Essays on the Economics of Information

The thesis is composed of three chapters discussing the economics of information in markets and contracts. The first chapter paper proposes a theoretical framework that combines information design and mechanism design to analyze markets for mediation services between an informed and an uninformed party. The mediator receives compensation from the informed party and must rely on information that is voluntarily reported. We describe all the outcomes that can be induced via a mediation contract and compare the optimal outcomes when the mediator has the bargaining power (i.e., monopolistic mediation) with those when the informed party has it. The main finding is that mediation contracts often reveal more information with a monopolistic mediator because they give up some information rents to retain incentive compatibility. Unlike the conventional logic of quality under-provision for physical goods, here the attempt to capture information rents can lead to increased information disclosure. These findings shed light on the controversial matter of whether a monopolistic market for information intermediaries, such as rating agencies for financial securities, is more or less desirable than a competitive one. The second chapter studies the bounds of mediated communication in sender-receiver games in which the sender’s payoff is state-independent. We show that the feasible distributions over the receiver’s beliefs under mediation are those that induce zero correlation, but not necessarily independence, between the sender’s payoff and the receiver’s belief. Mediation attains the upper bound on the sender’s value, i.e., the Bayesian persuasion value, if and only if this value is attainable under unmediated communication, i.e., cheap talk. The lower bound is given by the cheap talk payoff. We provide a geometric characterization of when mediation strictly improves on this using the quasiconcave and quasiconvex envelopes of the sender’s value function. In canonical environments, mediation is strictly valuable when the sender has countervailing incentives in the space of the receiver’s belief. We apply our results to asymmetric-information settings such as bilateral trade and lobbying and explicitly construct mediation policies that increase the surplus of the informed and uninformed parties with respect to unmediated communication. This chapter is the result of joint work with Yifan Dai. The third and final chapter studies a principal-agent model in which actions are imperfectly contractible and the principal chooses the extent of contractibility at a cost. If 3contractibility costs satisfy a monotonicity property—which is implied by costs that come from difficulties in distinguishing actions when writing the contract—then optimal contracts are necessarily coarse: they specify finitely many actions out of a continuum of possibilities. This result holds even if contractibility costs are arbitrarily small. By contrast, costs that are derived from enforcing a contract ex post affect allocations but yield complete contracts. Applying our results to a nonlinear pricing model, we study how changes in consumer demand, production costs, and informational asymmetries affect the optimally coarse set of quality options. This chapter is the result of joint work with Joel P. Flynn and Karthik A. Sastry. JEL Codes: D40, D42, D86

Name thesis:degree_name

Doctoral

Department dc:contributor.department

Massachusetts Institute of Technology. Department of Economics

Grantor dc:publisher

Massachusetts Institute of Technology

Year dc:date.issued

2024

Author dc:creator

• Corrao, Roberto

Advisors dc:contributor.advisor

• Morris, Stephen
• Fudenberg, Drew
• Wolitzky, Alexander

Statement dc:rights

• In Copyright - Educational Use Permitted
• Copyright retained by author(s)

Licence dc:rights.uri

• https://rightsstatements.org/page/InC-EDU/1.0/

Handle dc:identifier.uri

https://hdl.handle.net/1721.1/155346

OAI identifier oai:identifier

oai:dspace.mit.edu:1721.1/155346