Working Papers
Cheap Talk with Transparent Motives (paper on SSRN)
With: Elliot Lipnowski
We study a model of cheap talk with one substantive assumption: The sender’s preferences are stateindependent. Our main observation is that such a sender gains credibility by garbling selfserving information. Using this observation, we examine the possibility of valuable communication, assess the value of commitment, and explicitly solve for senderoptimal equilibria in several examples. A key result is a geometric characterization of the value of cheap talk, described by the quasiconcave envelope of the sender’s value function.
A seller makes repeated offers to a rationally inattentive buyer (Sims, 2003). The seller knows the product's quality, which is random. The buyer needs to pay attention both to the product's quality and to the seller's offers. I show that there is delay in trade that decreases in product quality, and that the buyer obtains a significant surplus, which remains significant in a frequentoffers environment with vanishing attention costs. Finally, I show that revealing the product's quality to the buyer reduces both the buyer's surplus and overall efficiency.
Bad Temptation (paper on SSRN)
With: Kai Steverson
We study a static selfcontrol model in which an agent's preference, temptation ranking, and cost of selfcontrol drive her choices among a finite set of options. We show that it is without loss to assume that the agent's temptation ranking is the opposite of her preference. We characterize the model by relaxing the Weak Axiom of Revealed Preference (WARP), and exploit WARP violations to identify the model's parameters.
Persuasion via Weak Institutions (paper on SSRN)
With: Elliot Lipnowski and Denis Shishkin A sender (S) publicly commissions a study by an institution to persuade a receiver (R). The study consists of a research plan and an official reporting rule. S privately learns the research’s outcome, and also whether she can influence the report. Under influenced reporting, S can privately change the report to a message of her choice. Otherwise, the official reporting rule applies. We geometrically characterize S’s highest equilibrium value and examine how optimal persuasion varies with the probability that reporting is uninfluenced—S’s “credibility.” We identify two phenomena: (1) R can strictly benefit from a reduction in S’s credibility; and (2) small decreases in credibility often lead to large payoff losses for S, but this typically will not happen when S is almost fully credible.
Focus, Then Compare (paper on SSRN) With: Kai Steverson
We study the following random choice procedure called “Focus, then Compare.” First, the agent focuses on an option at random from the choice set. Then, she compares the focal option to each other alternative in the set. Comparisons are binary, random and independent of each other. The agent chooses the focal option only if it passes all comparisons favorably. Otherwise, the agent draws a new focal option with replacement. We characterize the revealed preference implications of the procedure, and show that it can accommodate a range of experimental findings, including the Attraction, Compromise and Overchoice effects. We then show that the procedure can approximate some deterministic models used in the literature to explain violations of utility maximization.
