It has been well-recognized that markets can aggregate less-than-perfect information across market participants. With two differently designed securities, this work examines the impact of security design on the information aggregation ability of markets in laboratory experiments. Results show that markets with one security aggregate information significantly better than markets with the other s...

This paper provides a class of examples of two-bidder common value second price auctions in which bidders may be financially constrained and the seller has access to information about the common value. We show that the seller’s expected revenue under a revelation policy may be lower than that under a concealing policy. The intuition for the failure of the linkage principle is as follows. In the...

We introduce a new class of preferences — which we call additive-belief-based (ABB) utility — that captures a general, but still tractable, approach to belief-based utility, and that encompasses many popular models in the behavioral literature. We axiomatize a general class of ABB preferences, as well as two prominent special cases that allow utility to depend on the level of each period’s beli...

We characterize a precise comparative static on welfare and the amount of public information in an economy under uncertainty. Results dating to Hirshleifer (1971) have suggested that information can have negative value in such a setting, but counterexamples using competitive equilibrium outcomes have suppressed general results to this effect. We show that under the solution concept of implement...

We study mechanism design in non-Bayesian settings of incomplete information, when the designer has no information about the players, and the players have arbitrary, heterogeneous, first-order, and possibilistic beliefs about their opponents’ payoff types. Using such beliefs, in auctions of a single good, we • define a revenue benchmark at least as high as the second-highest valuation, and some...

A discrete public good is provided when total contributions exceed the contribution threshold, yet the threshold is often not known with certainty. I show that the relationship between the degree of threshold uncertainty and equilibrium contributions and welfare is not monotonic. For a large class of threshold probability distributions, equilibrium contributions will be higher under increased u...

Information flows are weaker in a heterogeneous population when the performance of a new technology is sensitive to unobserved individual characteristics, preventing individuals from learning from neighbors’ experiences. This characterization of social learning is tested with wheat and rice data from the Indian Green Revolution. The rice-growing regions display greater heterogeneity in growing ...

High Compensation Creates a Ratchet Effect We consider a firm which pays a worker for his effort over several periods. The more the firm pays in one period, the wealthier the worker is in the following periods, and so the more he must be paid for a given effort. This wealth effect can induce an employer to pay little initially and more later on. For related reasons, the worker may work harder t...

In this paper, we consider the costs and benefits of transactions privacy. In the environment we consider, privacy is the concealment of potentially useful information, but concealment also potentially bestows benefits. In some versions of the environment, the standard Coasian logic applies: given an unambiguous initial assignment of rights and sufficient flexibility in contracting, efficiency ...

McAfee and Reny (1992) have given a necessary and sufficient condition for full surplus extraction in models with a continuum of types. In this paper we show that it is satisfied by a generic set of model specifications. We extend the classical embedding theorem for continuous functions to account for a stronger geometric condition on the functions mapping abstract types into beliefs which is b...