Working Papers and Works in Progress
Delegating to a rationally inattentive agent with action restrictions. (Job Market Paper) (Draft coming soon)
Abstract. This paper studies whether a principal should restrict the discretion of an agent who endogenously acquires information. The principal and the agent share the same state-dependent payoff from actions, but only the agent bears the information cost. Before the agent acquires information, the principal can influence learning only by restricting the feasible action set. A restriction may improve information acquisition (learning effect), but may also exclude an ex post optimal action (distortion effect). With continuous actions and belief-responsive optimal choices, full discretion is strictly suboptimal whenever it induces informative but incomplete learning: a nearby one-sided restriction induces a more valuable experiment while creating only negligible distortion. When full discretion induces no learning, we provide a local condition under which a restriction is beneficial, comparing the curvature of decision payoffs with that of information costs. They also show that full discretion can be optimal at both low and high information costs yet suboptimal in between.
Abstract. We study a long-run persuasion problem where a long-lived Sender repeatedly interacts with a sequence of short-lived Receivers who may adopt a misspecified model for belief updating. The Sender commits to a stationary information structure, but suspicious Receivers compare it to an uninformative alternative and may switch based on the Bayes factor rule. We characterize when the one-shot Bayesian Persuasion-optimal (BP-optimal) structure remains optimal in the long run despite this switching risk. In particular, when Receivers cannot infer the state from the Sender’s preferred action, they never switch, and the BP-optimal structure maximizes the Sender’s lifetime utility. In contrast, when such inference is possible, full disclosure may outperform BP-optimal. Our findings highlight the strategic challenges of information design when the Receiver’s interpretation of signals evolves over time, offering new insights into persuasion mechanisms in repeated interactions.
Paying too much attention with Jason Tayawa and Adnan Mahmood
Abstract. Why do people gather more information than needed? We propose an inattentive agent with distorted beliefs and implementation noise. Such an agent may hold under-responsive beliefs—beliefs that move too little given the signal— and therefore undervalue information and acquire more of it. We show when their choice-frequency data can satisfy the canonical test of rational inattention. Even then, estimated attention-cost functions from choice frequencies can be misspecified, identifying some cost families only up to a bias. In a controlled laboratory setting, we find that participants respond monotonically to rewards and beliefs, as characterized. Implementation is noisy: participants choose the optimal action given beliefs 94% of the time. Beliefs are distorted: 65% are under-responsive. As the model predicts, those with more under-responsive beliefs acquire more information. Estimating costs from choices assigns less than a quarter of rationally inattentive participants to the correct cost family. Distortion and noise embedded in choice frequencies cost 25% of optimal profits. Choices alone obscure over-acquisition and mismeasure attention and its costs.
Costly Information Revealed by Beliefs: A More Direct Test of Rational Inattention Models with Suha Kim and Jason Tayawa. (Draft coming soon)
Abstract. Rational-inattention models treat information costs as structural, yet the same information choice can be represented either as an experiment or as the posterior beliefs it induces. We test whether revealed information-cost structure is stable across these theoretically equivalent representations. Subjects choose from the same feasible information set either through posterior accuracy or the corresponding experiment-based sampling fraction. We vary priors and rewards and evaluate behavior using Prior-Invariant (PI) and Uniformly Posterior-Separable (UPS) cost benchmarks, without assigning either representation to a cost class ex ante. We also examine choices when subjects select the representation themselves. Information acquisition differs systematically across representations despite identical states, incentives, and feasible choices. Many subjects are not fully consistent with either benchmark and change the cost class that better rationalizes their behavior across representations. Aggregate comparative statics show similar instability. The results show that theoretically equivalent representations need not be behaviorally equivalent, raising concerns about transporting revealed information costs across elicitation environments.
When Fairness Bends Rationality: Incorporating Inequity-Aversion in Models of Regretful and Noisy Behavior with Doruk İriş and Alessandro Tavoni. R&R at the International Journal of Game Theory
Abstract. Impulse balance equilibrium (IBE) and quantal response equilibrium (QRE) are prominent examples of tractable equilibrium concepts, which relax the rationality assumption and empirically outperform the Nash equilibrium. This paper introduces equity considerations into IBE and QRE, and assesses the performance of the modified concepts relative to the established ones using experimental data from 12 completely mixed constant and non-constant sum 2x2 games. We rank all concepts in terms of fit to the data for different sets of games and stability over time. Results show that fairness does not uniformly improve behavioral equilibrium models; its explanatory value depends on whether behavior is generated through noisy responses or regret-based impulse balancing, and on whether the game fixes or varies total surplus.
Published and Forthcoming Papers
Subjective Beliefs in International Agreements. with Doruk İriş and Sungwoo Im. Singapore Economic Review, 2022. [Working paper version]