MiaoMiao DONG will defend her thesis on "Dynamic Decision-Making:Self Control and Experimentation" on Tuesday 19th December 2017, Room MF323 (Manufacture des Tabacs) at 2:30 pm.
Supervisor: Thomas Mariotti, TSE researcher
- Catherine CASAMATTA, TSE researcher
- Thomas MARIOTTI, TSE researcher
- Nicolas VIEILLE, Professeur, HEC Paris
- Sven RADY, University of Bonn
My thesis aims to understand intra-personal and inter-personal dynamic decision making. Motivated by applications, it analyzes the new effects generated by dynamic interactions, and provides new empirical predictions and practical policy implications.
Chapter 1 studies addictive good consumption by a time inconsistent consumer.
I find that, a time inconsistent consumer cannot maintain moderation in the long run. However, she can adopt a bright-line personal rule to stay away from excessive consumption. This rule says, as long as her consumption is below the bright line, then her future selves would behave; once her consumption exceeds the bright line, a full-blown relapse would occur. The bright-line personal rule thus features the “lapse-activated consumption” pattern well documented in the Psychology literature. If temporary shocks can affect the consumers consumption decisions and if outside help is available, the consumer involves cyclical consumption patterns that are widely observed in practice. This chapter also demonstrates that abstinence based treatment is recommendable for drugs and alcohol addiction.
The following two chapters start from the view that leaders see further than followers. Consequently, leaders’ leading-by-example signals optimism about the state of the world. The two chapters demonstrate that, in environments where agents resolve uncertainty through experimentation, this signaling effect sheds new light on the nature of leader-follower relationship and on the dynamics of leadership.
Chapter 2 analyzes how signaling and public learning affect the nature of leader-follower relationship. Two players conduct costly experimentation on a risky project of unknown quality. Both experimentation decisions and results are public. The two players differ only in their initial information: one player, called the leader, has better information about the state of nature initially. I construct an equilibrium in which, a mutual encouragement effect governs the leader-follower relationship: in the absence of a breakthrough, the leader leads by example by exerting the maximal effort; this signals his optimism, thereby encouraging the follower to experiment; in return, the follower’s positive reaction also encourages the leader to persevere even when he is pessimistic. Due to the mutual encouragement, total effort can increase over time, which has important empirical implications for how to test whether agents learn from each others experimentation. Moreover, creating information asymmetry improves welfare if the leaders initial signal is sufficiently precise.
Chapter 3 studies how signaling and private learning affect the dynamics of leadership. It focuses on how (multiple) leaders can emerge out of an environment where there is no leaders, and how leadership-followership roles evolve over time. Different from Chapter 2, here, players are symmetric, and can accumulate private information over time: they observe each other’s experimentation result only with some probability. This partial observability of each other’s results gives rise to what the management literature calls “shared leadership:” multiple leaders emerge sequentially; leadership and followership are mere temporary distinctions as a leader and a follower can switch their roles over time. The shared leadership is commonly observed in flat teams in practice.