Negotiations, Experise and Strategic Misinformation (job market paper)
The paper analyzes the role of an expert in negotiations over settlements. I study a situation where a plaintiff suffers a harm of an unknown value from a defendant and contracts an attorney to provide an advise during the settlement negotiations. I show that in equilibrium the plaintiff never offers a contract that leads to a complete information transmission. If the costs of the trial are high, the plaintiff compromises on the precision of information and increases her bargaining position through transferring the costs of the trial to the attorney. If the costs of the trial are low, the plaintiff bears the costs herself. In this situation, the attorney recommends rejecting the settlement even for some offers that would be profitable for the plaintiff, which improves the plaintiff's bargaining position through making the threat of resolving the case by trial more credible.
JEL: D82, D83, D86, K41
Cherry-picking and Career Concerns
I develop a model in which the career-concerned agent decides on performing the task of a random difficulty. The reputation of the agent is determined only by the outcome of the task, as the market does not observe the difficulty of the task. I find that there always exist an threshold equilibrium in which the agent performs only the tasks that are sufficiently simple. Presence of career concerns introduces inertia in the model, leading the agent under-reacting to changes in prices. Particularly, if the price for successfully completing the task is high (low) and the costs of performing the task is low (high), career concerned-agent performs less (more) tasks than the agent caring only about a monetary payoff.
JEL: D82, K41
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
Work in Progress
Dynamics of Collective Litigation (joint with Andrés Espita De la Hoz)
We model an environment in which a defendant is liable for a harm suffered by multiple plaintiffs. The plaintiffs realize that they have a right to compensation over time, arriving to the system according to a Poisson process. Each plaintiff can decide to litigate individually or join the 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 are not informed about the intensity of the arrival process. We study the learning of the plaintiffs, the decisions they take over time, and analyze strategies that the defendant can use to manipulate the information.
JEL: D82, D83, K41