A Theory of Stability in Matching with Incomplete Information

By Yi-Chun Chen and Gaoji Hu

American Economic Journal: Microeconomics, February 2023

We provide a framework for studying two-sided matching markets with incomplete information. The framework accommodates two-sided incomplete information as well as heterogeneous information among the agents. We propose a notion called stability for a marke...

An Information Theory of Efficient Differential Treatment

By Emil Temnyalov

American Economic Journal: Microeconomics, February 2023

When are differential treatment policies—such as preferential treatment, affirmative action, and gender equity policies—justified by efficiency concerns? I propose a nonparametric assignment model where a policymaker assigns agents to different treatm...

Dynamic Information Design under Constrained Communication Rules

By Caio Lorecchio and Daniel Monte

American Economic Journal: Microeconomics, February 2023

An information designer wishes to persuade agents to invest in a project of unknown quality. To do so, she must induce investment and collect feedback from these investments. Motivated by data regulations and simplicity concerns, our designer faces commun...

Sequential Learning

By Yair Antler, Daniel Bird, and Santiago Oliveros

American Economic Journal: Microeconomics, February 2023

We develop a model in which two players sequentially and publicly examine a project. In our model the player who moves first can fabricate evidence to influence the second mover, which creates a moral hazard problem. We find that early strategic uncertain...

When Is a Contrarian Adviser Optimal?

By Robert Evans and Sönje Reiche

American Economic Journal: Microeconomics, February 2023

We compare contrarian to conformist advice, a contrarian expert being one whose preference bias is against the decision-maker's prior optimal decision. Optimality of an expert depends on characteristics of prior information and learning. If either the exp...

Debunking Rumors in Networks

By Luca P. Merlino, Paolo Pin, and Nicole Tabasso

American Economic Journal: Microeconomics, February 2023

We study the diffusion of a true and a false message (the rumor) in a social network. Upon hearing a message, individuals may believe it, disbelieve it, or debunk it through costly verification. Whenever the truth survives in steady state, so does the rum...

Censorship and Reputation

By Daniel N. Hauser

American Economic Journal: Microeconomics, February 2023

I study how a firm manages its reputation by both investing in the quality of its product and censoring, hiding bad news from consumers. Without censorship, the threat of bad news provides strong incentives for investment. I highlight discontinuities in t...

Ten Isn't Large! Group Size and Coordination in a Large-Scale Experiment

By Jasmina Arifovic, Cars Hommes, Anita Kopányi-Peuker, and Isabelle Salle

American Economic Journal: Microeconomics, February 2023

We provide experimental evidence on coordination within large groups that could proxy the atomistic nature of real-world markets. We use a bank run game where the two pure-strategy equilibria can be ranked by payoff and risk dominance and a sequence of pu...

Moral Hazard and Efficiency in a Frictional Market

By Guillaume Roger and Benoît Julien

American Economic Journal: Microeconomics, February 2023

Principals seek to trade with homogeneous agents by posting incentive contracts, which direct their search. Search and moral hazard interact in equilibrium. If using transfers to compensate agents failing to contract, the equilibrium allocation is always ...

Celebrating Ned

By Axel Leijonhufvud

Journal of Economic Literature, September 2004

Robust Information Transmission

By Francesc Dilmé

American Economic Review: Insights, March 2023

This paper investigates robust information transmission between a sender and a receiver in the Crawford and Sobel (1982) model. We characterize behavior that remains equilibrium behavior independently of the form of a small communication cost. Under stand...

Designing Information Provision Experiments

By Ingar Haaland, Christopher Roth, and Johannes Wohlfart

Journal of Economic Literature, March 2023

Information provision experiments allow researchers to test economic theories and answer policy-relevant questions by varying the information set available to respondents. We survey the emerging literature using information provision experiments in econom...

Rational Inattention: A Review

By Bartosz Maćkowiak, Filip Matějka, and Mirko Wiederholt

Journal of Economic Literature, March 2023

We review the recent literature on rational inattention, identify the main theoretical mechanisms, and explain how it helps us understand a variety of phenomena across fields of economics. The theory of rational inattention assumes that agents cannot pr...

Tax Refund Uncertainty: Evidence and Welfare Implications

By Sydnee Caldwell, Scott Nelson, and Daniel Waldinger

American Economic Journal: Applied Economics, April 2023

Transfers paid through annual tax refunds are a large but uncertain source of income for poor households. We document that low-income tax filers have substantial subjective uncertainty about these refunds. We investigate the determinants and consequences ...

Why Do Households Leave School Value Added on the Table? The Roles of Information and Preferences

By Robert Ainsworth, Rajeev Dehejia, Cristian Pop-Eleches, and Miguel Urquiola

American Economic Review, April 2023

Romanian households could choose schools with one standard deviation worth of additional value added. Why do households leave value added "on the table"? We study two possibilities: (i) information and (ii) preferences for other school traits. In an exper...

State-Dependent Attention and Pricing Decisions

By Javier Turen

American Economic Journal: Macroeconomics, April 2023

This paper studies price-setting decisions under rational inattention. Prices are set by tracking an unobserved target whose distribution is also unknown. Information acquisition is dynamic and fully flexible since, given information acquired previously, ...

Persistent Monetary Non-neutrality in an Estimated Menu Cost Model with Partially Costly Information

By Marco Bonomo, Carlos Carvalho, René Garcia, Vivian Malta, and Rodolfo Rigato

American Economic Journal: Macroeconomics, April 2023

We propose a model that reconciles microeconomic evidence of frequent and large price changes with sizable monetary non-neutrality. Firms incur separate lump-sum costs to change prices and to gather and process some information about marginal costs. Addit...

Dynamic Privacy Choices

By Shota Ichihashi

American Economic Journal: Microeconomics, May 2023

I study a dynamic model of consumer privacy and platform data collection. In each period consumers choose their level of platform activity. Greater activity generates more information about the consumer, thereby increasing platform profits. When the platf...

Optimal Nonlinear Pricing with Data-Sensitive Consumers

By Daniel Krähmer and Roland Strausz

American Economic Journal: Microeconomics, May 2023

We study monopolistic screening when some consumers are data sensitive and incur a privacy cost if their purchase reveals information to the monopolist. The monopolist discriminates between data-sensitive and classical consumers using privacy mechanisms t...

The Good, the Bad, and the Complex: Product Design with Imperfect Information

By Vladimir Asriyan, Dana Foarta, and Victoria Vanasco

American Economic Journal: Microeconomics, May 2023

We study the joint determination of product quality and complexity. In our model complexity affects how difficult it is for an agent to acquire information about product quality. An agent can accept or reject a product proposed by a designer, who can affe...