[pdf]
[arXiv]
[SSRN]
Abstract:
This paper shows that in delegation problems, a biased principal can strictly benefit from hiring an agent with misaligned preferences or beliefs. We consider a ``delegated expertise'' problem in which the agent has an advantage in acquiring information relative to the principal. We show that it is optimal for a principal who is ex ante biased towards one action to select an agent who is less biased. Such an agent is more uncertain ex ante about what the best course of action is and would acquire more information. The benefit to the principal from a more informed decision always outweighs the cost of a small misalignment. Further, we show that selecting an optimally misaligned agent is a valuable tool, which performs on par with optimal contracting (while imposing no additional cost on the principal) and outperforms restricted delegation. Finally, we show that all results continue to hold if the agent has to recommend an action instead of being able to choose it directly.
Research
Listed below are my projects, completed and preliminary. Click the paper title to see more details where available, including abstracts and all related links.
Working papers
[pdf] [RePeC]
[SSRN]
[BibTeX]
An earlier draft was circulated under the title "Experts, Quacks and Fortune-Tellers: Dynamic Cheap Talk with Career Concerns".
Abstract: This paper studies the dynamics of announcements in prediction markets in the presence of reputation concerns. In our model, an analyst of privately known competence, who cares about his reputation, chooses when to make a prediction regarding the outcome of some future event. We find that the interplay of incentives of the quacks and the real experts produces equilibria in which the earlier reports are more credible and more informative for the receivers. Further, any report hurts the analyst's reputation in the short run, with later reports incurring larger reputation penalties. The reputation of a silent analyst, on the other hand, gradually improves over time.
An earlier draft was circulated under the title "Experts, Quacks and Fortune-Tellers: Dynamic Cheap Talk with Career Concerns".
Abstract: This paper studies the dynamics of announcements in prediction markets in the presence of reputation concerns. In our model, an analyst of privately known competence, who cares about his reputation, chooses when to make a prediction regarding the outcome of some future event. We find that the interplay of incentives of the quacks and the real experts produces equilibria in which the earlier reports are more credible and more informative for the receivers. Further, any report hurts the analyst's reputation in the short run, with later reports incurring larger reputation penalties. The reputation of a silent analyst, on the other hand, gradually improves over time.
[pdf]
[arXiv]
Abstract: This paper studies strategic communication in the context of social learning. Product reviews are used by consumers to learn product quality, but in order to write a review, a consumer must be convinced to purchase the item first. When reviewers care about welfare of future consumers, this leads to a conflict: a reviewer today wants the future consumers to purchase the item even when this comes at a loss to them, so that more information is revealed for the consumers that come after. We show that due to this conflict, communication via reviews is inevitably noisy, regardless of whether reviewers can commit to a communication strategy or have to resort to cheap talk. The optimal communication mechanism involves truthful communication of extreme experiences and pools the moderate experiences together.
Abstract: This paper studies strategic communication in the context of social learning. Product reviews are used by consumers to learn product quality, but in order to write a review, a consumer must be convinced to purchase the item first. When reviewers care about welfare of future consumers, this leads to a conflict: a reviewer today wants the future consumers to purchase the item even when this comes at a loss to them, so that more information is revealed for the consumers that come after. We show that due to this conflict, communication via reviews is inevitably noisy, regardless of whether reviewers can commit to a communication strategy or have to resort to cheap talk. The optimal communication mechanism involves truthful communication of extreme experiences and pools the moderate experiences together.
[pdf]
Abstract: This paper explores the effects of leadership and inequality in public good games. We conduct a survey experiment, where a leader publicly announces their contribution, and then two followers with unequal endowments, productivities, and claims to final product make their contribution choices. The results indicate that the leader's cooperativeness significantly affects subsequent cooperation, with the effect being larger for the better-endowed and the less-productive followers. Inequality between the followers has a weak effect on contributions, attributed mainly to one's own characteristics, while the partner's characteristics have little effect, despite the participants' own perceptions.
Abstract: This paper explores the effects of leadership and inequality in public good games. We conduct a survey experiment, where a leader publicly announces their contribution, and then two followers with unequal endowments, productivities, and claims to final product make their contribution choices. The results indicate that the leader's cooperativeness significantly affects subsequent cooperation, with the effect being larger for the better-endowed and the less-productive followers. Inequality between the followers has a weak effect on contributions, attributed mainly to one's own characteristics, while the partner's characteristics have little effect, despite the participants' own perceptions.
Published papers
[pdf]
[BibTeX]
[journal page]
[arXiv]
Abstract: This paper characterizes informational outcomes in a model of dynamic signaling with vanishing commitment power. It shows that contrary to popular belief, informative equilibria with payoff-relevant signaling can exist without requiring unreasonable off-path beliefs. The paper provides a sharp characterization of possible separating equilibria: all signaling must take place through attrition, when the weakest type mixes between revealing own type and pooling with the stronger types. The framework explored in the paper is general, imposing only minimal assumptions on payoff monotonicity and single-crossing. Applications to bargaining, monopoly price signaling, and labor market signaling are developed to demonstrate the results in specific contexts.
