8 research outputs found
Reputation, Learning and Project Choice in Frictional Economies
I introduce a dynamic model of learning and random meetings between a
long-lived agent with unknown ability and heterogenous projects with observable
types. There is incomplete yet symmetric information about the agent's ability.
She needs to accept the contacting projects and create success to learn her
type. Alternatively, lack of success during a match leads to a reputational
loss followed from Bayesian learning, in that the reputation is interpreted as
the posterior belief about the agent's ability. Developing a self-type learning
framework with endogenous outside option, I find the optimal matching strategy
of the agent, that determines what types of projects the agent with a certain
level of reputation will accept. Comparing with a perfect information
benchmark, I show learning incentives lead to larger matching sets in the
optimum
Risk minimization and portfolio diversification
We consider the problem of minimizing capital at risk in the Black-Scholes
setting. The portfolio problem is studied given the possibility that a
correlation constraint between the portfolio and a financial index is imposed.
The optimal portfolio is obtained in closed form. The effects of the
correlation constraint are explored; it turns out that this portfolio
constraint leads to a more diversified portfolio
Binary Mechanisms under Privacy-Preserving Noise
We study mechanism design for public-good provision under a noisy
privacy-preserving transformation of individual agents' reported preferences.
The setting is a standard binary model with transfers and quasi-linear utility.
Agents report their preferences for the public good, which are randomly
``flipped,'' so that any individual report may be explained away as the outcome
of noise. We study the tradeoffs between preserving the public decisions made
in the presence of noise (noise sensitivity), pursuing efficiency, and
mitigating the effect of noise on revenue
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Essays in Venture Capital, Reputation and Learning
In chapter 1, I study the experimentation dynamics of a decision maker (DM) in a two-armed bandit setup ([5]), where the agent holds ambiguous beliefs regarding the distribution of the return process of one arm and is certain about the other one. The DM entertains Multiplier preferences Ć la [27], thus I frame the decision making environment as a twoplayer differential game against nature in continuous time. I characterize the DMās value function and her optimal experimentation strategy that turns out to follow a cut-off rule with respect to her belief process. The belief threshold for exploring the ambiguous arm is found in closed form and is shown to be increasing with respect to the ambiguity aversion index. I then study the effect of provision of an unambiguous information source about the ambiguous arm. Interestingly, I show that the exploration threshold rises unambiguously as a result of this new information source, thereby leading to more conservatism. This analysis also sheds light on the efficient time to reach for an expert opinion. The results of this chapter has been recently published in [61].In chapter 2, I introduce a dynamic model of random search where ex ante heterogeneous venture capitalists (investors) with unknown abilities match with a variety of startups (projects). There is incomplete yet symmetric information about investorsā types, whereas the projectsā types are publicly observable to all investors. In the unique stationary equilibrium, the matching sets, value functions and steady state distributions are endogenously determined. Interpreting the market posterior belief about the venture capitalistsā ability as their reputation, I study the outcomes of the economy when the success or failure of the projects create feedback effects: innovation spillovers and reputational externalities. When there are positive spillovers from successful early stage projects to late stage business opportunities, I show increased levels of search frictions could save the market from breakdown caused by the neglect of spillover effect. When the reputational externality is at play, namely when the deal flow of each investor is inversely impacted by the distribution of other investorsā reputation, I show the proportion of the high ability inactive investors is inefficiently high, and the projects suffer from early termination