# Browsing by Subject "Economic theory"

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Item Open Access Approximately Optimal Mechanisms With Correlated Buyer Valuations(2013) Albert, Michael JosephCremer and McLean 1985 shows that if buyers valuations are suciently correlated, there is a mechanism that allows the seller to extract the full surplus from the buyers. However, in practice, we do not see the Cremer-McLean mechanism employed. In this thesis, I demonstrate that one reason that the Cremer-McLean mechanism

is not implemented in practice is because the mechanism requires very precise assumptions about the underlying distributions of the buyers. I demonstrate that a small mis-estimation of the underlying distribution can have large and signicant effects on the outcome of the mechanism. I further prove that the Cremer-McLean mechanism cannot be approximated by a simple second price auction, i.e. there is no approximating factor when using a second price auction with reserve in either outcome or expectation for the Cremer-McLean mechanism. Further, I show that there is no mechanism that approximates the Cremer-McLean mechanism for bidders with

regular distributions in a single item auction if the correlation among buyers is not considered. Finally, I introduce a new mechanism that is robust to distribution mis-estimation and show empirically that it outperforms the Cremer-McLean mechanism on average in cases of distribution mis-estimation and I show that the mechanism can

be determined in polynomial time in the number of types of the buyers.

Item Open Access Auctions, Equilibria, and Budgets(2012) Bhattacharya, SayanWe design algorithms for markets consisting of multiple items, and agents with budget constraints on the maximum amount of money they can afford to spend. This problem can be considered under two broad frameworks. (a) From the standpoint of Auction Theory, the agents valuation functions over the items are private knowledge. Here, a "truthful auction" computes the subset of items received by every agent and her payment, and ensures that no agent can manipulate the scheme to her advantage by misreporting her valuation function. The question is to design a truthful auction whose outcome can be computed in polynomial time. (b) A different, but equally

important, question is to investigate if and when the market is in "equilibrium",

meaning that every item is assigned a price, every agent gets her utility-maximizing subset of items under the current prices, and every unallocated item is priced at zero.

First, we consider the setting of multiple heterogeneous items and present approximation algorithms for revenue-optimal truthful auctions. When the items are homogeneous, we give an efficient algorithm whose outcome defines a truthful and Pareto-optimal auction. Finally, we focus on the notion of "competitive equilibrium", which is a well known solution concept for market clearing. We present efficient algorithms for finding competitive equilibria in markets with budget constrained agents, and show that these equilibria outcomes have strong revenue guarantees.

Item Open Access Dynamic Mechanism Design in Complex Environments(2020) Deng, YuanInspired by various applications including ad auctions, matching markets, and voting, mechanism design deals with the problem of designing algorithms that take inputs from strategic agents and return an outcome optimizing a given objective, while taking the strategic behavior from the agents into account.

The focus of this thesis is to design mechanisms in dynamic environments that take into account rich constraints (e.g., budget constraints), features (e.g., robustness and credibility), and different types of agents (e.g., utility-maximizing agents and learning agents). Two main reasons why dynamic mechanism design is hard compared to mechanism design in a static environment are the need to make decisions in an online manner while the future might be unpredictable or even be chosen by an adversary arbitrarily, and the need to cope with strategic agents, who aim to maximize their cumulative utilities by looking into the future.

We propose a framework to design dynamic mechanisms with simple structures for utility-maximizing agents without losing any optimality, which facilitates both the design for the designer and the participation for the agents. Our framework enables the design of mechanisms achieving non-trivial performance guarantees relative to the optimal mechanism that has access to all future information in advance, even though our mechanisms are not equipped with any knowledge about the future. We further develop a class of dynamic mechanisms that are robust against estimation errors in agents' valuation distributions, a class of dynamic mechanisms that are credible so that the designer is incentivized to follow the rules, and a class of dynamic mechanisms for learning agents. In addition to dynamic mechanism design frameworks, we develop statistical tools to test whether a dynamic mechanism has correctly aligned the agents' incentives, and to measure the extent of the misalignment if it exists.

Item Open Access Eliciting and Aggregating Forecasts When Information is Shared(2016) Palley, AsaUsing the wisdom of crowds---combining many individual forecasts to obtain an aggregate estimate---can be an effective technique for improving forecast accuracy. When individual forecasts are drawn from independent and identical information sources, a simple average provides the optimal crowd forecast. However, correlated forecast errors greatly limit the ability of the wisdom of crowds to recover the truth. In practice, this dependence often emerges because information is shared: forecasters may to a large extent draw on the same data when formulating their responses.

