Debraj Ray, NYU: Noisy Agents
ESOP seminar. Debraj Ray is Silver Professor, Faculty of Arts and Science, and Professor of Economics at New York University. He will present a paper entitled "Noisy Agents", written jointly with Francisco Espinosa.
Debraj Ray. Photo: NYU.
Agents signal their type in a principal-agent model; the principal seeks to retain good agents. Types can only be signaled with some minimal noise, but agents can choose to be ambiguous by adding additional noise to the signaling process. The main result is that bad agent types choose higher noise than their good counterparts, which implies in turn that the principal is wary of both excessively good and excessively bad signals: she retains the agent if and only if the signal falls in some bounded set. This observation has implications in several settings, such as electoral competition and financial portfolio management.
Host: Kalle Moene