Private Information: Market Effects and Responses

Tue 18 July 2017

Programme

8:00 Breakfast
8:45 Director’s Introduction and Academic Briefing
9:00 Market Collapse and Screening (John Thanassoulis)
10:00 Syndicate Discussion
11:15 Signalling In Theory and Practice (John Thanassoulis)
12.15 Break, followed by Lunch at 12:30
1:15 Syndicate Discussion
2:15 Corporate Finance: Financial Policy and Firm Behaviour (John Thanassoulis)
3:15 Syndicate Discussion
4:30Providing Incentives Via Contract Design (John Thanassoulis
7:00 Drinks Reception followed by Dinner at 7:30
8:45 Evening Speaker: Lothar Ehring

Overview

When a simple market-based transaction takes place, a price determines the allocation of a good or service. Sometimes, however, what economists call “information asymmetries” may be present. This simply means that buyers and sellers may have private, price relevant, information about the product or service at the centre of the transaction. We begin the day exploring the impact of such private information on market outcomes. We demonstrate that such problems can negatively impact markets down leading to, for example, credit rationing and the misallocation of graduates to jobs and industries. This market problem is often addressed by ‘screening’ or by ‘signaling.’  Screening is a practice common in the insurance industry and we explore it in the first lecture. Signaling is the subject of the second lecture and underpins much of the practice of investor relations at major corporations.  In the third lecture, we turn to the problem of contracting. In contracting the private information arises after the contract is signed:  a worker must be incentivised to fully pursue her employer’s objectives. Or a firm must be incentivised to pursue the needs of her client. In the final lecture of the day we further develop the role of information asymmetries by focusing on one of its most important applications – corporate finance.  In this lecture we establish the core principles of corporate finance, namely, how the capital structure of a firm may generate value.

Lothar Ehring – European Commission

Lothar Ehring is Senior Expert in the European Commission’s Directorate-General for Trade, where he currently serves in the Legal Unit, after returning from a secondment to the European Commission’s Support Group for Ukraine (2014-1016). Before that, he served as the Assistant to the Deputy Director-General responsible for multilateral trade, legal affairs, trade defence instruments and bilateral trade relations with North America, Europe and its neighbours and Central Asia. 2003-2009, Lothar Ehring already served in the Unit that is responsible for Legal Aspects of Trade Policy. Prior to his appointment to the European Commission, Lothar Ehring briefly worked as Legal Affairs Officer in the Legal Affairs Division and the Appellate Body Secretariat of the World Trade Organization in Geneva on dispute settlement cases. He graduated in law from the University of Passau in Germany, holds the German qualification for the judicial office and a Master of Public Administration from Harvard University.

John Thanassoulis – Warwick University

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John is a Professor of Financial Economics at Warwick University Business School. Until 2013 he was a University Lecturer in Economics at Oxford and also a former OUBEP senior tutor. John is a member of the UK Competition Commission Academic Panel, Treasurer of the Blackfriars Overseas Aid Trust (charity number 288585), and was a Non-Executive Director of Oxford Investment Partners (OXIP) until its successful acquisition. John was educated at both Oxford and Cambridge, studying Mathematics followed by Economics. John is an economic theorist specialising in the scientific analysis of strategic decision making. He applies these tools to the fields of Executive Pay, Finance and Financial Stability, and Industrial Organization. His current major research projects include the link between bankers’ pay and financial stability; the case for forced deferral of executive bonuses; credit constraints and firm performance; the analysis of strategic pricing for example in multimedia markets; buyer and supplier power in supermarket supply chains; and the analysis of consumer bargaining. After completion of his academic studies, and before returning to academia in 2004, John worked first in the telecommunications industry and then as an antitrust consultant. His antitrust and strategy work has covered sectors including finance, advertising, fmcg and transport. He explains current economic issues on radio and TV.