To address this problem, I propose an elicitation procedure in which each respondent is asked to provide both their own best forecast and a guess of the average forecast that will be given by all other respondents. I study optimal responses in a stylized information setting and develop an aggregation method, called pivoting, which separates individual forecasts into shared and private information and then recombines these results in the optimal manner. I develop a tailored pivoting procedure for each of three information models, and introduce a simple and robust variant that outperforms the simple average across a variety of settings.

In three experiments, I investigate the method and the accuracy of the crowd forecasts. In the first study, I vary the shared and private information in a controlled environment, while the latter two studies examine forecasts in real-world contexts. Overall, the data suggest that a simple minimal pivoting procedure provides an effective aggregation technique that can significantly outperform the crowd average.

Item Open Access Essays in Decision Theory(2019) Wang, MengkeThis dissertation consists of three essays in decision theory. The first chapter is an introduction. The second chapter studies individual decision making when deadlines are random. Since the quality of any decision relies on information and it takes time to gather information, a decision maker should have a preference over deadlines as well as over menus. Past research studies rationally inattentive decision making without deadlines. It is established that a decision maker’s informational constraint is revealed by her distaste for contingent planning. This paper extends the analysis to random deadlines and establishes the relationship between a decision maker’s preference over timed choice problems and the set of information acquisition paths she has available.

It is demonstrated that if a decision maker’s preference over random deadlines satisfies the von Neumann-Morgenstern independence axiom, then it is as if the decision maker’s optimal way to acquire information depends only on the menu she is presented with and is independent of the deadline. Moreover, if no information is lost along any path then the decision maker’s distaste for contingent planning becomes weaker as she is allowed more time to decide. The third chapter studies strategic situations where a population of heterogeneous players are randomly matched with each other to play games with strategic substitutes and players have incomplete information about their opponents' private types. If players hold type-independent beliefs about their opponents' types, then in equilibrium players' actions are monotonic with respect to their types. Since players' private types are often not observable to the analyst, to understand what kind of observable behavior can be explained by this model, a representation result is established for this model when the analyst observes how the population behaves on an aggregate level. Of course, a model with type-independent beliefs may not be justified, since types could be correlated in many applications. Moreover, in experiments where individuals are randomly matched to play games with strategic substitutes, they report systematically heterogeneous conjectures about their opponents' actions: Players who act more aggressively also conjecture that their opponents would act more aggressively. This not only contradicts the type-independent belief model, but is also counterintuitive because in games with strategic substitutes, opponents' aggressive behavior discourages players from playing aggressively. A model is then proposed where players have self-similar beliefs. It captures the intuition that higher types believe that their opponents are also of higher types and fits the experimental observations. One important and surprising result is that models with type-independent beliefs and self-similar beliefs are observationally equivalent for many payoff parameters, that is they have identical behavioral implications.

Item Open Access Essays in Macroeconomics(2018) Chen, LinxiThis dissertation consists of my essays in macroeconomics. In the first essay, I develop a new general equilibrium model to explain several facts about aggregate inventory that are challenging to existing inventory models. This work highlights the importance of taking into account consumers' search behavior in understanding aggregate inventory dynamics. In the second essay, I adapt a Markov-switching vector autoregression (MS-VAR) to uncover detailed asymmetries embedded in inventory dynamics. This work further demonstrates the shortcomings of existing inventory models and points to new directions in improving inventory models.

Item Open Access Essays in Microeconomic Theory(2022) Liu, EricaThis dissertation consists of three main chapters - chapter 2, 3, and 4. These are different research problems studying the use of information. In chapter 2, we study a mechanism design problem where the Principal hires two agents to inspect a product, the quality of which is uncertain. The main research question we ask is the comparison of the inspection protocols. We found the optimality of sequential inspection among the protocols considered. We then extend the analysis to allow agents to differ and try to understand which is the better to order the agents when using the sequential protocol. In chapter 3, we study an information design problem where a present biased agent could commit to an information choice to help herself to save more that she would have. We provide a full characterization of the optimal information choice for a risk averse present biased agent. After that, as an effort to further understand the interaction between risk aversion and present bias, we introduce the EZKP framework and find a counterexample where risk aversion itself has no impact on the form of the information choice in a special case where the elasticity of the intertemporal substitution is fixed. In chapter 4, we study an information design in games problem where a designer chooses information for the agents to induce joint effort. We provide two examples illustrating the relative strength of two prominent constructions of the optimal information structure in the literature.

