Publications:
Communication in the Shadow of Catastrophe (with Dezsö Szalay) (2024)
Journal of Economic Theory, 222.
We perform distributional comparative statics in a cheap talk model of adaptation. Receiver borne adaptation costs drive a wedge between the objectives of sender and receiver that is increasing in the magnitude of adaptation. We allow for infinite supports with infinite disagreement at the extremes and compare communication to unconstrained delegation. We study increases in risk that arise from transformations of the state variable. We find that linear transformations (implying increases in variance) decrease communication and
delegation payoffs but do not change their ranking. By contrast, increasing, convex transformations (implying increases in tail risk ) decrease the communication payoff relative to the delegation payoff. Our finding extends to the comparison of distributions with thin versus heavy tails.
Incomplete contracts versus Communication (with Andreas Blume and Sean Inoue) (2022)
Journal of Economic Theory, 205.
We consider a principal's choice between either controlling an agent's action through an incomplete contract or guiding him through non-binding communication. The principal anticipates receiving private information and must hire an agent to take an action on her behalf. Contracts can only specify a limited number of actions as a function of the state. The principal is at liberty not to specify actions for some of the states. States not covered by the contract induce a communication game. Contract clauses create gaps in the state space of the communication game, which can be used to generate distance between communication events. This relaxes incentive constraints for communication, helping enable and structure influential communication. We find that close alignment of interests favors communication and, thus, ceding authority to the agent, while strong misalignment favors reliance on contracts. In the uniform-quadratic environment, optimal contracts that induce influential communication split the communication region: there are at least two communication actions separated by contract actions. For sufficiently closely aligned interests, it is also the case that communication splits the contract region: there are at least two contract actions separated by a communication action.
Control, cost, and confidence: perseverance and procrastination in the face of failure (with Julia Wirtz) (2022)
Games and Economic Behavior, 134: 52-74.
We study effort provision and the development of the belief that effort matters over time: a student is uncertain whether she has control over success through her effort or whether success is determined by her innate ability, which she also does not know. In each period, what she can learn about her control and her ability depends on the level of effort she exerts. The student's optimal effort policy in this two-dimensional bandit problem takes the form of a linear belief cutoff rule and typically features repeated switching of the effort level. Moreover, we define perseverance and procrastination as indices for the student's behavior over time and analyze how they are affected by control, cost, and confidence. Finally, we relate our results to findings in educational psychology and discuss policies to foster perseverance and to lower procrastination.
Delegated Expertise, Authority, and Communication (with Dezsö Szalay) (2019)
American Economic Review, 109 (4): 1349-74.
A decision-maker needs to reach a decision and relies on an expert to acquire information. Ideal actions of expert and decision-maker are partially aligned and the expert chooses what to learn about each. The decision-maker can either get advice from the expert or delegate decision-making to him. Under delegation, the expert learns his privately optimal action and chooses it. Under communication, advice based on such information is discounted, resulting in losses from strategic communication. We characterize the communication problems that make the expert acquire information of equal use to expert and decision-maker. In these problems, communication outperforms delegation.
Information and Communication in Organizations (with Dezsö Szalay) (2019)
AEA Papers and Proceedings, 109 : 545-49.
We study a constrained information design problem in an organization. A designer chooses the information structure. A sender with preferences different from the decision-maker observes and processes the information before he communicates with the decision-maker. Information shapes conflicts within the organization: the optimal information structure essentially eliminates conflicts and serves as a substitute to the allocation of decision-making authority in the organization.
Consistency and Communication in Committees (with Felix Ketelaar and Mark T. Le Quement) (2015)
Journal of Economic Theory, 160: 24 –35.
We generalize the classical binary Condorcet jury model by introducing a richer state and signal space, thereby generating a concern for consistency in the evaluation of aggregate information. We analyze truth-telling incentives in simultaneous pre-vote communication in heterogeneous committees and find that full pooling of information followed by sincere voting is compatible with a positive probability of ex post conflict in the committee.
