headshot of Franz Ostrizek Franz Ostrizek Postdoctoral Researcher University of Bonn

I am a postdoctoral researcher at University of Bonn and a research affiliate at briq.
My research interests are in microeconomic theory and behavioral economics.

Working papers

Why wouldn't a firm gather and use all information about worker performance?

PDF Dec 2019

We study a dynamic principal-agent setting in which both sides learn about the importance of effort. The quality of the agent’s output is not observed directly. Instead, the principal jointly designs an evaluation technology and a wage schedule. More precise performance evaluation reduces current agency costs but promotes learning, which is shown to increase future agency costs. As a result, the optimal evaluation technology is both imprecise and tough: a bad performance is always sanctioned, but a good one is not always recognized. We also study the case in which principal and agent have different priors, for instance because the agent has incorrect beliefs about his abilities. If the agent is overconfident, the principal uses a tough evaluation structure to preserve the agent’s profitable misperception. For an underconfident agent, by contrast, she either uses a fully informative evaluation in order to promote learning and eliminate costly underconfidence, or is lenient if learning is too costly.

How can a principal use framing effects in extensive-form mechanisms?

PDF EC '21: Extended Abstract New Version: Sep 2021

A principal faces an agent with frame-dependent preferences and designs an extensive-form decision problem with a frame at each stage. This allows the principal to induce dynamic inconsistency and thereby circumvent incentive compatibility constraints. We show that a vector of contracts can be implemented if and only if it can be implemented using a canonical extensive form, which has a simple high-low-high structure using only three stages and the two highest frames. We apply our results to the classic monopolistic screening problem. Some types buy in the first stage, while others continue the interaction and buy at the last stage. The firm offers unchosen decoy contracts. Sophisticated consumers correctly anticipate that if they deviated, they would choose a decoy, which they want to avoid in a lower frame. This eliminates incentive compatibility constraints into types who don't buy in the first stage. With naive consumers, the principal can perfectly screen by cognitive type and extract full surplus from naifs.

How to price discriminate when agents differ in their payoff-type and their influence on a global externality?

PDF New Version: Sep 2021

We propose a tractable framework to introduce externalities in a screening model. Agents differ in both payoff-type and influence (how strongly their actions affect others). Applications range from pricing network goods to regulating industries that create externalities. Inefficiencies arise only if the payoff-type is unobservable. When both dimensions are unobserved, the optimal allocation satisfies lexicographic monotonicity<\i>: increasing along the payoff-type to satisfy incentive compatibility, but tilted towards influential agents to produce the externality. In particular, the allocation depends on a private characteristic that is payoff-irrelevant for the agent. We characterize the solution through a two-step ironing procedure that addresses the nonmonotonicity in virtual values arising from the countervailing impact of payoff-types and influence. If observable, influence is used as a signal of the payoff-type. We provide sufficient conditions for rents from influence to emerge even in a setting featuring atomistic agents.

  • Acquisition, (Mis)use and Dissemination of Information: The Blessing of Cursedness and Transparency (with Elia Sartori)

How does inferential naivete affect information acquisition, information use, and information dissemination?

Draft coming soon!

This paper studies strategic interactions where players observe statistics of others' actions, focusing on: First, the endogeneity of the precision of such aggregate information as signals of the fundamental; and second, agents' well-documented difficulty in making inference based on such signals. We conduct our analysis in a beauty contest game with information acquisition, adapting cursed equilibrium to model agents limited ability to process aggregative information. To discipline information acquisition choices in this setting with incorrect information use, we define a novel notion of cursed expectations equilibrium with information acquisition: Agents assess the value of private information according to a subjective envelope condition, as they correctly anticipate their actions and (incorrectly) deem them optimal. We show that there is inefficiently low acquisition and use of private information in the rational benchmark due to an information dissemination externality. Despite suboptimal use, cursed agents rely more heavily on their private information which pushes information acquisition towards its efficient level and causes an initial increase in welfare.Transparency crowds out private information but always increases the endogenous precision of the aggregative signal and welfare, while other policy instruments can have paradoxical effects due to their interaction with cursedness. Finally, we explore the behavior and welfare of an atomistic rational agent playing against a cursed crowd and demonstrate that transparency may be an elitist policy.

Publications