Asset quality uncertainty: risk management and learning.

Summary This thesis analyzes the economic impacts resulting from uncertainty about the quality of goods. The first chapter deals with goods whose quality is uncertain only for the producer. When a producer must determine the number of goods to produce without knowing which goods will be of good quality, his income is uncertain. Overproduction in relation to demand (by producing reserve goods) then appears as an instrument to manage these risks, this strategy being in effect a generalization of a self-protection strategy. The study of this strategy combined with an insurance strategy shows the complementarity of these two instruments. The second and third chapters of this thesis deal with goods whose quality is unknown to producers and consumers. There is then a problem of learning about the quality of these goods. In these two chapters, we want to show a strategic behavior of consumers, namely a waiting behavior to acquire information by observing the consumption of other agents. The objective of the second chapter is to analyze how this strategic behavior influences the pricing policies of two competing firms. We show that the possibility of such waiting behavior favors firms insofar as they can extract the surplus associated with the acquisition of information without waiting for this information. The use of option contracts is shown to be an effective instrument to induce waiting behavior. The third chapter analyzes the decision to introduce a new technology by a durable goods monopoly. In addition to the pricing instrument, the monopoly uses production as a vehicle for learning about the quality of its product. The monopoly can adopt a slow production rate to allow for the acquisition of information about its product, flood the market as soon as it judges that the learning is sufficient, or abandon production when the good is of too low quality.