We model demand for non-instrumental information, drawing on the idea that people derive entertainment utility from suspense and surprise. A period has more suspense if the variance of the next period's beliefs is greater. A period has more surprise if the current belief is further from the last period's belief. Under these definitions, we analyze the optimal way to reveal information over time so as to maximize expected suspense or surprise experienced by a Bayesian audience. We apply our results to the design of mystery novels, political primaries, casinos, game shows, auctions, and sports.
In a class of delegation problems over multiple decisions, it is optimal for the principal to cap the agent's choices against the direction of her bias. Geometrically, this corresponds to a half-space delegation set.
This paper extends the concept of a quota contract to account for discounting and for the possibility of infinitely many periods: a discounted quota fixes the number of expected discounted plays on each action. A repeated principal-agent contracting environment is presented in which discounted quota contracts are optimal, even when dynamic contracts with arbitrary transfer payments may be used. The optimal discounted quotas are recursively characterized for an infinitely repeated iid problem. More explicit descriptions of the contracts are given for the limit as interactions become frequent, and the case where only two actions are available.
I present a simple and tractable model of the optimal taxation of married couples, working off of the multidimensional screening framework of Armstrong and Rochet (1999). In particular, I study how the tax code varies with the degree of assortative mating. One implication of the model is that the "negative jointness" of marginal tax rates found in Kleven, Kreiner, and Saez (2006, 2009) for couples with uncorrelated earnings should be attenuated in the presence of assortative mating. When mating is sufficiently assortative, the optimal tax schedule has zero jointness -- one's marginal taxes do not depend on the partner's income.
Forthcoming and Published Papers
A principal delegates multiple decisions to an agent, who has private information relevant to each decision. The principal is uncertain about the agent's preferences. I solve for max-min optimal mechanisms -- those which maximize the principal's payoff against the worst case agent preference types. These mechanisms are characterized by a property I call "aligned delegation:" all agent types play identically, as if they shared the principal's preferences. Max-min optimal mechanisms may take the simple forms of ranking mechanisms, budgets, or sequential quotas.
Consider an environment where long-lived experts repeatedly interact with short-lived customers. In periods when an expert is hired, she chooses between providing a profitable major treatment or a less profitable minor treatment. The expert has private information about which treatment best serves the customer, but has no direct incentive to act in the customer's interest. Customers can observe the past record of each expert's actions, but never learn which actions would have been appropriate. We find that there exists an equilibrium in which experts always play truthfully and choose the customer's preferred treatment. The expert is rewarded for choosing the less profitable action with future business: customers return to an expert with high probability if the previous treatment was minor, and low probability if it was major.
If experts have private information regarding their own payoffs as well as what treatments are appropriate, then there is no equilibrium with truthful play in every period. But we construct equilibria where experts are truthful arbitrarily often as their discount factor converges to one.