ANTON D. SUVOROV

TransTeleCom Assistant Professor of Economics, NES
Lead Economist, CEFIR

Office 1721-12
Nakhimovsky pr, 47
Moscow 117418, Russia
Tel.: (+7-495) 129-1700 ext. 120
Fax: (+7-495) 129-3722
E-mail: asuvorov(a)nes.ru
Curriculum vitae: pdf

Teaching at NES

Microeconomics 5; Behavioral Economics

Research Interests

Behavioral economics, contract theory, industrial organization, corporate finance, regulation, economics of education.

Short Bio

Since September 2004, Anton Suvorov is Assistant Professor at the New Economic School, where he teaches courses of behavioral economics and microeconomics, and CEFIR lead economist. He received a diploma with honors from Moscow State University, Department of Mechanics and Mathematics, in 1995 and a PhD from the same department in 1998. In 1999 he graduated from NES and entered MPSE, the doctoral school in economics at Toulouse University, where received a PhD with honors in February 2005. Anton Suvorov jointly with NES professor Andrei Bremzen is a founder of the Laboratory of Experimental Economics at the New Economic School.

Academic Projects

"Addiction to Rewards" (mimeo, 2003). The paper explores the "hidden costs" of rewards in a dynamic principal-agent framework, in which an informed principal selects in each period a reward for an agent. It shows that rewards are addictive in that once offered, a contingent reward makes the agent expect it whenever a similar task is faced, which, in turn, compels the principal to use rewards over and over again. Furthermore, in a long-term principal-agent relationship there is a double-sided ratchet effect: the principal is concerned about creating addiction for the agent, whereas the agent does not want to appear too enthusiastic. On the principal's side, the ratchet effect implies that there are fewer rewards in a long-term principal-agent relationship than in a situation where the agent faces transient principals while implementing a series of similar tasks. On the agent's side, ratcheting conflicts with a desire to work in order to acquire valuable information about the task attractiveness.

"Discretionary Bonuses as a Feedback Device" (joint with Jeroen van de Ven; first version: 2003; last version: march 2006). Under review in Games and Economic Behavior.) This paper studies the use of discretionary rewards in a finitely repeated principal-agent relationship with moral hazard. We show that the principal, when she obtains a private subjective signal about the agent's performance, may pay discretionary bonuses to provide credible feedback to the agent. Conistent with the often observed compression of ratings, we show that in equilibrium the principal communicates the agent's interim performance imperfectly, i.e. she does not fully differentiate good and bad performance. Furthermore, we show that small rewards can have a large impact on the agent's effort provided that the principal's stake in the project is small. Our analysis further reveals that, also in accordance with the empirical findings, the principal may ex ante prefer to choose a 'smoky', rather than a fully transparent performance monitoring system, thereby acquiring an implicit commitment device to reward the agent through discretionary bonuses.

"Information transmission through rewards: an experimental study" (ongoing project; joint with Andrei Bremzen and Akhmed Akhmedov). There is a certain divergence between economists and psychologists in the views on the effects of rewards on motivation: psychologists often express concerns about "hidden costs of rewards". Some recent economic models (e.g. Benabou and Tirole (2003)) emphasize the informational aspect of these "hidden costs". An extensive body of experiments both in economics and psychology related to the "hidden costs" literature has so far largely neglected this informational side of rewards. We are running a series of experiments to investigate the importance of the informational channel in forming the agents' attitude to the tasks and their behavior.

"Advice by an Informed Intermediary: Can You Trust Your Broker?" (mimeo, joint with Natalia Tsybouleva). The paper investigates credibility of the intermediary's advise in a bilateral trade model. A seller and a buyer with private and independent valuations exchange a unit of good, their trade being mediated by a broker, who at the pre-bargaining stage observes a coarse signal about the buyer's valuation. We show how the optimal direct mechanism maximizing the broker's expected profit incorporates the broker's signal. We prove that if the valuations of the seller and the buyer are drawn from uniform distributions and the intermediary's signal specifies whether the buyer's valuation exceeds a certain threshold, choosing an appropriate system of two-part tariffs allows the intermediary to secure in a modified double-auction game the same payoff as in the optimal direct mechanism. We then further restrict the contractual framework and assume that the intermediary gets only a fixed transaction fee, his goal being now to maximize the expected number of transactions. We show that the intermediary's information can be credibly transmitted via cheap talk. The transmission of information by the broker increases ex ante welfare of the seller and the broker, but has ambiguous impact on the buyer. If the intermediary observes signals about valuations of both participants, the equilibrium where the broker truthfully communicates both signals exist only under some further restrictions on parameters of the model.

"To appoint your governor or let him be elected?" (New project; joint with Andrei Bremzen; preliminary version of the paper expected December 2006). We compare two governance regimes for a federal state: in one regional governors are elected and in the other they are appointed by the (elected) president. We endogenize the governance structure by allowing the incumbent president to choose one of the regimes and explore the determinants of her choice. Favorable information about the economic prospects, held privately by the president, may urge her to choose the regime with appointed governors to reap all the glory, while gloomy forecasts encourage her to allow elected governors in order to ease her responsibility. We also explore the two regimes in terms of their ensuing transparency and the induced quality of monitoring in the hierarchy. Since the performance of appointed governors acts a signaling channel about her own ability (or benevolence), the president may be more tempted to obscure the information about the regional affairs available to the public than under the regime with elected governors.

