This dissertation presents three independent essays in microeconomic theory. Motivated by the rise of social media, Chapter 1 (co-authored with Yuhta Ishii) builds a model studying the effect of an economy's potential for social learning on the adoption of innovations of uncertain quality. Provided consumers are forward-looking (i.e. recognize the value of waiting for information), equilibrium dynamics depend non-trivially on qualitative and quantitative features of the informational environment. We identify informational environments that are subject to a saturation effect, whereby increased opportunities for social learning slow down adoption and learning and do not increase consumer welfare (possibly even being harmful). We also suggest a novel, purely informational explanation for different commonly observed adoption patterns (S-shaped vs. concave curves). Chapter 2 (co-authored with Assaf Romm) studies the solution concept $S^\infty W$ (one round of elimination of weakly dominated strategies followed by iterated elimination of strongly dominated strategies) in incomplete-information games. Under complete information, Dekel and Fudenberg (1990) and Börgers (1994) motivate $S^\infty W$ via its connection with "approximate common certainty" (ACC) of admissibility. Under incomplete information, we cast doubt on this connection: $S^\infty W$ corresponds to ACC of admissibility only when this is not accompanied by even the slightest changes to players' beliefs about states of nature. If we allow for vanishingly small perturbations to beliefs, then $S^\infty W$ is a (generally strict) subset of the predicted behavior, which we characterize in terms of a generalization of Hu's (2007) perfect $p$-rationalizable set. Motivated by the literature on "choice overload", Chapter 3 studies a boundedly rational agent whose choice behavior admits a monotone threshold representation: There is an underlying rational benchmark, corresponding to maximization of a utility function $v$, from which the agent departs in a menu-dependent manner. The severity of the departure is quantified by a threshold map $\delta$, which is monotone with respect to set inclusion. I axiomatically characterize the model, extending familiar characterizations of rational choice. I classify monotone threshold representations as a special case of Simon's theory of "satisficing", but as strictly more general than both Tyson's (2008) "expansive satisficing" model as well as Fishburn (1975) and Luce's (1956) model of choice behavior generated by a semiorder. I axiomatically characterize the difference, providing novel foundations for these models. / Business Economics

Chapter 1 introduces and axiomatizes a new class of representations for incomplete preferences called confidence models, which describe decision makers who behave as if they have probabilistic uncertainty over their true preferences, and are only willing to express a binary preference if it is sufficiently likely to hold. Confidence models provide a natural way to connect incomplete preferences with stochastic choice; this connection is characterized by a simple condition that serves to identify the behavioral content of incomplete preferences. Chapter 2 studies random choice rules over finite sets that obey regularity but potentially fail to satisfy all of the Block-Marschak inequalities. Such random choice rules can be represented by capacities on the space of preferences. The higher-order Block-Marschak inequalities are shown to be related to the degree of monotonicity that can be achieved by a capacity representation. Finally, Chapter 3 shows that failures of uniqueness for random utility representations are widespread. Uniqueness can be restored by introducing a finite state space and considering random choice over Savage acts. A representation is characterized in which acts are chosen according to the probability that they are optimal in every state. / Economics

This thesis consists of three essays on the economics of contracts and organizations. The first essay studies organizational design as the allocation of decision rights, primarily focusing on its interplay with agents' career motives. It identifies a new tradeoff between delegation and centralization, which arises solely from career concerns: When delegated, an agent takes inefficient actions at the cost of a principal but also works harder ex post to implement his project, in order to manipulate the market expectations of his ability. Compared to the existing literature, the contribution of this study is two-fold. First, it endogenizes the agent's bias as a result of career concerns. Second, and perhaps more importantly, it uncovers a new link between organizational design and the implementation of a decision. Both of these features are in sharp contrast to the vast majority of the existing studies, which takes the agent's bias as given and abstracts away from the implementation stage of a decision process. Specifically, delegation can be strictly optimal in the present framework even if the agent has no information advantage over the principal. Motivated by some entry-level labor markets, the second essay studies an incentive-contracting problem where (i) a principal learns an agent's ability before the agent himself, and (ii) both the agent's productivity with the principal as well as his outside option depends on his ability. I characterize the optimal contracts for the principal, defined to be the most profitable equilibrium outcomes among those satisfying the D1 criterion; pooling at an earlier date is strictly optimal if the agent's outside option is sufficiently sensitive to the principal's private information, whereas separation at a later date is (weakly) optimal otherwise.Further, the principal's profit is shown to be neither continuous nor monotone with respect to the agent's outside option. The third essay studies stable and (one-sided) strategy-proof matching rules in many-to-one matching markets with contracts. First, the number of such rules is shown to be at most one. Second, the doctor-optimal stable rule, whenever it exists, is shown to be the unique candidate for a stable and strategy-proof rule. Notably, these results are established without any substitutes conditions on hospitals' choice functions, and hence, the proofs do not rely on the "rural hospital" theorem. Finally, a stable and strategy-proof rule, when exists, is shown to be second-best optimal for doctor welfare, in the sense that no individually-rational and strategy-proof rule can dominate it. / Economics

