Topics in Economic Theory

Trustees Of Boston University, Boston

Investigators

Abstract

This award funds research on two distinct topics in economic theory. The first project develops new approaches to the modeling of decision making subject to temptation. The idea is that a person views his/her own future self as driven by currently unknown 'desires' which may conflict with the person's current view of what he wishes to consume. Surprisingly, this approach turns out to be mathematically equivalent to alternative recent approaches where the person expects his future self to choose what to consume to maximize his current utility subject to certain 'self control' costs. The second project studies implementation with evidence. More precisely, the PI and his collaborator consider the optimal design of social institustions when agents may posess evidence to back up their claims. They show that the use of evidence has dramatic effects on what can be achieved via appropriately designed institutions. Since virtually all work on this topic has ignored the possible availability of evidence, these results have important implications for rethinking the theory of optimal institutional design. This project is basic research in economic theory. It has broader impacts because it adds to a toolkit that researchers in economics, business, political science, and law can use to build models that incorporate important aspects of human behavior.