Presenting “Can Media Pluralism Be Harmful to News Quality?” at 16:00-17:30 QA 406
On 22 February 2022, we have Chistopher P. Stapenhurst of University of Edinburgh visiting us. He is going to give a seminar on “Lemons by design: sowing secrets that curb corruption” (with Andrew Clausen) at 16:00 in room QA406. Please help the organisers by registering in advance at email@example.com Registration is free. Event can only be attended with vaccination card.
Abstract: We study a problem in which a polluting firm can bribe an inspector to conceal evidence of illegal behaviour. We find that the best way to deter bribes involves paying secret rewards and sending secret clues. The regulator promises to pay a secret reward to either the firm or the inspector when evidence is reported; it then gives them different clues about who will be rewarded. These clues are carefully constructed to engineer the worst possible lemons problem in the market for concealment: each player only wants to conceal evidence if they believe that the other player is more optimistic about being rewarded. But they cannot both be more optimistic in equilibrium, so no concealment takes place. As well as deterring bribes cheaply, this scheme demonstrates the full extent of contagious adverse selection in a bilateral trade environment.