2025 Theses Doctoral

Essays in the economic theory of adaptation to a changing environment

Barilla, César

This thesis is composed of three individual research papers which use and develop theoretical tools to study questions related to the strategic dynamic behavior of economic agents faced with an uncertain and changing world.

In 𝘛𝘩𝘦 𝘥𝘺𝘯𝘢𝘮𝘪𝘤𝘴 𝘰𝘧 𝘪𝘯𝘴𝘵𝘢𝘣𝘪𝘭𝘪𝘵𝘺 (co-authored with Duarte Gonçalves), we study a model in which two players with opposing interests try to alter a status quo through instability-generating actions. We show that even if these actions are costly and do not lead to any short-term gains, they can be used to secure longer-term durable changes. In equilibrium, instability generated by a player decreases when the status quo favors them more. Equilibrium always exhibits stable states in which the status quo persists indefinitely. There is long-run path-dependency and inequity: although instability eventually leads to a stable state, it typically selects the least favorable one for the initially disadvantaged player.

In 𝘈𝘯𝘤𝘦𝘴𝘵𝘳𝘢𝘭 𝘰𝘳𝘪𝘨𝘪𝘯𝘴 𝘰𝘧 𝘢𝘵𝘵𝘦𝘯𝘵𝘪𝘰𝘯 𝘵𝘰 𝘤𝘭𝘪𝘮𝘢𝘵𝘦 𝘪𝘴𝘴𝘶𝘦𝘴 (co-authored with Palaash Bhargava), we ask: how does the climatic experience of previous generations affect today’s attention to environmental questions? Using self-reported beliefs and environmental themes in folklore, we show empirically that the realized intensity of deviations from typical climate conditions in ancestral generations influences how much descendants care about the environment. The effect exhibits a U-shape where more stable and more unstable ancestral climates lead to higher attention today, with a dip for intermediate realizations. We propose a theoretical framework where the value of costly attention to environmental conditions depends on the perceived stability of the environment, prior beliefs about which are shaped through cultural transmission by the experience of ethnic ancestors. The U-shape is rationalized by a double purpose of learning about the environment: optimal utilization of typical conditions and protection against extreme events.

In 𝘞𝘩𝘦𝘯 𝘢𝘯𝘥 𝘸𝘩𝘢𝘵 𝘵𝘰 𝘭𝘦𝘢𝘳𝘯 𝘪𝘯 𝘢 𝘤𝘩𝘢𝘯𝘨𝘪𝘯𝘨 𝘸𝘰𝘳𝘭𝘥, I study optimal dynamic information acquisition about evolving circumstances. A decision-maker periodically acquires information about a changing state, controlling both the timing and content of updates. I characterize optimal policies using a decomposition of the dynamic problem into optimal stopping and static information acquisition problems. Eventually, information acquisition either stops or follows a simple cycle, with updates occurring at regular intervals and leading to consistent certainty levels. In the limit as costs vanish it is optimal to trade-off quality for frequency; surprisingly, this entails that both belief and action changes become lumpier. By contrast, the optimal frequency of information acquisition is generally non-monotonic in the volatility of the underlying environment. I study applications to investment problems, highlighting consequences for portfolio diversification and asymmetries between safe and risky assets.