Welfare of naive and sophisticated players in school choice

Two main school choice mechanisms have attracted the attention in the literature: Boston and deferred acceptance (DA). The question arises on the ex-ante welfareimplications when the game is played by participants that vary in terms of their strategicsophistication. Abdulkadiroglu, Che and Yasuda (2011) have shown that the chances ofnaive participants getting into a good school are higher under the Boston mechanism thanunder DA, and some naive participants are actually better off. In this note we show thatthese results can be extended to show that, under the veil of ignorance, i.e. students not yetknowing their utility values, all naive students may prefer to adopt the Boston mechanism.

Approximate knowledge of rationality and correlated equilibria

We extend Aumann's theorem [Aumann 1987], deriving correlated equilibria as a consequence of common priors and common knowledge of rationality, by explicitly allowing for non-rational behavior. Wereplace the assumption of common knowledge of rationality with a substantially weaker one, joint p-belief of rationality, where agents believe the other agents are rational with probability p or more. We show that behavior in this case constitutes a kind of correlated equilibrium satisfying certain p-belief constraints, and that it varies continuously in the parameters p and, for p sufficiently close to one,with high probability is supported on strategies that survive the iterated elimination of strictly dominated strategies. Finally, we extend the analysis to characterizing rational expectations of interimtypes, to games of incomplete information, as well as to the case of non-common priors.

Let's (not) talk about sex: The effect of information provision on gender differences in performance under competition

We study how gender differences in performance under competition areaffected by the provision of information regarding rival s gender and/ordifferences in relative ability. In a laboratory experiment, we use two tasks thatdiffer regarding perceptions about which gender outperforms the other. Weobserve women s underperformance only under two conditions: 1) tasks areperceived as favoring men and 2) rivals gender is explicitly mentioned. Thisresult can be explained by stereotype-threat being reinforced when explicitlymentioning gender in tasks in which women already consider they are inferior.Omitting information about gender is a safe alternative to avoid women sunderperformance in competition.

A foundation for strategic agenda voting

We offer complete characterizations of the equilibrium outcomesof two prominent agenda voting institutions that are widely used in the democraticworld: the amendment, also known as the Anglo-American procedure,and the successive, or equivalently the Euro-Latin procedure. Our axiomaticapproach provides a proper understanding of these voting institutions, and allowscomparisons between them, and with other voting procedures.

Quotient spaces of boundedly rational types

By identifying types whose low-order beliefs up to level li about the state of nature coincide, weobtain quotient type spaces that are typically smaller than the original ones, preserve basic topologicalproperties, and allow standard equilibrium analysis even under bounded reasoning. Our Bayesian Nash(li; l-i)-equilibria capture players inability to distinguish types belonging to the same equivalence class.The case with uncertainty about the vector of levels (li; l-i) is also analyzed. Two examples illustratethe constructions.

Choice by sequential procedures

We propose a rule of decision-making, the sequential procedure guided byroutes, and show that three influential boundedly rational choice models can be equivalentlyunderstood as special cases of this rule. In addition, the sequential procedure guidedby routes is instrumental in showing that the three models are intimately related. We showthat choice with a status-quo bias is a refinement of rationalizability by game trees, which, inturn, is also a refinement of sequential rationalizability. Thus, we provide a sharp taxonomyof these choice models, and show that they all can be understood as choice by sequentialprocedures.

Predestination and the Protestant ethic

This paper shows an equivalence result between the utility functions of secularagents who abide by a moral obligation to accumulate wealth and those of religiousagents who believe that salvation is immutable and preordained by God. Thisresult formalizes Weber's renowned thesis on the connection between the worldlyasceticism of Protestants and the religious premises of Calvinism. Furthermore,ongoing economies are often modeled with preference relations such as "Keeping upwith the Joneses" which are not associated with religion. Our results relate thesesecular economies of today and economies of the past shaped by religious ideas.

On commercial media bias

Within the spokes model of Chen and Riordan (2007) that allowsfor non-localized competition among arbitrary numbers of media outlets, we quantify the effect of concentration of ownership on qualityand bias of media content. A main result shows that too few commercial outlets, or better, too few separate owners of commercial outlets can lead to substantial bias in equilibrium. Increasing the number of outlets (commercial and non-commercial) tends to bring down this bias; but the strongest effect occurs when the number of owners is increased. Allowing for free entry provides lower bounds on fixed costs above which substantial commercial bias occurs in equilibrium.

Endogenous spillovers, increased competition and re-organization waves

We consider an entrepreneur that is the sole producer of a costreducing skill, but the entrepreneur that hires a team to usethe skill cannot prevent collusive trade for the innovation related knowledge between employees and competitors. We showthat there are two types of diffusion avoiding strategies forthe entrepreneur to preempt collusive communication i) settingup a large productive capacity (the traditional firm) and ii)keeping a small team (the lean firm). The traditional firm ischaracterized by its many "marginal" employees that work shortdays, receive flat wages and are incompletely informed about the innovation. The lean firm is small in number of employees,engages in complete information sharing among members, that are paid with stock option schemes. We find that the lean firm is superior to the traditional firm when technological entry costsare low and when the sector is immature.

Finite sample nonparametric tests for linear regressions

We introduce several exact nonparametric tests for finite sample multivariatelinear regressions, and compare their powers. This fills an important gap inthe literature where the only known nonparametric tests are either asymptotic,or assume one covariate only.

Information acquisition and entry

Before firms decide whether to enter a new market or not, they havethe opportunity to buy information about several variables that might affectthe profitability of this market. Our model differs from the existing literatureon endogenous information acquisition in two respects: (1) there is uncertaintyabout more than one variable, and (2) information is acquired secretly. Whenthe cost of acquiring information is small, entry decisions will be as ifthere was perfect information. Equilibria where each firm acquires only asmall amount of information are more robust than the socially undesirableequilibria where all firms gather all information. Examples illustrate theimportance of assumptions (1) and (2).

Interviews and adverse selection

Interviewing in professional labor markets is a costly process for firms. Moreover, poor screening can have a persistent negative impact on firms bottom lines and candidates careers. In a simple dynamic model where firms can pay a cost to interview applicants who have private information about their own ability, potentially large inefficiencies arise from information-based unemployment, where able workers are rejected by firms because of their lack of offers in previous interviews. This effect may make the market less efficient than random matching. We show that the first best can be achieved using either a mechanism with transfers or one without transfers.

Consistent solutions in exchange economies: A characterization of the price mechanism

We characterize the Walrasian allocations correspondence by means offour axioms: consistency, replica invariance, individual rationality andPareto optimality. It is shown that for any given class of exchange economiesany solution that satisfies the axioms is a selection from the Walrasianallocations with slack. Preferences are assumed to be smooth, but may besatiated and non--convex. A class of economies is defined as all economieswhose agents' preferences belong to an arbitrary family (finite or infinite)of types. The result can be modified to characterize equal budget Walrasianallocations with slack by replacing individual rationality with individualrationality from equal division. The results are valid also for classes ofeconomies in which core--Walras equivalence does not hold.