Working papers

A principal wants information to help her decide whether or not to approve a project. She delegates costly experimentation to an agent, who wants her to approve the project and has private information about the state. The principal can influence experimentation only by restricting the experiments that the agent can undertake: she cannot commit to approval, and no transfers are possible. For example, the FDA may select a set of clinical trials that are acceptable for testing a new drug, but cannot pay drug companies or weaken its threshold for approval. We show that the principal can screen the agent—and thus learn his private information—by offering a menu of experiments that differ in conditional expected payoffs across states. Doing so is always optimal: screening dominates pooling. Private information distorts the optimal menu by making the false negative rate inefficiently high. In our drug approval application, too many good drugs are rejected.

Search and matching increasingly take place on online platforms with elements of centralized and decentralized matching. Platforms can alter the search process for users, but cannot eliminate search frictions entirely. I study a model where users pay to change the distribution of potential partners they search over and characterize the revenue-maximizing platform when match characteristics are private information. With complementary match characteristics, I show that the only possible source of inefficiency on the optimal platform is exclusion, unlike standard screening problems. Matching on the optimal platform is perfectly assortative—there is no equilibrium mismatch. This conclusion is robust to various manners in which fees are collected (e.g. subscription fees or match fees), and to environments where the platform designer can also change search speeds.

Delay is the norm in bargaining. I propose a novel source of bargaining delay: absentmindedness. Instead of interpreting absentmindedness as a literal memory friction, I use absentmindedness to represent a broader form of bounded rationality in dynamic games where players cannot perfectly track a game’s progression. I show that equilibrium behavior is equivalent to that of a bargainer who commits ex-ante to a stationary behavioral strategy. Bargainers unable to finely condition play on the stage of dynamic interaction can credibly refuse last-minute ultimatums. Other parties that anticipate this behavior are driven to offer preemptive concessions to avoid a breakdown in negotiations. Absentmindedness is thus a source of bargaining power, even for players who never make offers. This bargaining power comes at the cost of efficiency; I show that there can be equilibria where offers are rejected on the path of play.