Becker Friedman Institute
for Research in Economics
The University of Chicago

Research. Insights. Impact. Advancing the Legacy of Chicago Economics.

D83

Insider Investor and Information

Ehsan Azarmsa, Lin William Cong

We model dynamic financing of innovative projects where relational financiers observe entrepreneurs' experimentation and thus information they endogenously produce, before deciding on continued financing. We show that enterpreneurs' optimal information productions follow threshold strategies. Insider financiers extract little or no intermin rent even with full information monopoly, hindering efficient financing ex ante. Independent experimentation by insiders mitigate the problem, but can be either a complement or substitute to entrepreneurs' information production.

Cool to be Smart or Smart to be Cool? Understanding Peer Pressure in Education

Leonardo Bursztyn, Georgy Egorov, and Robert Jensen

Concerns about social image may negatively affect schooling behavior. We identify two potentially important peer cultures: one that stigmatizes effort (thus, where it is “smart to be cool”) and one
that rewards ability (where it is “cool to be smart”). We build a model showing that either may lower the takeup of educational activities when takeup and performance are potentially observable

Ideological Segregation and the Effects of Social Media on News Consumption

Seth R. Flaxman, Sharad Goel, Justin M. Rao

Scholars have argued that online social networks and personalized web search increase ideological segregation. We investigate the impact of these potentially polarizing channels on news consumption by examining web browsing histories for 50,000 U.S.-located users who regularly read online news. We find that individuals indeed exhibit substantially higher segregation when reading articles shared on social networks or returned by search engines, a pattern driven by opinion pieces. However, these polarizing articles from social media and web search constitute only 2% of news consumption.