Working Papers:
Information and authority in multi-divisional organizations (forthcoming at JLEO)
This paper studies the role of different kinds of information in the allocation of decision-making authority within two-divisional organizations. The divisions have access to different pieces of information that they communicate through cheap talk. Information is of common or private interest. I show that in a ‘balanced’ organization, centralization is optimal, and delegation to the more payoff-relevant division. Access to information, however, can counteract asymmetries in payoff-relevance. Better common-interest information leads to more delegation to the division with that information. The same holds for isolated private-interest information. By contrast, private-interest information that is combined with common-interest information is less valuable and can even imply less delegation to a better informed division.
Strategic Information Transmission in the Employment Relationship (with Andreas Blume)
Formal procedures for dealing with information in organizations may be costly to set up. Informal ones may be more vulnerable to opportunism. We study the tradeoffs by introducing strategic communication a la Crawford and Sobel (1982) into Simon’s (1951) model of the employment relationship. A contract specifies the principal’s `range of authority' and a fixed wage for the agent. With extreme conflict, optimal contracts minimize the range of authority and preclude communication. With little conflict they maximize the range of authority and induce influential communication. They divide the state space into approximately equal-sized topics. Topics are bounded by actions over which the principal has authority and contain approximately equal numbers of cheap-talk actions.
Blackwell Monotonicity and Motivated Reasoning (with Ernesto Rivera Mora)
When does more information increase an agent’s expected utility across all decision problems?—when does Blackwell monotonicity hold? In the standard setup, Blackwell (1951, 1953) implies that all agents with a Bayesian updating rule weakly benefit from more information, regardless of the decision problem they face. This paper goes beyond the standard setup by studying Blackwell monotonicity in settings with motivated reasoning and psychological preferences. That is, (1) we allow agents to freely choose their subjective belief up to some (exogenous) constraints described by their reasoning type and (2) we allow for decision problems with belief-dependent preferences. We find that Blackwell monotonicity holds if and only if the agent’s reasoning type is shrinking in support, i.e., a larger support of the objective belief implies a smaller choice of subjective beliefs.
Communication in the Shadow of Catastrophe (with Dezsö Szalay) (2024)
Journal of Economic Theory, 222.
We perform distributional comparative statics in a cheap talk model of adaptation. Receiver borne adaptation costs drive a wedge between the objectives of sender and receiver that is increasing in the magnitude of adaptation. We allow for infinite supports with infinite disagreement at the extremes and compare communication to unconstrained delegation. We study increases in risk that arise from transformations of the state variable. We find that linear transformations (implying increases in variance) decrease communication and
delegation payoffs but do not change their ranking. By contrast, increasing, convex transformations (implying increases in tail risk ) decrease the communication payoff relative to the delegation payoff. Our finding extends to the comparison of distributions with thin versus heavy tails.
Incomplete contracts versus Communication (with Andreas Blume and Sean Inoue) (2022)
Journal of Economic Theory, 205.
We consider a principal's choice between either controlling an agent's action through an incomplete contract or guiding him through non-binding communication. The principal anticipates receiving private information and must hire an agent to take an action on her behalf. Contracts can only specify a limited number of actions as a function of the state. The principal is at liberty not to specify actions for some of the states. States not covered by the contract induce a communication game. Contract clauses create gaps in the state space of the communication game, which can be used to generate distance between communication events. This relaxes incentive constraints for communication, helping enable and structure influential communication. We find that close alignment of interests favors communication and, thus, ceding authority to the agent, while strong misalignment favors reliance on contracts. In the uniform-quadratic environment, optimal contracts that induce influential communication split the communication region: there are at least two communication actions separated by contract actions. For sufficiently closely aligned interests, it is also the case that communication splits the contract region: there are at least two contract actions separated by a communication action.
Control, cost, and confidence: perseverance and procrastination in the face of failure (with Julia Wirtz) (2022)
Games and Economic Behavior, 134: 52-74.
