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  3. 2022
  4. Preliminary Program
  5. Theoretical Frontiers of Policies and Organizations
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Theoretical Frontiers of Policies and Organizations

Paper Session

Sunday, Jan. 9, 2022 10:00 AM - 12:00 PM (EST)

Hosted By: Econometric Society
  • Chair: Yingni Guo, Northwestern University

Robust Implementation with Costly Information

Harry Pei
,
Northwestern University
Bruno Strulovici
,
Northwestern University

Abstract

We study whether a planner can robustly implement a state-contingent social choice function when (i) agents must incur a cost to learn the state and (ii) the planner faces uncertainty regarding agents' preferences over outcomes, information costs, and beliefs and higher-order beliefs about one another's payoffs. We propose mechanisms that can approximately implement any desired social choice function when the perturbations concerning agents' payoffs have small ex ante probability. Our mechanism is also robust
when agents tremble with small probability and when agents receive noisy information about the state.

Delegated Costly Screening

Suraj Malladi
,
Cornell University

Abstract

A policymaker relies on regulators or bureaucrats to screen agents on her behalf. How can she maintain some control over the design of the screening process? She solves a \textit{two-layer} mechanism design problem: she restricts the set of allowable allocations, after which a screener picks a menu that maps an agent's costly evidence to this restricted set. In general, the policymaker can set a floor in a way that dominates full delegation no matter how the screener's objectives are misaligned. When this misalignment is only over the relative importance of reducing allocation errors or agent's screening costs, the effectiveness of this restriction hinges sharply on the direction of the screener's bias. If the screener is more concerned with reducing errors, setting this floor is in fact robustly optimal for the policymaker. But if the screener is more concerned with keeping costs down, not only does this particular floor have no effect: any restriction that strictly improves over full delegation is complex and sensitive to the details of the screener's preferences. I consider the implications for regulatory governance.

Endogenous Experimentation in Organizations

German Gieczewski
,
Princeton University
Svetlana Kosterina
,
University of Pittsburgh

Abstract

We study policy experimentation in organizations with endogenous membership. An organization initiates a policy experiment and then decides when to stop it based on its results. As information arrives, agents update their beliefs, and become more pessimistic whenever they observe bad outcomes. At the same time, the organization's membership adjusts endogenously: unsuccessful experiments drive out conservative members, leaving the organization with a radical median voter. We show that there are conditions under which the latter effect dominates. As a result, policy experiments, once begun, continue for too long. In fact, the organization may experiment forever in the face of mounting negative evidence. This result provides a rationale for obstinate behavior by organizations, and contrasts with models of collective experimentation with fixed membership, in which under-experimentation is the typical outcome.

Discussant(s)
Dana Foarta
,
Stanford University
Gabriel Carroll
,
University of Toronto
George Georgiadis
,
Northwestern University
JEL Classifications
  • D8 - Information, Knowledge, and Uncertainty