Technologies That Replace a "Central Planner"

By Robert M. Townsend and Nicolas X. Zhang

AEA Papers and Proceedings, May 2023

Contracting possibilities are endogenous to the technologies on which the negotiation and the trading environments are built. Here we review how different technologies allow different implementations of the "central planner" and gradually abstract this ce...

Influence Motives in Social Signaling: Evidence from COVID-19 Vaccinations in Germany

By Emilio Esguerra, Leonhard Vollmer, and Johannes Wimmer

American Economic Review: Insights, June 2023

We investigate whether a desire to influence others' choices affects our own behavior. To separate such influence motives from social pressure, we study participants' willingness to register for a COVID-19 vaccination in a field experiment in Germany. We ...

Optimal Procurement with Quality Concerns

By Giuseppe Lopomo, Nicola Persico, and Alessandro T. Villa

American Economic Review, June 2023

Adverse selection in procurement arises when low-cost bidders are also low-quality suppliers. We propose a mechanism called LoLA (lowball lottery auction) which, under some conditions, maximizes any combination of buyer's and social surplus, subject to in...

On Doctors, Mechanics, and Computer Specialists: The Economics of Credence Goods

By Uwe Dulleck and Rudolf Kerschbamer

Journal of Economic Literature, March 2006

Most of us need the services of an expert when our apartment's heating or our washing machine breaks down, or when our car starts to make strange noises. And for most of us, commissioning an expert to solve the problem causes concern. This concern does no...

Adverse Selection in Low-Income Health Insurance Markets: Evidence from an RCT in Pakistan

By Torben Fischer, Markus Frölich, and Andreas Landmann

American Economic Journal: Applied Economics, July 2023

We present robust evidence on adverse selection in hospitalization insurance for low-income individuals that received first-time access to insurance. A large randomized control trial from Pakistan allows us to separate adverse selection from moral hazard,...

Working for References

By Samuel Häfner and Curtis R. Taylor

American Economic Journal: Microeconomics, August 2023

We analyze the incentive and welfare consequences of job references in a large economy marked by moral hazard, limited liability, exogenous job separation, and structural unemployment. In the firm-optimal equilibrium, employers provide references whenever...

Self-Reported Signaling

By Thomas Jungbauer and Michael Waldman

American Economic Journal: Microeconomics, August 2023

In many real-world settings, an action that affects the value of a product or service is self-reported rather than publicly observable. We investigate self-reporting when self-reports serve as a signal of sender productivity. In our model, a sender choose...

Information Spillover in Multi-good Adverse Selection

By Bingchao Huangfu and Heng Liu

American Economic Journal: Microeconomics, August 2023

This paper analyzes information spillover in a multi-good adverse selection model in which a privately informed seller trades two different goods in two different markets. Buyers learn the seller's information from both the market they participate in and ...

Equilibrium Screening and Categorical Inequality

By Mogens Fosgerau, Rajiv Sethi, and Jörgen Weibull

American Economic Journal: Microeconomics, August 2023

We analyze equilibrium outcomes under costly screening of candidates from distinct categories. Candidates choose how much effort to invest in skill acquisition, and the screener decides how carefully to screen each candidate. Typically, there are multiple...

Judicial Mechanism Design

By Ron Siegel and Bruno Strulovici

American Economic Journal: Microeconomics, August 2023

This paper proposes a mechanism-design approach to study criminal justice systems. We derive properties of optimal mechanisms for two notions of welfare distinguished by their treatment of deterrence. These properties provide insights into the effects of ...

Bargaining over Treatment Choice under Disagreement

By Nabil I. Al-Najjar and Robert J. Gary-Bobo

American Economic Journal: Microeconomics, August 2023

A group of experts with different prior beliefs must choose a treatment. A dataset is made public and leads to revisions of beliefs. We propose a model where the experts' disagreements are resolved through bargaining, using the Nash bargaining solution. E...

Bid Caps in Noisy Contests

By Qiang Fu, Zenan Wu, and Yuxuan Zhu

American Economic Journal: Microeconomics, August 2023

This paper studies optimal bid caps in a multiplayer noisy contest in which a higher bid does not guarantee a sure win. The bid cap can be either rigid or flexible. The former imposes outright bidding restrictions on players' bids, while the latter taxes ...

Disclosure in Markets for Ratings

By Ran Weksler and Boaz Zik

American Economic Journal: Microeconomics, August 2023

We study the implications of the disclosure regime of ratings on the level of information released to the public. Specifically, we compare mandatory and voluntary disclosure. We analyze a model where the potential issuers are initially endowed with homoge...

Incentivizing School Attendance in the Presence of Parent-Child Information Frictions

By Damien de Walque and Christine Valente

American Economic Journal: Economic Policy, August 2023

Many countries use CCTs targeted to parents to promote schooling. Attendance conditions may work through two channels: incentivization and information. If children have private information, (i) providing attendance information to parents may increase atte...

The Costs of Misaligned Incentives: Energy Inefficiency and the Principal-Agent Problem

By Joshua A. Blonz

American Economic Journal: Economic Policy, August 2023

In many settings, misaligned incentives and inadequate monitoring lead employees to take self-interested actions. This paper identifies and quantifies the costs of this principal-agent problem in the context of an energy efficiency appliance replacement p...

Voting for Democracy: Chile's Plebiscito and the Electoral Participation of a Generation

By Ethan Kaplan, Fernando Saltiel, and Sergio Urzúa

American Economic Journal: Economic Policy, August 2023

This paper assesses the long-term consequences of voting for democracy. We study Chile's 1988 plebiscite, which ended 15 years of dictatorship and reestablished democracy. Taking advantage of individual-level voting data, we implement an age-based regress...

Worth Your Weight: Experimental Evidence on the Benefits of Obesity in Low-Income Countries

By Elisa Macchi

American Economic Review, September 2023

I study the economic value of obesity—a status symbol in poor countries associated with raised health risks. Randomizing decision-makers in Kampala, Uganda to view weight-manipulated portraits, I find that obesity is perceived as a reliable signal of we...

Decision Theory and Stochastic Growth

By Arthur Robson, Larry Samuelson, and Jakub Steiner

American Economic Review: Insights, September 2023

This paper examines connections between stochastic growth and decision problems. We use tools from the theory of large deviations to show that wishful thinking decision problems are equivalent to utility maximization problems, both of which are equivalent...

Regulation Design in Insurance Markets

By Dhruva Bhaskar, Andrew McClellan, and Evan Sadler

American Economic Review, October 2023

Regulators often impose rules that constrain the behavior of market participants. We study the design of regulatory policy in an insurance market as a delegation problem. A regulator restricts the menus of contracts an informed firm is permitted to offer,...

Optimal Insurance: Dual Utility, Random Losses, and Adverse Selection

By Alex Gershkov, Benny Moldovanu, Philipp Strack, and Mengxi Zhang

American Economic Review, October 2023

We study a generalization of the classical monopoly insurance problem under adverse selection (see Stiglitz 1977) where we allow for a random distribution of losses, possibly correlated with the agent's risk parameter that is private information. Our mode...