Kellogg School of Management
2001 Sheridan Road
Evanston, IL 60208-2013
Email: m-ottaviani AT northwestern DOT edu
Phone: +1 847-467-0684
Fax: +1 847-467-1777
This page collects links to my papers:
Recent Working Papers
How should a principal provide agents with incentives to conduct sequential search?
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.
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.
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.
Comparison of equilibrium outcomes in parimutuel and fixed-odds competitive markets with privately informed bettors.
Characterization of equilibrium in Hotelling location model with private information, with applications to strategic forecasting and political economy.
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.
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?
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.
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.
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 pricing by a monopolist selling to buyers who learn from each other’s purchases, with implications for herd behavior and welfare.
Strategic implications of risk sharing in mergers, with predictions for the method of payment used (cash versus shares).
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.
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.
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.
Conceptual and empirical framework for evaluating policies for the transition from analogue to digital television.
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.
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.
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.
Only temporary informational cascades can arise if the state of the world is changing stochastically over time during the learning process.
Older Working Papers
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.
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.
Cross Border Electricity Trading and Market Design: The England-France Interconnector, with Roman Inderst. [email me to receive the Teaching Note]