Abstract

This dissertation consists of three chapters on topics in microeconomic theory. In Chapter 1, I study reputation effects under uncertain monitoring. I examine a repeated gamebetween a long-run player and a series of short-run opponents. The long-run playercan either be a strategic type or a commitment type that plays the same action inevery period. The modeling innovation is that the short-run player is unsure aboutthe monitoring structure. The uncertainty about the monitoring structure introducesnew challenges to reputation building because there may not be a direct relationshipbetween the distribution of signals and the long-run player’s strategy. Thus the long-runplayer may not have the ability to establish a reputation for commitment. I showthat, when the short-run players cannot statistically distinguish commitment actionfrom a bad action, the standard reputation results break down. I also provide sufficientconditions under which reputation effects on long-run player’s payoffs can be extendedto the current framework. When the commitment payoff is the highest payoff he canget, the conditions can be relaxed. In Chapter 2, I study a bounded rationality model of opinion formation in which there are two different types of agents: naive agents and sophisticated agents. All agents update their opinions by taking weighted averages of neighbors’ opinions. Naive agents truthfully report their opinions, but sophisticated agents can strategically report opinions to manipulate naive agents. I show that the limiting opinions are completely determined by sophisticated agents’ biases and the structure of the network and that, generically, there is no consensus. I analyze how disagreement is affected by the intensity of lying cost, diverging interests, and the structure of the social network. I also show that naive agents do not have any social influence and sophisticated agents’ social influence can be decomposed into two separate factors: direct influence and indirect influence. In Chapter 3, which is co-authored with Pinar Yildirim, we investigate the impact of informal lending on the types andterms of contracts offered by formal banks, considering factors that facilitate informallending activity such as social ties among consumers. The density of the connectionsamong consumers represents the degree to which those with and without wealth mix,indirectly capturing the degree of inequality in a society. We develop a model whichrelates the density of social connections to the availability of informal lending activity.We show that a low to moderate degree of informal activity in a market can helppoor entrepreneurs because it motivates the bank to compete by cutting down theinterest rate of unsecured loans offered to these consumers. In turn, the bank facesan overinvestment problem when financial inclusion is higher. As informal borrowingopportunities increase further, the bank’s benefit from increased access to credit diminishes.It earns higher rents by increasing the rates on wealthy low-risk consumerswho can informally lend to their social contacts. As a consequence, the overinvestmentproblem is replaced by an underinvestment problem, and creditworthy entrepreneursare deprived of loans from the bank. We argue that although the entrepreneurialinvestment shrinks, only those projects with the best return are awarded financing,implying that the average investment in the market is now more attractive.

Committee Chair

Brian Rogers

Committee Members

Jonathan Weinstein, Marcus Berliant, SangMok Lee, Mariagiovanna Baccara,

Comments

Permanent URL: https://doi.org/10.7936/kxwx-p018

Degree

Doctor of Philosophy (PhD)

Author's Department

Economics

Author's School

Graduate School of Arts and Sciences

Document Type

Dissertation

Date of Award

Spring 5-15-2019

Language

English (en)

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Economics Commons

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