payment used (cash versus shares).
The Strategy of
Professional Forecasting, with Peter Norman Sørensen, Journal
of Financial Economics, August 2006, 81(2), 441–466. [preprint]
Framework for modeling
strategic behavior of professional forecasters: (1)
Concern for perceived talent leads to excessive conformity if the market is
naive and loss of information if the market is rational. (2) Competition for
best accuracy leads to excessive forecast differentiation.
Reputational
Cheap Talk, with Peter
Norman Sørensen, RAND Journal of Economics, Spring
2006, 37(1), 155–175.
[preprint]
Communication by an expert concerned about
appearing to be well informed, part II—general analysis with focus on
incentives to deviate from truthtelling, effect of
self-knowledge of information quality, and multiple experts speaking
simultaneously.
Professional Advice,
with Peter Norman Sørensen,
Journal of Economic Theory, January 2006, 126(1), 120–142. [preprint]
Communication by an expert concerned about
appearing to be well informed, part I—analysis of tractable example with
focus on characterization of equilibrium, comparative statics, and multiple
experts speaking sequentially.
The
Transition to Digital Television, with Jerome Adda, Economic Policy, January
2005, 41, 160–209.
[pre-panel
draft, presentation
slides]
Conceptual and empirical framework
for evaluating policies for the transition from analogue to digital television.
Price Competition for an
Informed Buyer, with Giuseppe Moscarini, Journal
of Economic Theory, December 2001, 101(2), 457–493.
Analysis of competition for a buyer with
private information on the relative quality of the sellers, with a Hotelling reinterpretation and comparative statics with
respect to buyer’s private information and public information.
The
Value of Public Information in Monopoly, with Andrea Prat, Econometrica,
November 2001, 69(6), 1673–1683. [earlier draft with additional examples]
When does a price-discriminating monopolist
want to reveal public information to its buyers? The linkage principle meets
mechanism design by an informed principal.
Information Aggregation in
Debate: Who Should Speak First?, with Peter Sørensen, Journal
of Public Economics, September 2001, 81(3), 393–421.
Dynamics of group think in a committee with
members concerned about their reputation for expertise, with implications for
the organization of debate.
Herd
Behavior and Investment: Comment, with Peter Sørensen, American
Economic Review, June 2000, 90(3), 695–704.
Paper (i) uncovers the close connection between
reputational and statistical herding and (ii) shows that reputational cascades also
result when better informed agents do not have access to signals that are more
positively correlated conditional on the state.
Social Learning in a
Changing World, with Giuseppe Moscarini
and Lones
Smith, Economic Theory, 1998, 11(3), 657–665.
Only
temporary informational cascades can arise if the state of the world is changing
stochastically over time during the learning process.
Older
Working Papers
Contracts and Competition in the Pay-TV
Market, with David
Harbord.
How is downstream competition affected by the
contractual terms used to sell essential inputs to competitors?
Analysis of issues relevant for regulation of
independent financial advisers: communication to unsophisticated audience,
information acquisition by advisers, uncertainty about the conflict of
interest, and optimal incentive design.
Other Publications
The Favorite-Longshot Bias: An Overview of the Main
Explanations, with Peter Norman Sørensen, forthcoming in Handbooks in Finance: Handbook of Sports and Lottery Markets,
edited by William T. Ziemba and Donald B. Hausch, Elsevier North Holland.
Switching to Digital
Television: Business and Public Policy Issues, with Norbert Maier, in Standard and Public Policy, edited by
Victor Stango and Shane Greenstein, Cambridge
University Press, 2006, 345-371.
Anti-Competitive Contracts
in the UK Pay-TV Market, with David
Harbord, European Competition Law Review, March 2002, 23(3),
122-126.
Economic Models of Social
Learning, with Giuseppe
Moscarini, Chapter 11 in “Decisions, Games and Markets,” edited by Pierpaolo Battigalli, Aldo
Montesano and Fausto Panunzi,
Kluwer Academic Publishers, 1997, 265-298.
Teaching Cases
Cross Border Electricity
Trading and Market Design: The England-France Interconnector, with Roman
Inderst. [email me to receive the Teaching Note]
Overture and Google:
Internet Advertising Pay-Per-Click Auctions, with Andrew Ellam.
Policy Reports
Microeconomic
Assessment of the Home Buying Offer and Contract Process, with Roman
Inderst.