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Pastine, Ivan
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Pastine, Ivan
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Pastine, Ivan
Research Output
Now showing 1 - 10 of 14
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Publication
Coordination in markets with consumption externalities : the role of advertising and product quality
2005-07, Pastine, Ivan
This paper studies advertising in vertically differentiated product markets with positive consumption externalities. In markets with consumption externalities, the value of the product to the consumer depends on the purchasing decisions of other consumers. In such markets, we show that firms will engage in advertising competition in order to convince consumers of their popularity only as long as they produce goods of similar quality. The firm with the lower quality product will have a greater incentive to advertise. If it is not the brand to provide the greater consumption externality it will have very low market share due to its low intrinsic quality. Hence, in equilibrium, the lower quality product will often be more popular. This provides an additional explanation for the empirical observation that in some markets high quality is associated with lower levels of advertising.
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Signal accuracy and informational cascades
2006-11, Pastine, Tuvana, Pastine, Ivan
We extend the Bikhchandani, Hirshleifer and Welch (1992) informational cascade framework to allow for asymmetric signal accuracy. Simulations demonstrate that even
small departures from symmetry may lead to non-monotonic effects of signal accuracy
on the likelihood of an inefficient cascade.
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On Nash Equilibria in Speculative Attack Models
2016-09, Pastine, Ivan
Since a fixed exchange rate regime is a fixed price system, there is no theoretical reason to presume that the foreign exchange market clears, particularly during a speculative attack. This paper shows that equilibria where we allow for the possibility of such corner solutions are a superset of the previously examined “market-clearing” equilibria. The timing of the balance-of-payments crisis is no longer predictable in the same sense – multiple equilibria exist even in the very simplest speculative attack model.
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Social learning in continuous time : when are informational cascades more likely to be inefficient?
2006-11, Pastine, Ivan, Pastine, Tuvana
In an observational learning environment rational agents may mimic the actions of the predecessors even when their own signal suggests the opposite. In case early movers’ signals happen to be incorrect society may settle on a common inefficient action, resulting in an inefficient informational cascade. This paper models observational learning in continuous time with endogenous timing of moves. This permits the analysis of comparative statics results. The effect of an increase in signal
quality on the likelihood of an inefficient cascade is shown to be nonmonotonic. If agents do not have strong priors, an increase in signal quality may lead to a higher probability of inefficient herding. The analysis also suggests that markets with quick response to investment decisions, such as financial markets, may be more prone to inefficient collapses.
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Comment on : Electoral Contests, incumbency advantages, and campaign finance
2009-09, Pastine, Ivan, Pastine, Tuvana
This paper completes Meirowitz (2008) by analyzing the effect of a
cap on political campaign spending in an environment where voters
have initial preferences over political candidates. The policy implications
are starkly different from the previously analyzed case where
voters are indifferent between candidates in the absence of campaign
spending. We find that a spending cap always favors the a priori
popular candidate. This result holds irrespective of whether it is the
incumbent or the challenger who is able to more effectively generate
and spend contributions.
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Equilibrium existence and expected payoffs in all-pay auctions with constraints
2022-05-30, Pastine, Ivan, Pastine, Tuvana
This paper introduces constraints on player choices in a broad class of all-pay auctions by allowing for upper bounds on players’ strategy sets. It proves the existence of equilibrium and derives simple closed-form formulae for players’ expected payoffs in any equilibrium. These formulae are straightforward to calculate in applications and do not require the derivation of the equilibrium or equilibria. This may be useful because: (i) In some applications players’ expected payoffs are the main item of interest. For example, one may be concerned about the effect of a policy on the market participants. In these cases the results can be used directly, bypassing the need for the full derivation of the equilibrium. (ii) In all-pay auctions, equilibrium is typically in mixed strategies. So in applications where the full characterization of the equilibrium is of interest, finding the players’ expected payoffs is a crucial first step in the derivation of the equilibrium.
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Student incentives and diversity in college admissions
2009-09, Pastine, Ivan, Pastine, Tuvana
This paper examines student incentives when faced with a college admissions policy which pursues
student body diversity. The effect of a diversify-conscious admissions policy critically depends on
the design of the policy. If the admissions policy fails to incentivize students from a disadvantaged
socioeconomic background it may lead to a deterioration in the intergroup score gap while failing to
improve student body diversity in equilibrium.
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All-pay contests with constraints
2012-02, Pastine, Ivan, Pastine, Tuvana
This paper provides simple closed form formulae for players’ expected payoffs in a broad class of all-pay contests where players may have constraints on their actions.
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Consumption externalities, coordination and advertising
2001-06, Pastine, Ivan
The aim of this Paper is to demonstrate that advertising can have an important function in markets with consumption externalities, apart from its persuasive and informative roles. We show that advertising may function as a device to coordinate consumer expectations of the purchasing decisions of other consumers in markets with consumption externalities. The implications of advertising as a coordinating device are examined in the pricing and advertising decisions of firms interacting strategically. While, at times, the one period advertising expense can exceed the one period monopoly profit, in equilibrium consumers will pay a premium for the more heavily advertised brand.
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Political campaign spending limits
2010-10, Pastine, Ivan, Pastine, Tuvana
Political campaign spending ceilings are purported to limit the incumbent's ability to exploit his fundraising advantage. If the challenger does not have
superior campaign effectiveness, in contrast to conventional wisdom, we
show that the incumbent always benefits from a limit as long as he has an
initial voter disposition advantage, however small and regardless of the
candidates’ relative fundraising ability. If the challenger has higher campaign
spending effectiveness, the effect of limits may be non-monotonic. If the
incumbent enjoys a mild initial voter disposition advantage, a moderate limit
benefits the challenger. Further restricting the limit favours the incumbent.
Stricter limits may lead to the unintended consequence of increased expected
spending.