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...

Checklists and Worker Behavior: A Field Experiment

By C. Kirabo Jackson and Henry S. Schneider

American Economic Journal: Applied Economics, October 2015

We analyze data from a field experiment in which an auto repair firm provided checklists to mechanics and monitored their use. Revenue was 20 percent higher during the experiment, and the effect is equivalent to that of a 1.6 percentage point (10 percent)...

Non-Optimal Mechanism Design

By Jason D. Hartline and Brendan Lucier

American Economic Review, October 2015

The optimal allocation of resources in complex environments—like allocation of dynamic wireless spectrum, cloud computing services, and Internet advertising—is computationally challenging even given the true preferences of the participants. In...

Optimal Annuitization with Stochastic Mortality and Correlated Medical Costs

By Felix Reichling and Kent Smetters

American Economic Review, November 2015

The conventional wisdom since Yaari (1965) is that households without a bequest motive should fully annuitize their investments. Numerous frictions do not break this sharp result. We modify the Yaari framework by allowing a household's mortality risk itse...

Exclusive Contracts and Market Dominance

By Giacomo Calzolari and Vincenzo Denicolò

American Economic Review, November 2015

We propose a new theory of exclusive dealing. The theory is based on the assumption that a dominant firm has a competitive advantage over its rivals, and that the buyers' willingness to pay for the product is private information. In this setting, the domi...

Market Structure, Reputation, and the Value of Quality Certification

By Daniel W. Elfenbein, Raymond Fisman, and Brian McManus

American Economic Journal: Microeconomics, November 2015

Quality certification programs help consumers identify high-quality products or sellers in markets with information asymmetries. Using data from eBay UK's online marketplace, we study how certification's impact on demand varies with market- and seller- le...

Learning from Others? Decision Rights, Strategic Communication, and Reputational Concerns

By Otto H. Swank and Bauke Visser

American Economic Journal: Microeconomics, November 2015

We examine centralized versus decentralized decision making when experience of agents is private information and communication is necessary to learn from others. An agent has reputational concerns and his market may or may not observe what the other agent...

Beneficial Long Communication in the Multiplayer Electronic Mail Game

By Kris De Jaegher

American Economic Journal: Microeconomics, November 2015

In the two-player electronic mail game (EMG), as is well-known, the probability of collective action is lower the more confirmations and reconfirmations are made available to players. In the multiplayer EMG, however, we show players may coordinate on equi...

Mechanisms for Repeated Trade

By Andrzej Skrzypacz and Juuso Toikka

American Economic Journal: Microeconomics, November 2015

How does feasibility of efficient repeated trade depend on the features of the environment such as persistence of values, private information about their evolution, or trading frequency? We derive a necessary and sufficient condition for efficient, unsubs...

Bankruptcy: Is It Enough to Forgive or Must We Also Forget?

By Ronel Elul and Piero Gottardi

American Economic Journal: Microeconomics, November 2015

In many countries, lenders are restricted in their access to information about borrowers' past defaults. We study this provision in a model of repeated borrowing and lending with moral hazard and adverse selection. We analyze its effects on borrowers' inc...

Assessing the Welfare Effects of Unemployment Benefits Using the Regression Kink Design

By Camille Landais

American Economic Journal: Economic Policy, November 2015

I show how, in the tradition of the dynamic labor supply literature, one can identify the moral hazard effects and liquidity effects of unemployment insurance (UI) using variations along the time profile of unemployment benefits. I use this strategy to in...

A Long Way Coming: Designing Centralized Markets with Privately Informed Buyers and Sellers

By Simon Loertscher, Leslie M. Marx, and Tom Wilkening

Journal of Economic Literature, December 2015

We discuss the economics literature relevant to the design of centralized two-sided market mechanisms for environments in which both buyers and sellers have private information. The existing literature and the history of spectrum auctions, including the i...