RESEARCH
Working papers
R&R at The Journal of Economic Theory
Summary: I derive a theoretical model of choice bracketing from two behavioral axioms in an expected utility framework. The first behavioral axiom establishes a direct link between narrow bracketing and correlation neglect. The second behavioral axiom identifies the reference point as the place where broad and narrow preferences are connected. In my model, the narrow bracketer is characterized by an inability to process changes from the reference point in different dimensions simultaneously. As a result, her tradeoffs between dimensions are distorted. While she disregards interactions between actual outcomes, she appreciates these interactions mistakenly with respect to the reference point.
Summary: Why do people give when asked, but prefer not to be asked, and even take when possible? We introduce a novel analytical framework expressing context dependence and narrow bracketing axiomatically. From these behavioral regularities, we derive a utility representation of distributive preferences. Our result characterizes altruism as a concern for the well-being of others captured by prospect-theoretical value functions. The implied reference dependence and nonconvexity of preferences predict previously irreconcilable empirical evidence on giving, taking, and sorting. We test the model on data from seminal experiments and observe significantly improved fit in relation to existing models, both in- and out-of-sample.
Summary: Trust is an important condition for economic growth and other economic outcomes. Previous studies suggest that the decision to trust is driven by a combination of risk attitudes, distributional preferences, betrayal aversion, and beliefs about the probability of being reciprocated. We compare the results of a binary trust game to the results of a series of control treatments that by design remove the effect of one or more of these components of trust. This allows us to decompose variation in trust behavior into its underlying factors. Our results imply that beliefs are a key driver of trust, and that the additional components only play a role when beliefs about reciprocity are sufficiently optimistic. Our decomposition approach can be applied to other settings where multiple factors that are not mutually independent affect behavior. We discuss its advantages over the more traditional approach of controlling for measures of relevant factors derived from separate tasks in regressions, in particular with respect to measurement error and omitted variable bias.
Fairness Preferences, Inequality Acceptance and Default Effects (with Justin Valasek and Weijia Wang)
Summary: An influential subset of the literature on distributional preferences studies how preferences condition on information about workers’ characteristics, such as their relative productivity. In this study, we confirm that there are default effects when such conditional fairness preferences are measured using the “inequality acceptance” method. Depending on the default, implemented inequality decreases by over 65%, and cross-country differences are not observed. To organize the data, we develop a simple framework in which agents form a reference point based on a combination of their conditional distributional preferences and the default. We use this framework to illustrate that choice data from different defaults is needed to separately identify distributional preferences and default effects, and discuss best practices for measuring fairness preferences.
Publications
Mathematical Social Sciences, 2013, 66(3):396-409
Summary: In the canonical network model, the connections model, only three specific network structures are generically efficient: complete, empty, and star networks. This renders many plausible network structures inefficient. We show that requiring robustness with respect to stochastic information transmission failures rehabilitates incomplete, redundant network structures. Specifically, we show that star and complete networks are not generally robust to transmission failures, that circular and quasi-circular networks are efficient at intermediate costs in four-player networks, and that if either of them is efficient, then at least one of them is pairwise stable even without reallocation. Thus, incomplete, redundant networks are efficient and stable at intermediate costs.
Work in Progress
Summary: We develop a theoretical model where malign actors disrupt communication between an aligned sender and receiver. Our model considers two types of malign actors; fake news senders who aim to push the receiver’s belief to the maximum irrespective of the state and trolls who seek to induce a maximally wrong belief. In equilibrium, both types limit information transmission between the aligned sender and receiver to a subset of states. Our analysis highlights the spillover effects of misinformation, even when rare, and evaluates policy interventions including censoring, flagging, and verification. We find that flagging is more effective than censoring when trolls are present, and that verification is preferred when aligned senders are scarce. We also show that the relative effectiveness of these policies depends on the rationality of the receiver.
Summary: People often exchange information in the hopes of making improved decisions. However, if there is a cost to exchanging information, individual decisions to participate should trade off the expected benefit with this cost. When the expected benefit is the instrumental value of the gathered knowledge, economic theory suggests that one's presence is a signal of one's information, with more informed agents not finding the benefit likely to exceed the cost. This paper develops a simple model to demonstrate this point and then proceeds to test experimentally whether individuals (a) respond to costs in their information-gathering choices and (b) anticipate that other agents are strategic both in terms of their equilibrium decision of whether to gather information and in how they process the information provided by others.