This paper explores possible reasons for the long and enduring dominance of neoclassical theory over the undergraduate microeconomics textbook. It proposes that those very attributes of neoclassical microeconomics that raise serious theoretical misgivings constitute the basis for the current hegemony of the standard undergraduate textbook. It further discusses the effects of the standard text on the education of economists in developing countries and conditions of the entrenchment of this text in undergraduate teaching. Finally, it looks at the possibilities of the emergence of alternative textbooks both in the centre and in the periphery of the global academic map.

This paper explores possible reasons for the long and enduring dominance of neoclassical theory over the undergraduate microeconomics textbook. It proposes that those very attributes of neoclassical microeconomics that raise serious theoretical misgivings constitute the basis for the current hegemony of the standard undergraduate textbook. It further discusses the effects of the standard text on the education of economists in developing countries and conditions of the entrenchment of this text in undergraduate teaching. Finally, it looks at the possibilities of the emergence of alternative textbooks both in the centre and in the periphery of the global academic map.

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This thesis groups three papers in applied microeconomic theory that focus on political economy and the economics of organisations. The first chapter studies the equilibrium outcomes of a dynamic game of electoral competition between two policy-motivated parties. I model incumbent policy persistence: parties commit to implement a policy for their full tenure in office, and hence in any election only the opposition party is free to choose a new platform. The model gives rise to novel equilibrium policy dynamics: governments alternate in power; parties compromise, that is, starting from differentiated ideological positions, they gradually move towards proposing platforms which resemble one another; however, they never capitulate, that is, party labels matter and parties maintain distinct policy goals. The second chapter studies a directed search model of competition between sellers that control the quality of buyers' private information about goods. As better informed buyers extract more informational rents from trade, sellers may try to attract buyers by offering better information. First, I establish how the characteristics of exogenously fixed sale mechanisms determine equilibrium information provision. Information provision is higher under competition than under monopoly, yet partial information is provided for many sale mechanisms. Second, when sellers commit to both information provision and mechanisms, I identify simple conditions under which every equilibrium has full information. In these equilibria, sellers capture the efficiency gains of information provision and compete only over non-distortionary rents offered to buyers. Retaining the option to develop a currently inactive project often requires maintaining specialised stocks of knowledge. However, standard models of experimentation treat the choice of one project over another as entailing only an implicit opportunity cost. In the third chapter, I characterise the optimal experimentation policy in a model in which undeveloped projects have explicit maintenance costs and can be irreversibly discarded. Projects which in the absence of maintenance costs would be developed only after more promising projects fail are sometimes developed first and then discarded early. Maintenance costs alter optimal project development by providing incentives to bring the option value of less promising projects forward.

This thesis groups three papers in applied microeconomic theory that focus on political economy and the economics of organisations. The first chapter studies the equilibrium outcomes of a dynamic game of electoral competition between two policy-motivated parties. I model incumbent policy persistence: parties commit to implement a policy for their full tenure in office, and hence in any election only the opposition party is free to choose a new platform. The model gives rise to novel equilibrium policy dynamics: governments alternate in power; parties compromise, that is, starting from differentiated ideological positions, they gradually move towards proposing platforms which resemble one another; however, they never capitulate, that is, party labels matter and parties maintain distinct policy goals. The second chapter studies a directed search model of competition between sellers that control the quality of buyers' private information about goods. As better informed buyers extract more informational rents from trade, sellers may try to attract buyers by offering better information. First, I establish how the characteristics of exogenously fixed sale mechanisms determine equilibrium information provision. Information provision is higher under competition than under monopoly, yet partial information is provided for many sale mechanisms. Second, when sellers commit to both information provision and mechanisms, I identify simple conditions under which every equilibrium has full information. In these equilibria, sellers capture the efficiency gains of information provision and compete only over non-distortionary rents offered to buyers. Retaining the option to develop a currently inactive project often requires maintaining specialised stocks of knowledge. However, standard models of experimentation treat the choice of one project over another as entailing only an implicit opportunity cost. In the third chapter, I characterise the optimal experimentation policy in a model in which undeveloped projects have explicit maintenance costs and can be irreversibly discarded. Projects which in the absence of maintenance costs would be developed only after more promising projects fail are sometimes developed first and then discarded early. Maintenance costs alter optimal project development by providing incentives to bring the option value of less promising projects forward.

