Heidi Christina Thysen
Assistant Professor at Norwegian School of Economics (NHH)
Email:
heidi.thysen(at)nhh.no
Research Interest:
Microeconomic Theory, Bounded Rationality
Publications
"Equilibrium Contracts and Boundedly Rational Expectations", joint with Heiner Schumacher, Theoretical Economics, Volume 17, Issue 1, p. 371-414, Supplementary Appendix
We study a principal-agent framework in which the agent forms beliefs based on a misspecified subjective model of the principal’s project. She fits this model to the objective probability distribution to predict output under alternative actions. Misspecifications in the subjective model may lead to biased beliefs. However, under mild restrictions, the agent has correct beliefs on the equilibrium path so that the optimal contract is non-exploitative. This allows for a behavioral version of the informativeness principle: The optimal contract conditions on an additional variable only if it is informative about the action according to the agent’s subjective model. We further characterize when misspecifications affect the optimal contract. One implication of this characterization is that the scope for belief biases depends on the agent’s job, e.g., her position in the hierarchy.
"Strategic Interpretations", joint with Kfir Eliaz and Rani Spiegler, Journal of Economic Theory, Volume 192, March 2021, 105192
We study strategic communication when the sender’s multi-dimensional messages are given an interpretation by the sender himself or by a proxy. Interpreting messages involves the provision of some data about their statistical state dependence. The receiver can only use this data to decipher messages. In this way, strategic interpretation of messages can influence the receiver’s understanding of their equilibrium meaning. We show that in a two-action, two-state setting, the sender can attain his first-best payoff when the prior on one state exceeds a threshold that decays quickly with message dimensionality. We examine the result’s robustness to the critique that the receiver may attempt to draw inferences from the selective interpretation itself.
"Persuasion with Endogenous Misspecified Beliefs", joint with Kfir Eliaz and Rani Spiegler, European Economic Review, Volume 134, May 2021, 103712
Working Papers
"Competing Causal Interpretations: An Experimental Study", joint with Sandro Ambuehl (2024)
Good decision-making requires understanding the causal impact of our actions. Often, we only have access to correlational data that could stem from multiple causal mechanisms with divergent implications for choice. Our experiments comprehensively characterize choice when subjects face conflicting causal interpretations of such data. Behavior primarily reflects three types: following interpretations that make attractive promises, choosing cautiously, and assessing the fit of interpretations to the data. We characterize properties of interpretations that obscure bad fit to subjects. Preferences for more complex models are more common than those reflecting Occam's razor. Implications extend to the Causal Narratives and Model Persuasion literatures.
“Subjective Causality in Choice”, joint with Andrew Ellis (2024)
Choices based on observational data depend on beliefs about which correlations reflect causality. An agent predicts the consequence of availables action using a dataset and her subjective beliefs about causality represented by a directed acyclic graph (DAG). We identify her DAG from her random choice rule. Her choices reveal the chains of causal reasoning that she undertakes and the confounding variables she adjusts for, and these pin down her model. When her choices determine the data available, her behavior affects her inferences, which in turn affect her choices. We provide necessary and sufficient conditions for testing whether an agent's behavior is compatible with the model.
"Fiscal Rules and Market Discipline", joint with Ethan Ilzetzki (2023)
Fiscal rules have proliferated as a way to limit public debt. Rules intend to impose fiscal discipline on governments that might be otherwise present-biased. However, lenders also discipline government borrowing through a market mechanism, with excessive debt penalized with higher interest rates. In this paper, we study the interaction between fiscal rules and market discipline in limiting government borrowing. We do so in a sovereign borrowing model with asymmetric information about governments' propensity to over-borrow and default. Governments may signal their fiscal rectitude by showing fiscal restraint and this can lead not only to over-borrowing as in traditional models, but also to under-borrowing, as governments attempt to signal their fiscal responsibility. In addition to its traditional role of restraining present-biased governments, fiscal rules also make signalling more difficult and may have the perverse effect of forcing prudent governments to save even more excessively than otherwise or alternatively hamper their ability to signal their rectitude entirely. Fiscal rules restrain impatient governments but penalize prudent governments. An optimal fiscal rule balances these trade-offs and will be binding at times, but will never be so tight as to naively push governments to ``do the right thing''.
"Correlation Neglect as a Commitment Device" (2018)
We study the strategic transmission of information from two informed senders to an uninformed receiver. The senders, whose preferences are perfectly aligned can send correlated, binary, pay-off irrelevant messages. The receiver observes the messages and takes an action that affects the pay-off of all the agents. The receiver understands the informational content of the individual messages, but not their correlation. Compared to the rational benchmark the receiver’s inability to infer the correlation between messages expands the range of disagreement for which information transmission can take place. The receiver strictly prefers to suffer from correlation neglect.
Work in progress
“Fixed or Flexible Election Structure?”
In many western democracies the Prime Minister have the option to call for an early election. We adapt Rogoff (1990)’s model of political budget cycles to allow for early elections and study the consequences in this framework when the PM can call for early elections.
“Policy Delays and Information Generation with Competing Experts”, joint with Clement Minaudier
The ability to uncover evidence over time can influence the duration of policy making. We consider a model where two competing experts can sequentially uncover hard evidence and choose whether to disclose it to a policy maker. We study how their decision to disclose evidence depends on the policy maker's valuation of the status quo and on the time, it takes to uncover evidence. We show in an example that competition can lead an expert to stop generating evidence early.