Konstantinos Tokis
PhD Candidate

The London School of Economics
and Political Science
Department of Economics
Houghton St
London WC2A 2AE

Office:    32L.4.08F

Contact: k.e.tokis@lse.ac.uk

Curriculum Vitae

Research Interests:

Microeconomic Theory
Corporate Finance
Public Finance and Tax Compliance

Job Market Paper:

Mechanism and information design with third parties:
The case of imperfectly correlated types

This paper studies the information provision problem of an entry principal Pa contracting with an agent, whose post contractual payoff is generated by her interaction with a second principal Pb. The agent's type is his private information and it evolves according to an exogenous Markov matrix. Pa's offer to the agent describes the nature of the information that the former will share with Pb. I show that under static types no information provision is optimal for Pa. However, if the agent's type evolves stochastically, then this is not true for some subset of parameters. In addition, if the first contract lasted for more than one period, then sharing some information with Pb is optimal for almost every parametric choice. Finally, a sufficient condition for implementation is identified, and it is shown that this may bind for informative signals.

Work In Progress:

Employment Contracts and References with Dynamic Private Types

An entry principal makes a take-it-or-leave-it offer to an agent, whose ability is his private information. This is either high or low and it multiplies the productivity of the match, which follows a Geometric Brownian motion. The agent's contract under the entry principal specifies the conditions of its termination. Following a termination, a second principal makes a new offer to the agent. The agent's ability under the second principal is correlated to his initial ability, which makes the information revealed in the first contract valuable. This specifies the quality of his reference, i.e. the informativeness of the signal that his former employer will provide to the latter. This is allowed to depend on his reported type. The optimal contract for the entry principal is derived. This entails perfect, some, or no information provision, depending on her prior on the agent's type and the probability transition matrix. Some results are also provided on the optimal termination time of the first contract.

The effect of Market Conditions and Career Concerns in the Fund Industry

Joint with Dimitri Papadimitriou and George Vichos

Two fund managers compete in two consecutive periods to attract a continuum of potential investors. The manager's alpha, defined as her ability to generate idiosyncratic returns, is her private information and it is either high or low. In each period, a manager receives a private signal on the potential performance of her alpha, and she also obtains some public news on the market's condition. The investors observe her decision to follow a market neutral strategy, or an index tracking one. It is shown that the former always results in a loss on reputation, which is also reflected on its fund flows. This loss is smaller in bull markets, when investors expect more managers to use high beta strategies. As a result, a manager's performance in bull market is less informative about her ability than in bear markets, because a high beta strategy does not rely on it. We empirically verify that fund flows of funds that follow high beta strategies are less responsive to the fund's performance from those that follow market neutral strategies.

Project in Early Stages:

The Effect of Taxation on Reported Employment and Income: Evidence from Greece

Joint with Panos Mavrokonstantis

A search and matching model with heterogeneous workers and homogeneous firms is developed in order to explain how the presence of taxation influences incentives to report income and employment. Both firms and workers are risk-neutral. Workers differ due to their ability, which is observable. A match's supply of labour is endogenously chosen to maximise its surplus, as is the amount of the match's income which is reported and taxed. Workers with low ability remain unemployed, while those with intermediate levels of ability form matches but remain in the shadow economy, hence they are also counted as unemployed in the official statistics. High productivity matches will join the formal economy, however they will still under-report their produced income. Kinks on the taxation of both the firm and the worker will create bunching on reported income. In particular, matches will bunch both at the minimum wage, and at large convex kinks in the tax schedule. While the latter can be attributed to optimal labour supply choices, the former arises due to tax evasion. We have already received some preliminary administrative Data from the Greek Ministry of Finance and we have filed a request for a more complete dataset.