Essays in Applied Microeconomic Theory

Abstract

This thesis presents three essays in microeconomics. The first and second chapters address the role that observable demographic characteristics, particularly gender, play in influencing strategic interactions. The third chapter analyzes a method for enforcing efficient trade among agents whose preferences fail to satisfy the gross substitutes assumption.

In the first essay, I translate the concept of fundamental attribution error from social psychology into a game theoretic framework and develop it into a novel solution concept. In an 'attributive equilibrium', each player forms beliefs according to a subjective model in which ex post data about her opponents is explained purely by her opponents' types. When players are partitioned into publicly observable groups, any realized differences across groups are thus interpreted as reflecting type differences. I demonstrate how this forms a novel pathway for sustaining discrimination and how it leads to systematic belief differences across groups.

In the second essay, my co-authors and I study gender differences in competition using data from 3,921 episodes of the TV trivia show Jeopardy! We find women answer clues correctly at a rate 99% that of men but attempt only 84% as many clues, leading to cash winnings only 65% those of men. We employ a structural hazard rate model to understand this critical gender gap in clue attempting. To attempt a clue, a contestant must be the first to push a signaling button. Our model suggests that in episodes with a mixed-gender panel, women signal 8% slower than in all-female episodes, and men signal 2% faster than in all-male episodes.

Finally the third essay addresses the problem that in thin markets, competitive equilibrium may fail to exist when traders' preferences include complementarities. I show that, nonetheless, efficient trades may be supported either by using non-linear prices or by restricting traders to a subset of exchange bids. Furthermore, these two alternative concepts are nearly equivalent in supportive power, and restricted equilibria admit a natural hierarchy in which relatively less restrictive equilibria yield greater efficiency and satisfy tighter core conditions than their more restrictive counterparts.