Working Papers


This paper analyzes a bilateral trade model where the buyer's valuation for the object is uncertain and she can privately purchase any signal about her valuation. The seller makes a take-it-or-leave-it offer to the buyer. The cost of a signal is smooth and increasing in informativeness. We characterize the set of equilibria when learning is free and show that they are strongly Pareto ranked. Our main result is that, when learning is costly but the cost of information goes to zero, equilibria converge to the worst free-learning equilibrium.

We study a model of cheap talk with one substantive assumption: The sender’s preferences are state-independent. Our main observation is that such a sender gains credibility by garbling self-serving information. Using this observation, we examine the possibility of valuable communication, assess the value of commitment, and explicitly solve for sender-optimal 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 to the product's quality and 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 frequent-offers environment with vanishing attention costs.

We study a static self-control model in which an agent's preference, temptation ranking, and cost of self-control 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.

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.

We study the following random choice procedure. First, the agent focuses on an option at random from the set of available options. Then, she compares the focal option to each other available alternative. Comparisons are binary, random and independent of each other. The agent chooses the focal option if it passes all comparisons favorably. Otherwise, the agent draws a new focal option with replacement. We characterize the procedure's revealed preference implications, show that it accommodates the Attraction effect and Choice overload, and discuss how to conduct welfare comparisons. We conclude by showing that while utility maximization is the procedure's unique deterministic special case, nearly deterministic versions of the procedure can exhibit context effects.