Item Open Access Essays on Allocation Problems(2022) Grigoryan, AramScarce resources are oftentimes allocated in a centralized clearinghouse based on individuals' reported preferences and objects' priorities. Prominent examples include public school assignment, allocation of dormitories, office spaces, allocation of organs to patients waiting for organ transplantation, and most recently, administration of COVID-19 vaccines. This dissertation develops and studies equitable and efficient allocation mechanisms without monetary transfers.

Chapter 2, which is a joint work with Atila Abdulkadiroglu, addresses the trade-off between efficiency and respecting priorities. We show that finding an efficient allocation that minimizes priority violations is an NP-hard problem when objects have weak priority rankings. Consequently, we focus on finding priority violations minimal mechanisms in subsets of efficient mechanisms, namely, sequential dictatorships and hierarchical exchange rules. Both classes are widely studied in the literature and applied in real-life resource allocation problems. We provide polynomial-time mechanisms that minimize priority violations in each of these classes. %Additionally, we study the possibility of minimizing priority violations in the entire class of efficient and strategyproof mechansims. We show that none of the well-known efficient and strategyproof mechanisms, such as hierarchical exchange rules or trading cycles mechanisms minimize priority violations in that class.

Chapter 3, which is also a joint work with Atila Abdulkadiroglu, studies diversity and distributional objectives in allocation problems. First, we study a single school's problem of choosing a set of applicants to be assigned to the school. We provide an axiomatic characterization of a general class of choice rules where distributional objectives are met through type-specific reserves and quotas. We show that a particular intuitive implementation of a reserves- and quotas-based rule, which we call the regular reserves-and-quotas rule, uniquely minimizes priority violations in this class. Next, we study a general setup with multiple schools. We show that when all schools use the regular reserves-and-quotas rule, the Deferred Acceptance mechanism minimizes priority violations in a large class of mechanisms that satisfy the distributional constraints.

Chapter 4 evaluates the welfare and distributional outcomes of the Deferred Acceptance mechanism in a unified framework with school choice and a housing market. In my model, families' strategically choose where to live before going through a school admission process. I show that when families receive higher priorities at neighborhood schools, the Deferred Acceptance mechanism improves aggregate or average welfare compared to neighborhood assignment. Additionally, under general conditions, the Deferred Acceptance mechanism improves the welfare of lowest-income families, both with and without neighborhood priorities. To the best of my knowledge, my work provides the first theoretical justification for using the Deferred Acceptance mechanism on the grounds of welfare and equity in a general matching model with residential choices.

Item Open Access Essays on Constrained Information Acquisition(2023) Sassano, TaishiThis dissertation explores the theory of constrained information acquisition and its application. I will provide theoretical models to study how economic agents who are facing limited ability to process information acquire information and how the information acquisition affects the trade mechanism in binary trades.

First, I study a dynamic information acquisition problem of an individual who faces a limited ability to process information. The individual acquires information to predict a payoff-relevant state such as the market condition in two periods. I characterize the optimal information structure and discuss how we can identify the discount factor and the information capacity. Under the optimal information acquisition, he uses three types of learning strategies depending on how certain he is about the state. In addition, I will provide two ways to identify the discount factor and the information capacity from the observed data.

Second, I will explore an application of the costly information acquisition model. I study a trade model where buyers costly acquire information about a good and a seller offers menus of an upfront fee and a strike price to screen the buyers’ ability to process information in order to differentiate the buyers. I first provide the buyer's optimal information acquisition problem and then the seller's optimal selling mechanism. The willingness to pay for the strike price depends on the ability to process information. The seller offers a higher strike price to a buyer with higher ability and a higher participation fee to extract the surplus.

Item Open Access Essays on Costly Charitable Fund-raising(2013) Name-Correa, AlvaroIn this dissertation I present a theory of charitable fund-raising in which it is costly to solicit donors. The second chapter shows how optimizing fund-raisers will affect the equilibrium level of contributions, determine the set of givers, respond to government grants, and behave in the limit in replicator economies. The third chapter characterizes optimal fund-raising when the fund-raiser learns to become a more efficient solicitor through experience. This chapter also introduces a notion of excessive fund-raising and it shows how this is affected by learning.

