Attention Management

By Elliot Lipnowski, Laurent Mathevet, and Dong Wei

American Economic Review: Insights, March 2020

Attention costs can cause some information to be ignored and decisions to be imperfect. Can we improve the material welfare of a rationally inattentive agent by restricting his information in the first place? In our model, a well-intentioned principal pro...

Endogenous Monitoring in a Partnership Game

By Anna Sanktjohanser

American Economic Review, March 2020

I consider a repeated game in which, due to imperfect monitoring, no collusion can be sustained. I add a self-interested monitor who commits to obtain private signals of firms' actions and sends a public message. The monitor makes an offer specifying the ...

Consumer Imperfect Information and Endogenous Price Rigidity

By Jean-Paul L'Huillier

American Economic Journal: Macroeconomics, April 2020

This paper studies the propagation of monetary shocks in an economy featuring a strategic microfoundation for price rigidities. Following an aggregate shock to money, most consumers are initially uninformed. The market for goods is decentralized. Firms ar...

Who Acquires Information in Dealer Markets?

By Jesper Rüdiger and Adrien Vigier

American Economic Review, April 2020

We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. When quotes are observable, this ...

The Economics of Crowdfunding

By Jen-Wen Chang

American Economic Journal: Microeconomics, May 2020

An entrepreneur finances her project via crowdfunding. She chooses a funding mechanism (fixed or flexible), a price, and a funding goal. Under fixed funding, money is refunded if the goal is not met; under flexible funding, there is no refund. Backers obs...

A Model of Complex Contracts

By Alexander M. Jakobsen

American Economic Review, May 2020

I study a mechanism design problem involving a principal and a single, boundedly rational agent. The agent transitions among belief states by combining current beliefs with up to K pieces of information at a time. By expressing a mechanism as a complex co...

Learning under Diverse World Views: Model-Based Inference

By George J. Mailath and Larry Samuelson

American Economic Review, May 2020

People reason about uncertainty with deliberately incomplete models. How do people hampered by different, incomplete views of the world learn from each other? We introduce a model of "model-based inference." Model-based reasoners partition an otherwise ho...

The Allocation of Decision Authority to Human and Artificial Intelligence

By Susan C. Athey, Kevin A. Bryan, and Joshua S. Gans

AEA Papers and Proceedings, May 2020

The allocation of decision authority by a principal to either a human agent or an artificial intelligence (AI) is examined. The principal trades off an AI's more aligned choice with the need to motivate the human agent to expend effort in learning choice ...

Do Workers Comply with Salary History Bans? A Survey on Voluntary Disclosure, Adverse Selection, and Unraveling

By Amanda Agan, Bo Cowgill, and Laura Katherine Gee

AEA Papers and Proceedings, May 2020

Salary history bans forbid employers from asking job candidates to disclose their salaries. However, applicants can still volunteer this information. Our theoretical model predicts that the effect of these laws varies by how workers comply. Our survey of ...

School Vouchers: A Critical View

[Symposium: School Vouchers]

By Helen F. Ladd

Journal of Economic Perspectives, Fall 2002

This paper marshals available evidence from both the U.S. and other countries on the effects of private schools, peer effects, and competition to demonstrate that that any gains in overall student achievement from a large scale voucher program are at best...

Pharmaceuticals and the Developing World

[Symposium: Pharmaceuticals]

By Michael Kremer

Journal of Economic Perspectives, Fall 2002

Pharmaceuticals have greatly improved health in developing countries, but many people in developing countries do not obtain even inexpensive pharmaceuticals and little pharmaceutical R&D is oriented toward products needed by developing countries, such as ...

Expert-Captured Democracies

By Archishman Chakraborty, Parikshit Ghosh, and Jaideep Roy

American Economic Review, June 2020

Does public cheap talk by a biased expert benefit voters? The answer depends on the nature of democratic institutions and the extent of communication possibilities. Expert endorsements induce office-seeking parties to serve the expert's interests, hurting...

Optimal Quality Certification

By Andriy Zapechelnyuk

American Economic Review: Insights, June 2020

Quality certification not only informs consumers but also stimulates producers to supply better-quality products. We study a problem of quality certification in a moral hazard setting. We show that, under standard assumptions, simple certification systems...

Radical Markets by Eric Posner and E. Glen Weyl: A Review Essay

By David K. Levine

Journal of Economic Literature, June 2020

At a time when standards of living have improved more than any time in history, this book makes a proposal for radical change. It is based—loosely—on market design principles. The plan for attacking overlapping ownership is reasonably well thought out...

The Limits of the Commune: A Review of The Mystery of the Kibbutz

By John V. C. Nye

Journal of Economic Literature, June 2020

Ran Abramitzky's book, The Mystery of the Kibbutz: Egalitarian Principles in a Capitalist World, tries to answer the questions of why the communal kibbutz worked so well in Israel's formative years and what limits its current success in modern Is...

Image versus Information: Changing Societal Norms and Optimal Privacy

By S. Nageeb Ali and Roland Bénabou

American Economic Journal: Microeconomics, August 2020

We analyze the costs and benefits of using social image to foster desirable behaviors. Each agent acts based on his intrinsic motivation, private assessment of the public good, and reputational concern for appearing prosocial. A Principal sets the general...

Imitation Perfection—A Simple Rule to Prevent Discrimination in Procurement

By Helene Mass, Nicolas Fugger, Vitali Gretschko, and Achim Wambach

American Economic Journal: Microeconomics, August 2020

Procurement regulation aimed at curbing discrimination requires equal treatment of sellers. However, Deb and Pai (2017) show that such regulation imposes virtually no restrictions on the ability to discriminate. We propose a simple rule—imitation perfec...

Stability and Bayesian Consistency in Two-Sided Markets

By Qingmin Liu

American Economic Review, August 2020

We propose a criterion of stability for two-sided markets with asymmetric information. A central idea is to formulate off-path beliefs conditional on counterfactual pairwise deviations and on-path beliefs in the absence of such deviations. A matching-be...

The Perils of High-Powered Incentives: Evidence from Colombia's False Positives

By Daron Acemoglu, Leopoldo Fergusson, James Robinson, Dario Romero, and Juan F. Vargas

American Economic Journal: Economic Policy, August 2020

We investigate the use of high-powered incentives for the Colombian military and show that this practice produced perverse side effects. Innocent civilians were killed and misrepresented as guerillas (a phenomenon known in Colombia as "false positives"). ...

Long-Term Care Insurance: Information Frictions and Selection

By M. Martin Boyer, Philippe De Donder, Claude Fluet, Marie-Louise Leroux, and Pierre-Carl Michaud

American Economic Journal: Economic Policy, August 2020

This paper conducts a stated-choice experiment where respondents are asked to rate various insurance products aimed to protect against financial risks associated with long-term care needs. Using exogenous variation in prices from the survey design and ind...