This thesis contains three chapters related to the microeconomic interactions in markets. The first paper deals with markets with many participants, and in which monetary transfers are allowed, and studies core convergence. The second paper considers reputation building in time-limited negotiations. The third paper studies two-sided markets with no monetary transfers, governed by stable matching mechanisms. / Business Economics

In many decision problems, agents base their actions on a simple objective index, a single number that summarizes the available information about objects of choice independently of their particular preferences. The first chapter proposes an axiomatic approach for deriving an index which is objective and, nevertheless, can serve as a guide for decision making for decision makers with different preferences. Unique indices are derived for five decision making settings: the Aumann and Serrano (2008) index of riskiness (additive gambles), a novel generalized Sharpe ratio (for a standard portfolio allocation problem), Schreiber’s (2013) index of relative riskiness (multiplicative gambles), a novel index of delay embedded in investment cashflows (for a standard capital budgeting problem), and the index of appeal of information transactions (Cabrales et al., 2014). All indices share several attractive properties in addition to satisfying the axioms. The approach may be applicable in other settings in which indices are needed. The second chapter uses conditions from previous literature on complete orders to generate partial orders in two settings: information acquisition and segregation. In the setting of information acquisition, I show that the partialorder prior independent investment dominance (Cabrales et al., 2013) refines Blackwell’s partial order in the strict sense. In the segregation setting, I show that without the requirement of completeness, all of the axioms suggested in Frankel and Volij (2011) are satisfied simultaneously by a partial order which refines the standard partial order (Lasso de la Vega and Volij, 2014). In the third and fourth chapters, I turn to examine matching markets. Although no stable matching mechanism can induce truth-telling as a dominant strategy for all participants (Roth, 1982), recent studies have presented conditions under which truthful reporting by all agents is close to optimal (Immorlica and Mahdian, 2005; Kojima and Pathak, 2009; Lee, 2011). The third chapter demonstrates that in large, balanced, uniform markets using the Men-Proposing Deferred Acceptance Algorithm, each woman’s best response to truthful behavior by all other agents is to truncate her list substantially. In fact, the optimal degree of truncation for such a woman goes to 100% of her list as the market size grows large. Comparative statics for optimal truncation strategies in general one-to-one markets are also provide: reduction in risk aversion and reduced correlation across preferences each lead agents to truncate more. So while several recent papers focused on the limits of strategic manipulation, the results serve as a reminder that without preconditions ensuring truthful reporting, there exists a potential for significant manipulation even in settings where agents have little information. Recent findings of Ashlagi et al. (2013) demonstrate that in unbalanced random markets, the change in expected payoffs is small when one reverses which side of the market “proposes,” suggesting there is little potential gain from manipulation. Inspired by these findings, the fourth chapter studies the implications of imbalance on strategic behavior in the incomplete information setting. I show that the “long” side has significantly reduced incentives for manipulation in this setting, but that the same doesn’t always apply to the “short” side. I also show that risk aversion and correlation in preferences affect the extent of optimal manipulation as in the balanced case. / Business Economics

This thesis consists of three essays on mechanism and market design. The first chapter studies the question of when we can eliminate investment inefficiency in a general mechanism design model with transferable utility. We show that when agents make investments only before participating in the mechanism, inefficient investment equilibria cannot be ruled out whenever an allocatively efficient social choice function is implemented. We then allow agents to make investments before and after participating in the mechanism. When ex post investments are possible and an allocatively constrained-efficient social choice function is implemented, efficient investments can be fully implemented in perfect Bayesian Nash equilibria if and only if the social choice function is commitment-proof (a weaker requirement than strategy-proofness). Our result implies that in the provision of public goods, implementation of efficient investments and efficient allocations is possible even given a budget-balance requirement. The second chapter analyzes the implementability of efficient investments for two commonly used mechanisms in single-item auctions: the first-price auction and the English auction. We allow uncertain ex ante investment and further ex post investment. Under private values, we show that both the first-price auction and the English auction implement efficient investments in equilibrium. In the third chapter, we study the controlled school choice problem employing the lower and upper bounds of type-specific constraints. In such a problem, it is known that the set of feasible, fair and non-wasteful assignments may be empty (Ehlers et al., 2014). We find that a common priority condition of a schools’ priority profile plays a key role for the non-emptiness. A schools’ priority profile is said to have a common priority order if a student has higher priority than any given student of the same type whenever she does so in some other school. We show that this condition is sufficient for the existence of a feasible assignment that is fair and non-wasteful, and also that it is necessary in a weak sense. To show the sufficiency part, we introduce an algorithm called the type-proposing deferred acceptance (TDA) algorithm. / Economics