Item Open Access Essays on Decision Theory(2020) Dong, JiayunDecision problems could involve comparisons of alternatives according to different aspects. An alternative may be more desirable than another alternative in some of the aspects, yet less desirable in others. The multi-dimensional comparisons between alternatives requires a high degree of rationality -- the ability to make systematic trade-offs across aspects.

Limited ability to make such trade-offs could lead to the default bias, the tendency of choosing the default regardless of the presence of a better one. In dynamic decision problems, default bias causes a novel trade-off between the current consumption and the flexibility to switch in the future. An asset replacement problem and a contract design problem involving decision makers with default bias are studied.

A decision maker may resort to market information to better understand the right trade-off to make in multi-aspects comparisons between alternatives. When the market composition of products that features different aspects carry relevant information regarding the trade-offs, the decision maker’s choices between two products could be affected by the presence of other alternatives. Learning from markets explains violations of the properties of classic random utility maximization models.

Normatively appealing decision rules are proposed for each of the scenarios of multi-dimensional comparisons. A choice rule imposes behavioral conditions that the choice data must satisfy if the data is generated by such a rule. The essays in the dissertation identify the behavioral conditions that characterize the proposed choice rules: When the decision maker’s behaviors satisfy those conditions, the behaviors can be interpreted as if they are made according to the choice rule.

The dissertation distinguishes itself from some of the existing literature in that the set of attributes that a decision maker considers in her comparisons is not assumed to be observable. Instead, they can be uniquely identified from the choice behaviors. It extends the current understanding of some behavioral anomalies to a richer domain and proposes novel explanations of them.

Item Embargo Essays on Decision Theory and Information Economics(2023) Wang, ZichangThis dissertation consists of three chapters. Chapter one is a study in decision theory that analyzes regret and information avoidance. Chapter two is a study in information theory that characterizes the comparison of ambiguous information. Chapter three discusses a persuasion model with a constrained sender.

In chapter one, we study regret and information avoidance. Empirical evidence suggests that individuals selectively avoid information, depending on a relevant past choice or lack thereof. We address these findings by studying an agent whose choice behavior can be modeled as if she trades off two conflicting effects of information. The first is a psychological cost from the regret about past choices that are revealed to be suboptimal by the information, whereas the second is the instrumental value of information for making better-informed choices in the future. The primitive of our study is the agent's preference over pairs consisting of a set of menus and an information structure. A set of menus captures a three-period decision problem. Our main axioms reflect the agent's desire to limit her options in period one and to have more flexibility in period two. We posit axioms that connect the agent's consumption choice and information choice. A subjective version of the model is examined where the agent's information choice is not observable. We show that all parameters in both versions of the model can be uniquely identified from the choice behavior.

In chapter two, we study informativeness orders over ambiguous information structures. We generalize Blackwell (1951)'s informativeness order to ambiguous experiments. The ambiguity in experiments is rooted in a lack of understanding about their probabilistic content. Formally, an ambiguous experiment is modeled as a mapping from an auxiliary state space to the set of unambiguous experiments. We show that one ambiguous experiment is preferred to another by every decision maker for every decision problem if and only if they are related by a condition called prior-by-prior dominance, which states that for any first-order belief the decision maker entertains on the auxiliary state space, the expected experiment resulting from this belief for the first experiment is Blackwell more informative than that of the second. This equivalence is robust across a wide range of ambiguity preferences. Comparisons of sets of experiments evaluated using the maxmin criterion are studied as a special case and are shown to result in a weaker informativeness order called Wald-more-informative, which states that for any Blackwell experiment in the convex hull of the first set of experiments, there exists another in the convex hull of the second set that is Blackwell less informative.

In chapter three, we study a Bayesian persuasion problem where the persuader's choices of signals are constrained. Specifically, we model this constraint as an alpha-constraint: Probabilities of any signal realization being sent out conditional on any state of the world are bounded by alpha and one minus alpha. Under this constraint, we extend the revelation principle style result in persuasion games by showing that considering the signal realization space to be subsets of the action space is without loss of generality. But it is possible that recommending a proper subset of all actions is uniquely optimal. This possibility contrasts the existing result that having the signal realization space equal to the action space can always be optimal. Based on the revelation principle, we give an algorithm to solve the general constrained persuasion problems. We also provide a characterization of feasible distribution over posterior beliefs for the binary-state-binary-action case, and a comparison of the alpha-constraint and other existing constraints on the signal space.

