We study a model of electoral competition where voters obtain information on candidates’ platforms through campaign advertising, and word-of-mouth communication. We show that when the costs of campaign advertising are low, an increase in word-of-mouth communication among voters causes polarization. In particular, the more voters can exchange political information between each other, the more of...

Dynamic Contracts and Learning by Doing This paper studies the design of optimal contracts in dynamic environments where agents learn by doing. We derive a condition under which contracts are fully incentive compatible. A closed-form solution is obtained when agents have CARA utility. It shows that human capital accumulation strengthens the power of incentives and allows the principal to provid...

We provide several generalizations of Mailath’s (1987) result that in games of asymmetric information with a continuum of types incentive compatibility plus separation implies differentiability of the informed agent’s strategy. The new results extend the theory to classic models in finance such as Leland and Pyle (1977), Glosten (1989), and DeMarzo and Duffie (1999), that were not previously co...

The minority game is a simple congestion game in which the players’ main goal is to choose among two options the one that is adopted by the smallest number of players. We characterize the set of Nash equilibria and the limiting behavior of several well-known learning processes in the minority game with an arbitrary odd number of players. Interestingly, different learning processes provide consi...

The purpose of this paper is to suggest a new theory of portfolio selection which is based on evolutionary reasoning in simple repeated market situations. According to this new point of view the ultimate success of a portfolio strategy is measured by the wealth share the strategy is eventually able to conquer in an evolutionary process of market selection. We identify a simple portfolio strateg...

We study a dynamic equilibrium search model where sellers differ in their urgency to liquidate an asset. Buyers strategically make price offers without knowing given seller’s urgency. liquidity and dynamics on the transition path after unexpected shock. Generically, includes phase all buyers offer same price, causing market collapse; however, dispersion resumes finite time, leading recovery bot...

This paper is concerned with learning decision-makers’ preferences using data on observed choices from a finite set of risky alternatives. We propose discrete choice model unobserved heterogeneity in consideration sets and standard risk aversion. obtain sufficient conditions for the model’s semi-nonparametric point identification, including cases where depends some exogenous variables. Our meth...

We show that business cycles reduce welfare through a decrease in the average level of employment labor market search model with learning on job and skill loss during unemployment. Empirically, unemployment job-finding rate are negatively correlated. Since new jobs product these two from transition equation, imply fewer jobs. Learning implies resulting reduces aggregate human capital. This ince...