My research focuses on incentive/information design for environments where contract enforcement is difficult and the information required for decision-making is dispersed. These environments are particularly challenging when the number of participants are small enough such that small perturbations have persistent influences. In these three chapters, I use theory, computation, and experiment to investigate the robustness of several basic economic mechanisms to stochastic noise.
The first chapter analyzes the basic unit of information aggregation – the Geanakoplos and Polemarchakis (1982) posterior revision process. I find that if stochastic noise is present, then 1) the posterior revision process does not reliably give public statistics that approach the full information posterior, and 2) methods exist to rank information structures based upon the likelihood that they produce good public statistics through the posterior revision process.
The last two chapters address the impact of stochastic noise on labor markets. The chapter coauthored with Margaret McConnell uncovers the image motivation behind prosociality by enforcing privately known stochastic stopping time in volunteering sessions. A unique cascade of quitting behavior suggests that volunteers are partially driven by stigma avoidance. The third chapter, coauthored with Colin Camerer, analyzes the robustness of
contracting relationships to exogenous disruptions caused by stochastic drops in demand. We find that stochastic noise slows the formation of relational contracts, but high-quality contracts remain unaffected.</p