Negotiations, Expertise and Strategic Misinformation (job market paper)

I study the role of an expert and the importance of strategic contracting for negotiations with asymmetric information on an example of civil litigation. I consider a situation in which a plaintiff suffers a harm of an unknown value from a defendant and contracts with an attorney, who plays the role of an expert. To avoid a costly trial the parties engage in a pre-trial negotiation. The informed defendant offers a settlement to the uninformed plaintiff, who consults the decision on accepting it with the attorney. For a fixed contract, I find that the result of the negotiation strongly depends on whether under the given contract the plaintiff or the attorney is more willing to resolve the case by trial. Moreover, I find that even though a contract which fully aligns the incentives of the plaintiff and the attorney is feasible, it is never optimal, and I characterize the optimal contract. In particular, I show that the plaintiff may be better-off under asymmetric than under complete information.

JEL: D82, D83, D86, K41

Cherry-picking and Career Concerns

I develop a model in which a career-concerned agent decides on performing a task of random difficulty. The reputation of the agent is determined only by the outcome of the task, as the market does not observe its difficulty. I find that there always exist a threshold equilibrium in which the agent performs only the tasks that are sufficiently simple. The presence of career concerns introduces inertia , leading the agent to under-react to changes in prices. In particular, if the price for successfully completing the task is high (low) and the costs of performing the task is low (high), a career concerned-agent performs less (more) tasks than an agent caring only about the monetary payoff.

JEL: D82, K41

Propensity to Trust and Network Formation (joint with: Juan Camilo Cardenas, Davide Pietrobon and Tomás Rodríguez Barraquer - click here for slides, draft coming soon)

We study how people's propensity to trust affects the social networks they form relying on an empirical strategy that is immune to reverse causality. We use a combination of survey questions and a standard trust experiment to measure the propensity to trust of 72 members of a cohort of first-year undergraduates before they had a chance to meet. After four months, we elicit five different social networks among the students. We estimate social network formation models for each of the networks elicited to identify how the different measures of trust affect link formation. We control for a large set of observables, including many individual and dyadic traits which are known to play a significant role in network formation. We find that trust poorly explains the formation of the networks we retrieve. In particular, the effect of homophily in socioeconomic background can go so far as being one order of magnitude bigger than the effect of trust.

JEL: C80, D85, D90, D91, Z13

Dynamics of Collective Litigation (joint with Andrés Espita De la Hoz - work in progress)

We model an environment in which multiple plaintiffs can litigate against a single defendant. The plaintiffs realize that they have a right to compensation over time. Once a plaintiff realizes that he has a right for a compensation, he decides whether to litigate individually or join a collective litigation. The collective litigation generates economies of scale, but delays receiving the compensation. Moreover, the plaintiffs are not aware of the range of the harm, that is they do not know how many litigants can appear in the future. We study the learning of the plaintiffs and the decisions they take.

JEL: D82, D83, K41