American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Journal Article Front Matter i vi Includes "Douglass C. North: Distinguished Fellow 2009" http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.i 10.1257/aer.100.4.i American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Morally Motivated Self-Regulation David P.BaronStanford U and Northwestern U 1299 1329 Self-regulation is the private provision of public goods and private redistribution. This paper examines the scope of self-regulation motivated by altruistic moral preferences that are reciprocal and stronger the closer are citizens in a socioeconomic distance. The focus is on the role of organizations in increasing self-regulation by mitigating free-rider problems. Social label and certification organizations can expand the scope of self-regulation but not beyond that with unconditional altruism. Enforcement organizations expand the scope of self-regulation farther, and for-profit enforcement is more aggressive than nonprofit enforcement. Enforcement through social pressure imposed by NGOs also expands the scope of self-regulation. (JEL D64, H41, L51) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1299 10.1257/aer.100.4.1299 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Identifying the Elasticity of Substitution with Biased Technical Change Miguel A.León-LedesmaU Kent PeterMcAdamEuropean Central Bank AlpoWillmanEuropean Central Bank 1330 57 The capital-labor substitution elasticity and technical biases in production are critical parameters. The received wisdom claims their joint identification is infeasible. We challenge that interpretation. Putting the new approach of "normalized" production functions at the heart of a Monte Carlo analysis we identify the conditions under which identification is feasible and robust. The key result is that jointly modeling the production function and first-order conditions is superior to single-equation approaches especially when merged with "normalization." Our results will have fundamental implications for production-function estimation under non-neutral technical change, for understanding the empirical relevance of normalization and variability underlying past empirical studies. (JEL E22, O33, O41) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1330 10.1257/aer.100.4.1330 http://www.aeaweb.org/aer/data/sept2010/20081031_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Social Comparisons and Contributions to Online Communities: A Field Experiment on MovieLens YanChenU MI F. MaxwellHarperU MN JosephKonstanU MN Sherry XinLiU TX, Dallas 1358 98 We design a field experiment to explore the use of social comparison to increase contributions to an online community. We find that, after receiving behavioral information about the median user's total number of movie ratings, users below the median demonstrate a 530 percent increase in the number of monthly movie ratings, while those above the median decrease their ratings by 62 percent. When given outcome information about the average user's net benefit score, above-average users mainly engage in activities that help others. Our findings suggest that effective personalized social information can increase the level of public goods provision. (JEL C93, H41, L82) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1358 10.1257/aer.100.4.1358 http://www.aeaweb.org/aer/data/sept2010/20071512_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Are Health Insurance Markets Competitive? Leemore S.DafnyNorthwestern U 1399 1431 To gauge the competitiveness of the group health insurance industry, I investigate whether health insurers charge higher premiums, ceteris paribus, to more profitable firms. Such "direct price discrimination" is feasible only in imperfectly competitive settings. Using a proprietary national database of health plans offered by a sample of large, multisite firms from 1998-2005, I find firms with positive profit shocks subsequently face higher premium growth, even for the same health plans. Moreover, within a given firm, those sites located in concentrated insurance markets experience the greatest premium increases. The findings suggest health care insurers are exercising market power in an increasing number of geographic markets. (JEL G22, I11, I18, L11, L25) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1399 10.1257/aer.100.4.1399 http://www.aeaweb.org/aer/data/sept2010/20080356_data.zip http://www.aeaweb.org/aer/data/sept2010/20080356_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Wage Risk and Employment Risk over the Life Cycle HamishLowU Cambridge and Institute for Fiscal Studies, London CostasMeghirU College London and Institute for Fiscal Studies, London LuigiPistaferriStanford U and SIEPR 1432 67 We specify a life-cycle model of consumption, labor supply and job mobility in an economy with search frictions. We distinguish different sources of risk, including shocks to productivity, job arrival, and job destruction. Allowing for job mobility has a large effect on the estimate of productivity risk. Increases in the latter impose a considerable welfare loss. Increases in employment risk have large effects on output and, primarily through this channel, affect welfare. The welfare value of programs such as Food Stamps, partially insuring