This paper examines the relationship between competition and efficiency in a market in which incentive contracts are offered to overconfident agents. The context is a labor market in which worker effort is not observed by firms (moral hazard), workers have private information about their...

This paper shows that the principal can strictly benefit from delegating a decision to an agent whose opinion differs from that of the principal. We consider a ``delegated expertise'' problem in which the agent has an advantage in information acquisition relative to the principal, as opposed to...

In this paper I analyze a dynamic moral hazard problem in teams with imperfect monitoring in continuous time. In the model, players are working together to achieve a breakthrough in a project while facing a deadline. The effort needed to achieve such a breakthrough is unknown but players have a...

We develop a simple model that describes individuals’ self-assessments oftheir abilities. We assume that individuals learn about their abilities from appraisalsof others and experience. Our model predicts that if communicationis imperfect, then (i) appraisals of others tend to be too positive,...

This paper analyses the welfare effects of price restrictions on private contracting in a world where agents have a limited cognitive ability. People compute the costs and benefits of entering a transaction with an error. The government knows the distribution of true costs and benefits as well...

Behavioral biases like disposition effect and over-confidence have received much attention as a potential driver of numerous anomalies observed in the markets. Also, it has been argued that information uncertainty tends to exacerbate these biases and induce stronger irrational behavior among...

A monopolist uses prices as an instrument to influence consumers' belief about the unknown quality of its product. Consumers observe prices and sales in earlier periods to learn about the product. Every period they decide whether to consume the product or to wait for a lower price in future. We...

This paper studies robust Bayesian persuasion of a privately informed receiver in which the sender only has limited knowledge about the receiver's private information. The sender is ambiguity averse and has a maxmin expected utility function. We show that when the sender faces full ambiguity,...

Concerns about constructing and maintaining good reputations are known to reduce borrowers' excessive risk-taking. However, I find that the self-discipline induced by these concerns is fragile, and can break down without obvious changes in economic fundamentals. Furthermore, in the aggregate,...