http://www.columbia.edu/~nk2339/Papers/Published/clct.pdf

Credulity, lies, and costly talk

We present a model of uninformative persuasion in which individuals “think coarsely”: they group situations into categories and apply the same model of inference to all situations within a category. Coarse thinking exhibits two features that persuaders take advantage of: (i) transference, whereby individuals transfer the informational content of a given message from situations in a category where it is useful to those where it is not, and (ii) framing, whereby objectively useless information influences individuals’ choice of category. The model sheds light on uninformative advertising and product branding, as well as on some otherwise anomalous evidence on mutual fund advertising.

/pdf/coarse-thinking-and-persuasion-1dfggpqacx.pdf

Coarse Thinking and Persuasion

This paper studies a model of strategic communication by an informed and upwardly biased sender to one or more receivers. Applications include situations in which (i) it is costly for the sender to misrepresent information, due to legal, technological, or moral constraints, or (ii) receivers may be credulous and blindly believe the sender's recommendation. In contrast to the predictions obtained in Crawford and Sobel's (1982) benchmark cheap talk model, our model admits a fully separating equilibrium, provided that the state space is unbounded above. The language used in equilibrium is inflated and naive receivers are deceived.

Credulity, Lies, and Costly Talk

What do we notice and how does this affect what we learn and come to believe? I present a model of an agent who learns to make forecasts on the basis of readily available information, but is selective as to which information he attends to: he chooses whether to attend as a function of current beliefs about whether such information is predictive. If the agent does not attend to some piece of information, it cannot be recalled at a later date. He uses Bayes' rule to update his beliefs given attended-to information, but does not attempt to fill in missing information. The model demonstrates how selective attention may lead the agent to persistently fail to recognize important empirical regularities, make systematically biased forecasts, and hold incorrect beliefs about the statistical relationship between variables. In addition, it identifies factors that make such errors more likely or persistent. The model is applied to shed light on stereotyping and discrimination, persistent learning failures and disagreement, and the process of discovery.

Selective attention and learning

If shareholders own diversified portfolios, and if companies impose externalities on one another, shareholders do not want value maximization to be corporate policy. Instead, shareholders want companies to maximize portfolio values. This occurs when firms internalize between-firm externalities. Any kind of externality, pecuniary or nonpecuniary, vertical or horizontal, suffices. What matters is simply that one company's actions affect another's value. Thus, besides the traditional benefit of risk reduction, portfolio diversifi? cation offers additional benefits to shareholders through helping internalize externalities. This paper documents the extent of diversification and cross-ownership of stocks among companies where these externalities are likely to be large and provides a capital market test of how merger offers vary with the extent of cross-ownership.

Externalities and Corporate Objectives in a World with Diversified Shareholder/Consumers

This paper proposes an equilibrium approach to belief manipulation and deception in which agents only have coarse knowledge of their opponent's strategy. Equilibrium requires the coarse knowledge available to agents to be correct, and the inferences and optimizations to be made on the basis of the simplest theories compatible with the available knowledge. The approach can be viewed as formalizing into a game theoretic setting a well documented bias in social psychology, the fundamental attribution error. It is applied to a bargaining problem, thereby revealing a deceptive tactic that is hard to explain in the full rationality paradigm.

/pdf/a-theory-of-deception-240iihc75u.pdf

A Theory of Deception

This paper proposes an equilibrium approach to deception where deception is defined to be the process by which actions are chosen to induce erroneous inferences so as to take advantage of them. Specifically, we introduce a framework with boundedly rational players in which agents make inferences based on a coarse information about others' behaviors: Agents are assumed to know only the average reaction function of other agents over groups of situations. Equilibrium requires that the coarse information available to agents is correct, and that inferences and optimizations are made based on the simplest theories compatible with the available information. We illustrate the phenomenon of deception and how reputation concerns may arise even in zero-sum games in which there is no value to commitment. We further illustrate how the possibility of deception affects standard economic insights through a number of stylized applications including a monitoring game and two simple bargaining games. The approach can be viewed as formalizing into a game theoretic setting a well documented bias in social psychology, the Fundamental Attribution Error.

https://halshs.archives-ouvertes.fr/halshs-00590767/document

Towards a theory of deception

Nous etudions l'impact des participations au capital sur les encheres a valeurs privees independantes. Le revenu de l'enchere decroit lorsque les acheteurs ont des participations croisees et croit lorsqu'ils detiennent une partie du capital du vendeur. Dans tous les cas de participations capitalistiques, les formats d'encheres ne sont plus equivalents. L'enchere au second prix est plus sensible, a la hausse ou a la baisse, que l'enchere au premier prix, a la presence de participations.

/pdf/auctions-and-shareholdings-5afb61dw5d.pdf

Auctions and shareholdings

https://www.econstor.eu/bitstream/10419/144968/1/cesifo1_wp5933.pdf

Vertical Integration and Downstream Collusion

https://hal.archives-ouvertes.fr/hal-00702434/document

Efficiency in auctions with crossholdings

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