Four Essays in Microeconomic Theory

Abstract

This thesis consists of four essays which all analyze aspects of the role of private information and information design in different game theoretic settings. In the first chapter, I study the implications of rational inattention for monopoly pricing. Chapters 2 and 3 cover topics on information acquisition and disclosure in auctions, contests, and matching markets. The focus of Chapter 4 is on understanding how the composition of committees affects collective decisions.<br /> Chapter 1 analyzes the effects of consumer's information on monopoly pricing. It is shown that the consumer-optimal (equilibrium) information structure has three characterizing properties: It is partitional, guarantees seller-indifference, and induces efficient trade. Even in the absence of information constraints or costs, the consumer benefits from committing to ignore information that would separate low valuations, since this may induce the seller to charge a lower price. Partial ignorance is bliss. <br /> Chapter 2 studies the effects of the precision of private information on the outcome in matching markets. It is shown that increasing the information level of agents has two main effects: an allocation effect and a competition effect. More precise information allows for a better allocation on average, hence increases the expected total match output, but may also increase wasteful signaling investments due to amplified competition within groups. The second effect may dominate, leading to a decrease in expected welfare. The effects on equilibrium properties depend on whether information is disclosed to agents on the short or on the long side of the market. Applications to auctions, contests, and matching markets are discussed.<br /> In chapter 3, sufficient conditions on the primitives of information structures that guarantee regularity of the distribution of posterior estimates are provided. These characterization results make it possible to study mechanism design problems with endogenous information, without imposing regularity conditions on the interim stage or restricting attention to specific information structures. Applications to information acquisition and disclosure in optimal auctions, and to allocation problems without money are discussed.<br /> In chapter 4, a committee model is analyzed, in which agents with interdependent values decide by voting between an alternative and the status quo. Agents hold two-dimensional private information: About a dimension of the payoff state, and about their individual preference type, which captures an agent's level of partisanship. In equilibrium, committee members adopt cutoff-strategies, and an agent's preference type is reflected in his acceptance standard. I identify how the composition of a committee affects its decisions: Agents adopt less stringent acceptance standards if they find themselves among committee members from a more partisan, or less heterogeneous, population. In the latter case agents are more uncertain about the preference types of their fellow committee members.