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Essays in information economics and political economy

Ding, Weihan (2019) Essays in information economics and political economy. PhD thesis, The London School of Economics and Political Science (LSE).

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Abstract

The three essays of my PhD thesis study theoretical issues of Information Design and their applications in Political Economy and Finance. Those essays aim to understand that in various economic and political situations, how an informed party can design information structure that another party faces and thus shape that party’s action for the informed party’s own interests. By working on those issues, those essays aim to provide more insights on how information sender’s incentives shape different levels of information quality, and how various variables of interest, including social welfare, are affected. The first chapter studies in international disputes, how a government can get concessions from another government by encouraging its own people to protest against the foreign government. By choosing different levels of propaganda, a government not only affects the probability of protests happening but also the informativeness of protests. This chapter sheds more light on a government’s optimal nation-building strategy, and also which kinds of countries can benefit most from stirring anti-foreign protests. The second chapter studies the optimal information design problem in a financial market. A security issuer designs a signal to persuade an investment bank to underwrite, taking as given that there is a secondary market. This chapter shows that the existence of demand shock would lead to worsening of information quality in the primary market. The third chapter studies that in a moral-hazard environment, how a principal can optimally design the information environment that the agent faces. This chapter shows how a principal can optimally combining providing information and pecuniary incentives to incentivise an agent to exert effort. It also generates some testable predictions about how the quality of equilibrium information structure is affected by factors such as cost of effort and noisiness of production technology.

Item Type: Thesis (PhD)
Additional Information: © 2019 Weihan Ding
Library of Congress subject classification: H Social Sciences > HB Economic Theory
Sets: Departments > Economics
Supervisor: Padro-I-Miquel, Gerard and Aghion, Philippe and Alonso, Ricardo
URI: http://etheses.lse.ac.uk/id/eprint/3979

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