The first chapter addresses a common presumption in organisational design that employees should not be given discretion about performance measures when offered performance pay. The concern is that they would make a self-serving choice, for example, one that allows them to boost their apparent performance by working on tasks which they find easy but bring little benefit to the company. I investigate this problem in a model in which the principal decides whether to delegate the choice of performance measure to an agent who is privately informed about the degree of substitutability of his effort on different tasks. I show that when the principal is using menus of contracts as a screening device, allowing the agent to choose his performance measure privately - and possibly in a self-serving way - can alleviate the problem of hidden information. Consequently, delegating the choice of performance measure can be complementary to provision of incentives and may increase the principal's payoff. The second chapter analyses the incentives of authoritarian regimes to manipulate information by adding noise to the citizens' information, which is a tactic that is increasingly common in the real world. I consider a global games model in which a regime controls the amount of noise in the citizens' private information and is overthrown if enough citizens attack it. The analysis sheds light on recent findings in political science which show that the Chinese regime uses censorship to prevent collective action rather than criticism of the state per se, and that it employs social media commentators to distract the citizens rather than to persuade them. I show that the better the citizens are informed about the regime, the more its incentives to add noise are driven by the criticism of the state rather than by the need to minimise the size of collective attacks. Furthermore, the incentives to add noise may become stronger if citizens' better coordination comes at the cost of impeded information aggregation. The third chapter, which is co-authored with Bartosz Redlicki (University of Cambridge), studies a game between a biased sender (an interest group) and a decision maker (a policy maker) where the former can falsify scientific evidence at a cost. The sender observes scientific evidence and knows that it will also be observed by the decision maker unless he falsifies it. If he falsifies, then there is a chance that the decision maker observes the falsified evidence rather than the true scientific evidence. First, we investigate the decision maker's incentives to privately acquire independent evidence, which not only provides additional information to her but can also strengthen or weaken the sender's falsification effort. We characterise the circumstances under which the benefit from the additional information is boosted, unaffected, dampened, and fully offset by the adjustment in the sender's falsification strategy. Second, we analyse the decision maker's incentives to acquire information from the sender. We show that she may be better off by committing to pay less than full attention to the sender as this can discourage falsification.

Thesis advisor: M. Utku Ünver / Thesis advisor: M. Bumin Yenmez / This dissertation consists of two essays in market design. In the first chapter, we study affirmative action policies in college admissions and hiring. A college or firm makes admissions or hiring decisions in which each candidate is characterized by priority ranking and type, which may depend on race, gender, or socioeconomic status. The admissions or hiring committee faces a trade-off between meritocracy and diversity: while a merit-first choice rule may admit candidates of the same type, a diversity-first choice rule may be unfair due to priority violations. To formalize this trade-off, we introduce a measure of meritocracy and a measure of diversity for choice rules. Then, we investigate how to resolve the tension between them. A choice rule that uses both reserves and quotas can be viewed as a compromise and is a generalization of the two extreme rules. The first result is comparative statics for this class of choice rules: we show that as parameters change and the choice rule becomes more meritorious, it also becomes less diverse. The second result is a characterization of the choice rule, which may help admissions or hiring committees to decide their policies. In the second chapter, we introduce a method to measure manipulability of a matching mechanism and use theory and simulation to study constrained mechanisms in school choice. First, we show that the implications from existing measures are strongly dependent on the full preference domain assumption. Our measure is more robust. The implications from existing measures can be carried over as well: while the recent school admissions reforms did not fully eliminate incentives to manipulate, they discouraged manipulation. Second, we use simulations for quantitative analysis. Our results support the recent school admissions reforms quantitatively, as well as qualitatively: they largely eliminated the incentives to manipulate. In addition, while the qualitative implications from theory are parallel to existing measures, the quantitative implications from simulations confirm a significant difference. / Thesis (PhD) — Boston College, 2021. / Submitted to: Boston College. Graduate School of Arts and Sciences. / Discipline: Economics.

