Konstantinos Tokis
PhD Candidate

London School of Economics
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
Mechanism Design
Corporate Finance

Expected Graduation Date:

April 2018

Job Market Paper:

A Mechanism Design Approach to the Optimal Disclosure of Private Client Data

This paper studies the incentives of a seller to voluntarily disclose or sell information about a buyer to a third party. While there are obvious benefits to sharing information with other sellers, there is also an incentive cost which is due to her learning about the buyer through her own trade with him. To study this trade-off we analyse a model in which a buyer interacts sequentially with two sellers, each of whom makes a take-it-or-leave-it offer. The buyer learns his valuation for the good of each seller sequentially but these might be correlated. In addition, we model information disclosure using Bayesian persuasion, that is we allow the first seller to commit to a disclosure rule which depends on the information she acquires in the first trade. In this setting we fully characterise the first seller's costs and benefits of information sharing. In particular, we show that voluntary information disclosure, or selling of information, is optimal when the correlation between the buyer's valuations for the two goods is not too positively correlated. Also, when information exchange is optimal the buyer benefits from it if his valuations are positively correlated, otherwise he is worse off.

(Online Appendix)

Other Papers:

The effect of market conditions and career concerns in the fund industry

Joint with Dimitri Papadimitriou and George Vichos

A continuum of potential investors allocates funds in two consecutive periods between a manager and a market index. 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 latter 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.

Dynamic contracting and termination: CEO compensation and golden parachutes

Working paper

A representative investor proposes a contract to a manager. If accepted this also specifies the conditions under which it is terminated. Production is a function of the manager's ability and effort, both of which are his private information. The former is a choice variable, whereas the latter follows a Geometric Brownian motion. After the termination of this contract, the manager receives an exogenous payoff from a managerial labour market. This depends on both the manager's reputation and his ability when entering it. We demonstrate that the investor's revenue maximisation problem encompasses an optimal stopping problem, the solution of which is a cutoff on the manager's reported ability. We calculate this cutoff in closed-form. We use this to show that if the production process is sufficiently efficient, an initially more competent manager will be given a more lenient contract. In addition, we demonstrate that the higher the weight that the market puts on the manager's actual ability vs his reputation, the less able the manager is when entering this market, and the longer the expected duration of his contract. We present a contract that implements the optimal stopping time, this uses a golden parachute to induce the manager to admit his incompetence.