Working Papers

“Competitive Capture of Public Opinion” (Online Appendix) with Gerard Padro i Miquel,  R&R at Econometrica

ABSTRACT

We propose a model where two opposed special interest groups (SIGs) compete to influence citizens with heterogeneous priors which receive reports drawn by a variety of sources from a continuous message space. The SIGs fight to capture the messages these sources convey. We characterize the equilibrium level of capture of each source as well as the equilibrium level of information transmission. Capture increases the prevalence of the ex ante most informative messages. Hence, rational citizens discount such informative reports. Opposite capturing efforts do not cancel each other and instead undermine social learning. Efforts to capture an information source are strategic substitutes: increasing citizens’ expectations that a source is captured by one SIG reduces the incentives of the opposite SIG. Strategic substitution exacerbates horizontal differentiation, increasing polarization across sources. Increased demand for information when SIGs want to fire up their base can increase capture and reduce information transmission in equilibrium.

“Persuading Large Investors" (Online Appendix) with Kostas Zachariadis, R&R at JET

ABSTRACT

A regulator who designs a public stress test to elicit private investment in a distressed bank must account for large investors' private information on the bank's state. We provide conditions for crowding-in (crowding-out) so that the regulator offers more (less) information to better-informed investors. Crowding-in obtains if investors' private information is not too discriminating of the state. We show that the region of the common prior is consequential: if crowding-in occurs for ex-ante optimistic investors then crowding-out follows if they were instead pessimistic. Investors' value from more precise private signals may come from the effect on the public test's precision.

“Recruiting and Selecting for Fit”

ABSTRACT

This paper studies employer recruitment and selection of job applicants when productivity is match-specific. Job seekers have private, noisy estimates of match value and firms perform noisy interviews. A job seeker's application depends on her perceived hiring probability given hiring standards, while firms consider the applicant pool's composition when setting hiring standards. Improvements in either the accuracy of job-seekers' estimates of fit or in the accuracy of a firm's interview can lower profits when it dissuades applications. I show that firms shun perfect tests of fit and avoid advertising to poorly informed job seekers for fear of dissuading suitable job seekers from applying. The model explains the adoption of previously unused costless testing technologies as application costs fall (e.g., following a move to online applications).

“Shared Control and Strategic Communication”.

ABSTRACT

This paper studies the optimal allocation of decision rights between an uninformed principal and an informed agent when interdependent activities need to be adapted to local conditions. While the principal cares only about overall profits the agent may favor higher, or lower, levels for each activity than the profit-maximizing level. The principal has limited commitment power and can only commit to an ex-ante allocation of decision rights. Whenever the principal retains some (or all) decision rights the agent communicates his information strategically, i.e. via cheap talk. We show that if activities are complementary the principal can always improve the informativeness of communication by sharing control with the agent, while sharing control over activities that interact as substitutes always worsens communication. As a result of this communication advantage, sharing control over complementary activities can be optimal, while control over activities that interact as substitutes is optimally allocated to the same party.