Overconfidence, Dishonesty and Economic Behavior

This thesis consists of three studies on economic behavior. The first two studies analyze the impact overconfidence on market outcomes and effort provision whereas the last one focuses on the impact of dishonesty on individual decision making. The first chapter uses a laboratory experiment to study the causal impact of self-confidence on bargaining with joint production. Self-confidence is exogenously manipulated by the means of an easy or a hard task. Relative performance in such task generates the joint surplus. The results of this chapter show that, when the joint surplus is low, overconfidence leads to bargaining failures, whereas most people settle on an equal split when the joint surplus is high. The second chapter analyses theoretically the impact of overconfidence on effort provision in an asymmetric tournament with heterogeneous agents. When overconfidence is small, the effort provision of an overconfident agent increases, whereas the effort provision of an unbiased agent decreases; when overconfidence is large, the effort provision of all agents decreases, compared to a symmetric equilibrium with unbiased workers. For a given prize spread, a firm is better off when overconfidence is small since profits are higher on average. The third chapter studies experimentally the determinants of lying behavior in absence of strategic interactions. In this context, it is shown that observing lying increases lying. The chapter also suggests that those who expect others to be truthful but observe lying, lie more than those who expect others to be truthful and observe truth telling. Yet, it is not the case that those who expect others to lie but observe truth telling lie less than those who expect lying and observe lying

Foreign law court enforcement and delays in sovereign debt restructuring

This thesis seeks to examine contemporary factors that prevent an orderly resolution to a sovereign debt crisis. It comprises of five chapters. The first chapter introduces the research and highlights its main contributions. The second chapter narrates the background and motivation for the study. The third chapter studies a related paper on holdouts in sovereign debt restructuring and finds that, under a discrete time version with two creditors, asymmetric pure strategy Nash equilibria exists. This result, overlooked by the original paper, implies immediate agreement as the time between successive periods tends to zero. The fourth chapter investigates the impact of heterogeneous beliefs on delays in sovereign debt restructuring and finds that parties inefficiently delay settlement when their combined beliefs of court-outcomes are sufficiently heterogeneous. The chapter also explores other model expositions and establishes delay conditions. The fifth chapter studies the implied duty on the debtor to act in good faith in sovereign debt restructuring and is divided into two parts. The first part theoretically examines the efficiency and distributional impacts from enforcing a good faith duty on the debtor when bargaining with heterogeneous creditors. Here, good faith is defined as the non-violation of the court interpretation of the pari passu clause. The second part identifies judicial attempts made to enforce the good faith debtor duty to negotiate and proposes a doctrinal threshold that restricts judicial intervention to situations in which there is clear evidence of a failure, on the part of the debtor, to negotiate in good faith