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Essays in Identification, Game Theory and Love

  • Author(s): de Brito Caruso, TIAGO
  • Advisor(s): Matzkin, Rosa
  • Zame, William
  • et al.
Abstract

This dissertation consists of three essays divided into chapters. In chapter 1, I construct a theoretical model of dating and falling in love in an online environment. A relationship is an experimental, common value good and partners slowly learn its quality by observing private news. They always have the option to unilaterally break-up, go back to the website and, after some friction, be matched again with another partner. I construct the unique symmetric equilibrium, which consists of a honeymoon and a break-up phase. I also show the value of the website in the two extremes scenarios: non-friction dating and arranged marriage. Moreover, this value is non-monotonic in the friction.

In Chapter 2, which is co-authored with Greg Kubitz, we study a binary choice model where an agent makes a decision that is informed by his beliefs after observing a public signal. This model generalizes to a wide range of economic environments which require econometricians to estimate the beliefs of agents. With minimal structure imposed on the agent's utility function, we characterize the structure of information needed to identify the beliefs of the agent after observing both signals and decisions. We find that the information must be sufficiently convincing and dense for the agent's beliefs to be point identified. When the full range of information is relaxed, we show how the agents beliefs can be partially identified. Additionally, we explicitly show how the econometrician can construct the sharpest boundaries around the agent's beliefs as she observes signals and decisions.

In chapter 3, I go back to the topic of playing with altruism. There I construct a simple model of decision making with altruism and show that the utility of the agent receiving the gift can decrease with his initial endowment. The idea is somewhat straightforward and it becomes especially relevant when the good being gift is indivisible. When the agent allocating the gift is altruistic if the person receiving the good is sufficiently poor he will get the gift. Knowing the decision rule in the second stage, the agent receiving the gift has incentives to manipulate his outside option in the first period. I show that the amount of manipulation is always positive and increasing with altruism.

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