For an incomplete-information model of public-good provision with interim participation constraints, we show that e¢ cient outcomes can be approximated, with approximately full surplus extraction, when there are many agents and each agent is informationally small. The result holds even if agents’ payo¤s cannot be unambiguously inferred from their beliefs, i.e., even if the so-called BDP propert...

We introduce a new class of finite horizon stochastic decision problems in which preferences change over time, and provide a proof of the existence of a recursively optimal strategy. Recursive optimization techniques dominate many areas of economic dynamics. However, in decision problems in which tastes change over time, the solution technique most commonly applied is not recursive, but rather ...

We focus on syntactic aspects of differential awareness that give rise to contractual disputes. Boundedly rational parties use a common language, but do not share a common understanding of the world, leading to ambiguity in both syntactic and semantic forms. In contractual relationships, ambiguity leads to disagreement and disputes. We show that the agents may prefer simpler less ambiguous cont...

An optimal decision model is developed to explore the impact of the structure of knowledge on specialization and cooperation in research. It shows that, (1) the degree of specialization in knowledge increases with the depth of knowledge and cooperation efficiency, and decreases with the average number of disciplines that are required for the solution of the problem; (2) the problem which requir...

We argue that, since activities providing political information are complementary with leisure, increased labor market activity should lower voter turnout, doing so least in elections with ubiquitous information. Using county-level data, we find that increased wages and employment: reduce gubernatorial turnout; do not affect Presidential turnout; and raise the share of persons casting a Preside...

We provide evidence of “soft” information production in investment banking. Using 2191 municipal bond offerings from 1997-2001, we find that “local” investment banks have substantial comparative and absolute advantages over non-local counterparts – locals charge lower fees and sell bonds at lower yields. Local investment banks’ strongest comparative advantage is at underwriting bonds with highe...

The analysis of lab data entails a joint test of the underlying theory and of subjects’conjectures regarding the experimental design itself, how subjects frame the experiment. We provide a theoretical framework for analyzing such conjectures. We use experiments of decision making under uncertainty as a case study. Absent restrictions on subjects’framing of the experiment, we show that any behav...

Individuals in many social networks imperfectly monitor other individuals’ network relationships. This paper shows that, in a model of a communication network, imperfect monitoring leads to the existence of many ine cient equilibria. Reasonable restrictions on actions or on beliefs about others’ actions can, however, eliminate many of these ine cient equilibria even with imperfect monitoring. S...

I analyze a game between an uninformed decision maker and a possibly biased expert. The expert receives a set of arguments, and each argument favors one of two alternatives. He can disclose each argument credibly, but cannot prove whether he has disclosed everything. In all equilibria, the biased expert sends messages containing arguments both for and against his preferred alternative. However,...

It has been well-recognized that markets can aggregate less-than-perfect information across market participants. With two differently designed securities, this work examines the impact of security design on the information aggregation ability of markets in laboratory experiments. Results show that markets with one security aggregate information significantly better than markets with the other s...