This thesis examines and compares the nature, magnitude and movement in the inequality of income and expenditure of Australian households from 1975-76 to 1998-99 and Canadian households from 1978 to 1992. The inequality of welfare impacts on an individual’s feelings of belonging and participation in society and the level of social division within it. It may have such tangible effects as political unrest and increased crime. This raises the issue of, what is happening to the inequality of welfare and how to measure household welfare and inequality? The thesis considers the normative judgements made in measuring the inequality, desirable properties of inequality indices and the appropriate variable to represent household welfare. It finds in favour of expenditure as a more appropriate measure of a household’s living standards than income and that equivalence scales and cost of living indices should be used to account for variation in household composition and prices. The majority of past studies of Australian and Canadian inequality report an increase in income inequality throughout the latter half of the 20th century. However, the timing and size of increase is dependent upon the inequality indices, equivalence scales and sample selection used in each study. While many studies have focussed on the distribution of income, few have considered the inequality of expenditure or the explicit role of prices in inequality movements via a cost of living index. The thesis specifies a demographically extended complete demand system and uses household survey and price data to obtain estimates of its parameters to construct and compare alternate equivalence scales and demographically varying cost of living indices. The independence of the equivalence scale to reference utility was found not to hold suggesting that welfare comparisons between households of varying demographic types will be dependent on the specification of the household cost function. While the estimated price elasticities vary significantly across households, prices of commodity groups have moved such that the change in the cost of living over time is relatively uniform across households. The thesis finds that the real adult equivalent disposable income inequality of households has been rising in Australia consistently from 1975-76 to 1998-99, while real adult equivalent expenditure inequality recorded a fall over the period as a whole. In contrast, the inequality of Canadian household real adult equivalent disposable income and expenditure, have moved together, rising from 1978 to 1986 before falling in 1992. Australia has a higher magnitude of inequality in the distribution of household equivalent expenditure compared to Canada. The decline in the inequality of accommodation expenditure has been significant for Australia and Canada in offsetting the rise in inequality of expenditure on food and alcohol and tobacco. The rise in wage inequality and to a lesser extent investment income inequality, have largely accounted for the rise in gross income inequality in both countries. The thesis finds that the movement in Australian inequality is not overly sensitive to equivalence scale specification, although Engel, OECD and per capita scaled welfare tend to exaggerate the movement when compared to demand system based scales. In Canada from 1982 to 1986 changes in household composition resulted in significant difference in the movement of inequality estimates for different equivalence scales. The Engel, OECD and per capita based estimates showed a fall in inequality in contrast to the demand system based scales. The magnitude and the movement in inequality for both countries are insensitive to the specification of price indices. Excluding observations from the original sample can have extreme consequences on the reported magnitude and trend in inequality. By exploiting the additive decomposability property of inequality, the employment status and education level of the household head for Australia and Canada respectively, were found to have a large effect on the magnitude and movement in inequality. Age of the household head and the demographic type of the household were found to explain less than a sixth of the magnitude and trend in household inequality for both Australia and Canada. To summarise, this thesis makes the following contributions: Methodological i) It considers the normative judgements made in measuring inequality, the desirable properties of inequality indices and the appropriate variable to use to represent household welfare. ii) It accounts for differences amongst the demographic composition of households by using equivalence scales based upon an explicitly defined demographic extended demand system. iii) It accounts for price movements by developing a cost of living index based upon an explicitly defined demographic household cost function and complete demand system. Empirical i) Real adult equivalent disposable income inequality of households has been rising in Australia consistently from 1975-76 to 1998-99, while real adult equivalent expenditure inequality recorded a fall over the period as a whole. ii) In contrast Canadian household real adult equivalent disposable income and expenditure inequality have moved together, rising from 1978 to 1986 before falling in 1992. iii) The movement in Australian and Canadian inequality is not overly sensitive to different demand system based scales but Engel, OECD and per capita scaled estimates tend to exaggerate the movement of Australian inequality and report movements in Canadian inequality from 1982-1986 reverse to the demand system based scales. iv) The magnitude and the movement in inequality for both countries are not very sensitive to the specification of price indices. However there is evidence that regional price movements in Canada have helped to offset inequality, while allowing for differing price impacts across households using the CLI reduces this effect. For Australia price movements appear to have reduced the fall in expenditure inequality and increased the rise in income inequality slightly. v) Excluding observations from the original sample can have extreme consequences on the reported magnitude and trend in inequality. vi) Employment status and education level of the household head for Australia and Canada respectively, were found to have a large effect on the magnitude and movement in inequality. Greater than, what could be explained by decomposing by age of the household head or the demographic type of the household.

