Information Asymmetry and Strategy: Applications to Impartiality and Free-Riding

Abstract

This dissertation consists of three essays examining information asymmetry, in particular on the topic of impartiality. The first two essays are in the form of the principle-agent model but the third essay is a public goods game where the information asymmetry is among the agents within the game. The first essay is an implementation problem. In this juror problem, there is a true ranking of contestants unknown to the designer but known to two biased jurors. The designer’s objective is to discover the true ranking. This information is unverifiable and unknowable by any means other than report from the two biased jurors. What the designer does know is the impartiality of each juror’s preference. We find that to Nash implement the true ranking, the designer requires: one, every pair of contestants is an impartial pair for some juror; two, the designer knows for every contestant pair some juror for whom it is an impartial pair; three, impartial pairs are distributed such that a construction of their lower contour sets overlap. Instead of impartiality being a restriction on preferences as in the juror problem, we next look at a literature survey of nomination rules with impartiality being a mechanism property. In this literature survey, impartiality is a property of a nomination rule that does not allow an agent to change his vote and lose his election. The literature survey establishes many impossibility results but some viable nomination rules include a majority rule with default agent and partition methods that culls an elect from partitioned (district) elections. We finally consider a public-goods game where the charity is seeking to maximize total donations. The information asymmetry is between two types of donors, informed and uninformed. The informed donor is aware of the value of the common value public good while the uninformed donor is not. The charity has the ability to choose the cost of donors becoming informed. We find in this problem that the charity maximizes total expected donations by making information costly such that the equilibrium is a mix of informed and uninformed donors.