Essays on the Microeconomic Theory of Behavioral Heterogeneity and Information Aggregation

In Chapter 1, I consider a voting model with asymmetric information of the type analyzed in Feddersen-Pesendorfer (1997, 1998). There are two alternatives and two states of the world; voters receive private signals about the true state; conditional on the true state, all voters have the same preference over alternatives. The twist introduced by this paper is that with probability 1-&theta a voter is sincere, meaning that he votes according to his signal. The presence of sincere voters improves information aggregation in the sense that sincere voters\u27 private information is directly reflected in their votes. And the presence of sincere voters exacerbates the swing voter\u27s curse among the sophisticated voters, as the information brought in by sincere voters enriches the information implicit in equilibrium, which pushes the sophisticated voters to put less weight on their own signals. But the exacerbation of the swing voter\u27s curse can improve collective decisions, as it can alleviate the negative influence caused by the wrong votes made by sincere voters who receive wrong signals. In Chapter 2, Bo Li and I consider a standard Glosten-Milgrom sequential trading model in which some traders use both their private information and historical information when making decisions, while other traders trade randomly. We introduce a third category of traders who rely only on their private information to decide whether to trade. We find that behavioral heterogeneity (at least three types of traders) provides one explanation for the occurrence of locked/crossed markets (negative bid/ask spreads), supported by various empirical statistics, even in competitive markets that are informationally efficient. In Chapter 3, Bo Li and I consider a voluntary voting model with asymmetric information of the type analyzed in Feddersen-Pesendorfer (1999). Voters share a common state-contingent preference on alternatives but have different beliefs about the state of the world. The twist introduced by this paper is that with probability 1-&theta a voter is sincere who always participates in voting and votes according his private signal only. We find that the presence of sincere voters exacerbates the swing voter\u27s curse , and the exacerbation of the swing voter\u27s curse imposes a signal-contingent effect on sophisticated voters\u27 participation