American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Front Matter i vii http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.i 10.1257/mic.3.4.i American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Platform Siphoning: Ad-Avoidance and Media Content Simon P.AndersonU VA Joshua S.GansU Toronto 1 34 Content providers rely on advertisers to pay for content. TiVo, remote controls, and pop-up ad blockers are examples of ad-avoidance technologies that allow consumers to view content without ads, and thereby siphon off the content without paying the "price." We examine the content provider's reaction to such technologies, demonstrating that their adoption increases advertising clutter (leading to a potential downward spiral), may reduce total welfare and content quality, and can lead to more mass-market content. We cast doubt on the profitability of using subscriptions to counter the impact of ad-avoidance. (JEL L82, L86, M37) http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.1 10.1257/mic.3.4.1 American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Mnemonomics: The Sunk Cost Fallacy as a Memory Kludge SandeepBaligaNorthwestern U Jeffrey C.ElyNorthwestern U 35 67 We offer a theory of the sunk cost fallacy as an optimal response to limited memory. As new information arrives, a decision-maker may not remember all the reasons he began a project. The sunk cost gives additional information about future profits and informs subsequent decisions. The Concorde effect makes the investor more eager to complete projects when sunk costs are high and the pro-rata effect makes the investor less eager. In a controlled experiment we had subjects play a simple version of the model. In a baseline treatment subjects exhibit the pro-rata bias. When we induce memory constraints the effect reverses and the subjects exhibit the Concorde bias. (JEL D24, D83, G31) http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.35 10.1257/mic.3.4.35 http://www.aeaweb.org/aej/mic/data/2010-0090_data.zip American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Tracking Decision Makers under Uncertainty AmosArieliWeizmann Institute of Science, Rechovot YanivBen-AmiTel Aviv U ArielRubinsteinTel Aviv U and NYU 68 76 Eye tracking is used to investigate the procedures that participants employ in choosing between two lotteries. Eye movement patterns in problems where the deliberation process is clearly identified are used to substantiate an interpretation of the results. The data provide little support for the hypothesis that decision makers rely exclusively upon an expected utility type of calculation. Instead eye patterns indicate that decision makers often compare prizes and probabilities separately. This is particularly true when the multiplication of sums and probabilities is laborious to compute. (JEL D81, D87) http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.68 10.1257/mic.3.4.68 http://www.aeaweb.org/aej/mic/data/2010-0017_data.zip American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Intermediation Reduces Punishment (and Reward) Lucas C.CoffmanOH State U 77 106 This paper shows moral decision making is not well predicted by the overall fairness of an act but rather by the fairness of the consequences that follow directly. In laboratory experiments, third-party punishment for keeping money from a poorer player decreases when an intermediary actor is included in the transaction. This is true for completely passive intermediaries, even though intermediation decreases the payout of the poorest player and hurts equity, and because intermediation distances the transgressor from the outcome. A separate study shows rewards of charitable giving decrease when the saliency of an intermediary is increased. (JEL A13, D63, D64) http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.77 10.1257/mic.3.4.77 http://www.aeaweb.org/aej/mic/data/2010-0151_data.zip http://www.aeaweb.org/aej/mic/app/2010-0151_app.pdf American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Performance and Turnover in a Stochastic Partnership DavidMcAdamsDuke U 107 42 Suppose that players in a stochastic partnership have the option to quit and rematch anonymously. If stage-game payoffs are subject to a persistent initial shock, the (unique) social welfare-maximizing equilibrium induces a "dating" process in which all partners enjoy the full potential equilibrium gains from each match. By contrast, maximizing social welfare in non-stochastic repeated games with rematching requires that players burn money or otherwise fail to realize all potential equilibrium gains. Comparative statics on welfare and turnover are also provided, consistent with documented patterns of "survivorship bias" and "honeymoon." (JEL C72, C73, C78) http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.107 10.1257/mic.3.4.107 http://www.aeaweb.org/aej/mic/app/2011-0039_app.pdf American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Hyperbolic Discounting and the Sustainability of Rotational Savings Arrangements KarnaBasuHunter College, CUNY 143 71 People across the developing world join rotational savings and credit associations (roscas) to fund repeated purchases of nondivisible goods. When the scope for punishment is weak, there is a natural question about why agents not defect from roscas. This paper models roscas as commitment savings devices and derives conditions under which hyperbolic discounters will never defect, even in the absence of formal contracting, social punishment, and reputation. I show why, unlike with standard commitment devices, a hyperbolic discounter will not postpone entry into a rosca. Finally, this paper makes predictions about the relative survival of random and fixed roscas. (JEL D14, D91, O12) http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.143 10.1257/mic.3.4.143 American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Subjective Probabilities on a State Space EdiKarniJohns Hopkins U 172 85 This paper extends the analytical framework of Karni (2011) to include a state space and advances a choice-based definition of subjective probabilities on this space. These probabilities represent the beliefs of Bayesian decision makers regarding the likelihoods of events, thus resolving a long-standing, fundamental difficulty with the definition of subjective probabilities. (JEL D81, D83) http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.172 10.1257/mic.3.4.172 American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 3 4 November 2011 http://www.aeaweb.org/issue.php?journal=MIC&volume=3&issue=4 Journal Article Competition in Multi-sided Markets: Divide and Conquer BrunoJullienToulouse School of Economics 186 220 This paper studies Stackelberg price competition in a multi-sided market. The second-mover can engage in divide-and-conquer strategies, which involve cross-subsidies between sides. The paper recovers bounds on profits, and refines the results with a selection criteria whereby consumers resolve coordination failure in favor of a focal platform. It then analyzes perfect price discrimination with network effects, and two-sided market, shedding light on inefficiencies and strategic choices by platforms. A leading platform may refrain from selling to some side in order to soften competition, it tends to favor excessively balanced market shares and may prefer compatibility to reduce price competition. (JEL D43, D85) http://www.aeaweb.org/articles.php?doi=10.1257/mic.3.4.186 10.1257/mic.3.4.186