Should First-Price Auctions Be Transparent?

By Dirk Bergemann and Johannes Hörner

American Economic Journal: Microeconomics, August 2018

We investigate the role of market transparency in repeated first-price auctions. We consider a setting with independent private and persistent values. We analyze three distinct disclosure regimes regarding the bid and award history. In the minimal disclos...

Why Voting? A Welfare Analysis

By Moritz Drexl and Andreas Kleiner

American Economic Journal: Microeconomics, August 2018

This article studies costly signaling. The signaling effort is chosen in multiple periods and observed with noise. The signaler benefits from the belief of the market, not directly from the effort or the signal. Optimal signaling behavior in time-varying ...

A Pseudo-Market Approach to Allocation with Priorities

By Yinghua He, Antonio Miralles, Marek Pycia, and Jianye Yan

American Economic Journal: Microeconomics, August 2018

We propose a pseudo-market mechanism for no-monetary-transfer allocation of indivisible objects based on priorities such as those in school choice. Agents are given token money, face priority-specific prices, and buy utility-maximizing random assignments....

Contracts with Framing

By Yuval Salant and Ron Siegel

American Economic Journal: Microeconomics, August 2018

We study a model of contracts in which a profit-maximizing seller uses framing to influence buyers' purchasing behavior. Framing temporarily affects how buyers evaluate different products, and buyers can renege on their purchases after the framing effect ...

Strategic Formulary Design in Medicare Part D Plans

By Kurt Lavetti and Kosali Simon

American Economic Journal: Economic Policy, August 2018

The design of Medicare Part D causes most beneficiaries to receive fragmented health insurance, with drug and medical coverage separated. Fragmentation is potentially inefficient since separate insurers optimize over only one component of healthcare spend...

Marking to Market versus Taking to Market

By Guillaume Plantin and Jean Tirole

American Economic Review, August 2018

Building on the idea that accounting matters for corporate governance, this paper studies the equilibrium interaction between the measurement rules that firms find privately optimal, firms' governance, and the liquidity in the secondary market for their a...

Fiscal Rules and Discretion in a World Economy

By Marina Halac and Pierre Yared

American Economic Review, August 2018

Governments are present-biased toward spending. Fiscal rules are deficit limits that trade off commitment to not overspend and flexibility to react to shocks. We compare coordinated rules, chosen jointly by a group of countries, to uncoordinated rules. If...

Compensation and Incentives in the Workplace

[Symposium: Incentives in the Workplace]

By Edward P. Lazear

Journal of Economic Perspectives, Summer 2018

Labor is supplied because most of us must work to live. Indeed, it is called "work" in part because without compensation, the overwhelming majority of workers would not otherwise perform the tasks. The theme of this essay is that incentives affect behavio...

Nonmonetary Incentives and the Implications of Work as a Source of Meaning

[Symposium: Incentives in the Workplace]

By Lea Cassar and Stephan Meier

Journal of Economic Perspectives, Summer 2018

Empirical research in economics has begun to explore the idea that workers care about nonmonetary aspects of work. An increasing number of economic studies using survey and experimental methods have shown that nonmonetary incentives and nonpecuniary aspec...

Forward Guidance without Common Knowledge

By George-Marios Angeletos and Chen Lian

American Economic Review, September 2018

How does the economy respond to news about future policies or future fundamentals? Standard practice assumes that agents have common knowledge of such news and face no uncertainty about how others will respond. Relaxing this assumption attenuates the gene...

The End of Alchemy by Mervyn King: A Review Essay

By Roger E. A. Farmer

Journal of Economic Literature, September 2018

I review The End of Alchemy by Mervyn King, published by W.W. Norton and Company in 2016. I discuss King's proposed regulatory reform, the "Pawn Broker for All Seasons" (PFAS), and I compare it to an alternative solution developed in my own work....

Evaluating Strategic Forecasters

By Rahul Deb, Mallesh M. Pai, and Maher Said

American Economic Review, October 2018

Motivated by the question of how one should evaluate professional election forecasters, we study a novel dynamic mechanism design problem without transfers. A principal who wishes to hire only high-quality forecasters is faced with an agent of unknown qua...

Disclosure to a Psychological Audience

By Elliot Lipnowski and Laurent Mathevet

American Economic Journal: Microeconomics, November 2018

We study how a benevolent expert should disclose information to an agent with psychological concerns. We first provide a method to compute an optimal information policy for many psychological traits. The method suggests, for instance, that an agent suffer...

Satisfaction Guaranteed: When Moral Hazard Meets Moral Preferences

By James Andreoni

American Economic Journal: Microeconomics, November 2018

The fear of moral hazard—especially in the age of Internet commerce—can depress or prevent profitable trades. Experiments show, however, that many people prefer honesty to deceit and would not succumb to moral hazard. This paper asks a whether we can ...

Discounting Disentangled

By Moritz A. Drupp, Mark C. Freeman, Ben Groom, and Frikk Nesje

American Economic Journal: Economic Policy, November 2018

The economic values of investing in long-term public projects are highly sensitive to the social discount rate (SDR). We surveyed over 200 experts to disentangle disagreement on the risk-free SDR into its component parts, including pure time preference, t...

Taking a Financial Position in Your Opponent in Litigation

By Albert H. Choi and Kathryn E. Spier

American Economic Review, December 2018

Before filing suit, a plaintiff can take a financial position in a defendant firm. A short position benefits the plaintiff by transforming a negative expected-value claim into a positive expected-value one and by enhancing the claim's settlement value. If...

Optimal Regulation of Financial Intermediaries

By Sebastian Di Tella

American Economic Review, January 2019

I characterize the optimal financial regulation policy in an economy where financial intermediaries trade capital assets on behalf of households, but must retain an equity stake to align incentives. Financial regulation is necessary because intermediaries...

Financial Incentives as Signals: Experimental Evidence from the Recruitment of Village Promoters in Uganda

By Erika Deserranno

American Economic Journal: Applied Economics, January 2019

I study the role of financial incentives as signals of job characteristics when these are unknown to potential applicants. To this end, I create experimental variation in expected earnings and use that to estimate the effect of financial incentives on c...

The Impact of Monitoring in Infinitely Repeated Games: Perfect, Public, and Private

By Masaki Aoyagi, V. Bhaskar, and Guillaume R. Fréchette

American Economic Journal: Microeconomics, February 2019

This paper uses a laboratory experiment to study the effect of the monitoring structure on the play of the infinitely repeated prisoner's dilemma. Keeping the strategic form of the stage game fixed, we examine the behavior of subjects when information abo...

The Social Value of Financial Expertise

By Pablo Kurlat

American Economic Review, February 2019

I study expertise acquisition in a model of trading under asymmetric information. I propose and implement a method to measure r, the ratio of the marginal social value to the marginal private value of expertise. This can be decomposed into three sufficien...