Cheap Talk with Fixed Agenda (paper on SSRN)
With: Elliot Lipnowski
Date: March, 2017
We study a model of cheap talk with one substantive assumption: the sender's preferences are state-independent. Our key observation is that this setting is amenable to the belief-based approach familiar from models of persuasion with commitment. Using this approach, we examine the possibility of valuable communication, assess the value of commitment, and explicitly solve for sender-optimal equilibria in a large class of examples. A key product is a geometric characterization of the value of cheap talk, described by the quasiconcave envelope of the sender's indirect utility.
Bargaining with Rational Inattention (paper on SSRN)
Date: April, 2017
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 frequent-offers 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.
Focus, Then Compare (paper)
Date: August 2015
I 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. I 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. I then show that the procedure can approximate some deterministic models used in the literature to explain violations of utility maximization.