Item Open Access Essays on Delegation and Mechanisms(2018) Baranovskyi, VolodymyrThis dissertation consists of three theoretical essays on delegation and mechanism design.

Chapter 2 is co-authored with Attila Ambrus and Aaron Kolb. We investigate competition in a delegation framework. An uninformed

principal is unable to perform a task herself and must solicit proposals from two biased and imperfectly informed experts.

In the focal equilibrium, the principal seeks to offset the bias of the experts, but when the experts are motivated more by ideology

than career concerns, they increase the bias of their proposals in anticipation. Despite this ideological winner's curse, we show that having a second expert can benefit the principal, even if the two experts have the same biases or if the first expert is known to be unbiased. In contrast with other models of expertise, in our setting the principal prefers experts with equal rather than opposite biases.

The principal may also benefit from commitment to an ``element of surprise," making an ex post suboptimal choice with positive probability.

Chapter 3 is co-authored with Sergii Golovko. We study an auction environment in which after the sale, the seller has the opportunity to verify the winner's ex-post value and impose a limited punishment for "underbidding." Investigating how the seller should approach this opportunity, we show that even small penalties allow the seller to significantly increase her revenue. In our environment, the first-price auction with an optimally chosen penalty rule is optimal among all winner-pay auctions. Before the auction begins, the seller recommends a bidding strategy to the bidders. If the auction winner bids at least as much as the seller has suggested, the winner is not punished; if, on the other hand, the winner does not bid as much as has been recommended, he is punished, with the penalty increasing as the buyer deviates more and more from the recommendation. Our results indicate several qualitative differences from standard (without ex-post punishments) auctions. In equilibrium, buyers bid more aggressively; the optimal reserve price is lower; and the revenue-equivalence principle does not hold---we state conditions under which a first-price auction is superior to a second-price auction. Our results also lead us to suggest the following recommendation for policymakers: A government may increase its revenue when auctioning publicly owned assets by providing tax concessions to buyers who submit sufficiently high bids.

Chapter 4 is co-authored with Attila Ambrus. As in Chapter 2, principal is trying to solicit information from multiple, incompletely informed experts. However, here we allow for action choice (policy) and monetary transfers to be conditional on reports. Additionally, we investigate an environment in which monetary transfers may be conditioned on realized state (ex post state verification). In this context we can also allow for only one expert. With multiple experts, we investigate the case with no ex post state verification - monetary transfers are conditional on reports only. Under certain assumptions we show that expert can solicit all information from experts, extracting all surplus.

Item Open Access Essays on Dynamic Tournaments(2017) Wang, RuoyuThis dissertation studies dynamic tournaments and their economic and managerial implications from two different perspectives. The first half focuses on the optimal timing of information release when a tournament uses a feedback scheme, while the other half investigates the impact of the use of mercy rule in a dynamic tournament on the economic output and other system wide characteristics.

In Chapter 2, we study dynamic tournaments in which time is modeled explicitly, as opposed to with the abstract notion of ``periods.'' By doing so, we characterize the effects of the ex-ante-designated timing of an interim progress report. Whether or not a policy of reporting increases total expected effort does not depend on the release time of the report, however the magnitude of the effect does. We demonstrate that total expected effort is single-peaked or single-troughed in the report's release time depending on parameters, with the peak/tough located at a time strictly more than halfway through the tournament. However, a policy of releasing information always harms the expected utility of the tournament's participants. Implications for tournament design are discussed.

Chaper 3 explores dynamic tournaments in a continuous space and continuous

time framework, in which contestants can observe their opponents' progresses

in real time and have the opportunity to end the contest early when one's

lead over the other is larger than some pre-determined threshold (a.k.a a

mercy rule). We first show that the game has a unique equilibrium, then characterize

the equilibrium numerically, and investigate the impacts of mercy rules on

tournament design. By doing so, we find that there exists an optimal mercy

rule that induces the best economic output, even though players always prefer a

tournament without a mercy rule. Depending on the cost and noises

parameters, a non-monotonic mercy rule may perform better. We also consider

the scenario in which players prefer to end the game early because of

outside options and have the choice to drop out. Given an exogenous mercy

rule, this drop-out option endogenizes another boundary. And surprisingly,

the endogenous mercy rule is not always dominated by the exogenous rule in

terms of inducing efforts.

