The Doors of Perception: Theory and Evidence of Frame-Dependent Rationalizability

By Gary Charness and Alessandro Sontuoso

American Economic Journal: Microeconomics, May 2023

We investigate how strategic behavior is affected by the set of notions (frames) used when thinking about the game. In our games the action set consists of visual objects: each player must privately choose one, trying to match the counterpart's choice. We...

Biased Beliefs in Search Markets

By Tobias Gamp and Daniel Krähmer

American Economic Journal: Microeconomics, May 2023

We study the implications of biased consumer beliefs for search market outcomes in the seminal framework due to Diamond (1971). Biased consumers base their search strategy on a belief function that specifies for any (true) distribution of utility offers i...

At the Helm, Kirk or Spock? The Pros and Cons of Charismatic Leadership

By Benjamin E. Hermalin

American Economic Journal: Microeconomics, May 2023

Charismatic leaders are often desired. At the same time, experience, especially with demagogues, as well as social science studies, raise doubts about such leaders. This paper offers explanations for charismatic leadership's "mixed report card." It offers...

Learning by Choosing: Career Concerns with Observable Actions

By T. Tony Ke, Christopher Li, and Mikhail Safronov

American Economic Journal: Microeconomics, May 2023

This paper explores potential inefficiencies of incomplete contracts in a dynamic career concerns context. In a firm-worker relationship, the worker performs public tasks that have trade-offs between productivity and informativeness. We show that the firs...

The Cost of Information: The Case of Constant Marginal Costs

By Luciano Pomatto, Philipp Strack, and Omer Tamuz

American Economic Review, May 2023

We develop an axiomatic theory of information acquisition that captures the idea of constant marginal costs in information production: the cost of generating two independent signals is the sum of their costs, and generating a signal with probability half ...

Optimal Income Taxation with Spillovers from Employer Learning

By Ashley C. Craig

American Economic Journal: Economic Policy, May 2023

I study optimal income taxation when human capital investment is imperfectly observable by employers. In the model, Bayesian inference about worker productivity compresses the wage distribution, lowering the private return to human capital investment. An ...

Using Grouped Data to Estimate Revenue Heterogeneity in Online Advertising Auctions

By Nils A. Breitmar, Matthew Harding, and Carlos Lamarche

AEA Papers and Proceedings, May 2023

This paper estimates the heterogeneous impact of advertising networks from the perspective of a publisher who has access to limited information provided by the advertising platform in the form of grouped data over different auctions and users. The models ...

News Media, Inflation, and Sentiment

By Alistair Macaulay and Wenting Song

AEA Papers and Proceedings, May 2023

We study the relationship between media portrayals of inflation and consumer sentiment. Using tools from natural language processing, we uncover two competing narratives in US news coverage of inflation: the first relates inflation to financial variables,...

Bank Loan Monitoring, Distance, and Delegation

By Amanda Rae Heitz, Christopher Martin, and Alexander Ufier

AEA Papers and Proceedings, May 2023

Using a proprietary transaction-level database of nearly 30,000 multiple-draw construction loans and their on-site inspection reports, we empirically examine the relationship between geographic distance and bank information acquisition over the course of ...

Stereotypes about Successful Entrepreneurs

By Victor Lyonnet and Léa Stern

AEA Papers and Proceedings, May 2023

What comes to mind when thinking about a successful entrepreneur? Belief formation models suggest that what comes to mind is an oversimplified picture of the characteristics of successful entrepreneurs—that is, stereotypes about successful entrepreneurs...

Privacy and the Value of Data

By Simone Galperti and Jacopo Perego

AEA Papers and Proceedings, May 2023

How does protecting consumers' privacy affect the value of their personal data? We model an intermediary that uses consumers' data to influence prices set by a seller. When privacy is protected, consumers choose whether to disclose their data to the inter...

Consumer Control and Privacy Policies

By S. Nageeb Ali, Greg Lewis, and Shoshana Vasserman

AEA Papers and Proceedings, May 2023

Firms use consumer data to price discriminate. In response, policymakers have pushed for consumers to have control over their data so that they choose what to share and with whom. We model consumer control and its effect on markets through the lens of vol...

The Role of Housing Platforms in Facilitating Trading between Firms

By Xuequan Elsie Peng and Maisy Wong

AEA Papers and Proceedings, May 2023

We study the 2013 merger of three multiple listings services (MLSes) in Florida, the primary platforms where properties are transacted. We use MLS listings data from 2009 to 2019 to trace out the effects of the merger on the likelihood that listings by br...

Self-Preferencing at Amazon: Evidence from Search Rankings

By Chiara Farronato, Andrey Fradkin, and Alexander MacKay

AEA Papers and Proceedings, May 2023

We study whether Amazon engages in self-preferencing on its marketplace by favoring its own brands (e.g., Amazon Basics) in search. To address this question, we collect new micro-level consumer search data using a custom browser extension installed by a p...

Matching and Network Effects in Ride-Hailing

By Juan Camilo Castillo and Shreya Mathur

AEA Papers and Proceedings, May 2023

A recent empirical literature models search and matching frictions by means of a reduced-form matching function. An alternative approach is to simulate the matching process directly. In this paper, we follow the latter approach to model matching in ride-h...

Blockchain Private Pools and Price Discovery

By Agostino Capponi, Ruizhe Jia, and Ye Wang

AEA Papers and Proceedings, May 2023

In this paper, we examine the balance between allocative efficiency and price discovery in blockchain-based finance. Our analysis reveals that the use of private pools, while improving blockspace allocation efficiency, negatively impacts price discovery. ...

Risk Rating without Information Provision

By Philip Mulder and Carolyn Kousky

AEA Papers and Proceedings, May 2023

We describe the initial impact of risk-based flood insurance pricing in the United States. More than two-thirds of National Flood Insurance Program policyholders are paying higher premiums under "Risk Rating 2.0" (RR2.0), and increases will continue in th...

Wildfire Insurance, Information, and Self-Protection

By Judson Boomhower, Meredith Fowlie, and Andrew J. Plantinga

AEA Papers and Proceedings, May 2023

Like other climate-related disasters, wildfires are intensifying. Property owners can reduce their vulnerability to wildfire losses but are not well informed about the costs and benefits of available self-protection investments. Technological advances mea...

(Incorrect) Perceived Returns and Strategic Behavior among Talented Low-Income College Graduates

By Jorge M. Agüero, Francisco Galarza, and Gustavo Yamada

AEA Papers and Proceedings, May 2023

Job applicants use resumes to send signals to potential employers. Applicants are free to select the items that go in their resumes and are expected to include signals they perceive will help them achieve their goals and avoid those that they anticipate c...

Perceptions of Gender Diversity in Occupations

By Jeffrey Flory, Andreas Leibbrandt, Olga Shurchkov, Olga Stoddard, and Alva Taylor

AEA Papers and Proceedings, May 2023

We design a survey experiment to investigate the effect of intervention with diversity on preferences for diverse outcomes. First, subjects report their perceptions of the archetypical occupations boss, professor, nurse, and clerk, rating boss/professor a...