Regulation of Insurance with Adverse Selection and Switching Costs: Evidence from Medicare Part D

By Maria Polyakova

American Economic Journal: Applied Economics, July 2016

I take advantage of regulatory and pricing dynamics in Medicare Part D to explore interactions among adverse selection, inertia, and regulation. I first document novel evidence of adverse selection and switching frictions within Part D using detailed admi...

Perceiving Prospects Properly

By Jakub Steiner and Colin Stewart

American Economic Review, July 2016

When an agent chooses between prospects, noise in information processing generates an effect akin to the winner's curse. Statistically unbiased perception systematically overvalues the chosen action because it fails to account for the possibility that noi...

Inducing Leaders to Take Risky Decisions: Dismissal, Tenure, and Term Limits

By Philippe Aghion and Matthew O. Jackson

American Economic Journal: Microeconomics, August 2016

How can a principal (employer or voter) induce an agent (worker or politician) to choose the "right" actions if risky actions reveal the agent's decision making competence and only dismissal can be used as an incentive instrument? We first show that if th...

Keeping Secrets: The Economics of Access Deterrence

By Emeric Henry and Francisco Ruiz-Aliseda

American Economic Journal: Microeconomics, August 2016

Keeping valuable secrets requires costly protection efforts. Breaking them requires costly search efforts. In a dynamic model in which the value of the secret decreases with the number of those holding it, we examine the secret holders' protection decisio...

Strategic Information Acquisition and Transmission

By Rossella Argenziano, Sergei Severinov, and Francesco Squintani

American Economic Journal: Microeconomics, August 2016

This paper explores the implications of costly information acquisition in a strategic communication setting. We show that equilibrium decisions based on a biased expert's advice may be more precise than when information is directly acquired by the decisio...

Just Enough or All: Selling a Firm

By Mehmet Ekmekci, Nenad Kos, and Rakesh Vohra

American Economic Journal: Microeconomics, August 2016

We consider the problem of selling a firm to a single buyer. The buyer privately knows post-sale cash flows and the benefits of control. Unlike the case where buyer's private information is one-dimensional, the optimal mechanism is a menu of tuples of cas...

Dynamic Delegation of Experimentation

By Yingni Guo

American Economic Review, August 2016

I study a dynamic relationship where a principal delegates experimentation to an agent. Experimentation is modeled as a one-armed bandit that yields successes following a Poisson process. Its unknown intensity is high or low. The agent has private informa...

Timing Decisions in Organizations: Communication and Authority in a Dynamic Environment

By Steven R. Grenadier, Andrey Malenko, and Nadya Malenko

American Economic Review, September 2016

We consider a problem where an uninformed principal makes a timing decision interacting with an informed but biased agent. Because time is irreversible, the direction of the bias crucially affects the agent's ability to credibly communicate information. W...

Asymmetric Information and Intermediation Chains

By Vincent Glode and Christian Opp

American Economic Review, September 2016

We propose a parsimonious model of bilateral trade under asymmetric information to shed light on the prevalence of intermediation chains that stand between buyers and sellers in many decentralized markets. Our model features a classic problem in economics...

The Allocation of Future Business: Dynamic Relational Contracts with Multiple Agents

By Isaiah Andrews and Daniel Barron

American Economic Review, September 2016

We consider how a firm dynamically allocates business among several suppliers to motivate them in a relational contract. The firm chooses one supplier who exerts private effort. Output is non-contractible, and each supplier observes only his own relations...

Adverse Selection and Auction Design for Internet Display Advertising

By Nick Arnosti, Marissa Beck, and Paul Milgrom

American Economic Review, October 2016

We model an online display advertising environment in which "performance" advertisers can measure the value of individual impressions, whereas "brand" advertisers cannot. If advertiser values for ad opportunities are positively correlated, second-price au...

Managerial Attention and Worker Performance

By Marina Halac and Andrea Prat

American Economic Review, October 2016

We present a novel theory of the employment relationship. A manager can invest in attention technology to recognize good worker performance. The technology may break and is costly to replace. We show that as time passes without recognition, the worker's b...

An Alternative to Signaling: Directed Search and Substitution

By Matthew Levy and Balázs Szentes

American Economic Journal: Microeconomics, November 2016

This paper analyzes a labor market, where: workers can acquire an observable skill at no cost, firms differ in unobserved productivity, workers' skill and firms' productivity are substitutes, and firms' search is directed. The main result is that, if the ...

Delegating Multiple Decisions

By Alex Frankel

American Economic Journal: Microeconomics, November 2016

This paper shows how to extend the heuristic of capping an agent against her bias to delegation problems over multiple decisions. Caps may be exactly optimal when the agent has constant biases, in which case a cap corresponds to a ceiling on the weighted ...

The (Human) Sampler's Curses

By Mark Thordal-Le Quement

American Economic Journal: Microeconomics, November 2016

We present a cheap talk model in which a receiver (R) sequentially consults multiple experts who are either unbiased or wish to maximize R's action, bias being unobservable. Consultation is costly and R cannot commit to future consultation behavior. We fi...

Bid Takers or Market Makers? The Effect of Auctioneers on Auction Outcome

By Nicola Lacetera, Bradley J. Larsen, Devin G. Pope, and Justin R. Sydnor

American Economic Journal: Microeconomics, November 2016

Auction design has been studied extensively; however, within a given design, does the process of how an auction is conducted matter as well? We address this question by looking for heterogeneity in the performance of auctioneers in English auctions. We an...

Achieving Efficiency in Dynamic Contribution Games

By Jakša Cvitanić and George Georgiadis

American Economic Journal: Microeconomics, November 2016

We analyze a game in which a group of agents exerts costly effort over time to make progress on a project. The project is completed once the cumulative effort reaches a prespecified threshold, at which point it generates a lump-sum payoff. We characterize...

Dynamic Procurement under Uncertainty: Optimal Design and Implications for Incomplete Contracts

By Malin Arve and David Martimort

American Economic Review, November 2016

We characterize the optimal dynamic contract for a long-term basic service when an uncertain add-on is required later on. Introducing firm risk aversion has two impacts. Profits for the basic service can be backloaded to induce cheaper information revelat...

Intertemporal Price Discrimination: Dynamic Arrivals and Changing Values

By Daniel F. Garrett

American Economic Review, November 2016

We study the profit-maximizing price path of a monopolist selling a durable good to buyers who arrive over time and whose values for the good evolve stochastically. The setting is completely stationary with an infinite horizon. Contrary to the case with c...