Jaden Chen, University of North Carolina-Chapel Hill
Will Cong, Nanyang Technological University
Siguang Li, Hong Kong University of Science & Technology
Abstract: We study endogenous information provision and source authentication when secondary senders can copy primary senders' signals, providing a microfoundation for correlation neglect. Authentication mitigates this duplication bias but hinders information diffusion, creating ambiguous effects on misinformation and welfare. Crucially, we show that policies aimed at maximizing user welfare can be fundamentally misaligned with the goal of minimizing misinformation. Non-verification can be optimal when diffusion is highly valued or primary senders hold strong bargaining power. While factors like signal quality reduce misinformation under exogenous verification, the effects are uneven when verification is endogenous. We also examine intellectual property protection and self-regulation, consistently highlighting a core trade-off between information accuracy and diffusion in shaping platform policy and welfare outcomes.
Discussant: Snehal Banerjee, University of Michigan
Maryam Farboodi, Massachusetts Institute of Technology
Peter Kondor, London School of Economics and Political Science
Pablo Kurlat, University of Southern California
Abstract: We develop a model of credit market competition with endogenous screening technologies and interest rates, and use it to study two implications of the technological transformation reshaping credit markets. First, lenders deploying similar AI systems and overlapping data may produce increasingly correlated screening errors. We show that correlated mistakes lead ex-ante identical lenders to endogenously specialize across distinct market segments, resulting in a hockey-stick interest rate schedule that echoes the coexistence of traditional banking, fintech lending and private credit, and high-rate indiscriminate lending. Within each segment, lenders charge lower rates and face fewer non-performing loans than absent specialization; yet because credit supply reallocates toward higher-rate segments, the average borrower may end up paying more. Second, technological and regulatory changes affect screening costs unevenly. Big data innovations expand financial inclusion, while broader Open Banking adoption can harm the financially excluded and increase inequality in financial access.
Discussant: Pavel Zryumov, University of Rochester
Abstract: I analyze a dynamic model of concurrent bargaining in which multiple prospective buyers compete to trade with an informed seller. When the seller maintains confidentiality over buyers’ past offers, buyers may engage in competitive “price experimentation”: buyers risk early losses to subsequently acquire informational advantages over competitors and expect to earn future information rents. Due to price experimentation, the seller may benefit from maintaining confidentiality over past offers and restricting buyer entry. The model has implications for the strategic choice between auctions and negotiations, and for the common use of “pre-qualification” in asset sales
Discussant: Brett Green, Washington University-St. Louis
