Researcher: Usman, Ali Murat
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Usman, Ali Murat
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Publication Metadata only Litigation and settlement under judicial agency(Elsevier Science Inc, 2012) N/A; Department of Economics; Department of Economics; Koçkesen, Levent; Usman, Ali Murat; Faculty Member; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; College of Administrative Sciences and Economics; 37861; 100999We model the settlement of a legal dispute when the trial outcome depends on the behavior of a strategically motivated judge. A defendant, who is uninformed about the level of harm that he has caused, makes a take-it-or-leave-it offer to an informed plaintiff. If the parties cannot agree on a settlement and the case goes to trial, the judge decides how much effort to exert in discovering the actual damages. We show that, under very general assumptions, this model exhibits multiple equilibria. In some equilibria, the judge exerts less effort and more cases settle out of court, whereas in others the opposite occurs. We also show that the judge prefers the low effort equilibria with high settlement rate and argue that a "managerial judge" could easily steer the parties towards low effort equilibria. This may be deemed undesirable, since in low-effort equilibria, the terms of the settlement heavily favor the informed plaintiff, and this in turn induces over-investment in ex ante preventive care by the defendant.Publication Metadata only Price discrimination through multi-level loyalty programs(Springer, 2016) Department of Business Administration; Department of Economics; Sayman, Serdar; Usman, Ali Murat; Faculty Member; Teaching Faculty; Department of Business Administration; Department of Economics; College of Administrative Sciences and Economics; College of Administrative Sciences and Economics; 112222; 100999Loyalty programs often feature multiple rewards with different requirements; for instance, an airline offering a free domestic ticket for 10 K miles, and an international ticket for 20 K miles. This research focuses on the role of multi-level rewards as a segmentation and price discrimination mechanism: Multi-level rewards can increase firm profits when buyers differ in purchase frequency and/or time discount factor. We propose that a program with two rewards can be designed in such a way that (i) it is more profitable than a one-reward program, and (ii) buyers self-select. Light users prefer to receive the smaller reward two times over receiving the larger reward one time, even though the smaller reward is less than half of the larger reward. We show that the smaller reward helps the firm enlarge its base in the light user segment. We also compare multi-level programs with quantity discounts.Publication Metadata only Optimal debt contracts with renegotiation(M I T Press, 2004) Department of Economics; Usman, Ali Murat; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; 100999This paper studies the role of debt in committing a seller not to trade at a low price. We consider a discrete-time finite-horizon buyer-seller relationship. the seller makes an upfront relationship-specific investment, which is financed with debt. Debt then is repaid gradually to mitigate the hold-up risk. Even though debt is renegotiable, under the assumption that with a small probability renegotiation may fail and may lead to inefficient liquidation, debt still can be used as a commitment device. We solve for renegotiation proof dynamic debt contracts that are optimal for the seller and show that debt is repaid over the entire course of the relationship with declining repayments.Publication Metadata only Costly signal extraction and profit differentials in oligopolistic markets(Elsevier, 2000) Çağlayan, Mustafa; Department of Economics; Usman, Ali Murat; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; 100999Empirical evidence indicates that there can be persistent profit differentials between firms in an industry. We show that demand uncertainty and costly information acquisition by firms on market demand leads to significant profit differentials for intermediate levels of demand variability.Publication Metadata only Incompletely informed policymakers and trade policy in oligopolistic industries(Blackwell Publ Ltd, 2004) Caglayan, M; Department of Economics; Usman, Ali Murat; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; 100999We study strategic trade policy design when governments are incompletely informed about the market demand. Two symmetric, homogeneous product Cournot firms, one in each country, compete in a third country market. Contrary to what common sense would suggest, we show that if governments are less informed on the stochastic market demand both countries will be better off. Also contrary to findings in the literature, we show that when the government is partially informed, although quantity controls would be optimal for both high and low levels of demand uncertainty, subsidies are preferred