Essays on Rational Inattention and Mechanism Design

Abstract

This dissertation consists of three essays on rational inattention and mechanism design. The first chapter studies a seller’s optimal mechanism when faced with two ex-ante identical buyers who can flexibly choose what type of information to acquire before purchase. It shows that the seller may optimally create exclusivity by offering different price–allocation schedules so that one buyer acquires precise information while the other remains uninformed. The core tradeoff is between rent extraction and acceptance probability: exclusivity strengthens incentives to acquire information but lowers the likelihood of trade, while equal treatment maximizes trade at the expense of weaker learning. Comparing mechanisms, sequential offers are optimal when rent extraction is paramount, while symmetric simultaneous offers are optimal when acceptance probability is more valuable. This distinction arises only under flexible information acquisition, highlighting how timing and exclusivity interact with buyers’ learning incentives to generate asymmetric treatment of symmetric buyers. The second chapter studies mechanism design with inattentive buyers whose signals are interdependent. Buyers can acquire costly information to refine their beliefs about the value of an asset, but their research is partially correlated, so each buyer’s posterior depends on both her own and her rival’s information. The analysis compares sequential and simultaneous mechanisms to understand how interdependence affects the seller’s incentives and revenue relative to the independent-signals benchmark. In sequential mechanisms, the first buyer’s signal becomes the prior for the second buyer, so unfavorable information propagates forward and reduces the seller’s continuation value. In simultaneous mechanisms, interdependence creates a free-rider problem that weakens incentives to acquire information, leading the seller to deter learning. Because this reduces informational rents, the seller’s revenue can exceed that under independent signals when interdependence induces deterrence of information acquisition. These results highlight how timing and interdependence jointly determine the value of information in optimal selling mechanisms. The third chapter studies a contracting problem in which a receiver decides whether to acquire costly information about an outside option before accepting an offer. Information acquisition improves decision quality but makes the receiver more selective, creating a tradeoff between acceptance probability and surplus extraction for the proposer. The analysis characterizes the equilibrium in which the receiver follows a cutoff strategy and the proposer optimally adjusts the offer in response. It shows how the distribution and dispersion of the outside option shape both information acquisition incentives and pricing. In particular, greater uncertainty increases the value of information, leading to lower equilibrium offers and more selective acceptance behavior. Taken together, these essays develop a unified framework for understanding how endogenous information acquisition shapes optimal mechanisms and contracts. Across different environments—multi-buyer competition, interdependent signals, and outside options—the results show that information frictions fundamentally alter the tradeoff between efficiency and surplus extraction. The analysis highlights how timing, exclusivity, and information structure jointly determine incentives to acquire information and, in turn, equilibrium outcomes. More broadly, the dissertation demonstrates that optimal design must account not only for agents’ private information but also for how that information is endogenously acquired.