productivity risk, is greater than the value of unemployment insurance which provides (partial) insurance against employment risk. (JEL D91, J22, J31, J61, J64, J65) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1432 10.1257/aer.100.4.1432 http://www.aeaweb.org/aer/data/sept2010/20070062_data.zip http://www.aeaweb.org/aer/data/sept2010/20070062_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles The Law of the Few AndreaGaleottiU Essex SanjeevGoyalChrist's College, U Cambridge 1468 92 Empirical work shows that a large majority of individuals get most of their information from a very small subset of the group, viz., the influencers; moreover, there exist only minor differences between the observable characteristics of the influencers and the others. We refer to these empirical findings as the Law of the Few. This paper develops a model where players personally acquire information and form connections with others to access their information. Every (robust) equilibrium of this model exhibits the law of the few. (JEL D83, D85, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1468 10.1257/aer.100.4.1468 http://www.aeaweb.org/aer/data/sept2010/20080216_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Technology Capital and the US Current Account Ellen R.McGrattanFederal Reserve Bank of Minneapolis and U MN Edward C.PrescottAZ State U and Federal Reserve Bank of Minneapolis 1493 1522 The US Bureau of Economic Analysis (BEA) estimates that the return on investments of foreign subsidiaries of US multinational companies over the period 1982-2006 averaged 9.4 percent annually after taxes; US subsidiaries of foreign multinationals averaged only 3.2 percent. BEA returns on foreign direct investment (FDI) are distorted because most intangible investments made by multinationals are expensed. We develop a multicountry general equilibrium model with an essential role for FDI and apply the BEA's methodology to construct economic statistics for the model economy. We estimate that mismeasurement of intangible investments accounts for over 60 percent of the difference in BEA returns. (JEL F23, F32) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1493 10.1257/aer.100.4.1493 http://www.aeaweb.org/aer/data/sept2010/20080414_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Sovereign Risk and Secondary Markets FernandoBronerCREI and U Pompeu Fabra AlbertoMartinCREI and U Pompeu Fabra JaumeVenturaCREI and U Pompeu Fabra 1523 55 Conventional wisdom says that, in the absence of default penalties, sovereign risk destroys all foreign asset trade. We show that this conventional wisdom rests on one implicit assumption: that assets cannot be retraded in secondary markets. Without this assumption, foreign asset trade is possible even in the absence of default penalties. This result suggests a broader perspective regarding the origins of sovereign risk and its remedies. Sovereign risk affects foreign asset trade only if default penalties are insufficient and secondary markets work imperfectly. To reduce its effects, one can either increase default penalties or improve the working of secondary markets. (JEL F34, G12, G15) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1523 10.1257/aer.100.4.1523 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Pavlovian Processes in Consumer Choice: The Physical Presence of a Good Increases Willingness-to-Pay BenjaminBushongCA Institute of Technology Lindsay M.KingCA Institute of Technology Colin F.CamererCA Institute of Technology AntonioRangelCA Institute of Technology 1556 71 This paper describes a series of laboratory experiments studying whether the form in which items are displayed at the time of decision affects the dollar value that subjects place on them. Using a Becker-DeGroot auction under three different conditions — (i) text displays, (ii) image displays, and (iii) displays of the actual items — we find that subjects' willingness-to-pay is 40-61 percent larger in the real than in the image and text displays. Furthermore, follow-up experiments suggest the presence of the real item triggers preprogrammed consummatory Pavlovian processes that promote behaviors that lead to contact with appetitive items whenever they are available. (JEL C91, D03, D12, D87) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1556 10.1257/aer.100.4.1556 http://www.aeaweb.org/aer/data/sept2010/20080052_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Determinants of Redistributive Politics: An Empirical Analysis of Land Reforms in West Bengal, India PranabBardhanU CA, Berkeley DilipMookherjeeBoston U 1572 1600 We investigate political determinants of land reform implementation in the Indian state of West Bengal. Using a village panel spanning 1974-1998, we do not find evidence supporting the hypothesis that land reforms were positively and monotonically related to control of local governments by a Left Front coalition vis-à-vis the right-centrist Congress party, combined with lack of commitment to policy platforms. Instead, the evidence is consistent with a quasi-Downsian theory stressing the role of opportunism (reelection concerns) and electoral competition. (JEL D72, O13, O17, Q15) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1572 10.1257/aer.100.4.1572 