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此贴6月10日下午3时前有效 （感谢各位帮忙！）
附件是原题，更清晰 Question 1 Take Tirole’s baseline model of Chapter 3 (fixed investment, two action, two outcomes – you have seen the game tree in class) (a) (terminology) (a1) How would you define the present value, net present value, and surplus of the project (both in case of low effort and high effort) (a2) As you know agency problems generally lead you away from a “Modigliani-Millar world”. In a general Principal-Agent setting with agency problems (e.g. moral hazard, asymmetric information) define what are meant by the first-best solution (=first-best outcome) and the second-best solution. Does the second-best solution always lead to an efficiency loss? (Why or why not?) (b) Argue why the “claim structure in the model is irrelevant”. (c) Argue why the (convenient) assumption that the cost of capital is 0% is an innocent assumption. (d) Argue how the (convenient) assumption of risk-neutrality is less innocent. Carefully discuss the implications of relaxing the assumption that the Entrepreneur/Insider is risk-neutral. (Continue to assume the Financier is risk-neutral. Feel free to try working out an example...) To the extent possible, use the terminology of (a) above to state your conclusions (e) Now let’s change the baseline model by assuming that in case of failure the firm’s return is 1 (instead of zero). Is the claim structure in the model still irrelevant. Argue whether or not the Modigliani-Miller Theorem is violated now. Question 2 (Asset substitution / risk-shifting) Like in question 1(e) above, assume in the baseline model that in case of failure the firm’s return is 1, instead of 0. Assume also that the project already has gone ahead and that the financier has a debt claim of D against the entrepreneur (who hold the equity). Assume furthermore that the entrepreneur has an oportunity to increase the riskiness of the investment (think of replacing the asset with another one; or taking a decision that makes the cash-flow of the existing project more risky). The decision to increase the risk is made before the entrereneur chooses her effect level, so before the moral hazard stage. (a) Model the choice to increase the riskiness of the project? Choose things in such a way that the expected cash-flows of the project remain the same. (b) Draw up the new game tree. (c) Show that in equilibrium the entrepreneur will indeed increase the riskiness of the project (use backward induction to solve the game). What happens to the expected payoff of the entrepreneur and the financier as the riskiness is higher? (d) The risk-shifting problem described by your answer to (c) is a phenomenon that benefits the entrepreneur ex post (i.e. after the contract is written). Demonstrate whether the entrepreneur also benefits ex ante? Assess also whether risk-shifting (as you modeled it above) affects the external finance capacity. (e) We assumed above that increasing the riskiness of the project did not affect the expected returns of the project. Suppose that the higher risk project had lower expected returns, but that the entrepreneur would still have the incentive to increase the risk ex post. Show that it would be in the interest of the entrepreneur to commit not to increase the riskiness of the project ex post. What is the form of such a commitment in reality? Give specific examples. (hint: if need be, check out the website notes of HGT Chapter 16). (f) In the context of banking it is often reasonable to assume that the terms of the loan of the bank (i.e. D above) do not change in light of the risk-shifting problem. At the same time banks are probably firms that have very abundant opportunities to shift risk (opportunities which they actually also use at times). Clarify this market failure (i.e. the failure to price the loan appropriately). |
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