Essays in Economics Theory

This dissertation contains three essays in Economic Theory. The first chapter relates to information economics and mechanism design: it studies the inefficiencies that arise from delegating information acquisition to an uninterested agent. The second and third chapter are essays in decision theory and explore the behavioral implications of certain types of incomplete preferences. In the first chapter, a principal hires an agent to acquire costly information that will influence the decision of a third party. While the realized piece of information is observable and contractible, the experimental process is not. Assuming a general family of information cost functions (inclusive of Shannon’s mutual information), we show that the first best is achievable when the agent has limited liability or when he is risk averse, in contrast to standard moral hazard models. However, when the agent is risk averse and has limited liability, efficiency losses arise generically. Specifically, we show that the principal obtains his first best outcome if and only if she intends to implement a ”symmetric” experiment, i.e. one in which the cost of generating each piece of evidence is the same. On the other hand, ”asymmetric” experiments that are relatively uninformative with high probability but occasionally produce conclusive evidence will bear large agency costs. In the second chapter, we define an elimination rule as a binary relation that is reflexive and has no strict cycle. We study the behaviors of decision makers that can be represented by certain types of menu dependent elimination rules: upward refinements, in which the elimination rule becomes more complete as the choice set grows and are consistent with the decision maker extracting increasingly more information from bigger sets; and downward refinements, in which the elimination rule shrinks as the choice set grows, and that are consistent with choice overload phenomena. Finally, we study the behavior of a decision maker with incomplete preference who uses a heuristic rule to select an arbitrary subsets of undominated elements in each choice set. We show how to use this framework to identify all choice data consistent with a certain behavioral bias, by illustrating it with both the compromise effect and the attraction effect. In the third chapter, we introduce the notion of revealed betweenness for partial orders of dimension two, i.e. that are the intersection of two linear orders: how to identify solely from binary comparisons which of three mutually incomparable alternatives is ranked as the middle one for both linear orders. We use it to provide a new set of sufficient conditions for a partial order to be of order dimension two or less, by applying a characterization of a particular class of ternary relations: betweenness relations. We finally address the issue of identifiability of this pair of criteria