A Road to Efficiency through Communication and Commitment

By Ala Avoyan and João Ramos

American Economic Review, September 2023

We experimentally examine the efficacy of a novel pre-play institution in a well-known coordination game—the minimum-effort game—in which coordination failures are robust and persistent phenomena. This new institution allows agents to communicate whil...

Decision Theory and Stochastic Growth

By Arthur Robson, Larry Samuelson, and Jakub Steiner

American Economic Review: Insights, September 2023

This paper examines connections between stochastic growth and decision problems. We use tools from the theory of large deviations to show that wishful thinking decision problems are equivalent to utility maximization problems, both of which are equivalent...

Making Our Neighborhoods, Making Our Selves: A Review Essay

By Dionissi Aliprantis

Journal of Economic Literature, September 2023

This essay reviews Making Our Neighborhoods, Making Our Selves, in which George C. Galster provides an overview of the literatures on neighborhood formation and neighborhood effects. I see two clear ways that Making Our Neighborhoods w...

Intrinsic Information Preferences and Skewness

By Yusufcan Masatlioglu, Yeşim Orhun, and Collin Raymond

American Economic Review, October 2023

We examine whether people have an intrinsic preference for negatively skewed or positively skewed information structures and how these preferences relate to intrinsic preferences for informativeness. The results from lab experiments show a strong intrinsi...

Immigration, Crime, and Crime (Mis)Perceptions

By Nicolás Ajzenman, Patricio Dominguez, and Raimundo Undurraga

American Economic Journal: Applied Economics, October 2023

This paper studies the effects of immigration on crime and crime perceptions in Chile, where the foreign-born population tripled in less than ten years. We document null effects of immigration on crime but positive and significant effects on crime-related...

Coordination and Bandwagon Effects: How Past Rankings Shape the Behavior of Voters and Candidates

By Riako Granzier, Vincent Pons, and Clemence Tricaud

American Economic Journal: Applied Economics, October 2023

Candidates' placements in polls and past elections can be powerful coordination devices for parties and voters. Using a regression discontinuity design in French two-round elections, we show that candidates who place first in the first round are more like...

Information Dynamics and Macro Fluctuations

By Kyriakos Chousakos, Gary Gorton, and Guillermo Ordoñez

American Economic Journal: Macroeconomics, October 2023

The amount of information produced about firms' productivities and about the quality of collateral backing their loans varies over time. These information dynamics determine the evolution of credit, output and productivity, which feeds back into incentive...

Monitor Reputation and Transparency

By Iván Marinovic and Martin Szydlowski

American Economic Journal: Microeconomics, November 2023

We study the disclosure policy of a regulator overseeing a monitor with reputation concerns. The monitor faces a manager, who chooses how much to manipulate based on the monitor's reputation. Reputational incentives are strongest for intermediate reputati...

Slope Takers in Anonymous Markets

By Daniel Quint and Marek Weretka

American Economic Journal: Microeconomics, November 2023

We present a learning-based selection argument for Linear Bayesian Nash equilibrium in a Walrasian auction. Endowments vary stochastically; traders model residual supply as linear, estimate its slope from past trade data, and periodically update these est...

A Model of Sequential Crisis Management

By Fei Li and Jidong Zhou

American Economic Journal: Microeconomics, November 2023

We propose a model of how multiple societies respond to a common crisis. A government faces a "damned-either-way" policymaking dilemma: aggressive intervention contains the crisis, but the resulting good outcome makes people skeptical about the costly res...

Information and Spillovers from Targeting Policy in Peru's Anchoveta Fishery

By Gabriel Englander

American Economic Journal: Economic Policy, November 2023

This paper establishes that a targeted policy backfires because it reveals information about nontargeted units. In the world's largest fishery, the regulator attempts to reduce the harvesting of juvenile fish by temporarily closing areas where the share o...

Herd Design

By Itai Arieli, Ronen Gradwohl, and Rann Smorodinsky

American Economic Review: Insights, December 2023

The classic herding model examines the asymptotic behavior of agents who observe their predecessors' actions as well as a private signal from an exogenous information structure. In this paper, we introduce a self-interested sender into the model and study...

Generative AI for Economic Research: Use Cases and Implications for Economists

By Anton Korinek

Journal of Economic Literature, December 2023

Generative artificial intelligence (AI) has the potential to revolutionize research. I analyze how large language models (LLMs) such as ChatGPT can assist economists by describing dozens of use cases in six areas: ideation and feedback, writing, backgro...

Firm-Level Upgrading in Developing Countries

By Eric Verhoogen

Journal of Economic Literature, December 2023

In principle, firms in developing countries benefit from the fact that advanced technologies and products have already been developed in industrialized countries and can simply be adopted, a process often referred to as industrial upgrading. But for many ...

Competing to Commit: Markets with Rational Inattention

By Carlo M. Cusumano, Francesco Fabbri, and Ferdinand Pieroth

American Economic Review, January 2024

Two homogeneous-good firms compete for a consumer's unitary demand. The consumer is rationally inattentive and pays entropy costs to process information about firms' offers. Compared to a collusion benchmark, competition produces two effects. As in standa...

The Immigrant Next Door

By Leonardo Bursztyn, Thomas Chaney, Tarek A. Hassan, and Aakaash Rao

American Economic Review, February 2024

We study how decades-long exposure to individuals of a given foreign descent shapes natives' attitudes and behavior toward that group. Using individualized donations data, we show that long-term exposure to a given foreign ancestry leads to more generous ...

Prolonged Learning and Hasty Stopping: The Wald Problem with Ambiguity

By Sarah Auster, Yeon-Koo Che, and Konrad Mierendorff

American Economic Review, February 2024

This paper studies sequential information acquisition by an ambiguity-averse decision-maker (DM), who decides how long to collect information before taking an irreversible action. The agent optimizes against the worst-case belief and updates prior by prio...

Predicting Cooperation with Learning Models

By Drew Fudenberg and Gustav Karreskog Rehbinder

American Economic Journal: Microeconomics, February 2024

We use simulations of a simple learning model to predict cooperation rates in the experimental play of the indefinitely repeated prisoner's dilemma. We suppose that learning and the game parameters only influence play in the initial round of each supergam...

Social Connectedness and Information Markets

By Rachel Kranton and David McAdams

American Economic Journal: Microeconomics, February 2024

This paper investigates information quality in a simple model of socially connected information markets. Suppliers' payoffs derive from the fraction of consumers who see their stories. Consumers prefer to share and act only on high-quality information. Qu...

Exit Dilemma: The Role of Private Learning on Firm Survival

By Doruk Cetemen and Chiara Margaria

American Economic Journal: Microeconomics, February 2024

We study the exit of duopolists from a stochastically declining market. Firms privately learn about the market conditions from observing the stochastic arrival of customers, while exit decisions are publicly observed. A larger firm is more likely to have ...