"Learning and not learning from others' mistakes; leadership" (Ongoing project; joint with G. Friebel and S. Guriev). We are building a model of information transmission, in which the history of the sendor's (advisor's) performance affects the incentives of the advisee to invest in acquiring information. In particular, in many circumstances the advisor's own poor performance undermines the advisee's incentives to invest in absorbing her experience/advise. However, in some situations the advisee may have even higher incentives to observe a loser's behavior in order to avoid committing the same mistakes. Our current research agenda consists of investigating the interaction between information transmission and complications thereof and the phenomenon of leadership. In particular, we are interested in how leaders manage to communicate their vision to the followers; what factors impede or facilitate such communication; what are the determinants of successful leadership.

"The impact of psychological biases on occupational choice and job performance" (Ongoing project; joint with Ekaterina Zhuravskaya). There is an extensive literature in psychology and behavioral economics that shows that people often deviate from rational thinking and rational behavior. Moreover, people often have systematically biased beliefs (e.g., the confirmation bias often induces us to give disproportionate credit to the information that fits well our prior views), and systematically find themselves in similar behavioral traps. Importantly, people are different: some are more prone to time-inconsistent behavior (such as procrastination when working on difficult or unpleasant tasks) while others are more likely to make judgment errors by using imperfect heuristics, etc. Our project consists of investigating the impact of different judgmental and behavioral biases on the future occupational choice and work performance. While there is an extensive empirical literature that demonstrates the existence of biases, and a burgeoning literature in behavioral economics that investigates their impact on individual behavior and performance of various markets, to our best knowledge this project is unique in that it should allow us to obtain micro-level data that will relate the measured biases to the subjects' real-life performance. We have conducted an extensive survey of 3 classes of NES students and are about to launch an extensive survey of NES graduates. Preliminary results are expected in December 2006.

"Discretionary Acquisition of Firm-Specific Human Capital under Non-Verifiable Performance" (mimeo, September 2006; with A. Akhmedov). The paper considers a two-period model, in which a worker hired by a firm in the first period acquires firm-specific human capital that increases the firm's second-period profit. We assume that this investment is non-contractible, which implies a standard underinvestment result. However, the inability of the incumbent firm to observe second-period wage offers of potential raiders prevents it from complete expropriation of the surplus created by the worker's investment; the worker is thus induced to make positive investment in equilibrium. Further, we assume that when hiring the worker, the firm can impose a lower bound on it's second-period wage offers. We show that such policy destroys the worker's incentives to acquire HC and is practiced only if the worker's investment is sufficiently unproductive. We also consider an extension of the basic model, in which firms differ in the productivity of their employees efforts related to HC acquisition. To separate themselves and thus induce the employee to exert higher effort, more productive firms offer higher entry wages than the less productive ones, whereas under symmetric information they offer lower first-period wages. Furthermore, we show that the ability to impose a lower bound on second-period wages may allow the efficient firms to increase the entry wage to a smaller degree or even not increase it at all compared to the entry wage under symmetric information.

Policy Projects

"Gas sector reform in Russia: proposals for restructuring, gas market development and tariff regulation" (November 2004-April 2005). The project analyzes some key issues of restructuring the Russian gas sector, with a special emphasis on the previous international and domestic experience in reforming natural monopolies, as well as the specifics of the Russian gas industry. The analysis allows to provide specific policy recommendations on the optimal structure of the gas industry, gas market development and tariff regulation, including export taxation. Based on a detailed analysis of case studies from the European Union countries, the U.S., Canada and Argentine, a reform model has been developed taking into account the specifics of Russia. The model suggests that a competitive gas market should be developed combined with state regulation mechanisms in the infrastructure market segments marked with characteristics of natural monopolies (transportation, distribution). Two more alternative reform models have also been worked out.

"Development of a Mechanism for the Management of Property of Russian Academy of Science not Used for Research Activities" (December 2005-September 2006). Much of state-owned real estate property is placed under the management of the Russian Academy of Science (RAS). Some of this property is used for the research activity, some is not; the unused premises are rented by RAS institutes to the third parties. The project consisted of estimating the efficiency of the use of real estate not used for the research activity by RAS and suggesting a mechanism to improve the efficiency. Our estimates revealed that RAS rents its premises approximately 35% below the market value. Our main suggestion to improve the situation was to create a special centralized Fund which would pool the premises of all institutes meant for rent and hire (via a competitive procedure) a professional company to manage this real estate. The proceeds are to be partially distributed between the institutes supplying premises (so that their financial situation does not deteriorate), but the expected improve of the efficiency will allow to use some part of the proceeds for rewarding the best performing institutions and financing some dedicated research.

"Governance Mechanisms for Russian Universities" (in progress: November-December 2006). Improving governance at the university level is crucial for improving the performance of Russian higher education system. The project consists of examining innovative governance mechanisms already used by some Russian universities and suggesting guidelines for building efficient governance models for universities.