The structure, length, and characteristics of matching markets affect the outcomes for their participants. This dissertation attempts to fill the lacuna in our understanding about matching markets on three dimensions through three essays. The first essay highlights the role of constraints at the interviewing stage of matching markets where participants have to make choices even before they discover their own preferences entirely. Two results stand out from this setting. When preferences are ex-ante aligned, relaxing the interviewing constraints for one side of the market improves the welfare for everyone on the other side. Moreover, such interventions can lead to a decrease in the number of matched agents. The second essay elucidates the importance of rematching opportunities when relationships last over multiple periods. It identifies sufficient conditions for existence of a stable matching which accommodates the form of preferences we expect to see in multi-period environments. Preferences with inter-temporal complementarities, desire for variety and a status-quo bias are included in this setting. The third essay furthers our understanding while connecting two of the sufficient conditions in a specialized matching with contracts setting. It provides a novel linkage by providing a constructive way of arriving at a preference condition starting from another and thus proving that the later implies the former. / Economics

This dissertation presents three independent essays in microeconomic theory. Chapter 1 suggests an alternative to the common prior assumption, in which agents form beliefs by learning from data, possibly interpreting the data in different ways. In the limit as agents observe increasing quantities of data, the model returns strict solutions of a limiting complete information game, but predictions may diverge substantially for small quantities of data. Chapter 2 (with Jon Kleinberg and Sendhil Mullainathan) proposes use of machine learning algorithms to construct benchmarks for “achievable" predictive accuracy. The paper illustrates this approach for the problem of predicting human-generated random sequences. We find that leading models explain approximately 10-15% of predictable variation in the problem. Chapter 3 considers the problem of how to interpret inconsistent choice data, when the observed departures from the standard model (perfect maximization of a single preference) may emerge either from context-dependencies in preference or from stochastic choice error. I show that if preferences are “simple" in the sense that they consist only of a small number of context-dependencies, then the analyst can use a proposed optimization problem to recover the true number of underlying context-dependent preferences. / Economics

This dissertation presents three independent essays in microeconomic theory. Chapter 1 (co-authored with Akitada Kasahara) studies the implications of gradual adjustment in strategic interactions, relative to the one-shot environment. That is, agents have flexible ability to adjust and monitor their actions before the deadline rather than committing to once-for-all choices. Its main implication is equilibrium uniqueness, which arises as an interaction with randomness of the outcome process. In the model, players take frequent and costly actions to affect the stochastic evolution of state variables that are commonly observable before the deadline. The values of these state variables influence players' terminal payoffs as well as their flow payoffs. In contrast to the one-shot case, the equilibrium is unique under a large class of terminal payoffs. We also examine the welfare implications of such gradualness in applications, including team production, hold-up problems, and dynamic contests. Perturbed utility functions---the sum of expected utility and a non-linear perturbation function---provide a simple and tractable way to model various sorts of stochastic choice. Chapter 2 (co-authored with Drew Fudenberg and Tomasz Strzalecki) provides two easily understood conditions each of which characterizes this representation: One condition generalizes the acyclicity condition used in revealed preference theory, and the other generalizes Luce's IIA condition. We relate the discrimination or selectivity of choice rules to properties of their associated perturbations, both across different agents and across decision problems. We also show that these representations correspond to a form of ambiguity-averse preferences for an agent who is uncertain about her true utility. Chapter 3 offers an equilibrium characterization of a general class of global games with strategic complementarities. The analysis highlights a form of acyclicity in the interim belief structure of global games, which allows us to formalize a selection criterion, {\it iterated generalized half-dominance}. This criterion is shown to be a unique global game selection when noise distributions satisfy a regularity condition. A similar logic also applies to the perfect foresight dynamics of Matsui and Matsuyama (1995); an iterated generalized half-dominant equilibrium is a unique globally stable state when agents are patient enough. The criterion is especially useful for games with more than two asymmetric players, and can be easily applied to local interaction games with an arbitrary network structure. / Economics

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