Selection on Moral Hazard in Health Insurance

By Liran Einav, Amy Finkelstein, Stephen P. Ryan, Paul Schrimpf, and Mark R. Cullen

American Economic Review, February 2013

We use employee-level panel data from a single firm to explore the possibility that individuals may select insurance coverage in part based on their anticipated behavioral ("moral hazard") response to insurance, a phenomenon we label "selection on mora...

Front Matter

American Economic Review, February 2013

The Case against Patents

[Symposium: Patents]

By Michele Boldrin and David K. Levine

Journal of Economic Perspectives, Winter 2013

The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless productivity is identified with the number of patents awarded—which, as evidence shows, has no correl...

Structural Models of Nonequilibrium Strategic Thinking: Theory, Evidence, and Applications

By Vincent P. Crawford, Miguel A. Costa-Gomes, and Nagore Iriberri

Journal of Economic Literature, March 2013

Most applications of game theory assume equilibrium, justified by presuming either that learning will have converged to one, or that equilibrium approximates people's strategic thinking even when a learning justification is implausible. Yet several recent...

School Inputs, Household Substitution, and Test Scores

By Jishnu Das, Stefan Dercon, James Habyarimana, Pramila Krishnan, Karthik Muralidharan, and Venkatesh Sundararaman

American Economic Journal: Applied Economics, April 2013

Empirical studies of the relationship between school inputs and test scores typically do not account for household responses to changes in school inputs. Evidence from India and Zambia shows that student test scores are higher when schools receive unan...

Designing Random Allocation Mechanisms: Theory and Applications

By Eric Budish, Yeon-Koo Che, Fuhito Kojima, and Paul Milgrom

American Economic Review, April 2013

Randomization is commonplace in everyday resource allocation. We generalize the theory of randomized assignment to accommodate multi-unit allocations and various real-world constraints, such as group-specific quotas ("controlled choice") in school choi...

Dynamic Matching and Bargaining Games: A General Approach

By Stephan Lauermann

American Economic Review, April 2013

Dynamic matching and bargaining games are models of decentralized markets with trading frictions. A central objective is to investigate how equilibrium outcomes depend on the level of frictions. In particular, does the trading outcome become Walrasian ...

Assignment of Arrival Slots

By James Schummer and Rakesh V. Vohra

American Economic Journal: Microeconomics, May 2013

Industry participants agree that, when inclement weather forces the FAA to reassign airport landing slots, incentives and property rights should be respected. We show that the FAA's Compression algorithm is incentive compatible, but fails to guarantee ...

Trust, Reciprocity, and Favors in Cooperative Relationships

By Atila Abdulkadiroğlu and Kyle Bagwell

American Economic Journal: Microeconomics, May 2013

We study trust, reciprocity, and favors in a repeated trust game with private information. In our main analysis, players are willing to exhibit trust and thereby facilitate cooperative gains only if such behavior is regarded as a favor that must be rec...

Is Ignorance Bliss? The Effect of Asymmetric Information between Spouses on Intra-household Allocations

By Carolina Castilla and Thomas Walker

American Economic Review, May 2013

We conducted a field experiment in Southern Ghana to test the effect of asymmetric information on intrahousehold allocation. A lottery was conducted, where prizes were distributed in public and in private. The results indicate that asymmetric information ...

Economic Experts versus Average Americans

By Paola Sapienza and Luigi Zingales

American Economic Review, May 2013

We compare answers to policy questions by economic experts and a representative sample of the US population. We find a 35 percentage point difference between the two groups. This gap is only partially explained by differences in ideological or personal ch...

The Lure of Authority: Motivation and Incentive Effects of Power

By Ernst Fehr, Holger Herz, and Tom Wilkening

American Economic Review, June 2013

Authority and power permeate political, social, and economic life, but empirical knowledge about the motivational origins and consequences of authority is limited. We study the motivation and incentive effects of authority experimentally in an authorit...

Lemons Markets and the Transmission of Aggregate Shocks

By Pablo Kurlat

American Economic Review, June 2013

I study a dynamic economy featuring adverse selection in asset markets. Borrowing-constrained entrepreneurs sell past projects to finance new investment, but asymmetric information creates a lemons problem. I show that this friction is equivalent to a tax...

Private Information and the Allocation of Land Use Subsidies in Malawi

By B. Kelsey Jack

American Economic Journal: Applied Economics, July 2013

Efficient targeting of public programs is difficult when the cost or benefit to potential recipients is private information. This study illustrates the potential of self-selection to improve allocational outcomes in the context of a program that subsid...

Platform Competition under Asymmetric Information

By Hanna Halaburda and Yaron Yehezkel

American Economic Journal: Microeconomics, August 2013

We consider platform competition in a two-sided market, where the two sides (buyers and sellers) have ex-ante uncertainty and ex-post asymmetric information concerning the value of a new technology. We find that platform competition may lead to a market...

Homophily in Peer Groups

By Mariagiovanna Baccara and Leeat Yariv

American Economic Journal: Microeconomics, August 2013

The focus of this paper is the endogenous formation of peer groups. In our model agents choose peers before making contributions to public projects, and they differ in how much they value one project relative to another. Thus, the group's preference compo...

Contracts for Agents with Biased Beliefs: Some Theory and an Experiment

By Anja Sautmann

American Economic Journal: Microeconomics, August 2013

This paper experimentally tests the predictions of a principal-agent model in which the agent has biased beliefs about his ability. Overconfident workers are found to earn lower wages than underconfident ones because they overestimate their expected pa...

Too Far Away? The Effect of Distance to Headquarters on Business Establishment Performance

By Arturs Kalnins and Francine Lafontaine

American Economic Journal: Microeconomics, August 2013

In the population of over 1.7 million Texan sales-tax collecting business establishments, we show that greater distance to owner headquarters is associated with shorter establishment longevity. For the lodging industry, where we have revenue data, inc...

Asymmetric Information between Employers

By Lisa B. Kahn

American Economic Journal: Applied Economics, October 2013

This study explores whether potential employers have the same information about worker ability as the incumbent firm. I develop a model of asymmetric learning that nests the symmetric learning case and allows the degree of asymmetry to vary. I then sho...

Information Asymmetries in Consumer Credit Markets: Evidence from Payday Lending

By Will Dobbie and Paige Marta Skiba

American Economic Journal: Applied Economics, October 2013

Information asymmetries are prominent in theory but difficult to estimate. This paper exploits discontinuities in loan eligibility to test for moral hazard and adverse selection in the payday loan market. Regression discontinuity and regression kink ap...