We study effort provision and the development of the belief that effort matters over time: a student is uncertain whether she has control over success through her effort or whether success is determined by her innate ability, which she also does not know. In each period, what she can learn about her control and her ability depends on the level of effort she exerts. The student's optimal effort policy in this two-dimensional bandit problem takes the form of a linear belief cutoff rule and typically features repeated switching of the effort level. Moreover, we define perseverance and procrastination as indices for the student's behavior over time and analyze how they are affected by control, cost, and confidence. Finally, we relate our results to findings in educational psychology and discuss policies to foster perseverance and to lower procrastination.
Delegated Expertise, Authority, and Communication (with Dezsö Szalay) (2019)
American Economic Review, 109 (4): 1349-74.
A decision-maker needs to reach a decision and relies on an expert to acquire information. Ideal actions of expert and decision-maker are partially aligned and the expert chooses what to learn about each. The decision-maker can either get advice from the expert or delegate decision-making to him. Under delegation, the expert learns his privately optimal action and chooses it. Under communication, advice based on such information is discounted, resulting in losses from strategic communication. We characterize the communication problems that make the expert acquire information of equal use to expert and decision-maker. In these problems, communication outperforms delegation.
Information and Communication in Organizations (with Dezsö Szalay) (2019)
AEA Papers and Proceedings, 109 : 545-49.
We study a constrained information design problem in an organization. A designer chooses the information structure. A sender with preferences different from the decision-maker observes and processes the information before he communicates with the decision-maker. Information shapes conflicts within the organization: the optimal information structure essentially eliminates conflicts and serves as a substitute to the allocation of decision-making authority in the organization.
Consistency and Communication in Committees (with Felix Ketelaar and Mark T. Le Quement) (2015)
Journal of Economic Theory, 160: 24 –35.
We generalize the classical binary Condorcet jury model by introducing a richer state and signal space, thereby generating a concern for consistency in the evaluation of aggregate information. We analyze truth-telling incentives in simultaneous pre-vote communication in heterogeneous committees and find that full pooling of information followed by sincere voting is compatible with a positive probability of ex post conflict in the committee.
Working Papers:
Information and authority in multi-divisional organizations (forthcoming at JLEO)
This paper studies the role of different kinds of information in the allocation of decision-making authority within two-divisional organizations. The divisions have access to different pieces of information that they communicate through cheap talk. Information is of common or private interest. I show that in a ‘balanced’ organization, centralization is optimal, and delegation to the more payoff-relevant division. Access to information, however, can counteract asymmetries in payoff-relevance. Better common-interest information leads to more delegation to the division with that information. The same holds for isolated private-interest information. By contrast, private-interest information that is combined with common-interest information is less valuable and can even imply less delegation to a better informed division.
Strategic Information Transmission in the Employment Relationship (with Andreas Blume)
Formal procedures for dealing with information in organizations may be costly to set up. Informal ones may be more vulnerable to opportunism. We study the tradeoffs by introducing strategic communication a la Crawford and Sobel (1982) into Simon’s (1951) model of the employment relationship. A contract specifies the principal’s `range of authority' and a fixed wage for the agent. With extreme conflict, optimal contracts minimize the range of authority and preclude communication. With little conflict they maximize the range of authority and induce influential communication. They divide the state space into approximately equal-sized topics. Topics are bounded by actions over which the principal has authority and contain approximately equal numbers of cheap-talk actions.
Blackwell Monotonicity and Motivated Reasoning (with Ernesto Rivera Mora)
When does more information increase an agent’s expected utility across all decision problems?—when does Blackwell monotonicity hold? In the standard setup, Blackwell (1951, 1953) implies that all agents with a Bayesian updating rule weakly benefit from more information, regardless of the decision problem they face. This paper goes beyond the standard setup by studying Blackwell monotonicity in settings with motivated reasoning and psychological preferences. That is, (1) we allow agents to freely choose their subjective belief up to some (exogenous) constraints described by their reasoning type and (2) we allow for decision problems with belief-dependent preferences. We find that Blackwell monotonicity holds if and only if the agent’s reasoning type is shrinking in support, i.e., a larger support of the objective belief implies a smaller choice of subjective beliefs.
