Coercive Trade Policy

By Vincent Anesi and Giovanni Facchini

American Economic Journal: Microeconomics, August 2019

Coercion is used by one government (the "sender") to influence the trade practices of another (the "target"). We build a two-country trade model in which coercion can be exercised unilaterally or channeled through a "weak" international organization witho...

Bayesian Identification: A Theory for State-Dependent Utilities

By Jay Lu

American Economic Review, September 2019

We provide a revealed preference methodology for identifying beliefs and utilities that can vary across states. A notion of comparative informativeness is introduced that is weaker than the standard Blackwell ranking. We show that beliefs and state-depend...

Honesty via Choice-Matching

By Jakša Cvitanić, Dražen Prelec, Blake Riley, and Benjamin Tereick

American Economic Review: Insights, September 2019

We introduce choice-matching, a class of mechanisms for eliciting honest responses to a multiple choice question (MCQ), as might appear in a market research study, opinion poll, or economics experiment. Under choice-matching, respondents are compensated t...

Does Cheap Talk Affect Market Outcomes? Evidence from eBay

By Daniel W. Elfenbein, Raymond Fisman, and Brian McManus

American Economic Journal: Applied Economics, October 2019

We study cheap talk by firms and responses by their consumers, focusing on unverifiable promises of charitable donations on eBay during 2005–2006. Cheap talk listings have lower sales probabilities but sell at higher prices when successful. The negative...

Relational Contracts with Private Information on the Future Value of the Relationship: The Upside of Implicit Downsizing Costs

By Matthias Fahn and Nicolas Klein

American Economic Journal: Microeconomics, November 2019

We analyze a relational-contracting problem, in which the principal has private information about the future value of the relationship. In order to reduce bonus payments, the principal is tempted to claim that the value of the future relationship is lower...

Disguising Lies—Image Concerns and Partial Lying in Cheating Games

By Kiryl Khalmetski and Dirk Sliwka

American Economic Journal: Microeconomics, November 2019

We study equilibrium reporting behavior in cheating games when agents have a fixed cost of lying and image concerns not to be perceived as a liar. We show that equilibria naturally arise in which agents with low costs of lying randomize among a set of the...

Dynamic Non-monetary Incentives

By Daniel Bird and Alexander Frug

American Economic Journal: Microeconomics, November 2019

We study a principal-agent interaction where investments and rewards arrive stochastically over time and are privately observed by the agent. Investments (costly for the agent, beneficial for the principal) can be concealed by the agent. Rewards (benefici...

Information Design

By Ina Taneva

American Economic Journal: Microeconomics, November 2019

A designer commits to a signal distribution that is informative about a payoff-relevant state. Conditional upon the privately observed signals, agents take actions that affect their payoffs as well as those of the designer. We show how to derive the (desi...

Learning Theory and Heterogeneous Play in a Signaling-Game Experiment

By Drew Fudenberg and Emanuel Vespa

American Economic Journal: Microeconomics, November 2019

We study the effect of how types are assigned to participants in a signaling-game experiment. The sender has two actions, In and Out, and two types. In one treatment, types are i.i.d. in every period, and senders gather experience with both types. In the ...

Training and Effort Dynamics in Apprenticeship

By Drew Fudenberg and Luis Rayo

American Economic Review, November 2019

A principal specifies time paths of effort provision, task allocation, and knowledge transfer for a cash-constrained apprentice, who is free to walk away at any time. In the optimal contract the apprentice pays for training by working for low or no wages ...

Liquidity Sentiments

By Vladimir Asriyan, William Fuchs, and Brett Green

American Economic Review, November 2019

We develop a rational theory of liquidity sentiments in which the market outcome in any given period depends on agents' expectations about market conditions in future periods. Our theory is based on the interaction between adverse selection and resale c...

The Rise of NGO Activism

By Julien Daubanes and Jean-Charles Rochet

American Economic Journal: Economic Policy, November 2019

Activist nongovernmental organizations (NGOs) increasingly oppose firms' practices. We suggest this might be related to the vulnerability of public regulation to corporate influence. We examine a potentially harmful industrial project subject to regulator...

Sovereign Debt and Structural Reforms

By Andreas Müller, Kjetil Storesletten, and Fabrizio Zilibotti

American Economic Review, December 2019

We construct a dynamic theory of sovereign debt and structural reforms with limited enforcement and moral hazard. A sovereign country in recession wishes to smooth consumption. It can also undertake costly reforms to speed up recovery. The sovereign can r...

Efficient Child Care Subsidies

By Christine Ho and Nicola Pavoni

American Economic Review, January 2020

We study the design of child care subsidies in an optimal welfare problem with heterogeneous private market productivities. The optimal subsidy schedule is qualitatively similar to the existing US scheme. Efficiency mandates a subsidy on formal child care...

Diffusing Coordination Risk

By Deepal Basak and Zhen Zhou

American Economic Review, January 2020

In a regime change game, privately informed agents sequentially decide whether to attack without observing others' previous actions. To dissuade them from attacking, a principal adopts a dynamic information disclosure policy, frequent viability tests. A v...

Bargaining and News

By Brendan Daley and Brett Green

American Economic Review, February 2020

We study a bargaining model in which a buyer makes frequent offers to a privately informed seller, while gradually learning about the seller's type from "news." We show that the buyer's ability to leverage this information to extract more surplus from the...

A Single-Judge Solution to Beauty Contests

By Zhen Huo and Marcelo Pedroni

American Economic Review, February 2020

We show that the equilibrium policy rule in beauty contest models is equivalent to that of a single agent's forecast of the economic fundamental. This forecast is conditional on a modified information process, which simply discounts the precision of idios...

Promotion Signaling and Human Capital Investments

By Michael Waldman and Ori Zax

American Economic Journal: Microeconomics, February 2020

In a world characterized by asymmetric learning, promotions can serve as signals of worker ability, and this, in turn, can result in inefficient promotion decisions. If the labor market is competitive, the result will be practices that reduce this distort...

Credibility of Crime Allegations

By Frances Xu Lee and Wing Suen

American Economic Journal: Microeconomics, February 2020

The lack of hard evidence in allegations about sexual misconduct makes it difficult to separate true allegations from false ones. We provide a model in which victims and potential libelers face the same costs and benefits from making an allegation, but th...

Experimenting with Career Concerns

By Marina Halac and Ilan Kremer

American Economic Journal: Microeconomics, February 2020

A manager who learns privately about a project over time may want to delay quitting it if recognizing failure/lack of success hurts his reputation. In the banking industry, managers may want to roll over bad loans. How do distortions depend on expected pr...