Information Economics
In: Journal of political economy, Band 125, Heft 6, S. 1885-1890
ISSN: 1537-534X
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In: Journal of political economy, Band 125, Heft 6, S. 1885-1890
ISSN: 1537-534X
In: American economic review, Band 98, Heft 5, S. 2127-2149
ISSN: 1944-7981
Context can influence decisions. This malleability of choice is usually invoked as evidence that people do not maximize stable preference orderings. In a market equilibrium, however, context conveys payoff-relevant information to consumers. Consequently, these consumers rationally violate naïve formulations of standard choice theoretic principles. I identify informational asymmetries under which apparently anomalous behaviors, namely the compromise effect and choice overload, arise as market equilibria. Firms respond to consumers' contextual inference; in case of the compromise effect, a firm may introduce premium loss leaders (expensive goods of overly high quality that increase the demand for other goods). (JEL D11, D83, M31)
In: American economic review, Band 109, Heft 10, S. 3650-3680
ISSN: 1944-7981
We examine ways to measure the amount of information generated by a piece of news and the amount of uncertainty implicit in a given belief. Say a measure of information is valid if it corresponds to the value of news in some decision problem. Say a measure of uncertainty is valid if it corresponds to expected utility loss from not knowing the state in some decision problem. We axiomatically characterize all valid measures of information and uncertainty. We show that if measures of information and uncertainty arise from the same decision problem, then they are coupled in that the expected reduction in uncertainty always equals the expected amount of information generated. We provide explicit formulas for the measure of information that is coupled with any given measure of uncertainty and vice versa. Finally, we show that valid measures of information are the only payment schemes that never provide incentives to delay information revelation. (JEL D81, D83)
In: NBER Working Paper No. w24771
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Working paper
In: Becker Friedman Institute for Research in Economics Working Paper No. 2018-47
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In: CEPR Discussion Paper No. DP13024
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In: American economic review, Band 106, Heft 5, S. 597-601
ISSN: 1944-7981
Rothschild and Stiglitz (1970) represent random variables as convex functions (integrals of the cumulative distribution function). Combining this representation with Blackwell's Theorem (1953), we characterize distributions of posterior means that can be induced by a signal. This characterization provides a novel way to analyze a class of Bayesian persuasion problems.
In: American economic review, Band 104, Heft 5, S. 457-462
ISSN: 1944-7981
We study the design of informational environments in settings where generating information is costly. We assume that the cost of a signal is proportional to the expected reduction in uncertainty. We show that Kamenica & Gentzkow's (2011) concavification approach to characterizing optimal signals extends to these settings.
In: American economic review, Band 101, Heft 6, S. 2590-2615
ISSN: 1944-7981
When is it possible for one person to persuade another to change her action? We consider a symmetric information model where a sender chooses a signal to reveal to a receiver, who then takes a noncontractible action that affects the welfare of both players. We derive necessary and sufficient conditions for the existence of a signal that strictly benefits the sender. We characterize sender-optimal signals. We examine comparative statics with respect to the alignment of the sender's and the receiver's preferences. Finally, we apply our results to persuasion by litigators, lobbyists, and salespeople. (JEL D72, D82, D83, K40, M31)
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In: Chicago Booth Research Paper No. 10-14
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In: Public choice, Band 159, Heft 1-2, S. 159-176
ISSN: 1573-7101
Why do the poor vote against redistribution? We examine one explanation experimentally, namely that individuals gain direct expressive utility from voting in accordance with their ideology and understand that they are unlikely to be pivotal; hence, their expressive utility, even if arbitrarily small, determines their voting behavior. In contrast with a basic prediction of this model, we find that the probability of being pivotal does not affect the impact of monetary interest on whether a subject votes for redistribution. Adapted from the source document.
In: Public choice, Band 159, Heft 1, S. 159-176
ISSN: 0048-5829
In: Public choice, Band 159, Heft 1-2, S. 159-176
ISSN: 1573-7101