Matching Agents to Fighting Clients (joint with Kemal Kivanc Akoz and Emre Dogan)

Two sets of clients are pre-matched in battles. Each client needs help from an agent. We study the stability of matchings of the form: agent-client X opponent client-opponent agent. Each agent (client) faces a trade-off between matching a better battle (agent) and worse opponent agent. We show that if the clients are of binary type stable matching always exist. We propose a novel notion of comparing assortativity of matchings and show that stable matchings exist for any preference profile if and only if the pre-matching is close to negative assortative and propose a preference domain for which stable matchings are guaranteed to exist. We show that at any stable matching the induced matching between agents need to be less positive assortative than the prematching. It suggests that in matching with conflict like matchings of opposing lawyers or political candidates, negative assortative matchings are more common than positive assortative ones.


JEL: C78, D62

Should lawyers lie to their clients? Biased expertise in negotiations

(previous title: "Negotiations, Expertise and Strategic Misinformation")

R & R American Law and Economics Review

A plaintiff suffers harm of random value from a defendant. The informed defendant proposes a settlement to the uninformed plaintiff who additionally receives cheap-talk advice from her informed attorney. The attorney can be biased towards or against a trial. A small bias against the trial does not change the outcome of the negotiation. A small bias towards the trial improves the outcome for the plaintiff. The bias may depend on the contract signed by the plaintiff and the attorney. When, the costs of litigation for the plaintiff are large, and the value of the harm is likely to be large, a contingency fee contract is signed and the attorney is biased against the trial. Otherwise, an hourly fee contract is signed and the attorney is biased for the trial. Contracts resulting in no bias are never signed.

Online Appendix

Old version of the paper (with continous liabilitiy value) and its Online Appendix

JEL: D82, D83, D86, K41

Dynamics of Collective Litigation (joint with Andrés Espitia De la Hoz )

In collective litigations the outcome of the trial may depend on the number of litigants. In this paper, we study how collectives form and explore actions that the defendant can take to interfere in this process. We propose a dynamic model of litigation in which a defendant faces the arrival of plaintiffs over time and where the defendant is privately informed about the scope of the harm she has caused (e.g. how many consumers have been exposed to a defective product). We show that when all plaintiffs are strategic the defendant can completely avoid the formation of a collective. However, if some plaintiffs (exogenously) join the collective then strategic plaintiffs may also join. We compare the baseline, in which all settlements are public, to a setting where the privacy of settlements is endogenous. We show that use of private settlements can decrease expected payments for some plaintiffs but may increase payments to subsequent ones. The defendant gains on the possibility of settling the case secretly only if the plaintiffs prior about the scope of the harm is low.

JEL: D82, D83, K41

Trust and Network Formation (joint with: Juan Camilo Cardenas, Davide Pietrobon, Tomás Rodríguez Barraquer, and Tatiana Velasco)

We study whether trust towards strangers is a determinant of social networks among an incoming cohort of first-year undergraduate students. We employ an experiment and survey questions to measure students' trust before they have substantial chances to meet and socialize. After four months, during which the students have many opportunities to interact, we elicit five networks capturing different relationships between them. The students' initial levels of trust do not significantly predict the relationships they formed after four months. In contrast, time of exposure, similarity in socioeconomic status, and hometown are relevant determinants of relationship formation.

Online Appendix

JEL: C80, D85, D90, D91, Z13

Work in progress

Career concerns and task selection (joint with: Rosa Ferrer)

There is a continuum of two-period-living agents and single-period-living principals, each principal holds a task which can be talent sensitive or talent insensitive, each agent holds a private information on his talent. We study competitive equilibria in this setting and show that costly signaling arises endogeneusly. We show that in every equilibrium wages of young agents are non-increasing in their talent. Young talented agents choose to work at talent sensitve tasks at low wages to signal their skills. All competitive equilibria are inefficient, as too many young agents work at talent sensitive tasks. There exists a simple strategy proof mechanism implementing the first best allocation.

JEL: C78, D41, D82