http://www.aeaweb.org/aer/data/sept2010/20071071_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Monopoly Price Discrimination and Demand Curvature IñakiAguirreU Basque Country SimonCowanU Oxford JohnVickersAll Souls College, U Oxford 1601 15 This paper presents a general analysis of the effects of monopolistic third-degree price discrimination on welfare and output when all markets are served. Sufficient conditions — involving straightforward comparisons of the curvatures of the direct and inverse demand functions in the different markets — are presented for discrimination to have negative or positive effects on social welfare and output. (JEL D42) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1601 10.1257/aer.100.4.1601 American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Strategic Redistricting FarukGulPrinceton U WolfgangPesendorferPrinceton U 1616 41 Two parties choose redistricting plans to maximize their probability of winning a majority in the House of Representatives. In the unique equilibrium, parties maximally segregate their opponents' supporters but pool their own supporters into uniform districts. Ceteris paribus, the stronger party segregates more than the weaker one, and the election outcome is biased in the stronger party's favor and against the party whose supporters are easier to identify. We incorporate policy choice into our redistricting game and find that when one party controls redistricting, the equilibrium policy is biased towards the preferences of the redistricting party's supporters. (JEL C72, D72) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1616 10.1257/aer.100.4.1616 http://www.aeaweb.org/aer/data/sept2010/20070930_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles A Price Theory of Multi-sided Platforms E. GlenWeylHarvard Society of Fellows and Toulouse School of Economics 1642 72 I develop a general theory of monopoly pricing of networks. Platforms use insulating tariffs to avoid coordination failure, implementing any desired allocation. Profit maximization distorts in the spirit of A. Michael Spence (1975) by internalizing only network externalities to marginal users. Thus the empirical and prescriptive content of the popular Jean-Charles Rochet and Jean Tirole (2006) model of two-sided markets turns on the nature of user heterogeneity. I propose a more plausible, yet equally tractable, model of heterogeneity in which users differ in their income or scale. My approach provides a general measure of market power and helps predict the effect of price regulation and mergers. (JEL D42, D85, L14) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1642 10.1257/aer.100.4.1642 http://www.aeaweb.org/aer/data/sept2010/20080170_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Consumption Taxes and Redistribution IsabelCorreiaBank of Portugal 1673 94 This study considers replacing the current US tax system with only a flat tax consumption tax, showing, in contrast to the literature, that such a reform leads to a decline in inequality and increase in welfare for the welfare-poor. The results are obtained from a simple model that identifies the main channels through which the reform affects the economy. It is shown also that these novel results depend on the distribution of wealth and earnings, and that they hold for the relevant empirical distributions. (JEL D31, H23, H25) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1673 10.1257/aer.100.4.1673 http://www.aeaweb.org/aer/data/sept2010/20070451_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles When Does Communication Improve Coordination? ToreEllingsenStockholm School of Economics RobertÖstlingInstitute for International Economic Studies, Stockholm U 1695 1724 We study costless pre-play communication of intentions among inexperienced players. Using the level-k model of strategic thinking to describe players' beliefs, we fully characterize the effects of preplay communication in symmetric 2x2 games. One-way communication weakly increases coordination on Nash equilibrium outcomes, although average payoffs sometimes decrease. Two-way communication further improves payoffs in some games but is detrimental in others. Moving beyond the class of symmetric 2x2 games, we find that communication facilitates coordination in common interest games with positive spillovers and strategic complementarities, but there are also games in which any type of communication hampers coordination. (JEL C72, D83) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1695 10.1257/aer.100.4.1695 http://www.aeaweb.org/aer/data/sept2010/20080626_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Articles Kinship, Incentives, and Evolution IngelaAlgerCarleton U Jörgen W.WeibullStockholm School of Economics 1725 58 We analyze how family ties affect incentives, with focus on the strategic interaction between two mutually altruistic siblings. The siblings exert effort to produce output under uncertainty, and they may transfer output to each other. With equally altruistic siblings, their equilibrium effort is nonmonotonic in the common degree of altruism, and it depends on the harshness of the environment. We define a notion of local evolutionary stability of degrees of sibling altruism and show that this degree is lower than the kinship-relatedness factor. Numerical simulations show how family ties vary