UCLA

In this dissertation I present three theoretical papers, each as an individual chapter. The first paper is titled "The Economics of Discretion in Multi-Agent Decision Problems." It is premised on the idea that discretion is valuable when knowledge mismatches lead principals to delegate decisions to agents with specialized knowledge. In the paper, I consider a team setting, and I characterize the optimal delegated choice set that is offered to agents when an agency conflict is present. I show that the amount of discretion increases with the value of an agent's private information, with the degree of alignment between the principal and agents, and with the ex ante uncertainty faced by the principal and agents. The latter finding implies that discretion may be used by agents to hedge the risk that they face. Nevertheless, I demonstrate that when all participants have rational expectations, it is never optimal for agents to add strategic uncertainty to receive more discretion ex post. I conclude the paper by applying the theory to delegated portfolio management, which yields novel empirical implications in this setting.

The second paper is co-authored with Bruce I. Carlin and Andrew Iannaccone and it is titled "Competition, Comparative Performance, and Market Transparency." In the paper, we study how competition affects market transparency, taking into account that comparative performance is assessed via tournaments and contests. Extending Dye (1985) to a multi-firm setting in which top performers are rewarded, we show that increased competition usually makes disclosure less likely, which lowers market transparency and may decrease per capita welfare. This result appears to be robust to several model variations and as such, has implications for market regulation.

The final paper is co-authored with Bruce. I. Carlin and is titled "Political Influence and the Regulation of Consumer Financial Products." In the paper, we explore a theoretical model of product regulation in which the social planner chooses an optimal level of market complexity, given that people have varied sophistication. We investigate how several dimensions affect the quality of regulation: the skill of the social planner, imperfect information, lobbying efforts, voting behavior in elections, and political philosophy. We find that both sophisticated and unsophisticated market participants often vote to elect the least informed and educated planners, which erodes social welfare. Further, when concerns regarding equality are sufficiently large (i.e., a socialistic agenda), the social planner limits the market to one product. In such case, adequacy suffers and all market participants are equally worse off.