Agency Problems in Political Science

Citation

Devdariani, Saba (2022) Agency Problems in Political Science. Dissertation (Ph.D.), California institute of Technology. doi:10.7907/frhb-rn17. https://resolver.caltech.edu/CaltechTHESIS:08272021-193158262

Abstract

This dissertation consists of three chapters analyzing agency problems in political science. More specifically the role of different/additional information available to the principal or the agent.

In Chapter 2 we analyze the effect of the politician's knowledge of the external shock on his policy decisions on unrelated issues. Elected politicians cannot control some external shocks, even if they can still anticipate their occurrence better than the general public. How can politicians use these types of anticipated external shocks to their benefit? How do they change their pandering incentives? And how does a rational voter incorporate these seemingly irrelevant external shocks in her voting decision? We build on the political accountability model of Canes-Wrone Herron, Shotts (2001), adding the ability to the voter to observe her utility, which is affected by an external shock. The shock is observed by the incumbent politician but not by the voter. Our analyses show that for high or low enough magnitude external shocks, a politician's ability to anticipate them eliminates his pandering incentives in equilibrium. For medium negative shocks, pandering could be a "gamble for resurrection," while for medium positive shocks, it acts as an "insurance" to guarantee the reelection. We show that both of these pandering regions emerge in equilibrium. The politician's knowledge of the shock, overall, decreases the voter's welfare in equilibrium.

In Chapter 3 we endogenize the information acquisition for the voter to study what types of policy decisions voters pay attention to, and why, and how rational voter attention affects the behavior of politicians in office. We extend the Canes-Wrone, Herron, Shotts (2001) model of electoral agency to allow the voter to rationally choose when to ``pay attention'' to an incumbent's policy choice by expending costly effort to learn its consequences. When attention is moderately costly the voter generally pays more of it after the ex-ante unpopular policy than the ex-ante popular one. Rational attention may improve accountability by encouraging the politician to be truthful. In some cases, it may also severely harm accountability both by inducing a strong incumbent to ``play it safe'' with a policy that avoids attention, or a weak incumbent to ``gamble for resurrection'' with a policy that draws it. Finally, rational attention can induce or worsen pandering but never ``fake leadership''.

Chapter 4 analyzes delegated information acquisition with a biased agent who also has private information about the state of the world. The information acquired is public and its informativeness increases with costly effort. Equilibria are characterized for two cases: when the agent decides an effort level and when a principal imposes formal requirements on it. The analysis demonstrates that even when the principal cannot commit to an arbitrary decision rule, he benefits from imposing formal requirements by getting as much public information as possible and correctly aligning the biased agent's incentives. In the optimal mechanism, the principal incentivizes the low-type agent to truthfully reveal her private information by requiring a relatively low amount of costly effort, while the high private report has to be followed by the maximum effort in the public signal.

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