Essays in information economics

Kudinova, Evgeniya (2024) Essays in information economics. PhD thesis, London School of Economics and Political Science.

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Abstract

This thesis consists of three essays in information economics. The first two chapters examine how economic agents adapt to risky new opportunities when they can invest in increasing the likelihood of a successful outcome, while also learning about its quality (i.e. experimenting). In the first chapter, I build on a single risky arm Poisson bandit environment with conclusive breakthroughs and explore how the ability to endogenously change the arm, by investing, affects experimentation (I assume that successful investment turns a bad arm into a good one). I find that the agent may behave according to one of the two regimes. She either acts non-monotonically with purely experimenting before and after the investment stage and eventually abandons the risky arm; or, due to converging to an interior belief, she never quits investing and experimenting until the risky option generates a success. The second chapter studies a similar setting when the information arrives as conclusive breakdowns instead of breakthroughs. Despite the changed information structure, the agent still finds herself in one of the two regimes, but the mechanism behind those becomes very different: the ability to invest may make the agent willing to experiment and invest even after a breakdown, so she may never give up on the risky arm and remain in cycles of pure experimentation and investment stages. The third chapter explores the idea that voters may communicate their protest against the government’s silence on certain socially important issues (e.g. climate change) through elections. I use the common value elections framework to represent the traditional policies dimension and introduce an extra dimension that refers to the previously excluded policies. The voters are motivated by selecting a better fit along the salient dimension and signaling their views towards the previously excluded one. I show that the voters may signal their protesting views by abstaining from elections at a cost of increasing a risk of a wrong candidate selection, and identify conditions under which the citizens can achieve fully successful communication in large elections.

Item Type:	Thesis (PhD)
Additional Information:	© 2024 Evgeniya Kudinova
Library of Congress subject classification:	H Social Sciences > HB Economic Theory J Political Science > JA Political science (General)
Sets:	Departments > Economics
Supervisor:	Levy, Gilat
URI:	http://etheses.lse.ac.uk/id/eprint/4765

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