This paper proposes a framework for assessing whether misspecified decision-makers would be willing to pay for information that can potentially make them less misspecified. We introduce a prior-free approach, based on “constrained” maximal regret, to derive an upper bound on the subjective assessment of potential gains from acquiring a more accurate model. The constraint stems from the information currently available to the decision-maker. We apply our approach to three prominent models of misspecified beliefs: coarse expectations, causal misperceptions, and sampling equilibria. (JEL D83, D84, D91)
People participate in protests even though it is costly, benefits are not exclusive to participants, and each individual is unlikely to be pivotal. Building on these characteristics, I propose a sequential model of protest formation where opportunities to participate arrive stochastically, and the protest succeeds if participation surpasses a threshold. I show a unique equilibrium exists and characterize its dynamics. If the unique equilibrium involves participation, the time between participation decisions shortens as the protest progresses—a pattern observed empirically. A player with an opportunity becomes sequentially pivotal if, after abstaining, the protest will likely end before another opportunity arrives. (JEL D72, D84, D91)
We study misperceptions of private-signal correlation in an incomplete-information Cournot duopoly game. Exaggerating the correlation between players' demand signals is beneficial when agents hold flexible beliefs about price elasticity but is harmful when their beliefs are dogmatically correct. For agents with flexible beliefs who learn elasticity by observing prices, correlation misperceptions indirectly distort behavior through elasticity misinference. If agents know the true elasticity, this learning channel is eliminated. Correlation misperceptions have opposite direct and indirect effects on behavior, so the presence of elasticity inference can reverse an error's viability. (JEL C72, D21, D43, D81, D82, D83)
We study a data provider's problem of optimally designing and selling marketing lists that enable a retailer with private types to access consumers with heterogeneous characteristics. When virtual values satisfy a particular form of convexity (named boundary dominance), under certain regularity conditions, the optimal mechanism comprises fully revealing marketing lists, irrespective of whether the retailer's types are vertically or horizontally ordered. Moreover, in the vertical case, the optimal mechanism allows a simple “fixed-price” implementation. In the horizontal case, it exhibits no-exclusion and rotation properties. Conversely, if boundary dominance is violated, the optimal mechanism may not be fully revealing. (JEL D82, L81, M31)
This paper studies bid rigging in auctions with bidder preselection. We develop a theoretical model to analyze the optimal behavior of partial bid-rigging cartels and show how commonly used two-stage auction formats, in which the first stage is used to preselect bidders, may be exploited. Based on our theoretical results, we construct a collusion marker reflecting the optimal cartel strategy and, using administrative data on public procurement auctions in Slovakia, we identify bidders suspected of collusion. We show that bidder preselection allows cartels to exclude competitive rivals and thereby increase procurement costs above what would be possible without preselection. (JEL D43, D44, H57, L12)