with the environment, and how this affects economic outcomes. (JEL D13, D64, J12, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1725 10.1257/aer.100.4.1725 http://www.aeaweb.org/aer/data/sept2010/20080830_data.zip http://www.aeaweb.org/aer/data/sept2010/20080830_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Elections, Capital Flows, and Politico-economic Equilibria RobertoChangRutgers U 1759 77 We study an open economy where a pro-labor and a pro-business candidate compete in an election. The winner chooses taxes, which affect investment returns. Electoral outcomes depend on the size of the foreign debt, but the debt itself reflects expectations about the election. The resulting interaction is novel and has several implications. Elections are associated with increased volatility. Politico-economic crises can occur. Inefficiencies vanish if the candidates commit to an appropriate tax policy, but such commitments have predictable effects on the election. Empirical evidence supporting the theory is discussed. (JEL D72, F34, O17, O19) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1759 10.1257/aer.100.4.1759 http://www.aeaweb.org/aer/data/sept2010/20060832_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Preemption Games: Theory and Experiment Steven T.AndersonNational Minerals Information Center, US Geological Survey, Reston, VA DanielFriedmanU CA, Santa Cruz RyanOpreaU CA, Santa Cruz 1778 1803 Several impatient investors with private costs C_i face an indivisible irreversible investment opportunity whose value V is governed by geometric Brownian motion. The first investor i to seize the opportunity receives the entire payoff, V-C_i. We characterize the symmetric Bayesian Nash equilibrium for this game. A laboratory experiment confirms the model's main qualitative predictions: competition drastically lowers the value at which investment occurs; usually the lowest-cost investor preempts the other investors; observed investment patterns in competition (unlike monopoly) are quite insensitive to changes in the Brownian parameters. Support is more qualified for the prediction that markups decline with cost. (JEL C73, D44, D82, G31) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1778 10.1257/aer.100.4.1778 http://www.aeaweb.org/aer/data/sept2010/20080616_data.zip http://www.aeaweb.org/aer/data/sept2010/20080616_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Watta Satta: Bride Exchange and Women's Welfare in Rural Pakistan Hanan G.JacobyWorld Bank GhazalaMansuriWorld Bank 1804 25 Can marriage institutions limit marital inefficiency? We study the pervasive custom of watta satta in rural Pakistan, a bride exchange between families coupled with a mutual threat of retaliation. Watta satta can be seen as a mechanism for coordinating the actions of two sets of parents, each wishing to restrain their son-in-law. We find that marital discord, as measured by estrangement, domestic abuse, and wife's mental health, is indeed significantly lower in watta satta versus "conventional" marriage, but only after accounting for selection bias. These benefits cannot be explained by endogamy, a marriage pattern associated with watta satta. (JEL J12, J16, O15, O18, Z13) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1804 10.1257/aer.100.4.1804 http://www.aeaweb.org/aer/data/sept2010/20080045_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Self-Interest through Delegation: An Additional Rationale for the Principal-Agent Relationship John R.HammanFL State U GeorgeLoewensteinCarnegie Mellon U Roberto A.WeberCarnegie Mellon U 1826 46 Principal-agent relationships are typically assumed to be motivated by efficiency gains from comparative advantage. However, principals may also delegate tasks to avoid taking direct responsibility for selfish or unethical behavior. We report three laboratory experiments in which principals repeatedly either decide how much money to share with a recipient or hire agents to make sharing decisions on their behalf. Across several experimental treatments, recipients receive significantly less, and in many cases close to nothing, when allocation decisions are made by agents. (JEL D82) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1826 10.1257/aer.100.4.1826 http://www.aeaweb.org/aer/data/sept2010/20080806_data.zip American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers The Gender Wage Gap and Domestic Violence AnnaAizerBrown U 1847 59 Three quarters of all violence against women is perpetrated by domestic partners. This study exploits exogenous changes in the demand for labor in female-dominated industries to estimate the impact of the male-female wage gap on domestic violence. Decreases in the wage gap reduce violence against women, consistent with a household bargaining model. These findings shed new light on the health production process as well as observed income gradients in health and suggest that in addition to addressing concerns of equity and efficiency, pay parity can also improve the health of American women via reductions in violence. (JEL D13, I12, J16, J23, J31) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1847 10.1257/aer.100.4.1847 http://www.aeaweb.org/aer/data/sept2010/20080093_data.zip http://www.aeaweb.org/aer/data/sept2010/20080093_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Constrained