ESSAYS ON INFORMATION DESIGN IN ECONOMIC THEORY

Open Access
- Author:
- Muratov, Oleg
- Graduate Program:
- Economics
- Degree:
- Doctor of Philosophy
- Document Type:
- Dissertation
- Date of Defense:
- August 29, 2019
- Committee Members:
- Ron Siegel, Dissertation Advisor/Co-Advisor
Ron Siegel, Committee Chair/Co-Chair
Kalyan Chatterjee, Committee Member
Rohit Lamba, Committee Member
Fenghua Song, Outside Member
Barry William Ickes, Program Head/Chair - Keywords:
- Information Design
Competition
Research and Development
Moral Hazard
Optimal Contracts
All-Pay Auctions
Contest Theory - Abstract:
- Information generated and exchanged during the economic interactions is crucially influ- enced by the nature of those economic interactions. In this dissertation I focus is on the amount of information generated within the Entrepreneur-Investor relationships. In the first chapter I consider an environment in which a single entrepreneurs can gen- erate information about the quality of his project prior to contracting with the investor to fund the projects. The investor faces a moral hazard problem, since the entrepreneur has an ability to expropriate the investment funds to enjoy private benefit. I identify conditions under which the efficient amount of information about project quality is generated. I show that the efficient amount of information is generated if and only if the bargaining power of the entrepreneur is high enough. The theoretical results imply the importance of abundance of investment capital for the efficient amount of information about the projects. They also imply that investors might prefer markets, where they have limited bargaining power, since precise information leads to on average higher returns to investment. In the second chapter I consider a similar environment, in which two entrepreneurs compete for the limited investment fund of the single investor. I allow both entrepreneurs to generate information about their own projects. I show that the efficient amount of information is generated by an entrepreneur if and only if the prior belief about the quality of his competitor’s project is high enough. From the technical standpoint in the second chapter I show a link between two different types of problems, often studied by the economists. I show parallels between the Information Design problem on the one hand and the All-Pay Auction with the reserve price and bid cap, on the other hand. Using the fact that the two types of problems are linked can be helpful in solving for equilibria in the Information Design Problems. The third chapter is an empirical application of my theoretical findings in the first two chapters. The fourth chapter extends and modifies the analysis carried out of the first two chap- ters.