Rationing to Endogenously Informed Consumers (Job Market Paper) [Click here for the latest draft.]
Abstract: A good in limited supply is rationed by allocating equal quantity shares only to those consumers who complete a costly ordeal. Each consumer is initially uncertain about his or her value for the good but can incur a learning cost to become informed prior to choosing whether to complete the ordeal. With endogenous information acquisition, when the ordeal cost is relatively low, marginal increases in the ordeal cost can increase consumer welfare, even for distributions of consumer values under which welfare would be guaranteed to be decreasing if consumers were exogenously fully informed. When the ordeal cost is low, uninformed consumers complete the ordeal by default, and marginal increases in the ordeal cost incentivize a greater fraction of consumers to become informed, some of whom realize they have low values and opt out of completing the ordeal, thereby freeing up additional quantity that can be reallocated to the other consumers. I show that the reallocation from newly informed low-value consumers to high-value consumers more than compensates for the additional utility consumers must burn completing the more costly ordeal.
Surveillance and Selective Crackdowns
Abstract: I study the signaling role of an authoritarian regime setting up a surveillance network. Agents play a global game in which they choose whether to participate in a protest against the regime, and if the protest is unsuccessful, the regime chooses whether to crack down selectively on just participants or indiscriminately against both participants and nonparticipants. Using selective repression discourages participation relative to indiscriminate repression, but the regime regime is unable to commit to this, since indiscriminate repression is less costly. Prior to the protest, the regime observes a noisy signal about the state of the world and chooses whether to pay an up-front investment cost to establish a surveillance network, which lowers the cost of selective repression. The regime benefits from the surveillance network in two ways. First, solves the commitment problem by letting the regime publicly commit to selective repression, directly discouraging participation. Second, it conveys the regime’s private information about the state of the world to agents, making them more pessimistic about the probability of a successful protest, further reducing participation.