This dissertation consists of three chapters devoted to the study of communication games and behavioral economics. The first chapter extends the cheap talk model of Crawford and Sobel (1982) (CS). In CS, a speaker (S) uses cheap talk to persuade a decision maker (DM) to select an action as profitable to S as possible. This paper shows that the presence of an outside option -- that is, allowing DM to avoid taking any action, yielding state-independent reservation utilities to DM and S -- has an important qualitative impact on the results. Contrary to CS, in this model, the informativeness of communication is not always decreasing in the level of conflict of interest. Relatedly, communication can be more informative than in CS. The second chapter uses a different version of my cheap talk model with an outside option to explore managerial issues such as delegation and interpersonal authority. In this chapter, actions are costly for DM, and S's information is noisy. Hence, the agents may agree or disagree on the ex-ante ranking over projects, and DM may choose not to carry out any project. Unlike in the standard cheap talk model (without an outside option), when their ex-ante rankings coincide, S is more tempted to lie and hide bad news about both agents' ex-ante most preferred project because DM is highly likely to carry it out. Consequently, when their ex-ante rankings coincide, DM can have less incentives to delegate the choice of project to S and more incentives to use interpersonal authority than when their ex-ante rankings differ. The third chapter develops a theory of "personal rules" to explain a paradoxical stylized fact that increasing punishment rates can increase crime. This theory, based on the tradeoff between one's self-image of criminal productivity and the temptation of committing a crime, analyzes the way the agent may transform lapses into precedents. The foundation for this transformation is imperfect recall of one's own criminal productivity, which leads people to draw inaccurate inferences from their past actions. Rationalization may lead them to overestimate the utility of committing a crime when the opportunity presents itself.

The overall goal of the dissertation is to contribute to the growing literature on multiple discrete-continuous (MDC) choice models. In MDC choice situations, consumers often encounter two inter-related decisions at a choice instance – which alternative(s) to choose for consumption from a set of available alternatives, and the amount to consume of the chosen alternatives. In the recent literature, there is increasing attention on modeling MDC situations based on a rigorous underlying micro-economic utility maximization framework. Among these models, the multiple-discrete continuous extreme value MDCEV model (Bhat, 2005, 2008) provides a number of advantages over other models. The primary objective of this dissertation is to extend the MDCEV framework to accommodate more realistic decision-making processes from a behavioral standpoint. The dissertation has two secondary objectives. The first is to advance the current operationalization and the econometric modeling of MDC choice situations. The second is to contribute to the transportation literature by estimating MDC models that provide new insights on individuals’ travel decision processes. The proposed extensions of the MDCEV model include: (1) To formulate and estimate a latent choice set generation model within the MDCEV framework, (2) To develop a random utility-based model formulation that extends the MDCEV model to include multiple linear constraints, and (3) To extend the MDCEV model to relax the assumption of an additively separable utility function. The methodologies developed in this dissertation allow the specification and estimation of complex MDC choice models, and may be viewed as a major advance with the potential to lead to significant breakthroughs in the way MDC choices are structured and implemented. These methodologies provide a more realistic representation of the choice process. The proposed extensions are applied to different empirical contexts within the transportation field, including participation in and travel mileage allocated to non-work activities during various time periods of the day for workers, participation in recreational activities and time allocation for workers, and household expenditures in disaggregate transportation categories. The results from these exercises clearly underline the importance of relaxing some of the assumptions made, not only in the MDCEV model, but in MDC models in general. / text