Breakthroughs, Deadlines, and Self-Reported Progress: Contracting for Multistage Projects

By Brett Green and Curtis R. Taylor

American Economic Review, December 2016

We study the optimal incentive scheme for a multistage project in which the agent privately observes intermediate progress. The optimal contract involves a soft deadline wherein the principal guarantees funding up to a certain date--if the agent reports p...

Beeps

By Jeffrey C. Ely

American Economic Review, January 2017

I introduce and study dynamic persuasion mechanisms. A principal privately observes the evolution of a stochastic process and sends messages over time to an agent. The agent takes actions in each period based on her beliefs about the state of the process ...

Dynamic Assignment of Objects to Queuing Agents

By Francis Bloch and David Cantala

American Economic Journal: Microeconomics, February 2017

We analyze the dynamic assignment of objects to agents organized in a constant size waiting list. Applications include the assignment of social housing and organs for transplants. We analyze the optimal design of probabilistic queuing disciplines, punishm...

Power Dynamics in Organizations

By Jin Li, Niko Matouschek, and Michael Powell

American Economic Journal: Microeconomics, February 2017

We examine an infinitely repeated game between a principal, who has the formal authority to decide on a project, and a biased agent, who is privately informed about what projects are available. The optimal relational contract speaks to how power is earned...

Incentives for Quality in Friendly and Hostile Informational Environments

By Pierre Fleckinger, Matthieu Glachant, and Gabrielle Moineville

American Economic Journal: Microeconomics, February 2017

We develop a model of costly quality provision under biased disclosure. We define as friendly an environment in which the disclosure probability increases with quality, and as hostile an environment in which the opposite holds. Hostile environments produc...

Discrimination via Symmetric Auctions

By Rahul Deb and Mallesh M. Pai

American Economic Journal: Microeconomics, February 2017

Discrimination (for instance, along the lines of race or gender) is often prohibited in auctions. This is legally enforced by preventing the seller from explicitly biasing the rules in favor of bidders from certain groups (for example, by subsidizing thei...

Does It Pay to Know Prices in Health Care?

By Ethan M. J. Lieber

American Economic Journal: Economic Policy, February 2017

Consumers rarely know the price of medical care before they consume it. I use variation in the timing of access to a new source of price information to show how access to and search for price information leads consumers to pay significantly less for care....

Heterogeneity, Demand for Insurance, and Adverse Selection

By Johannes Spinnewijn

American Economic Journal: Economic Policy, February 2017

Recent evidence underlines the importance of demand frictions distorting insurance choices. Heterogeneous frictions cause the willingness to pay for insurance to be biased upward (relative to value) for those purchasing insurance, but downward for those w...

Cultural Proximity and Loan Outcomes

By Raymond Fisman, Daniel Paravisini, and Vikrant Vig

American Economic Review, February 2017

We present evidence that cultural proximity (shared codes, beliefs, ethnicity) between lenders and borrowers increases the quantity of credit and reduces default. We identify in-group lending using dyadic data on religion and caste for officers and borrow...

Misallocation and the Distribution of Global Volatility

By Maya Eden

American Economic Review, February 2017

Decreasing returns at the macro level are an outcome of efficiency at the micro level. When inputs are scarce, an efficient economy carries out only the most productive projects; when inputs are abundant, the economy implements less productive projects as...

Evidence Games: Truth and Commitment

By Sergiu Hart, Ilan Kremer, and Motty Perry

American Economic Review, March 2017

An evidence game is a strategic disclosure game in which an informed agent who has some pieces of verifiable evidence decides which ones to disclose to an uninformed principal who chooses a reward. The agent, regardless of his information, prefers the rew...

Modeling the Revolving Revolution: The Debt Collection Channel

By Lukasz A. Drozd and Ricardo Serrano-Padial

American Economic Review, March 2017

We investigate the role of information technology (IT) in the collection of delinquent consumer debt. We argue that the widespread adoption of IT by the debt collection industry in the 1990s contributed to the observed expansion of unsecured risky lending...

Information Avoidance

By Russell Golman, David Hagmann, and George Loewenstein

Journal of Economic Literature, March 2017

We commonly think of information as a means to an end. However, a growing theoretical and experimental literature suggests that information may directly enter the agent's utility function. This can create an incentive to avoid information, even when it is...

Expertise versus Bias in Evaluation: Evidence from the NIH

By Danielle Li

American Economic Journal: Applied Economics, April 2017

Evaluators with expertise in a particular field may have an informational advantage in separating good projects from bad. At the same time, they may also have personal preferences that impact their objectivity. This paper examines these issues in the cont...

Bank Leverage Cycles

By Galo Nuño and Carlos Thomas

American Economic Journal: Macroeconomics, April 2017

We propose a general equilibrium framework with financial intermediaries subject to endogenous leverage constraints, and assess its ability to explain the observed fluctuations in intermediary leverage and real economic activity. In the model, intermediar...

Nominal Exchange Rate Determinacy under the Threat of Currency Counterfeiting

By Pedro Gomis-Porqueras, Timothy Kam, and Christopher Waller

American Economic Journal: Macroeconomics, April 2017

We study the endogenous choice to accept fiat objects as media of exchange and their implications for nominal exchange rate determination. We consider a two-country environment with two currencies that can be used to settle any transactions. However, curr...

Strategic Vote Trading in Power Sharing Systems

By Dimitrios Xefteris and Nicholas Ziros

American Economic Journal: Microeconomics, May 2017

This paper studies decentralized vote trading in a power sharing system that follows the rules of strategic market games. In particular, we study a two-party election in which prior to the voting stage, voters are free to trade votes for money. Voters hol...

Pricing Institutions and the Welfare Cost of Adverse Selection

By E. Glen Weyl and André Veiga

American Economic Journal: Microeconomics, May 2017

To mitigate adverse selection in insurance markets, individuals are often mandated to buy at least a baseline plan, but may choose to opt into a premium plan. In some markets, such as US health exchanges, each plan is responsible for the full expenses of ...

Disclosure and Legal Advice

By Yeon-Koo Che and Sergei Severinov

American Economic Journal: Microeconomics, May 2017

This paper examines how the advice that lawyers provide to their clients affects the disclosure of evidence and the outcome of adjudication, and how the adjudicator should allocate the burden of proof in light of these effects. Despite lawyers' expertise ...

Designing Matching Mechanisms under General Distributional Constraints

By Masahiro Goto, Fuhito Kojima, Ryoji Kurata, Akihisa Tamura, and Makoto Yokoo

American Economic Journal: Microeconomics, May 2017

To handle various applications, we study matching under constraints. The only requirement on the constraints is heredity; given a feasible matching, any matching with fewer students at each school is also feasible. Heredity subsumes existing constraints s...