School Choice: An Experimental Study CaterinaCalsamigliaU Autonoma de Barcelona GuillaumeHaeringerU Autonoma de Barcelona FlipKlijnCSIC, U Autonoma de Barcelona 1860 74 The literature on school choice assumes that families can submit a preference list over all the schools they want to be assigned to. However, in many real-life instances families are only allowed to submit a list containing a limited number of schools. Subjects' incentives are drastically affected, as more individuals manipulate their preferences. Including a safety school in the constrained list explains most manipulations. Competitiveness across schools plays an important role. Constraining choices increases segregation and affects the stability and efficiency of the final allocation. Remarkably, the constraint reduces significantly the proportion of subjects playing a dominated strategy (JEL D82, I21 ) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1860 10.1257/aer.100.4.1860 http://www.aeaweb.org/aer/data/sept2010/20081211_data.zip http://www.aeaweb.org/aer/data/sept2010/20081211_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Financing Development: The Role of Information Costs JeremyGreenwoodU PA Juan M.SanchezFederal Reserve Bank of Richmond and Federal Reserve Bank of St Louis ChengWangFudan U and IA State U 1875 91 To address how technological progress in financial intermediation affects the economy, a costly-state verification framework is embedded into the standard growth model. The framework has two novel ingredients. First, firms differ in the risk/return combinations that they offer. Second, the efficacy of monitoring depends upon the amount of resources invested in the activity. A financial theory of firm size results. Undeserving firms are over-financed, deserving ones under-funded. Technological advance in intermediation leads to more capital accumulation and a redirection of funds away from unproductive firms toward productive ones. With continued progress, the economy approaches its first-best equilibrium. (JEL G21, G31, O16, O33, O41) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1875 10.1257/aer.100.4.1875 http://www.aeaweb.org/aer/data/sept2010/20071480_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Efficiency Gains from Team-Based Coordination—Large-Scale Experimental Evidence FrancescoFeriU Innsbruck BerndIrlenbuschLondon School of Economics and U Cologne MatthiasSutterU Innsbruck and U Gothenburg 1892 1912 The need for efficient coordination is ubiquitous in organizations and industries. The literature on the determinants of efficient coordination has focused on individual decision making so far. In reality, however, teams often have to coordinate with other teams. We present a series of coordination experiments with a total of 1,101 participants. We find that teams of three subjects each coordinate much more efficiently than individuals. This finding adds one important cornerstone to the recent literature on the conditions for successful coordination. We explain the differences between individuals and teams using the experience weighted attraction learning model. (JEL C71, C91, D23, D83, M54 ) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1892 10.1257/aer.100.4.1892 http://www.aeaweb.org/aer/data/sept2010/20081027_data.zip http://www.aeaweb.org/aer/data/sept2010/20081027_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Social Identity and Preferences Daniel J.BenjaminCornell U James J.ChoiYale U A. JoshuaStricklandKirkland & Ellis LLP, Chicago, IL 1913 28 Social identities prescribe behaviors for people. We identify the marginal behavioral effect of these norms on discount rates and risk aversion by measuring how laboratory subjects' choices change when an aspect of social identity is made salient. When we make ethnic identity salient to Asian-American subjects, they make more patient choices. When we make racial identity salient to black subjects, non-immigrant blacks (but not immigrant blacks) make more patient choices. Making gender identity salient has no effect on intertemporal or risk choices. (JEL D81, J15, J16, Z13 ) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1913 10.1257/aer.100.4.1913 http://www.aeaweb.org/aer/data/sept2010/20070931_data.zip http://www.aeaweb.org/aer/data/sept2010/20070931_app.pdf American Economic Association Nashville, TN 0002-8282 American Economic Review http://www.aeaweb.org/aer/ 100 4 September 2010 http://www.aeaweb.org/issue.php?journal=AER&volume=100&issue=4 Shorter Papers Bidding with Securities: Comment Yeon-KooCheColumbia U and Yonsei Economic Research Institute, Yonsei U JinwooKimYonsei U 1929 35 Peter DeMarzo, Ilan Kremer, and Andrzej Skrzypacz (2005) analyzed auctions in which bidders compete in securities. They show that a steeper security leads to a higher expected revenue for the seller, and also use this to establish the revenue ranking between standard auctions. In this comment, we obtain the opposite results to DKS's by assuming that a higher return requires a higher investment cost. Given this latter assumption, steeper securities are more vulnerable to adverse selection, and may yield lower expected revenue, than flatter ones. (JEL D44 ) http://www.aeaweb.org/articles.php?doi=10.1257/aer.100.4.1929 10.1257/aer.100.4.1929