Procurement Design with Corruption

By Roberto Burguet

American Economic Journal: Microeconomics, May 2017

I investigate the design of optimal procurement mechanisms in the presence of corruption. After contracting with the sponsor, the contractor may bribe the inspector to misrepresent quality. The mechanism affects whether bribery occurs. I discuss the cases...

Assortative Matching under Asymmetric Information: Evidence from Malawi

By Manuela Angelucci and Daniel Bennett

American Economic Review, May 2017

Asymmetric information is a key feature of the marriage market. In HIV-endemic settings, HIV risk is an important partner attribute that may influence marriage timing and partner selection. We use a sample of married women in rural Malawi to validate a mo...

Redesigning the Israeli Psychology Master's Match

By Avinatan Hassidim, Assaf Romm, and Ran I. Shorrer

American Economic Review, May 2017

We report on the centralization of a two-sided matching-with-contracts market, in which pre-existing choice functions violate the substitutes condition. The ability to accommodate these choice functions was critical for the success of our design. The new ...

The Mechanism Is Truthful, Why Aren't You?

By Avinatan Hassidim, Déborah Marciano, Assaf Romm, and Ran I. Shorrer

American Economic Review, May 2017

Honesty is the best policy in the face of a strategy-proof mechanism--irrespective of others' behavior, the best course of action is to report one's preferences truthfully. We review evidence from different markets in different countries and find that a s...

Mistaken Play in the Deferred Acceptance Algorithm: Implications for Positive Assortative Matching

By Alex Rees-Jones

American Economic Review, May 2017

Recent literature has documented failures of truthful preference reporting in the strategy-proof deferred acceptance algorithm. I consider the implications of these strategic mistakes for a common welfare consideration: the ability of the mechanism to sor...

Obvious Ex Post Equilibrium

By Shengwu Li

American Economic Review, May 2017

I propose a new solution concept, obvious ex post (OXP) equilibrium. This is a formal standard of cognitive simplicity for mechanisms, in settings with interdependent values. Under some standard assumptions, the ascending auction has an efficient OXP equi...

Bounded Rationality and Robust Mechanism Design: An Axiomatic Approach

By Luyao Zhang and Dan Levin

American Economic Review, May 2017

We propose an axiomatic approach to study the superior performance of mechanisms with obviously dominant strategies to those with only dominant strategies. Guided by the psychological inability to reason state-by-state, we develop Obvious Preference as a ...

Regression Discontinuity in Serial Dictatorship: Achievement Effects at Chicago's Exam Schools

By Atila Abdulkadiroǧlu, Joshua D. Angrist, Yusuke Narita, Parag A. Pathak, and Roman A. Zarate

American Economic Review, May 2017

Many school and college admission systems use centralized mechanisms to allocate seats based on applicant preferences and school priorities. When tie-breaking uses non-randomly assigned criteria like distance or a test score, applicants with the same pref...

What Can We Learn from Experiments? Understanding the Threats to the Scalability of Experimental Results

By Omar Al-Ubaydli, John A. List, and Dana L. Suskind

American Economic Review, May 2017

Policymakers often consider interventions at the scale of the population, or some other large scale. One of the sources of information about the potential effects of such interventions is experimental studies conducted at a significantly smaller scale. A ...

Does Machine Learning Automate Moral Hazard and Error?

By Sendhil Mullainathan and Ziad Obermeyer

American Economic Review, May 2017

Machine learning tools are beginning to be deployed en masse in health care. While the statistical underpinnings of these techniques have been questioned with regard to causality and stability, we highlight a different concern here, relating to measuremen...

Bidder Solicitation, Adverse Selection, and the Failure of Competition

By Stephan Lauermann and Asher Wolinsky

American Economic Review, June 2017

We study a common value, first-price auction in which the number of bidders is endogenous: the seller (auctioneer) knows the value and solicits bidders at a cost. The number of bidders, which is unobservable, may thus depend on the true value. Therefore, ...

A Theory of Crowdfunding: A Mechanism Design Approach with Demand Uncertainty and Moral Hazard

By Roland Strausz

American Economic Review, June 2017

Crowdfunding provides innovation in enabling entrepreneurs to contract with consumers before investment. Under aggregate demand uncertainty, this improves screening for valuable projects. Entrepreneurial moral hazard and private cost information threatens...

Can Women Have Children and a Career? IV Evidence from IVF Treatments

By Petter Lundborg, Erik Plug, and Astrid Würtz Rasmussen

American Economic Review, June 2017

This paper introduces a new IV strategy based on IVF (in vitro fertilization) induced fertility variation among childless women to estimate the causal effect of having children on their career. For this purpose, we use administrative data on IVF treated w...

Eponymous Entrepreneurs

By Sharon Belenzon, Aaron K. Chatterji, and Brendan Daley

American Economic Review, June 2017

We demonstrate that eponymy—firms being named after their owners—is linked to superior firm performance, but is relatively uncommon (about 19 percent of firms in our data). We propose an explanation based on eponymy creating an association bet...

Sorting through Search and Matching Models in Economics

By Hector Chade, Jan Eeckhout, and Lones Smith

Journal of Economic Literature, June 2017

Toward understanding assortative matching, this is a self-contained introduction to research on search and matching. We first explore the nontransferable and perfectly transferable utility matching paradigms, and then a unifying imperfectly transferable u...

Conflicts of Interest and Steering in Residential Brokerage

By Panle Jia Barwick, Parag A. Pathak, and Maisy Wong

American Economic Journal: Applied Economics, July 2017

This paper documents uniformity in real estate commission rates offered to buyers' agents using 653,475 residential listings in eastern Massachusetts from 1998–2011. Properties listed with lower commission rates experience less favorable transaction...

Pay for Performance and Beyond

By Bengt Holmström

American Economic Review, July 2017

Incentives are often associated with narrow financial rewards such as bonuses or executive stock options. But in general such rewards are just a small part of the design of incentives. Properly designed incentive systems have to take into account the full...

Knowledge of Future Job Loss and Implications for Unemployment Insurance

By Nathaniel Hendren

American Economic Review, July 2017

This paper studies the implications of individuals' knowledge of future job loss for the existence of an unemployment insurance (UI) market. Learning about job loss leads to consumption decreases and spousal labor supply increases. This suggests existing ...

Information Spillovers in Asset Markets with Correlated Values

By Vladimir Asriyan, William Fuchs, and Brett Green

American Economic Review, July 2017

We study information spillovers in a dynamic setting with correlated assets owned by privately informed sellers. In the model, a trade of one asset can provide information about the value of other assets. Importantly, the information content of trading be...

Buyer-Optimal Learning and Monopoly Pricing

By Anne-Katrin Roesler and Balázs Szentes

American Economic Review, July 2017

This paper analyzes a bilateral trade model where the buyer's valuation for the object is uncertain and she observes only a signal about her valuation. The seller gives a take-it-or-leave-it offer to the buyer. Our goal is to characterize those signal str...