Working Papers

June 5, 2022

June 5, 2022

Dynamic Choice of Information Sources

June 5, 2022

submitted

An agent learns in continuous time from two information sources, each associated with a hypothesis. If a hypothesis is true, the associated source confirms it at a positive rate. False hypotheses are never confirmed. The agent's optimal learning strategy has two phases. During the first phase, the agent follows his beliefs; that is, at each moment, he learns from the source associated with the most likely hypothesis according to his current beliefs. During the second phase, he follows the opposite rule and focuses on the least likely hypothesis.

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June 16, 2022

June 16, 2022

Imposing Commitment to Rein in Overconfidence in Learning (joint with Marcelo A. Fernandez and Arina Nikandrova)

June 16, 2022

submitted

A rational principal delegates learning to an overconfident agent who overestimates the precision of the information he collects. The principal chooses between two contracts: commitment, in which the agent commits to the duration of learning in advance, and flexible, in which the agent decides when to stop learning in real time. When the agent is sufficiently overconfident, the principal optimally ties the agent's hands by offering him the commitment contract. When the principal can choose both the contract and the agent's level of overconfidence, selecting the rational agent is suboptimal when the cost of learning is sufficiently high.

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August 25, 2022

August 25, 2022

Talking with an Extremist (joint with Emiliano Catonini)

August 25, 2022

submitted

Two agents exchange their guesses about a state of the world infinitely many times. A small departure from common knowledge of rationality can have a severe impact on the beliefs and behavior of an extremist: while initial periods of disagreement produce a temporary convergence of beliefs, perpetual disagreement induces reversion to the prior. Paradoxically, a late change of opinion by the counterpart induces the extremist to switch sides because the change reassures him that the counterpart is intellectually capable and honest.

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May 25, 2022

May 25, 2022

The Dark Side of Transparency: When Hiding in Plain Sight Works (joint with Arina Nikandrova)

May 25, 2022

R&R in Journal of Economic Theory

A hider publicly commits to the number of seekers and then privately gets involved in a story, which may be compromising. Each seeker aims to be the first to learn and report a compromising story. The seekers learn the story privately and in continuous time. With more seekers, the hider's story gets revealed at a faster rate, but each seeker gets discouraged and ceases learning more quickly. To reduce the probability of a compromising report, the hider may optimally choose infinitely many seekers. Nevertheless, the hider unambiguously benefits from making it harder for each seeker to learn her story.

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July 15, 2022

July 15, 2022

Does Reducing Communication Barriers Promote Diversity? (joint with Miaomiao Dong)

July 15, 2022

We study optimal diversity (in expertise) in hiring decisions. The key trade-off our model captures is that while higher diversity increases the pool of knowledge in a team, it also makes communication between the hired experts more challenging. The optimal diversity balances this trade-off. We find that a gradual reduction in communication cost can lower the diversity, but a big reduction in communication cost will eventually foster the diversity.

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Work in Progress

The Effect of Data-Driven Mergers on Insurance Markets (joint with Claudia Herresthal and Arina Nikandrova)

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Knowledge Transfers (joint with Doruk Cetemen, Chiara Margaria and Arina Nikandrova)

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Archive

Are People Subject to Persuasion Bias? Test of DeGroot Model (joint with Li Song)

Sept 27, 2017

Theoretical paper DeMarzo, Vayanos, and Zwiebel (2003) proposes a model of information aggregation in networks when individuals are subject to persuasion bias. The term "persuasion bias" refers to a particular form of boundedly rational behavior when individuals connected into a network do not account for repetition in the information they acquire. We argue that under the assumption that agents form their beliefs as a weighted average of all information available to them, the persuasion bias assumption is equivalent to a generalized version of the famous DeGroot model (DeGroot (1974)). We test the persuasion bias hypothesis against the (generalized) Bayesian updating model and find support for the persuasion bias hypothesis. We also found a positive correlation between how well a subject fits the generalized DeGroot model, compared to the alternative generalized Bayesian updating model, and their performance in the experiment. Data suggest that the generalized DeGroot model better accommodates other subjects' deviations from equilibrium, which explains the positive correlation.

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Stochastic Choice in Criterion Space

May 30, 2014

Many experiments demonstrate that an individual's choice decisions are inconsistent. Following Luce (1959) and Block, Marschak, et al. (1960), a random choice approach to this problem has become very popular. It posits the existence of a probabilistic choice function that describes the probability of choosing an alternative from a given set of options. This paper contributes to the theoretical literature that narrows the class of random choice functions. Each alternative can be fully characterized by a vector in a n-dimensional space. A decision maker pays attention only to a randomly chosen subset of coordinates (or criteria) each time he faces a set of alternatives to choose from. Given this randomly chosen subset, he is perfectly rational, that is he chooses according to some strict preference ordering. For this procedure to be well-defined, the preference ordering must be separable with respect to criteria. In other words, the preference of the decision maker over any two alternatives should not depend on the characteristics that these alternatives have in common. This paper characterizes all systems of choice probabilities that are induced by this choice procedure.

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