Robustness and Linear Contracts

By Gabriel Carroll

American Economic Review, February 2015

We consider a moral hazard problem where the principal is uncertain as to what the agent can and cannot do: she knows some actions available to the agent, but other, unknown actions may also exist. The principal demands robustness, evaluating possible ...

Price Subsidies, Diagnostic Tests, and Targeting of Malaria Treatment: Evidence from a Randomized Controlled Trial

By Jessica Cohen, Pascaline Dupas, and Simone Schaner

American Economic Review, February 2015

Both under- and over-treatment of communicable diseases are public bads. But efforts to decrease one run the risk of increasing the other. Using rich experimental data on household treatment- seeking behavior in Kenya, we study the implications of this...

Information Disclosure as a Matching Mechanism: Theory and Evidence from a Field Experiment

By Steven Tadelis and Florian Zettelmeyer

American Economic Review, February 2015

Market outcomes depend on the quality of information available to its participants. We measure the effect of information disclosure on market outcomes using a large-scale field experiment that randomly discloses quality information in wholesale automob...

Adverse Selection and an Individual Mandate: When Theory Meets Practice

By Martin B. Hackmann, Jonathan T. Kolstad, and Amanda E. Kowalski

American Economic Review, March 2015

We develop a model of selection that incorporates a key element of recent health reforms: an individual mandate. Using data from Massachusetts, we estimate the parameters of the model. In the individual market for health insurance, we find that premiums a...

The Virtues of Hesitation: Optimal Timing in a Non-stationary World

By Urmee Khan and Maxwell B. Stinchcombe

American Economic Review, March 2015

In many economic, political, and social situations, circumstances change at random points in time, reacting is costly, and reactions appropriate to present circumstances may become inappropriate upon future changes, requiring further costly reaction. Wait...

Jon Elster's Securities against Misrule: Juries, Assemblies, Elections: A Review Essay

By David Austen-Smith

Journal of Economic Literature, March 2015

The standard economic approach to designing institutions for collective decision making recognizes individuals' strategically rational motivations for misrepresentation and asks how best, given an objective function, to design a set of incentives and cons...

A Review of William Easterly's The Tyranny of Experts: Economists, Dictators, and the Forgotten Rights of the Poor

By Carol Graham

Journal of Economic Literature, March 2015

William Easterly marshals yet another brilliant critique of established development policies, with a focus on the experts' excessive focus on state-led policies and goals (a la Myrdal) and ignorance of bottom-up solutions, including technology and individ...

The Role of Connections in Academic Promotions

By Natalia Zinovyeva and Manuel Bagues

American Economic Journal: Applied Economics, April 2015

This paper analyzes how evaluators' private information and subjective biases affect evaluations in academia. We use evidence from centralized selection exams in Spain, where evaluators are randomly assigned to promotion committees. Candidates are signifi...

Unemployment Insurance Fraud and Optimal Monitoring

By David L. Fuller, B. Ravikumar, and Yuzhe Zhang

American Economic Journal: Macroeconomics, April 2015

An important incentive problem for the design of unemployment insurance is the fraudulent collection of unemployment benefits by workers who are gainfully employed. We show how to efficiently use a combination of tax/subsidy and monitoring to prevent such...

Formal versus Informal Monitoring in Teams

By Alex Gershkov and Eyal Winter

American Economic Journal: Microeconomics, May 2015

In this paper we analyze a principal's optimal monitoring strategies in a team environment. In doing so we study the interaction between formal monitoring and informal (peer) monitoring. We show that if the technology satisfies complementarity, peer monit...

Becoming the Neighbor Bidder: Endogenous Winner's Curse in Dynamic Mechanisms

By Alejandro Francetich

American Economic Journal: Microeconomics, May 2015

This paper addresses the problem of sequentially allocating time sensitive goods, or one-period leases on a durable good, among agents who compete through time and learn about the common component of their valuation privately through experience. I show th...

Grading Standards and Education Quality

By Raphael Boleslavsky and Christopher Cotton

American Economic Journal: Microeconomics, May 2015

We consider school competition in a Bayesian persuasion framework. Schools compete to place graduates by investing in education quality and by choosing grading policies. In equilibrium, schools strategically adopt grading policies that do not perfectly re...

Tagging and Targeting of Energy Efficiency Subsidies

By Hunt Allcott, Christopher Knittel, and Dmitry Taubinsky

American Economic Review, May 2015

A corrective tax or subsidy is "well-targeted" if it primarily affects choices that are more distorted by market failures. Energy efficiency subsidies are designed to correct multiple distortions: externalities, credit constraints, "landlord-tenant" infor...

Endogenous Liquidity and the Business Cycle

By Saki Bigio

American Economic Review, June 2015

I study an economy where asymmetric information about the quality of capital endogenously determines liquidity. Liquid funds are key to relaxing financial constraints on investment and employment. These funds are obtained by selling capital or using it as...

Team Contests with Multiple Pairwise Battles

By Qiang Fu, Jingfeng Lu, and Yue Pan

American Economic Review, July 2015

We consider a multi-battle team contest in which players from two rival teams form pairwise matches to fight in distinct component battles, which are carried out sequentially or (partially) simultaneously. A team wins if and only if its players win a majo...

Pricing and Efficiency in the Market for IP Addresses

By Benjamin Edelman and Michael Schwarz

American Economic Journal: Microeconomics, August 2015

We consider market rules for transferring IP addresses, numeric identifiers required by all computers connected to the Internet. Transfers usefully move resources from lowest- to highest-valuation networks, but transfers tend to cause socially costly grow...

Collusion and the Organization of the Firm

By Alfredo Burlando and Alberto Motta

American Economic Journal: Microeconomics, August 2015

This paper shows that the threat of collusion between a productive agent and the auditor in charge of monitoring production can influence a number of organizational dimensions of the firm, including outsourcing decisions and the allocation of productio...

Referrals: Peer Screening and Enforcement in a Consumer Credit Field Experiment

By Gharad Bryan, Dean Karlan, and Jonathan Zinman

American Economic Journal: Microeconomics, August 2015

Empirical evidence on peer intermediation lags behind both theory and practice in which lenders use peers to mitigate adverse selection and moral hazard. Using a referral incentive under individual liability, we develop a two-stage field experiment that p...

Two-Sided Matching with Endogenous Preferences

By Yair Antler

American Economic Journal: Microeconomics, August 2015

We modify the stable matching problem by allowing agents' preferences to depend on the endogenous actions of agents on the other side of the market. Conventional matching theory results break down in the modified setup. In particular, every game that is i...

Learning from Failure: A Review of Peter Schuck's Why Government Fails So Often: And How It Can Do Better

By David M. Levy and Sandra J. Peart

Journal of Economic Literature, September 2015

Peter Schuck catalogs an overwhelming list of US government failures. He points to both structural problems (culture and institutions) and incentives. Despairing of cultural change, Schuck focuses on incentives. He relies on Charles Wolf's theory of nonma...