Auctions with Limited Commitment

By Qingmin Liu, Konrad Mierendorff, Xianwen Shi, and Weijie Zhong

American Economic Review, March 2019

We study the role of limited commitment in a standard auction environment. In each period, the seller can commit to an auction with a reserve price but not to future reserve prices. We characterize the set of equilibrium profits attainable for the seller ...

Research and the Approval Process: The Organization of Persuasion

By Emeric Henry and Marco Ottaviani

American Economic Review, March 2019

An informer sequentially collects and disseminates information through costly research to persuade an evaluator to approve an activity. Payoffs and control rights are split between informer and evaluator depending on the organizational rules governing the...

Persuasion: The Art of Changing Worldviews

By Simone Galperti

American Economic Review, March 2019

Persuaders often face the task of changing their listeners' worldview, which may involve conveying evidence that disconfirms that view. It has been shown, however, that people are often reluctant to change their worldviews. These aspects of persuasion can...

Information Design: A Unified Perspective

By Dirk Bergemann and Stephen Morris

Journal of Economic Literature, March 2019

Given a game with uncertain payoffs, information design analyzes the extent to which the provision of information alone can influence the behavior of the players. Information design has a literal interpretation, under which there is a real information des...

Adverse Selection in ACA Exchange Markets: Evidence from Colorado

By Matthew Panhans

American Economic Journal: Applied Economics, April 2019

This study tests for adverse selection in the Affordable Care Act (ACA) health insurance exchanges established in 2014 and quantifies the welfare consequences. Using a new statewide dataset of medical claims from Colorado, I use plausibly exogenous premiu...

Selling to Advised Buyers

By Andrey Malenko and Anton Tsoy

American Economic Review, April 2019

In many cases, buyers are not informed about their valuations and rely on experts, who are informed but biased for overbidding. We study auction design when selling to such "advised buyers." We show that a canonical dynamic auction, the English auction, h...

Delegated Expertise, Authority, and Communication

By Inga Deimen and Dezső Szalay

American Economic Review, April 2019

A decision maker needs to reach a decision and relies on an expert to acquire information. Ideal actions of expert and decision maker are partially aligned and the expert chooses what to learn about each. The decision maker can either get advice from the ...

Targeting with In-Kind Transfers: Evidence from Medicaid Home Care

By Ethan M. J. Lieber and Lee M. Lockwood

American Economic Review, April 2019

Making a transfer in kind reduces its value to recipients but can improve targeting. We develop an approach to quantifying this trade-off and apply it to home care. Using randomized experiments by Medicaid, we find that in-kind provision significantly red...

Beyond Truth-Telling: Preference Estimation with Centralized School Choice and College Admissions

By Gabrielle Fack, Julien Grenet, and Yinghua He

American Economic Review, April 2019

We propose novel approaches to estimating student preferences with data from matching mechanisms, especially the Gale-Shapley deferred acceptance. Even if the mechanism is strategy-proof, assuming that students truthfully rank schools in applications may ...

Multiple Lenders, Strategic Default, and Covenants

By Andrea Attar, Catherine Casamatta, Arnold Chassagnon, and Jean-Paul Décamps

American Economic Journal: Microeconomics, May 2019

We study capital markets in which investors compete by designing financial contracts to control an entrepreneur's ability to side trade and default on multiple loans. We show that covenants may have anticompetitive effects: in particular, they prevent inv...

Strategic Ignorance in Sequential Procurement

By Silvana Krasteva and Huseyin Yildirim

American Economic Journal: Microeconomics, May 2019

Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. In...

Policies in Relational Contracts

By Daniel Barron and Michael Powell

American Economic Journal: Microeconomics, May 2019

We consider how a firm's policies constrain its relational contracts. A policy is a sequence of decisions made by a principal; each decision determines how agents' efforts affect their outputs. We consider surplus-maximizing policies in a flexible dynamic...

Cream Skimming and Information Design in Matching Markets

By Gleb Romanyuk and Alex Smolin

American Economic Journal: Microeconomics, May 2019

Short-lived buyers arrive to a platform over time and randomly match with sellers. The sellers stay at the platform and decide whether to accept incoming requests. The platform designs what buyer information the sellers observe before deciding to form a m...

Screening in Contract Design: Evidence from the ACA Health Insurance Exchanges

By Michael Geruso, Timothy Layton, and Daniel Prinz

American Economic Journal: Economic Policy, May 2019

We study insurers' use of prescription drug formularies to screen consumers in the ACA Health Insurance exchanges. We begin by showing that exchange risk adjustment and reinsurance succeed in neutralizing selection incentives for most, but not all, consum...

Neutral Bargaining in Financial Over-The-Counter Markets

By Jin Yeub Kim

AEA Papers and Proceedings, May 2019

I study bargaining over prices between two investors in financial over-the-counter markets with asymmetric information. I focus on environments in which an asset owner has private information about both her liquidity state and asset quality, and so a buye...

Optimal Information Design for Search Goods

By Michael Choi, Kyungmin Kim, and Marilyn Pease

AEA Papers and Proceedings, May 2019

We consider a monopoly pricing problem in which a consumer with an uncertain valuation of a search good receives a signal of value before deciding whether to visit the seller. She discovers her true value upon visiting and before purchase. We characterize...

The Culture of Overconfidence

By V. Bhaskar and Caroline Thomas

American Economic Review: Insights, June 2019

Perceptions of overconfidence can exacerbate the tendency of reputationally concerned leaders to continue bad projects. Reputation concerns alone induce a bias toward inefficient continuation in a leader receiving information privately. When she is overco...

Dynamic Mechanism Design: An Introduction

By Dirk Bergemann and Juuso Välimäki

Journal of Economic Literature, June 2019

We provide an introduction to the recent developments of dynamic mechanism design, with a primary focus on the quasilinear case. First, we describe socially optimal (or efficient) dynamic mechanisms. These mechanisms extend the well-known Vickrey–Clarkâ...

Do Women Give Up Competing More Easily? Evidence from the Lab and the Dutch Math Olympiad

By Thomas Buser and Huaiping Yuan

American Economic Journal: Applied Economics, July 2019

We use lab experiments and field data from the Dutch Math Olympiad to show that women are more likely than men to stop competing if they lose. In a math competition in the lab, women are much less likely than men to choose competition again after losing i...

Cadet-Branch Matching in a Kelso-Crawford Economy

By Ravi Jagadeesan

American Economic Journal: Microeconomics, August 2019

Sonmez (2013) and Sonmez and Switzer (2013) used matching theory with unilaterally substitutable priorities to propose mechanisms to match cadets to military branches. This paper shows that, alternatively, the Sonmez and Sonmez-Switzer mechanisms can be c...