American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article Front Matter i viii http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.i 10.1257/mic.4.1.i American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article Observational Learning and Demand for Search Goods KennethHendricksU WI AlanSorensenU WI ThomasWisemanU TX 1 31 We develop a model of herds in which consumers observe only the aggregate purchase history, not the complete ordered history of search actions. We show that the purchasing information changes the conditions under which herds can occur for both low- and high-quality products. Inferior products are certain to be ignored; high quality products may be ignored, but complete learning may also occur. We obtain closed form solutions for the probabilities of these events and conduct comparative statics. We test the model’s predictions using data from an online music market created by Salganik, Dodds, and Watts (2006). (JEL D11, D12, L82) http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.1 10.1257/mic.4.1.1 http://www.aeaweb.org/aej/mic/data/2011-0059_data.zip American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article Community Structure and Market Outcomes: A Repeated Games-in-Networks Approach Itay P.FainmesserBrown U 32 69 Consider a large market with asymmetric information, in which sellers have the option to "cheat" their buyers, and buyers decide whether to repurchase from different sellers. We model active trade relationships as links in a buyer-seller network and study repeated games in such networks. Endowing sellers with incomplete knowledge of the network, we derive conditions that determine whether a network is consistent with cooperation between every buyer and seller that are connected. Three network features reduce the minimal discount factor sufficient for cooperation: moderate and balanced competition, sparseness, and segregation. Incentive constraints are binding and rule out efficient networks. (JEL C73, D82, D85, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.32 10.1257/mic.4.1.32 American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article Partially Specified Probabilities: Decisions and Games EhudLehrerTel Aviv U and INSEAD, Fontainebleau 70 100 The paper develops a theory of decision making based on partially specified probabilities. It takes an axiomatic approach using Anscombe and Aumann's (1963) setting, and is based on the concave integral for capacities. This theory is then expanded to interactive models in order to extend Nash equilibrium by introducing the concept of partially specified equilibrium. (JEL C70, D81, D83) http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.70 10.1257/mic.4.1.70 American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article The Impact of Social Ties on Group Interactions: Evidence from Minimal Groups and Randomly Assigned Real Groups LorenzGoetteU Lausanne DavidHuffmanSwarthmore College StephanMeierColumbia U 101 15 Economists are increasingly interested in how group membership affects individual behavior. The standard method assigns individuals to "minimal" groups, i.e. arbitrary labels, in a lab. But real group often involve social interactions leading to social ties between group members. Our experiments compare randomly assigned minimal groups to randomly assigned groups involving real social interactions. While adding social ties leads to qualitatively similar, although stronger, in-group favoritism in cooperation, altruistic norm enforcement patterns are qualitatively different between treatments. Our findings contribute to the micro-foundation of theories of group preferences, and caution against generalizations from "minimal" groups to groups with social context. (JEL C92, D64, D71, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.101 10.1257/mic.4.1.101 http://www.aeaweb.org/aej/mic/data/2010-0103_data.zip http://www.aeaweb.org/aej/mic/app/2010-0103_app.pdf American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article Fraternities and Labor-Market Outcomes Sergey V.PopovCentre for Advanced Studies, National Research U Higher School of Economics, Moscow DanBernhardtU IL 116 41 We model how student choices to rush a fraternity, and fraternity admission choices, interact with signals firms receive about student productivities to determine labor-market outcomes. The fraternity and students value wages and fraternity socializing values. We provide sufficient conditions under which, in equilibrium, most members have intermediate abilities: weak students apply, but are rejected unless they have high socializing values, while most able students do not apply to avoid taint from association with weaker members. (JEL C72, J24, J31, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.116 10.1257/mic.4.1.116 http://www.aeaweb.org/aej/mic/data/2010-0131_data.zip American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article Competitive Nonlinear Taxation and Constitutional Choice MassimoMorelliColumbia U and European U Institute HuanxingYangOH State U LixinYeOH State U 142 75 In an economy where agents have different productivities and mobility, we compare a unified nonlinear optimal taxation with the equilibrium taxation that would be chosen by two competing tax authorities if the same economy were divided into two states. The overall level of progressivity and redistribution is unambiguously lower under competitive taxation; the "rich" are always in favor of competing authorities, whereas the "poor" are always in favor of unified taxation; the preferences of the middle class depend on the initial conditions in terms of the distribution of abilities, the relative power of the various classes, and mobility costs. (JEL D72, H21, H23, H24) http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.142 10.1257/mic.4.1.142 http://www.aeaweb.org/aej/mic/app/2010-0039_app.pdf American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article Matching in Networks with Bilateral Contracts John WilliamHatfieldStanford U Scott DukeKominersBecker Friedman Institute, U Chicago 176 208 We introduce a model in which firms trade goods via bilateral contracts which specify a buyer, a seller, and the terms of the exchange. This setting subsumes (many-to-many) matching with contracts, as well as supply chain matching. When firms' relationships do not exhibit a supply chain structure, stable allocations need not exist. By contrast, in the presence of supply chain structure, a natural substitutability condition characterizes the maximal domain of firm preferences for which stable allocations are guaranteed to exist. Furthermore, the classical lattice structure, rural hospitals theorem, and one-sided strategy-proofness results all generalize to this setting. (JEL C78, D85, D86, L14) http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.176 10.1257/mic.4.1.176 American Economic Association Nashville, TN 1945-7669 1945-7685 American Economic Journal: Microeconomics http://www.aeaweb.org/aej-micro/ 4 1 February 2012 http://www.aeaweb.org/issue.php?journal=MIC&volume=4&issue=1 Journal Article Diverging Opinions JamesAndreoniU CA, San Diego TymofiyMylovanovU PA 209 32 People often see the same evidence but draw opposite conclusions, becoming polarized over time. More surprisingly, disagreements persist even when they are commonly known. We derive a model and present an experiment showing that opinions can diverge when one-dimensional opinions are formed from two-dimensional information. When subjects are given sufficient information to reach agreement, however, disagreement persists. Subjects discount information when it is filtered through the actions of others, but not when it is presented directly, indicating that common knowledge of disagreement may be the result of excessive skepticism about the decision-making skills of others. (JEL C92, D82, D83) http://www.aeaweb.org/articles.php?doi=10.1257/mic.4.1.209 10.1257/mic.4.1.209 http://www.aeaweb.org/aej/mic/data/2011-0110_data.zip http://www.aeaweb.org/aej/mic/app/2011-0110_app.pdf