research

I provide a behavioral characterization of conformity when individuals have social concerns, as modeled in Bernheim (1994). The problem bridges decision and game theory in a novel way, as the agents’ utility function explicitly incorporates an object that is endogenously determined in equilibrium. I consider a society described by a prior distribution of privately known types. When agents care about how others perceive them, the equilibrium choice of one type affects the inference function that guides how all other types are judged and, consequently, their payoffs (and vice versa). I first establish a representation theorem using standard decision-theoretic tools, treating the inference function as exogenous. To endogeneize the inference function, I describe the necessary restrictions on the utility function to ensure that there exists an action profile that is consistent with both utility maximization and the corresponding inference function.

We develop a model of strategic obfuscation in which an interested Principal chooses the cost for a rationally inattentive Decision Maker to process information, making learning costs endogenous. We characterize when the Principal chooses transparency, total obfuscation (no-learning), or partial learning. Endogenous information costs can lead to a counterintuitive implication: increasing the Decision Maker’s cost of mistakes can improve her resulting welfare as it leads the Principal to favor more transparency. The framework links persuasion and rational inattention, shifting attention from commitment in disclosure to the design of information costs. The model rationalizes fine print, product complexity, and has implications for disclosure and transparency policy

I study the effects of allowing consumers to exceed their predetermined budget due to imperfectly observed prices. Consumers are risk-averse and sophisticated in the sense that they know they don't observe the real price and make decisions based on an objective price distribution. Due to risk aversion, demand for homogeneous products doesn't go all to the good with the lowest expected price as consumers hedge by buying a bit of both. Counterintuitively, competition pushes towards uncertain prices: firms producing a homogeneous product may choose to keep prices uncertain to put them above marginal cost.