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Essays in Microeconomics

  • Author(s): Breig, Zachary
  • Advisor(s): Sobel, Joel
  • et al.
Abstract

Each of this dissertations chapters studies a different problem in microeconomics. The approach used in each is uniquely tailored to deal with a particular problem.

The first chapter shows how to optimally delegate actions to an informed agent when the principal cannot require payments. Instead, they are able to commit to actions in the future that affect both parties’ payoffs. I use these results to study a model of delegating decisions sequentially, and a model of delegation in which the principal can use measures that are costly to both parties. I characterize optimal mechanisms in both of these settings and show how the mechanisms vary with the model’s parameters.

The second chapter compares the predictive performance of several models of risk aversion and time preferences in experimental settings. Models are evaluated on the basis of out of sample prediction rather than in sample fit. Some models predict behavior better than others, and these are often not the models which have the best in sample fit. More complicated models improve predictive power in choices over risk, and “behavioral” parameters improve prediction further. This contrasts with time preferences, where adding the present bias parameter β worsens prediction for all sample sizes, despite improving fit significantly. The methodology is easy to implement and interpret, and results can be used by both experimentalists and applied modelers.

In the third chapter, I study a dynamic model of monopoly sales in which consumers are finitely lived. I characterize the equilibrium when the monopolist can only commit to a contract in the current period, and compare it to the equilibrium when the monopolist can fully commit and when she can sign long term commitments with renegotiation. I then extend the model to a repeated setting, in which one long-term monopolist interacts with a sequence of short-term consumers. I then characterize how the equilibrium payoff set of the repeated game is affected by exogenously provided commitment.

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