UC Berkeley

This dissertation consists of two essays on microeconomics.

The first chapter explores leadership within hierarchical organizations.

For each hierarchy, I consider a dynamic signaling game

in which each player observes only the actions of his direct

superiors before choosing his action.

At the top of the hierarchy are the leaders, who learn the state from nature.

The hierarchy controls the flow of information and the timing of the game,

and determines the equilibrium output and welfare.

I show that the welfare-optimal hierarchy is the chain, because

it maximizes the incentive of players to ``lead by example'' for their

subordinates. The chain remains optimal even in the presence of verifiable

or unverifiable costly information acquisition by the leaders.

Lastly, I characterize optimal hierarchies when the number of layers or

the number of leaders is limited. Applications to fund-raising are also discussed.

The second chapter studies the optimal way to select projects or agents in environments where

information arrives in well defined rounds. Examples include academic

environments where review periods are set by policy, aptitude tests such as

those given by software developers to programmers applying for jobs, venture

capital protocols where the rounds of funding may be stopped before the

project is complete, and FDA testing, where drugs can be dropped at well

defined junctures. Sequential rounds of elimination reduce the cost of

selection, but also reduce the average quality of surviving projects. I

characterize the nature of the optimal screening process with and without

"memory." The second chapter is based on joint work with Suzanne Scotchmer.