Research
Publications
Neutral Mechanisms: On the Feasibility of Information Sharing (Job Market Paper)
The paper analyzes information sharing in neutral mechanisms when an informed party will face future interactions with an uninformed party. Neutral mechanisms are mechanisms that do not rely on (1) the provision of evidence, (2) conducting experiments, (3) verifying the state, or (4) changing the after-game (i.e., the choices and payoffs of future interactions). They include cheap talk, long cheap talk, noisy communication, mediation, money burning, and transfer schemes, among other mechanisms. To address this question, the paper develops a reduced-form approach that characterizes the agents’ payoffs in terms of belief-based utilities. This effectively induces a psychological game, where the psychological preferences summarize information-sharing incentives. The first main result states that if an expert's reduced form (i.e., belief-based utility) satisfies a weak supermodularity condition between the state and hierarchies of beliefs, then there is a neutral mechanism that induces complete revelation of the state. Moreover, it identifies a mechanism that is easy to implement. The second main result states that if the expert's reduced-form representation (i.e., set of belief-based utilities) satisfies a strict submodularity condition between the state and the hierarchies of beliefs, neutral mechanisms are futile for any (relevant) information sharing. This implies a limit in the ability to use neutral mechanisms for information sharing. The paper goes on to show how the approach is useful in applications related to political economy and industrial organization.
Working Papers
Information Selling under Prior Disagreement (with Nicolás Rodríguez)
This paper studies information selling in environments in which (1) the seller has limited commitment power, and (2) the buyer and the seller hold different beliefs about the state of the world. We show that in environments with a common prior, there is no advantage to selling information sequentially; the seller cannot achieve higher revenue than by offering an experiment that fully reveals the state in one period. We find that if, on the other hand, the agents agree to disagree about their prior beliefs, the seller achieves a strictly higher revenue by gradually selling information over multiple periods. Moreover, increasing the number of periods of the selling protocol strictly increases the seller’s expected revenue. In addition, in some environments, it is optimal for the seller to first offer a free sample test, i.e., an experiment that partially reveals information, at no charge.
Mechanism Design with Belief-Dependent Preferences (Journal of Economic Theory)
This paper studies mechanism design when agents have belief-dependent preferences, in that utilities depend on the agents’ ex-post beliefs about types. For instance, agents may be subject to curiosity, image concerns, or privacy concerns. In this setting, the textbook revelation principle does not hold, since mechanisms can provide agents with information that affects ex-post beliefs. This paper uses a psychological game framework suited for mechanism design and provides a novel version of the revelation principle for belief-dependent preferences. The new revelation principle makes use of extended direct mechanisms that map each reported type into material outcomes and private suggestions of what ex-post beliefs the agents should have. The paper shows that it suffices to use extended direct mechanisms that satisfy three conditions: Bayesian incentive compatibility, individual rationality, and a new condition called believability. The new revelation principle is used to find revenue-maximizing auctions when bidders have different types of image concerns. Moreover, it provides an alternate tool—distinct from Myerson’s communication revelation principle—to study mechanism design with after-games.
Deterministic Mechanism Design
This paper studies mechanism design in environments where a designer can only commit to deterministic mechanisms. If there is one agent, stochastic mechanisms may strictly dominate deterministic mechanisms. The main theorem shows an equivalence between stochastic and deterministic mechanisms, whenever there are two or more agents. The equivalence is achieved through an indirect deterministic mechanism. The paper goes on to show a deterministic revelation principle: Under ex-post implementation, direct deterministic mechanisms suffice, provided the set of outcomes is binary.
Information Markets in Games
Markets for information are ubiquitous in modern society. Understanding how information providers choose to sell information is important for designing policies that improve efficiency. This paper studies markets for information when two uninformed agents play a quadratic game and characterizes the revenue maximizing information-selling schemes. The optimal way to sell information depends on the degree to which agents' actions are strategic substitutes or complements. In the case of strategic complements, it is always optimal to sell perfect information to both agents. However, in the case of strategic substitutes, there is a trade-off; revealing more information increases the correlation between the agents' actions, which in turn decreases the value of information. If the degree of strategic substitutability is sufficiently high, it is optimal for the seller to obfuscate information. Depending on the degree of substitutability, it is either optimal to sell perfect information to exactly one agent, or to sell a noisy signal to both.
Blackwell's Equivalence in Models of Motivating Reasoning (with Inga Deimen)
More information (in the sense of Blackwell) is known to robustly improve the welfare of Bayesian agents facing standard decision problems. It is also well known that more information might decrease the welfare of Bayesian agents facing psychological decision problems. We study general psychological decision problems and wonder for which ‘types’ of agents (beyond Bayesian), more information is better. To do so, we introduce a unifying framework of motivated reasoning in which agents can choose their own beliefs up to some exogenous constrains. We identify the type of constraints on the agent’s belief-choice such that more information robustly increases the agent’s welfare. Our main result provides necessary and sufficient conditions for Blackwell’s equivalence theorem to hold in psychological decision problems with motivated reasoning.
Optimal Scaling Auctions: A Consumer Theory Deconstruction (with Allan Hernandez)
We study scaling auctions for procurement environments in which the sellers are risk-averse and have private fixed costs. We show that equilibrium behavior in scaling auctions exhibits a Hicksian structure: the sellers’ bidding behavior is a solution to a Hicksian demand problem where the prices are the weights associated with the scoring rule. Thus, changes in weights lead to a pure substitution effect that matches the skewing-bidding behavior observed by the empirical literature. We use the Hicksian properties of equilibrium bidding to characterize the scoring rules that minimize the buyer’s expected payment.
Exchangeable Robust Mechanisms
This paper defines exchangeable-robust implementation. This concept requires interim incentive compatibility in environments where agents have arbitrary exchangeable first-order beliefs, i.e., in environments where the agents perceive the rest of the agents as ex-ante symmetric. Exchangeable-robust implementation requires weaker conditions than ex-post implementation; thus, it extends the set of social choice correspondences that can be implemented. Exchangeable-robust mechanisms are particularly useful when the planner can provide a subjective randomization device, such as the private information of a third party. As an application, the paper defines the auditor mechanism. It is a prior-free, efficient, and budget-balanced mechanism for agents with quasilinear preferences. Despite the lack of an ex-post implementable mechanism with such features, the auditor mechanism is exchangeable-robust. Hence, it requires mild epistemic assumptions to induce truthful reports.