for intermediate levels.Publication Metadata only Price discrimination through multi-level loyalty programs (vol 27, pg 687, 2015)(Springer, 2016) Department of Business Administration; Department of Economics; Sayman, Serdar; Usman, Ali Murat; Faculty Member; Teaching Faculty; Department of Business Administration; Department of Economics; College of Administrative Sciences and Economics; College of Administrative Sciences and Economics; 112222; 100999Loyalty programs often feature multiple rewards with different requirements; for instance, an airline offering a free domestic ticket for 10 K miles, and an international ticket for 20 K miles. This research focuses on the role of multi-level rewards as a segmentation and price discrimination mechanism: Multi-level rewards can increase firm profits when buyers differ in purchase frequency and/or time discount factor. We propose that a program with two rewards can be designed in such a way that (i) it is more profitable than a one-reward program, and (ii) buyers self-select. Light users prefer to receive the smaller reward two times over receiving the larger reward one time, even though the smaller reward is less than half of the larger reward. We show that the smaller reward helps the firm enlarge its base in the light user segment. We also compare multi-level programs with quantity discounts.Publication Metadata only Verifiability and contract enforcement: a model with judicial moral hazard(Oxford University Press (OUP) inc, 2002) Department of Economics; Usman, Ali Murat; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; 100999I model the litigation of a contract containing a variable not observable by courts, hence nonverifiable, unless the rational and self-interested judge exerts effort. He values the correct ruling but dislikes effort. Judicial effort is discretionary. I show that effort cost is inconsequential-"always breach" is equilibrium for any effort cost. But there exists another equilibrium where a small breach rate is achieved even with significant effort costs. Maximal remedies for breach are not optimal. Because effort is discretionary, low effort cost increases breach. Pretrial negotiations can have a substantial negative impact on verifiability under arbitrarily small deviations from full rationality.Publication Metadata only Commitment with renegotiable debt contracts and verifiable cash flow(Elsevier Science Sa, 2008) Department of Economics; Usman, Ali Murat; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; 100999We study a Buyer-Seller relationship with one-sided relationship-specific investment. Debt commits the Seller not to trade at a low price even though it is renegotiable, and the cash flow is verifiable.Publication Metadata only Bank lending with imperfect competition and spillover effects(Walter de Gruyter, 2006) Department of Economics; Department of Economics; Altuğ, Sumru; Usman, Ali Murat; Faculty Member; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; College of Administrative Sciences and Economics; N/A; 100999We examine bank lending decisions in an economy with spillover effects in the creation of new investment opportunities and asymmetric information in credit markets. We examine price-setting equilibria with horizontally differentiated banks. If bank lending takes place under a weak corporate governance mechanism and is fraught with agency problems and ineffective bank monitoring, then an equilibrium emerges in which loan supply is strategically restricted. In this equilibrium, the loan restriction, the "under- lending" strategy, provides an advantage to one bank by increasing its market share and sustaining monopoly interest rates. The bank's incentives for doing so increase under conditions of increased volatility of lending capacities of banks, more severe borrower-side moral hazard, and lower returns on the investment projects. Although this equilibrium is not always unique, with poor bank monitoring and corporate governance, a more intense banking competition renders the bad equilibrium the unique outcome.Publication Metadata only The role of lender behavior in international project finance(Springer, 2002) Altug, S; Ozler, S; Department of Economics; Usman, Ali Murat; Teaching Faculty; Department of Economics; College of Administrative Sciences and Economics; 100999A sovereign borrower seeks to raise funds internationally to finance a fixed-size project, which no single lender can finance alone. Lenders cannot lend more than their endowments, which are private information. A coordination failure arises; therefore, some socially desirable projects may not be financed, even if ex post feasible. There are multiple equilibria, and a conflict exists between lenders about which equilibrium to coordinate on. When endowments are volatile, some lenders prefer an equilibrium in which the project is financed with probability p < 1, even if ex post feasible. The government eliminates such equilibria by offering a sufficiently high return, only if endowment volatility is small.