PSE Assistant Professor
Roy-Adres economic theory
Seminar
Location 48 Boulevard Jourdan, 75014 Paris, France
Location R1-09
Presence On site
The aim of the Roy seminar is mainly the development of Economic Theory, in particular through its ramifications towards applied fields including Industrial Organization, Market Design, Insurance, Finance, Public economics, Political economy, Labor economics and the dialog with complementary methodologies (structural econometrics, experimental
economics).
This seminar is subsidized by ADRES, PSE and Sciences Po, and receives state aid managed by the ANR-17-EURE-0001.
Organizers
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PSE Assistant Professor
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PSE Professor
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Assistant professor at Sciences Po Paris
Operational contact
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Administration Assistant
Multiple event dates
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Research Waves – with Gilat Levy (London School of Economics) and Ronny Razin (London School of Economics)
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We study a continuous-time setting in which researchers irreversibly choose between two risky fields of exploration and their individual time of entry. Information production in each field depends on the mass of researchers who have already joined that field. In the bad news case, where a unique ‘bandwagon’ equilibrium wave emerges, we show that as the priors of the two fields are further apart, the equilibrium wave starts earlier, and it is slower and longer. On the other hand, the good news case is characterized by two sequential fast surges into the two fields. The probability of both fields being explored depends on the researchers’ pool size and the efficacy of the information production technology. We compare the equilibrium outcomes to a welfare benchmark that accounts for the societal externalities of research and discuss how alternative incentive structures (such as citations’ impact and tenure clock) affect the researchers’ specialization decisions.
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Mechanism Reform: An Application to Child Welfare with E. Jason Baron, Richard Lombardo, Joseph Ryan and Jeongsoo Suh
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The design of mechanisms for allocating tasks among agents is a central question in economics, with applications across various high-stakes settings. In many of these market-design problems, new mechanisms are introduced to reform existing assignment systems. Unlike mechanisms developed in isolation, the presence of a status-quo mechanism imposes additional political and institutional constraints for the designer. We study this problem in the context of reforming the rotational assignment mechanism used to allocate Child Protective Services investigators to reported cases of child maltreatment. Investigators make the consequential decision of whether to place children in foster care when their safety at home is in question. Given concerns about investigator burnout and turnover, a key constraint on the new mechanism is ensuring that no investigator is made worse off compared to the status quo. We develop a design framework built on two sets of results: (i) an identification strategy that leverages the status-quo rotational assignment to estimate investigator performance, and (ii) mechanism-design results that enable us to elicit investigators’ preferences and allocate cases to maximize the welfare of children and families without making any investigator worse off. Our main technical contribution is a novel solution to a class of dynamic combinatorial allocation problems with type-dependent participation constraints. In a simulation, we show that this mechanism could reduce the number of investigators’ false positives (children placed in foster care who would have been safe in their homes) by 11% while also decreasing false negatives (children left at home who are subsequently maltreated) and overall placements. A naive approach that ignores investigator heterogeneity in preferences over case types would generate substantial welfare losses for investigators, with potential adverse effects on investigator turnover. -
Dynamic Collective Action and the Power of Large Numbers (with Marco Battaglini).
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Self-Selection, Evaluation, and Optimal Ordeals”, joint with Nenad Kos
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We model an agent who stubbornly underestimates how much his behavior is driven by un- desirable motives, and, attributing his behavior to other considerations, updates his views about those considerations. We study general properties of the model, and then apply the framework to identify novel implications of partially naive present bias. In many stable situations, the agent appears realistic in that he eventually predicts his behavior well. His unrealistic self-view does, however, manifest itself in several other ways. First, in basic settings he always comes to act in a more present-biased manner than a sophisticated agent. Second, he systematically mispredicts how he will react when circumstances change, such as when incentives for forward- looking behavior increase or he is placed in a new, ex-ante identical environment. Third, even for physically non-addictive products, he follows empirically realistic addiction-like consumption dynamics that he does not anticipate. Fourth, he holds beliefs that — when compared to those of other agents — display puzzling correlations between logically unrelated issues. Our model implies that existing empirical tests of sophistication in intertemporal choice can reach incorrect conclusions. Indeed, we argue that some previous findings are more consistent with our model than with a model of correctly specified learning.
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Two firms compete to attract and hire from a pool of workers of unknown productivity. Firms simultaneously post a selection procedure which consists of a test and an acceptance probability for each test outcome. After observing the firms’ selection procedures, each worker can apply to one of them. Both firms have access to a limited set of feasible tests. The firms face two key considerations when choosing their selection procedure: the statistical properties of their test and the selection into the procedure by the workers. I identify two partial orders on tests that are useful to characterise the equilibrium of this game: the test’s accuracy (Lehmann, 1988) and difficulty. I show that in any symmetric equilibrium, the test chosen must be maximal in the accuracy order and minimal in the difficulty order. I use this result to show that when firms can flexibly design their test up to a cost constraint, the test used in a symmetric equilibrium exhausts the budget but the expected productivity at the high signal is zero. I also consider the cases where firms face capacity constraints or have the possibility of making a wage offer.
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This paper studies security design by bidders who bid for a common-value investment opportunity when information is dispersed. Out of a large space of securities, bidders offer debt financing, the security family with the lowest information sensitivity. First, a debt offer better protects a bidder against the winner’s curse. Second, even if the entrepreneur is ex ante uninformed, by learning from the offers, the entrepreneur has an informational advantage when choosing among the offers. A debt offer wins more often when the entrepreneur’s information is positive. The results are in stark contrast to security design by a monopolistic agent, as well as to DeMarzo, Kremer, and Skrzypacz (2005)’s result under private-value competition. If the entrepreneur has the commitment power to restrict offers to an ordered set, the entrepreneur does not benefit from it.
