Working Papers

Investment Timing and Reputation

Abstract: An agent learns dynamically about the profitability of a project and decides when to make an irreversible investment. The agent seeks to maximize his reputation for learning. Equilibrium strategies are dictated by the prior belief that the project is profitable: a high-ability agent plays a cutoff strategy in every period, where the cutoffs are bounded below by the prior. Agents are reputationally rewarded for both speed and accuracy, but accuracy becomes gradually less consequential for reputation over time. Compared to a benchmark where the agent has no reputational motive, investment timing may be either be premature or delayed. For projects with a substantial downside risk, reputation induces premature investment. Meanwhile, when projects have a positive net present value ex-ante, reputation induces delayed investment.

Competition and Herding in Breaking News (submitted) [Online Appendix]

Abstract: I present a dynamic model of breaking news. Firms are rewarded for preempting their competitors and for making credible reports. Errors occur when firms fake, reporting without evidence. While even monopolists err, competition and observational learning exacerbate errors and give rise to rich dynamics in reporting. Competition intensifies faking by engendering a preemptive motive, but is endogenously mitigated by improvement in credibility over time. Observational learning causes errors to propagate through the market via a copycat effect, where a new report triggers a surge in faking. The copycat effect causes herding on the timing of news.

Homophily in Social Media and News Polarization (with Luis Abreu and Doh-Shin Jeon, submitted)

Abstract: We consider an ad-financed media firm that chooses the ideological location of its news when consumers who directly receive the news can share it with their followers on social media. When the firm maximizes the breadth of news sharing, it tends to produce

polarized news if the mean (the variance) of ideological locations of the followers of a direct consumer is a convex (concave) function of the latter’s location. This implies that it is the curvature, rather than the slope, of homophily that determines news polarization so that surprisingly, larger homophily at the center (extremes) can lead to (no) polarization.

Reputation in News Media: Speed vs. Accuracy

Abstract: We study news firms’ reporting behavior, including their propensity to misreport, when they are reputation driven. A news firm (sender) dynamically learns about a state and reports to a consumer (receiver). Senders are concerned with their reputation, and must choose when to make a report. In equilibrium, the sender fakes, i.e., reports despite being ignorant of the state, with positive probability in every period. This faking in turn leads to a higher level of misreporting than if the sender were instead truthful. We further find the sender’s reputation is endogenously rewarded for both speed and accuracy, and thus we provide a microfoundation for the speed-accuracy tradeoff. Finally, we consider the dynamics in the sender’s strategy, finding that the sender becomes more truthful, and thus less prone to misreporting, as time passes.

Works In Progress

Dynamic Reputation-Driven Media Bias