Essays in Microeconomic Theory

This thesis comprises four self-contained essays in economic theory studying the optimal use of private information in strategic interactions. In all the situations considered, non-monetary as well as dynamic incentives play an important role. Chapter 1 contributes to the theory of information design by analysing how information is optimally released to attract attention over time. The questions studied in Chapters 2-4 belong to the theory of mechanism design and contract theory. These chapters aim to understand how information is used to support incentive provision and when it is most effective to acquire costly information

Should the Timing of Inspections be Predictable?

A principal hires an agent to work on a long-term project that culminates in a breakthrough or a breakdown. At each time, the agent privately chooses to work or shirk. Working increases the arrival rate of breakthroughs and decreases the arrival rate of breakdowns. To motivate the agent to work, the principal conducts costly inspections. She fires the agent if shirking is detected. We characterize the principal's optimal inspection policy. Periodic inspections are optimal if work primarily generates breakthroughs. Random inspections are optimal if work primarily prevents breakdowns. Crucially, the agent's actions determine his risk attitude over the timing of punishments

The Indispensability of the Holy Scriptures

Man has always and everywhere sough to know about God. Though his mind has been corrupted and blurred by sin, he has, nevertheless, recognized that his eternal destiny is in the hands of his Creator. This recognition has at the same time brought with it a heart-craving for some assurance that God is pleased with his life and is determined to provide for his eternal wellbeing. Evangelical Christendom has always maintained that such an assurance may be realized by a prayerful study of the Bible. Furthermore, Protestantism has traditionally claimed the Bible as the unique depository of Revealed Truth concerning God\u27s revelation of Himself through His Son, Jesus Christ. Any investigation will bear out the fact of traditional Protestantism\u27s implicit confidence in the authority of Holy Scriptures. Protestantism has from the beginning been vigorous and productive almost in exact proportion to the degree that it has regarded the Bible with due respect. At the same time, whenever the Bible has lost its paramount position in the Protestant faith, the vitality of the Reformers\u27 faith has deteriorated into an empty and cold formalism which has nothing to offer hungry souls. The problem which confronted us in this study was this: Is an infallible and authoritative Bible to be regarded as an indispensable element in the Christian faith? Just how important are the Scriptures to man\u27s knowledge of God and His designs for men? The first part of this study was therefore primarily a problem of epistemology. It dealt with the role of the Scriptures in relation to man\u27s necessary religious knowledge. The second part of this study was primarily one of authority, though it was still vitally related to the first part of this study. In each chapter the method of procedure was to present the most representative views relative to the subject under consideration in that particular chapter. These views have been critically evaluated as to their attitude to the Scriptures. Contemporary trends of thought were given special attention. Research included a study of works which were especially pertinent to the subject and which find popular acceptance either in the conservative or in the liberal camp

Relational enforcement

A principal incentivizes an agent to maintain compliance and to truthfully announce any breaches of compliance. Compliance is imperfectly controlled by the agent’s private effort choices, is partially persistent, and is verifiable by the principal only through costly inspections. We show that in principal-optimal equilibria, the principal enforces maximum compliance using deterministic inspections. Periodic inspection cycles are suspended during periods of self-reported noncompliance, during which the agent is fined. We show how commitment to random inspections would benefit the principal, and discuss possible ways for the principal to overcome her commitment problem

Value Computations in Ventral Medial Prefrontal Cortex during Charitable Decision Making Incorporate Input from Regions Involved in Social Cognition

Little is known about the neural networks supporting value computation during complex social decisions. We investigated this question using functional magnetic resonance imaging while subjects made donations to different charities. We found that the blood oxygenation level-dependent signal in ventral medial prefrontal cortex (VMPFC) correlated with the subjective value of voluntary donations. Furthermore, the region of the VMPFC identified showed considerable overlap with regions that have been shown to encode for the value of basic rewards at the time of choice, suggesting that it might serve as a common valuation system during decision making. In addition, functional connectivity analyses indicated that the value signal in VMPFC might integrate inputs from networks, including the anterior insula and posterior superior temporal cortex, that are thought to be involved in social cognition