In Spence's (1973) signaling by education model and in many of its extensions, firms can only infer workers' productivities from their education choices. In reality, firms also use sophisticated pre-employment auditing to learn workers' productivities. We characterize the trade-offs between...

Promise competition is prevalent in many economic environments, but promise keeping is often difficult to observe. We study the value of transparency for promise competition and ask whether promises still offer an opportunity to honor future obligations when outcomes do not allow for observing...

We study the welfare effects of ambiguous product information for a buyer with alpha-max-min preferences and a price-setting seller. The buyer privately receives information about her valuation. We show that both can benefit when this information is ambiguous, and we characterize all possible...

Most insurance companies publish few data on the occurrence and detection of insurance fraud. This stands in contrast to the previous literature on costly state verification, which has shown that it is optimal to commit to an auditing strategy, as the credible announcement of thoroughly auditing...

Individuals use narratives as rationales or justifications to make their claims more convincing. I provide a general framework for partial verifiability based on narratives. Narratives give many reasons and arguments. The receiver derives the message's meaning by aggregating these reasons; her...

Promises are prevalent in many competitive environments, but promise keeping is often difficult to observe. Do promises still offer an opportunity to honor future obligations, if promise keeping is unobservable? Focusing on campaign promises, we study the value of transparency. We showhow...

We analyze a competitive labor market in which workers signal their productivities through education à la Spence (1973), and firms have the option of auditing to learn workers' productivities. Audits are costly and non–contractible. We characterize the trade–offs between signaling by...

Different models of uncertainty aversion imply strikingly different economic behavior. The key to understanding these differences lies in the dichotomy between first-order and second-order ambiguity aversion which I define here. My definition and its characterization are independent of specific...