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Social networks shape individual behavior and public policy increasingly leverages networks to enhance effectiveness. It is therefore important to understand how individuals behave in network interactions. This paper uses lab experiments to examine behavior in games on networks involving strategic substitutes and strategic complements. Theory suggests that an individual’s choice is proportional to their (Bonacich) centrality. Our experiments, however, find that while choices increase with centrality, the relationship is weaker than predicted. The total action levels individuals choose and the total payoff they achieve are higher than the Nash outcomes in some cases while lower in others. We find that these results can be coherently explained by individuals behavioral attenuation: they have incomplete adjustments to the strategic differences across network positions, exhibiting a bias toward generally high-payoff choices in complex networks—even when these choices are not optimal for their specific network positions.
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This paper studies games of voluntary disclosure in which a sender discloses evidence to a receiver who then offers an allocation and transfers. We characterize the set of equilibrium payoffs in this setting. Our main result establishes that any payoff profile that can be achieved through information design can also be supported by an equilibrium of the disclosure game. Hence, our analysis suggests an equivalence between disclosure and design in these settings. We apply our results to monopoly pricing, bargaining over policies, and insurance markets.
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Communicating about endogenous issues, joint with Doron Ravid
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A sender communicates about a multidimensional state with a receiver who is boundedly rational: he is restricted to interpreting the sender’s messages as describing the best course of action in a small number of endogenously chosen issues. We model this restriction by requiring the receiver to use a low-dimensional linear strategy. Both players would like the action to be perfectly tailored to the state, but they may have different preferences, disagreeing over which aspects of the state are most important to match. We find that equilibrium is shaped only by the sender’s perspective, because she cannot jointly communicate issues she deems differentially important. We identify a new equilibrium miscoordination risk, whereby the players may end up communicating about issues both players find to be minute. A receiver concerned about such a risk may prefer a sender with a differing perspective. -
This paper revisits the classic Pandora’s box problem, studying a decision-maker (DM) who seeks to minimize her maximal ex-post regret. The DM decides how many options to explore before choosing one or taking an outside option. We characterize the regret-minimizing search rule and show that the likelihood of opting out often increases as more options become available for exploration. Our model thus predicts `choice overload,’ the phenomenon by which a default alternative is more likely to be chosen in larger choice sets
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Optimal allocations with capacity constrained verification, joint with Andreas Kleiner
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A principal has m identical objects to allocate among a group of n agents. Objects are desirable and the principal’s value of assigning an object to an agent is the agent’s private information. The principal can verify up to k agents, where k < m, thereby perfectly learning the types of those verified. We find the mechanism that maximizes the principal’s expected utility when no monetary transfers are available. In this mechanism, an agent receives an object if (i) his type is above a cutoff and among the m highest types, (ii) his type is above some lower cutoff but among the k highest types, or (iii) he receives an object in a lottery that allocates the remaining objects randomly.
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News Media as Suppliers of Narratives (and Information) (joint paper with Ran Spiegler)
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We present a model in which news media shape beliefs by providing information (signals about an exogenous state) and narratives (models of what determines outcomes). To amplify consumers’ engagement, the media maximize their anticipatory utility. We characterize the optimal monopolistic media strategy under various classes of separable consumer preferences, and demonstrate the synergy between false narratives and biased information. Consumer heterogeneity gives rise to a novel menu-design problem due to an “equilibrium data externality” among consumers. The optimal menu features multiple narratives and creates polarized beliefs and choices. These effects also arise in a competitive media market model. -
Career Concerns with Costly Agent Assessment and Misspecified Learning: Theory and Applications, with Federico Echenique
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Blood Allocation with Replacement Donors: Theory and Application, joint with Xiang Han Shanghai (Shanghai University of Finance and Economics – School of Economics) & Onur Kesten ( University of Sydney)
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Blood donations by volunteer non-remunerated donors can only meet less than 50% of demand in 56 countries where blood banks had to adopt replacement donor programs to provide blood to patients in return for donations made by their donors. These programs are inefficient, as they limit the direct exchange of donors among patients. We introduce a novel framework and propose a general mechanism class accommodating efficiency objectives that embed current practices and other plausible fairness criteria. These mechanisms are incentive-compatible for patients to truthfully reveal their utility functions and replacement donors. Our framework also applies to other multi-unit exchange problems. -
This paper introduces the signed subjective expected utility (SSEU) model in which an individual’s willingness-to-bet (WTB) on an event reflects not only the event’s subjective likelihood but also its “valence”- a measure of intrinsic attractiveness or aversiveness of the event. As a result, an event’s WTB may be greater than 1 or less than 0 . Our model directly extends the subjective expected utility (SEU) model by weakening the Monotonicity axiom. We show that SSEU accounts for behavioral phenomena such as hedging aversion, coexistence of insurance and gambling, the choice of dominated actions in strategy-proof mechanisms, and some conjunction fallacies. We go on to show how to extend SSEU to allow for a stake-dependent (and non-additive) WTB, which also relaxes our earlier constraints on how valence can behave.
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Opportunity Hunters: A Model of Competitive Sequential Inspections
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(Co-authors: Ran Eilat, Eilon Solan). We introduce a new type of games, called “opportunity-hunting games,” in which two players compete to discover an uncertain event (“opportunity”) that occurs at an unobserved and random point in time. Players can inspect whether the event has already occurred again and again, but each inspection is costly. Varying the parameters of the model spans the range from games where competition between the players to be the first to identify the opportunity is the dominant force, to games in which free-riding on the other player’s effort is the dominant force. We characterize the game’s unique symmetric Markov Perfect Equilibrium.
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Paris School of Economics
Paris School of Economics
Address: 48 boulevard jourdan 75014 Paris