Competitive Information Disclosure to an Auctioneer

By Stefan Terstiege and Cédric Wasser

American Economic Journal: Microeconomics, August 2022

We analyze how voluntary disclosure of information by bidders affects the outcome of optimally designed auctions. In a single-object auction environment, we assume that before the revenue-maximizing auctioneer designs the auction, bidders noncooperatively...

Dynamic Competition and Arbitrage in Electricity Markets: The Role of Financial Players

By Ignacia Mercadal

American Economic Journal: Microeconomics, August 2022

I study the effects of financial players who trade alongside physical buyers and sellers in electricity markets. Using detailed firm-level data, I examine physical and financial firms' responses to regulation that exogenously increased financial trading. ...

Belief Elicitation When More than Money Matters: Controlling for "Control"

By Jean-Pierre Benoît, Juan Dubra, and Giorgia Romagnoli

American Economic Journal: Microeconomics, August 2022

Elicitation mechanisms typically presume only money enters utility functions. However, nonmonetary objectives are confounders. In particular, psychologists argue people favor bets where ability is involved over equivalent random bets—a preference for co...

Sentiment and Speculation in a Market with Heterogeneous Beliefs

By Ian W. R. Martin and Dimitris Papadimitriou

American Economic Review, August 2022

We present a model featuring risk-averse investors with heterogeneous beliefs. Individuals who are correct in hindsight—whether through luck or judgment—get rich, so sentiment is bullish following good news and bearish following bad news. Sentiment ma...

All Eyes on Them: A Field Experiment on Citizen Oversight and Electoral Integrity

By Natalia Garbiras-Díaz and Mateo Montenegro

American Economic Review, August 2022

Can information and communication technologies help citizens monitor their elections? We analyze a large-scale field experiment designed to answer this question in Colombia. We leveraged Facebook advertisements sent to over 4 million potential voters to e...

Overreaction and Diagnostic Expectations in Macroeconomics

By Pedro Bordalo, Nicola Gennaioli, and Andrei Shleifer

Journal of Economic Perspectives, Summer 2022

We present the case for the centrality of overreaction in expectations for addressing important challenges in finance and macroeconomics. First, non-rational expectations by market participants can be measured and modeled in ways that address some of th...

JEL Classification System

Journal of Economic Literature, June 2003

Belief Elicitation and Behavioral Incentive Compatibility

By David Danz, Lise Vesterlund, and Alistair J. Wilson

American Economic Review, September 2022

Subjective beliefs are crucial for economic inference, yet behavior can challenge the elicitation. We propose that belief elicitation should be incentive compatible not only theoretically but also in a de facto behavioral sense. To demonstrate, we show th...

The Rise and Fall of Local Elections in China

By Monica Martinez-Bravo, Gerard Padró i Miquel, Nancy Qian, and Yang Yao

American Economic Review, September 2022

We posit that autocrats introduce local elections when their bureaucratic capacity is low. Local elections exploit citizens' informational advantage in keeping local officials accountable, but they also weaken vertical control. As bureaucratic capacity ...

Experimental Cost of Information

By Tommaso Denti, Massimo Marinacci, and Aldo Rustichini

American Economic Review, September 2022

We relate two main representations of the cost of acquiring information: a cost that depends on the experiment performed, as in statistical decision theory, and a cost that depends on the distribution of posterior beliefs, as in applications of rational i...

Optimal Information Disclosure in Classic Auctions

By Dirk Bergemann, Tibor Heumann, Stephen Morris, Constantine Sorokin, and Eyal Winter

American Economic Review: Insights, September 2022

We characterize the revenue-maximizing information structure in the second-price auction. The seller faces a trade-off: more information improves the efficiency of the allocation but creates higher information rents for bidders. The information disclosure...

Belief-Dependent Motivations and Psychological Game Theory

By Pierpaolo Battigalli and Martin Dufwenberg

Journal of Economic Literature, September 2022

The mathematical framework of psychological game theory is useful for describing many forms of motivation where preferences depend directly on one's own or others' beliefs. It allows for incorporating, for example, emotions, reciprocity, image concerns, a...

Persistent Overconfidence and Biased Memory: Evidence from Managers

By David Huffman, Collin Raymond, and Julia Shvets

American Economic Review, October 2022

A long-standing puzzle is how overconfidence can persist in settings characterized by repeated feedback. This paper studies managers who participate repeatedly in a high-powered tournament incentive system, learning relative performance each time. Using r...

Fake News, Voter Overconfidence, and the Quality of Democratic Choice

By Melis Kartal and Jean-Robert Tyran

American Economic Review, October 2022

This paper studies, theoretically and experimentally, the effects of overconfidence and fake news on information aggregation and the quality of democratic choice in a common-interest setting. We theoretically show that overconfidence exacerbates the adver...

Learning on the Job and the Cost of Business Cycles

By Karl Walentin and Andreas Westermark

American Economic Journal: Macroeconomics, October 2022

We show that business cycles reduce welfare through a decrease in the average level of employment in a labor market search model with learning on the job and skill loss during unemployment. Empirically, unemployment and the job-finding rate are negatively...

Persistent Polarizing Effects of Persuasion: Experimental Evidence from Turkey

By Ceren Baysan

American Economic Review, November 2022

I evaluate randomly varied neighborhood exposure to information campaigns regarding either executive performance, or increases in executive power, prior to a Turkish referendum on weakening checks and balances on the executive. The campaigns increased vot...

Evaluating Deliberative Competence: A Simple Method with an Application to Financial Choice

By Sandro Ambuehl, B. Douglas Bernheim, and Annamaria Lusardi

American Economic Review, November 2022

We examine methods for evaluating interventions designed to improve decision-making quality when people misunderstand the consequences of their choices. In an experiment involving financial education, conventional outcome metrics (financial literacy and d...

Transition Dynamics in Equilibrium Search

By Ş. Nuray Akın and Brennan C. Platt

American Economic Journal: Microeconomics, November 2022

We study a dynamic equilibrium search model where sellers differ in their urgency to liquidate an asset. Buyers strategically make price offers without knowing a given seller's urgency. We study liquidity and price dynamics on the transition path after an...

Communication and Cooperation in Markets

By S. Nageeb Ali and David A. Miller

American Economic Journal: Microeconomics, November 2022

Many markets rely on traders truthfully communicating who has cheated in the past and ostracizing those traders from future trade. This paper investigates when truthful communication is incentive compatible. We find that if each side has a myopic incentiv...

Too Much Data: Prices and Inefficiencies in Data Markets

By Daron Acemoglu, Ali Makhdoumi, Azarakhsh Malekian, and Asu Ozdaglar

American Economic Journal: Microeconomics, November 2022

When a user shares her data with online platforms, she reveals information about others. In such a setting, externalities depress the price of data because once a user's information is leaked by others, she has less reason to protect her data and privacy....