Abstract: This paper characterizes informational outcomes in a model of dynamic signaling with vanishing commitment power. It shows that contrary to popular belief, informative equilibria with payoff-relevant signaling can exist without requiring unreasonable off-path beliefs. The paper provides a sharp characterization of possible separating equilibria: all signaling must take place through attrition, when the weakest type mixes between revealing own type and pooling with the stronger types. The framework explored in the paper is general, imposing only minimal assumptions on payoff monotonicity and single-crossing. Applications to bargaining, monopoly price signaling, and labor market signaling are developed to demonstrate the results in specific contexts.
[pdf]
[BibTeX]
[journal page]
Abstract: This paper argues, in the context of targeted advertising, that receivers' ability to independently acquire information has a non-trivial impact on the sender's optimal disclosure strategy. In our model, a monopolist has an opportunity to launch an advertising campaign and chooses a targeting strategy -- which consumers to send its advertisement to. The consumers are uncertain about and heterogeneous in their valuations of the product, and can engage in costly learning about their true valuations. We discover that the firm generally prefers to target consumers who are either indifferent between ignoring and investigating the product, or between investigating and buying it unconditionally. If the firm is uncertain about the consumer appeal of its product, it targets these two distinct groups of consumers simultaneously but may ignore all consumers in between.
Abstract: This paper argues, in the context of targeted advertising, that receivers' ability to independently acquire information has a non-trivial impact on the sender's optimal disclosure strategy. In our model, a monopolist has an opportunity to launch an advertising campaign and chooses a targeting strategy -- which consumers to send its advertisement to. The consumers are uncertain about and heterogeneous in their valuations of the product, and can engage in costly learning about their true valuations. We discover that the firm generally prefers to target consumers who are either indifferent between ignoring and investigating the product, or between investigating and buying it unconditionally. If the firm is uncertain about the consumer appeal of its product, it targets these two distinct groups of consumers simultaneously but may ignore all consumers in between.
[pdf]
[BibTeX]
[journal page]
Abstract: Sellers often have the power to censor the reviews of their products. We explore the effect of these censorship policies in markets where some consumers are unaware of possible censorship. We find that if the share of such “naive” consumers is not too large, then rational consumers treat any bad review that is revealed in equilibrium as good news about product quality. This makes bad reviews worth revealing and allows the seller to use them as a costly signal of his product's quality to rational consumers.
Media coverage: TASS (in Russian), Gazeta.ru (in Russian), Деловой Петербург/Business Petersburg (in Russian), Phys.org, Haptic.ro.
Abstract: Sellers often have the power to censor the reviews of their products. We explore the effect of these censorship policies in markets where some consumers are unaware of possible censorship. We find that if the share of such “naive” consumers is not too large, then rational consumers treat any bad review that is revealed in equilibrium as good news about product quality. This makes bad reviews worth revealing and allows the seller to use them as a costly signal of his product's quality to rational consumers.
Media coverage: TASS (in Russian), Gazeta.ru (in Russian), Деловой Петербург/Business Petersburg (in Russian), Phys.org, Haptic.ro.
Work in progress
Abstract:
We study a model in which a payoff-relevant state comprises multiple unknown attributes. The decision-maker delegates learning to a biased researcher, who chooses how to allocate a budget of informative tests across attributes. We derive the researcher's equilibrium learning strategy and show that it coincides with the equilibrium solution of a modified single-player problem. Notably, we find that the researcher may abstain from learning altogether if he deems the decision-maker's reaction to new information excessive. We then study the role of preference misalignment in the context of diversity in organizations, political discrimination, media polarization and dynamic preferences. In particular, we show that the decision-maker may sometimes prefer more biased researchers.
Abstract: coming soon!
Unpublished manuscripts
[pdf - June 2013]
Abstract: This paper looks into the question of optimal design of communication network within a company. The principal trade-off in managerial decisionmaking is often identified as adaptation to local environment versus coordination with other divisions within a firm. This trade-off creates a conflict of interests between managers of different departments and prevents them from communicating truthfully with each other. We explore different communication structures in order to optimize the communication process and find out that if the divisions differ sufficiently in size and the smaller division depends heavily on coordination then sequential communication with larger firm as leader is more preferable by the firm, while with divisions of similar sizes simultaneous communication yields better performance.
Abstract: This paper looks into the question of optimal design of communication network within a company. The principal trade-off in managerial decisionmaking is often identified as adaptation to local environment versus coordination with other divisions within a firm. This trade-off creates a conflict of interests between managers of different departments and prevents them from communicating truthfully with each other. We explore different communication structures in order to optimize the communication process and find out that if the divisions differ sufficiently in size and the smaller division depends heavily on coordination then sequential communication with larger firm as leader is more preferable by the firm, while with divisions of similar sizes simultaneous communication yields better performance.