Artificial Intelligence, Algorithm Design, and Pricing

By John Asker, Chaim Fershtman, and Ariel Pakes

AEA Papers and Proceedings, May 2022

We calculate the time path of prices generated by algorithmic pricing games that differ in their learning protocols. Asynchronous learning occurs when the algorithm only learns about the return from the action it actually took. Synchronous learning occurs...

Screening Inattentive Buyers

By Jeffrey Mensch

American Economic Review, June 2022

Information plays a crucial role in mechanism design problems. A potential complication is that buyers may be inattentive, and so their information may endogenously and flexibly depend on the offered mechanism. I show that it is without loss of generality...

Bargaining with Mechanisms

By Marcin Pęski

American Economic Review, June 2022

Two players bargain over a single indivisible good and a transfer, with one-sided incomplete information about preferences. Both players can offer arbitrary mechanisms to determine the allocation. We show that there is a unique perfect Bayesian equilibriu...

Robust Predictions in Coasian Bargaining

By Heng Liu

American Economic Review: Insights, June 2022

This paper studies robust predictions when players may have additional information in an otherwise standard seller-offer bargaining with private values. Players' extra information gives rise to higher-order uncertainties about the underlying surplus. We s...

Assortative Matching at the Top of the Distribution: Evidence from the World's Most Exclusive Marriage Market

By Marc Goñi

American Economic Journal: Applied Economics, July 2022

Using novel data on peerage marriages in Britain, I find that low search costs and marriage-market segregation can generate sorting. Peers courted in the London Season, a matching technology introducing aristocratic bachelors to debutantes. When Queen Vic...

Belief Distortions and Macroeconomic Fluctuations

By Francesco Bianchi, Sydney C. Ludvigson, and Sai Ma

American Economic Review, July 2022

This paper combines a data-rich environment with a machine learning algorithm to provide new estimates of time-varying systematic expectational errors ("belief distortions") embedded in survey responses. We find sizable distortions even for professional f...

Monetary Policy with Opinionated Markets

By Ricardo J. Caballero and Alp Simsek

American Economic Review, July 2022

We build a model in which the Fed and the market disagree about future aggregate demand. The market anticipates monetary policy "mistakes," which affect current demand and induce the Fed to partially accommodate the market's view. The Fed expects to imple...

Health, Inequality, and Economic Development

By Angus Deaton

Journal of Economic Literature, March 2003

I discuss mechanisms linking health and inequality and review evidence for effects of income inequality on aggregate and individual mortality, over time and over space. I conclude that there is no direct link. Correlations come from factors other than inc...

Learning by Sharing: Monetary Policy and Common Knowledge

By Alexandre N. Kohlhas

American Economic Journal: Macroeconomics, July 2022

A common view states that central bank releases decrease central banks' own information about the economy and are harmful if about inefficient disturbances, such as cost-push shocks. This paper shows how neither is true in a microfounded macroeconomic mod...

Review of The Ordinary Business of Life by Backhouse

By Samuel Brittan

Journal of Economic Literature, March 2003

Roger Backhouse's book The Ordinary Business of Life is a comprehensive history of economic thought, from the ancient Greeks to the present day. It will be useful both to specialist economists and to people with a smattering of economic ideas who...

Platform Governance

By Tat-How Teh

American Economic Journal: Microeconomics, August 2022

Platforms that intermediate trades—such as Amazon, Airbnb, and eBay—play a regulatory role in deciding how to govern the marketplaces they create. We propose a framework to analyze a platform's nonprice governance design and its incentive to act in a ...

Trust and Promises over Time

By Florian Ederer and Frédéric Schneider

American Economic Journal: Microeconomics, August 2022

Using a large-scale hybrid laboratory and online trust experiment with and without preplay communication, we investigate how the passage of time affects trust. Communication (predominantly through promises) raises cooperation, trust, and trustworthiness b...

Strategic Teaching and Learning in Games

By Burkhard C. Schipper

American Economic Journal: Microeconomics, August 2022

We show there is no uncoupled learning heuristic leading to Nash equilibrium in all finite games that a player has an incentive to adopt, that would be evolutionary stable, or that could "learn itself." Rather, a player has an incentive to strategically t...

Learning in Games and the Interpretation of Natural Experiments

By Drew Fudenberg and David K. Levine

American Economic Journal: Microeconomics, August 2022

We show that the treatment effect estimated by standard methods such as regression discontinuity analysis or difference-in-differences may contain a transient "learning effect" that is entangled with the long-term effect of the treatment. This learning ef...

Waiting to Choose: The Role of Deliberation in Intertemporal Choice

By Alex Imas, Michael A. Kuhn, and Vera Mironova

American Economic Journal: Microeconomics, August 2022

We study the impact of deliberation on intertemporal choices. Using multiple experiments, including a field study in the Democratic Republic of the Congo, we show that the introduction of waiting periods—a policy that temporally separates information ab...

Acquisition, Aggregation, and Sharing of Information in Sequential-Move Aggregative Games

By Eray Cumbul

American Economic Journal: Microeconomics, August 2022

We study quadratic payoff common-value sequential-move aggregative games with signaling. Applications include Stackelberg quantity-setting, public good contribution, common resource, gas emission, and manufacturer-retailer games. Whereas efficient aggrega...

Investment and Information Acquisition

By Dimitri Migrow and Sergei Severinov

American Economic Journal: Microeconomics, August 2022

We study the interaction between productive investment and persuasion activities in a principal–agent setting with strategic disclosure. In an attempt to persuade the principal, the agent diverts substantial resources from productive activities to info...

Attention Oligopoly

By Andrea Prat and Tommaso Valletti

American Economic Journal: Microeconomics, August 2022

We model digital platforms as attention brokers that have proprietary information about their users' product preferences and sell targeted ad space to retail product industries. Retail producers—incumbents or entrants—compete for access to this attent...

Searching Forever After

By Yair Antler and Benjamin Bachi

American Economic Journal: Microeconomics, August 2022

We study a model of two-sided search in which agents' strategic reasoning is coarse. In equilibrium, the most desirable agents behave as if they were fully rational, while for all other agents, coarse reasoning results in overoptimism with regard to their...

Experience Goods and Consumer Search

By Yongmin Chen, Zhuozheng Li, and Tianle Zhang

American Economic Journal: Microeconomics, August 2022

We introduce a search model where products differ in horizontal attributes and unobserved quality ("experience goods"), and firms can establish quality reputation. We show that the inability of consumers to observe quality before purchase significantly ch...