Item Open Access Essays on Endogenous Decision Points(2013) Landry, PeterThis dissertation explores the implications of endognenizing the times decisions are faced for intertemporal decision-making in a variety of contexts. Chapter 1 considers a standard, expected-utility maximizer whose preferences are inferred using standard protocols that influence the decisions that the agent considers. The treatment shows how these induced decision points," if unaccounted for, can produce illusions of well-known preference anomalies. Capturing the endowment effect, if receiving a good compels the agent to consider the decision to consume it, then the willingness-to-accept (WTA) in exchange for the received good exceeds the willingness-to-pay (WTP) prior to its receipt. If eliciting time-preferences -- i.e. being asked to evaluate an intertemporal tradeoff involving different quantities of the good -- likewise compels the agent to consider the consumption decision, present bias arises in the form of a measured quasi-hyperbolic discount function with present bias factor less than one. While reconciling the preference anomalies with core principles of standard utility theory, the results also suggest that the endowment effect and present bias | generally treated as distinct phenomena | are actually manifestations of an identical decision-purview effect. In fact, the elicited present bias equals WTP/WTA.

Chapter 2 introduces a framework for bad habits (namely, addiction) based on endogenous decision points -- i.e. the times a recurring decision is faced. Cravings are interruptive decision points that force an individual to consider consumption while inflicting a small opportunity cost. By extinguishing the craving, addictive consumption brings a brief vacation from unwanted decision points. The development of a habit is jointly characterized by a rising frequency and a rising per-decision level of consumption, matching behavioral patterns that standard habit-formation models do not address. Integrating external cues, modeled as random decision points, consumption routines become regimented as addiction develops. Occasional users are most responsive to cues, while addicts are comparatively immune. With peer consumption as a decision point, the group model predicts synchronized consumption, homogeneous self-sorting, and herd behavior | including imitation of a stray peer.

Chapter 3 complements the endogenous decision points theory of addiction of the previous chapter with a multidisciplinary survey of addiction research, organized and interpreted through the lens of the theory. In particular, I present evidence to support formalizations and results for the three decision point representations: internal cravings, external cues, and peer consumption. This chapter also discusses how the theory may help integrate key addiction concepts from other elds into economic formalism. For instance, I examine the physiological microfoundations of the interval function for cravings, and explain why it can be dierent for two products (e.g. cigarettes and chewing tobacco) that deliver the same product (nicotine). Further, I describe how transitions between abstinence and addiction can be motivated solely in terms of the endogenous interval function." Finally, I propose that the formal notion of cravings as decision points may shed light on three prominent symptoms of

Item Open Access Essays on Identification and Promotion of Game-Theoretic Cooperation(2018) Moon, CatherineThis dissertation looks at how to identify and promote cooperation in a multiagent system, first theoretically through the lens of computational game theory and later empirically through a human subject experiment. Chapter 2 studies the network dynamics leading to a potential unraveling of cooperation and identify the subset of agents that can form an enforceable cooperative agreement with. This is an important problem, because cooperation is harder to sustain when information of defection, and thus the consequent punishment, transfers slowly through the network structures from a larger community. Chapter 3 examines a model that studies cooperation in a broader strategic context where agents may interact in multiple different domains, or games, simultaneously. Even if a game independently does not give an agent sufficient incentive to play the cooperative action, there may be hope for cooperation when multiple games with compensating asymmetries are put together. Exploiting compensating asymmetries, we can find an institutional arrangement that would either ensure maximum incentives for cooperation or require minimum subsidy to establish sufficient incentives for cooperation. Lastly, Chapter 4 studies a two-layered public good game to empirically examine whether community enforcement through existing bilateral relationships can encourage cooperation in a social dilemma situation. Here, it is found that how the situation is presented matters greatly to real life agents, as their understanding of whether they are in a cooperative or a competitive, strategic setting changes the level of overall cooperation.

Item Open Access Essays on Information and Dynamic Incentives(2023) Kim, YonggyunThis dissertations consists of three essays on information and dynamic incentives.

