Date of Award

Spring 2021

Document Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

Hörner, Johannes

Abstract

This dissertation examines several economic questions related to dynamic incentives. In the first chapter, I study a dynamic game in which a careerist expert advises a sequence of principals on their actions to match a hidden, randomly evolving state. The expert privately knows her competence. The principals learn about the state and the expert's competence from past advice and past action outcomes, both publicly observable. I find that the equilibrium can feature a ``crisis of expertise,'' in which principals dismiss a competent expert's correct advice, and rely only on public information. Notably, the crisis happens precisely when the quality of public information is low, and thus when expert knowledge is much needed. Finally, I discuss policy implications for alleviating the crisis. In the second chapter, I study the design of certification schemes for a firm who faces a sequence of consumers confronted with adverse selection and dynamic moral hazard problems. I show that a certifier extracts the full net market surplus and maximizes social welfare by using a low-standard, honors certification scheme: at each time, a firm who signed up for certification is either ``certified'' or ``certified with honors;'' moreover, an inept firm is always certified. I relate my findings to common concerns about the ability of such certification schemes to alleviate information asymmetries, despite the prevalence of these schemes in practice. In the third chapter, I consider the strategic manipulation problem in multistage tournaments. In each stage, players are sorted into groups in which they play pairwise matches against each other. The match results induce a ranking over players in each group, and higher ranked players qualify to the next stage. Players prefer qualifying to higher stages. In this setting, a player may potentially profit by exerting zero effort in some matches even when effort exertion is costless. Since such behavior manipulates the tournament, it is desired that full effort exertion is an equilibrium and any equilibrium ranking of qualifying players is immune to manipulation. To this end, I show that it is both necessary and sufficient to allow only the top-ranked player to qualify from each group. Otherwise, rankings can become a noisy indicator of players' strengths, while effort cost and heterogeneous prize spread can be of little relevance to players' effort choices.

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