Essays on games with incomplete information

This dissertation consists of three essays on games with incomplete information. Among many issues that arise due to information asymmetry, I focus on, and shed some lights on, commitment, reputation, and information transmission. In Chapter 1, I investigate the effects of commitment and reputation in the classic dynamic durable goods monopoly setting. It is well-known that the Coase conjecture holds in the underlying environment, that is, the monopolist offers the competitive price immediately and there is no delay. I observe that a key to the Coase conjecture is the monopolist\u27s inability to commit to price, which leads consumers to believe that a high current price will be followed by low future prices. This paper studies the robustness of the Coase conjecture with respect to these beliefs of consumers. In particular, there is uncertainty over whether the monopolist is committed to a price (i.e. she may be a commitment type). Consequently, consumers are no longer certain that the price will change over time. I consider two kinds of commitment types. A behavioral commitment type charges an exogenously given price, while the rational commitment type optimally chooses a price. I show that the Coase conjecture is robust with regard to uncertainty over the monopolist\u27s commitment. When the probability of behavioral types is sufficiently small, as in the original Coase conjecture, the monopolist earns the competitive profit. When the probability of behavioral types is positive, unlike in the original Coase conjecture, there will be positive delay. But the delay disappears as the probability approaches zero. When the commitment type is rational, unless the probability of the commitment type is sufficiently high, both the normal and committed monopolists charge the competitive price, and thus there is no delay. In Chapter 2, I explore the possibility of endogenous segmentation in a market where asymmetric information about the quality of goods may result in only low-quality goods trading (lemons problem). I consider a model in which there are multiple ex ante identical submarkets, agents costlessly choose a submarket to join, and exchange takes place in each submarket. In a submarket, each buyer randomly selects a seller and makes a take-it-or-leave-it offer. I demonstrate that a market suffering from the lemons problem can be endogenously segmented and high-quality goods, that cannot trade without segmentation, do trade with segmentation. The result has implications for applied works, such as the structure of multiple marketplaces or platforms, the informativeness of costless advertisement for experience goods, and the role of non-binding list prices in decentralized markets. In Chapter 3, together with Jonathan Pogach, I examine the effects of commitment on information transmission. We study and compare the behavioral consequences of honesty and white lie in communication. An honest agent is committed to telling the truth, while a white liar may manipulate information but only for the sake of the principal. We identify the effects of honesty and white lie on communication and show that, even though a white lie is intended to be beneficial to the principal, the principal is often better off with a possibly honest agent than with a potential white liar. This result provides a fundamental rationale on why honesty is thought to be an important virtue in many contexts