In Chapter 1, I study the value of information in monotone decision problems where the action spaces are potentially multidimensional. As a criterion for comparing information structures, I develop a condition called monotone quasi-garbling meaning that an information structure is obtained by adding reversely monotone noise (more likely to return a higher signal in a lower state and a lower signal in a higher state) to another. It is shown that monotone quasi-garbling is a necessary and sufficient condition for decision makers to get a higher ex-ante expected payoff. Under the monotone likelihood ratio property, this new criterion is equivalent to the accuracy condition by Lehmann (1988) and refines the garbling condition by Blackwell (1951, 1953). To illustrate, I apply the result to problems in nonlinear monopoly pricing and optimal insurance.

In Chapter 2, I study a dynamic principal-agent problem where there are two routes of completing a project: directly attacking it or splitting it into two subprojects. When the project is split, the principal can better monitor the agent by verifying the completion of the first subproject. However, the inflexible nature of this approach may generate inefficiencies. To mitigate moral hazard, the principal needs to commit to a deadline, which also affects her choice of project management strategy. The optimal contract is determined by the interplay of these three factors: monitoring, efficiency, and an endogenous deadline.

Chapter 3, which is a joint work with Francisco Poggi, investigates firms' incentives to conceal intermediate research discoveries in innovation races. To study this, we introduce an innovation game where two racing firms dynamically allocate their resources between two distinct research and development (R&D) paths towards a final innovation: (i) developing it with the currently available but slower technology; (ii) conducting research to discover a faster new technology for developing it. We fully characterize the equilibrium behavior of the firms in the cases where their research progress is public and private information. Then, we extend the private information setting by allowing firms to conceal or license their intermediate discoveries. We show that when the reward of winning the race is high enough, firms would conceal their interim discoveries, which inefficiently retards the pace of innovation.

Item Open Access Essays on Information Economics(2019) Miami, YashaThis thesis contains essays on the economics of information. In particular it focuses on specific environments where groups of individuals are faced with both uncertainty and having their main source of information on the underlying state of the world being controlled by outside parties with their own agenda. The goal of this thesis is to characterize the equilibrium behavior and examine the welfare implications of having outside parties controlling the group's information structure. The first chapter studies the coordination and free-riding problem commonly found in the private provision of a public good and how a fundraiser can help alleviate the issues by designing information structures that determine the donors' behavior. And the second chapter studies a duopoly model where the firms invest in advertising to divert the consumers into adopting their product. The group's welfare can be improved even if their interests are not closely aligned with the outside parties' interests as long the information gains are high enough.

Item Open Access Essays on Monetary Theory(2023) Fratrik, CraigThis dissertation consists of two essays about macroeconomic theory of monetary policy. The first essay derives a general algorithm for finding optimal commitment policy when the policymaker's decision stabilizes the economy as well as informing the private sector about fundamental shocks. The paper describes three equivalent formulations of the problem facing the policymaker. The last formulation is recursive, facilitating the finding of the steady state. This paper finds the steady state for a New Keynesian central bank who has both a transitory and a persistent preference shock. Under discretion, the private sector's expected inflation is positive and persistent, limiting the ability of the central bank to achieve its output target. In contrast, under commitment, for both persistent and transient shocks, the central bank achieves negative expected inflation, allowing lower realized inflation and realized output closer to target.

The second essay introduces a new model for intermediate behavior between discretion and commitment. Instead of commitment as the ability bind a future self, this essay reframes it as how much does the current policymaker incorporate the perspective of its past self. In a monetary New Keynesian context, I define Scaled Commitment, where prior Lagrange multipliers are discounted, nesting both discretion and commitment. It also allows different degrees of commitment for the always-binding Phillips curve and occasionally-binding zero lower bound.

Item Open Access Essays on Self-Control(2012) Groves, AlexanderThis dissertation concerns methods to test whether or not self-control

is costly, the form of temptation, and the affects different assumptions

about costly self-control and temptation have on optimal borrowing

and saving mechanisms. The second chapter shows that costly self-control

and temptation can be differentiated from changing impatience in a

stochastic income consumption-savings environment. The third chapter

describes an experiment to test whether subjects have time inconsistent

preferences, whether self-control is costly, and if so, whether the

cost of self-control is time dependent. The fourth chapter describes

the affects on the optimal borrowing and savings mechanisms that assumptions

about the myopia of temptation and the strength of costly self-control

have.