I study a model of costly Bayesian persuasion by a privately and partially informed sender who conducts a public experiment. I microfound the cost of an experiment via a Wald's sequential sampling problem and show that it equals the expected reduction in a weighted log-likelihood ratio function evaluated at the sender's belief. I focus on equilibria that satisfy the D1 criterion. The equilibrium outcome depends on the relative costs of drawing good and bad news in the experiment. If bad news is more costly, there exists a unique separating equilibrium outcome, and the receiver unambiguously benefits from the sender's private information. If good news is sufficiently more costly, the single-crossing property fails. There exists a continuum of pooling equilibria, and the receiver strictly suffers from sender private information in some pooling equilibria.
BGSE Workshop
This paper reconsiders the problem of a durable-good monopolist who cannot make intertemporal commitments. The buyer’s valuation is binary and his private information. The seller has access to dynamic contracts and, in each period, decides whether deploy the previous period’s contract or to replace it with a new one. Our main result is that the Coase Conjecture fails: the monopolist’s payoff is bounded away from the low valuation irrespective of the discount factor.
We study a generalization of the classical monopoly insurance problem under adverse selection where we allow for a random distribution of losses, possibly correlated with the agent's risk parameter that is private information. Our main purpose is to provide a convenient analytical model that explains both the pattern of observed customer behavior and the pattern of insurance contracts most often observed in practice: these consist of menus of several deductible-premium pairs, or menus of insurance with coverage limits- premium pairs. The main departure from the classical insurance literature is obtained here by endowing the agents with risk-averse preferences that can be represented by a dual utility functional.
This paper studies the dynamic completion of interrelated projects. A decision maker allocates, at each point in time, a fixed unit of attention to projects that are completed in the form of breakthroughs. The agent's final payoff depends on the set of completed projects at the chosen stopping time. After completing a project, the agent might regret the attention that was already allocated to an incomplete project. I construct a partial order in the set of allocation policies that is based on regret, and show that the expected payoff of an allocation policy is increasing in such order. Moreover, I provide sufficient conditions in the distribution of completion times such that the optimal policy for complementary projects is regret-free. I apply these results to study the canonical problem of two complementary projects with uncertain but constant rate of completion and characterise the optimal attention allocation policy in that case.
We prove the 2-player, generic extensive-form case of the conjecture of Govindan and Wilson (1997a,b) and Hauk and Hurkens (2002) stating that an equilibrium component is essential in every equivalent game if and only if the index of the component is nonzero. This provides an index-theoretic characterization of the concept of hyperstable components of equilibria in generic extensive-form games, first formulated by Kohlberg and Mertens (1986). We explore the consequences of the result for the literature on refinements.
I adapt the Hotelling-Downs model with three parties and add an ''antipartisan''-component. Antipartisans vote for the party located furthest away from the party they dislike. While the standard game without antipartisanship has no equilibrium in pure strategies, antipartisanship allows for three types of outcomes: in equilibrium, parties spread over the spectrum, locate on extreme positions, or no equilibrium exists. The model provides a theoretical explanation for phenomena as those observed in Brazil in 2018: an exogenous increase in the share of antipartisans, followed by relocation on the spectrum towards the extrema. I characterise conditions under which such relocations can be explained by antipartisanship only.
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I investigate competition between news media firms under the assumptions that consumers get their information about political topics from these firms and that consumers prefer news that validates their views. I show that for topics where the consumers have sufficiently heterogeneous opinions, news media firms may withhold information which can lead to a polarization of political parties. In particular, the median voter theorem does not necessarily apply.
This paper studies costly information acquisition and transmission. An expert communicates with a decision-maker about a state of nature by sending a cheap-talk message. In efficient equilibria, the expert generally reveals all acquired information to the decision-maker. I show the existence of efficient equilibria under general conditions. For the class of posterior separable cost structures, I derive properties of efficient experiments. Under posterior-mean preferences, any cheap-talk problem is solved by a convex combination of two bi-pooling policies. The best bi-pooling policies are characterized for the uniform-quadratic case. Contrary to existing cheap-talk models, monotone partitions are not always optimal.
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We consider a multi-sender cheap talk model, where the receiver faces uncertainty over whether senders have aligned or state-independent preferences. This uncertainty generates a tradeoff between giving sufficient weight to the most informed aligned senders and minimizing the influence of the unaligned. We show that preference uncertainty diminishes the benefits from specialization, i.e., senders receiving signals with more dispersed accuracy. When preference uncertainty becomes large, it negates them entirely, causing qualified majority voting to become the optimal form of communication. Our results demonstrate how political polarization endangers the ability of society to reap the benefits of specialization in knowledge.
I study the effect of misspecified communication among voters in a political competition setting. Parties advertise by sending information about their candidate's type to voters, who subsequently can share this information with neighbors. I assume that voters misperceive the likelihood that other voters obtained information. Introducing this misperception has effects both on policy outcomes as well as communication between voters. Compared to a benchmark of no misperception, parties choose extreme candidates more often and advertise moderate candidates to a lesser extent. Further, strategic communication between voters results in higher thresholds for truthful communication.
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Sniping/last-minute bidding is an unusual bidding technique that has been extensively studied in empirical studies of eBay auctions, where bidders compete in a modified sealed-bid, second-price auction format and depart from the predictions of standard economic theory. Using Kőszegi and Rabin’s (2006) theory of reference-dependent preferences, I build a game theoretic model that explains not only late bidding but also overbidding in a private-value eBay auction setting involving a sophisticated, rational bidder and a naive, loss-averse bidder. The latter suffers from pseudo-endowment effect which causes willingness to pay (WTP) for the item to increase while the auction runs. By reserving her bid for late in the game, a rational bidder can prevent intermediate information revelation about relative valuation structure to her opponent. This discourages re-bidding for the loss-averse bidder, thereby preventing higher prices and justifying sniping.
I study information design in selection problems. There is a receiver who selects one out of many alternatives and takes an action, and a sender who transmits information about the viability of alternatives to persuade the receiver to select a favorable alternative and take a favorable action. The main theorem characterizes which distributions of posterior beliefs about the favorable alternative conditional on selection can be induced by some signal structure. This theorem facilitates a decomposition of the multi-dimensional information design problem into a selection persuasion problem and an action persuasion problem. I analyze applications of the model to advertising and lobbying.