Persuasion: The Art of Changing Worldviews

By Simone Galperti

American Economic Review, March 2019

Persuaders often face the task of changing their listeners' worldview, which may involve conveying evidence that disconfirms that view. It has been shown, however, that people are often reluctant to change their worldviews. These aspects of persuasion can...

Digital Economics

By Avi Goldfarb and Catherine Tucker

Journal of Economic Literature, March 2019

Digital technology is the representation of information in bits. This technology has reduced the cost of storage, computation, and transmission of data. Research on digital economics examines whether and how digital technology changes economic activity. I...

Information Design: A Unified Perspective

By Dirk Bergemann and Stephen Morris

Journal of Economic Literature, March 2019

Given a game with uncertain payoffs, information design analyzes the extent to which the provision of information alone can influence the behavior of the players. Information design has a literal interpretation, under which there is a real information des...

The Devil Is in the Details: Implications of Samuel Bowles's The Moral Economy for Economics and Policy Research

By Rachel Kranton

Journal of Economic Literature, March 2019

All economists should buy and read The Moral Economy by Samuel Bowles. The book challenges basic premises of economic theory and questions policies based on monetary incentives. Incentives not only crowd out intrinsic motivations, they erode the ...

Selling to Advised Buyers

By Andrey Malenko and Anton Tsoy

American Economic Review, April 2019

In many cases, buyers are not informed about their valuations and rely on experts, who are informed but biased for overbidding. We study auction design when selling to such "advised buyers." We show that a canonical dynamic auction, the English auction, h...

Delegated Expertise, Authority, and Communication

By Inga Deimen and Dezső Szalay

American Economic Review, April 2019

A decision maker needs to reach a decision and relies on an expert to acquire information. Ideal actions of expert and decision maker are partially aligned and the expert chooses what to learn about each. The decision maker can either get advice from the ...

Strategic Ignorance in Sequential Procurement

By Silvana Krasteva and Huseyin Yildirim

American Economic Journal: Microeconomics, May 2019

Should a buyer approach sellers of complementary goods informed or uninformed of her private valuations, and if informed, in which sequence? In this paper, we show that an informed buyer would start with the high-value seller to minimize future holdup. In...

Cream Skimming and Information Design in Matching Markets

By Gleb Romanyuk and Alex Smolin

American Economic Journal: Microeconomics, May 2019

Short-lived buyers arrive to a platform over time and randomly match with sellers. The sellers stay at the platform and decide whether to accept incoming requests. The platform designs what buyer information the sellers observe before deciding to form a m...

Who Benefits from Information Disclosure? The Case of Retail Gasoline

By Fernando Luco

American Economic Journal: Microeconomics, May 2019

How does online price disclosure affect competition when both consumers and firms can use the disclosed information? This paper addresses this question exploiting the sequential implementation of an online price-disclosure policy in the Chilean retail gas...

Revenue Guarantee Equivalence

By Dirk Bergemann, Benjamin Brooks, and Stephen Morris

American Economic Review, May 2019

We revisit the revenue comparison of standard auction formats, including first-price, second-price, and English auctions. We rank auctions according to their revenue guarantees, i.e., the greatest lower bound of revenue across all informational environm...

Does Simple Information Provision Lead to More Diverse Classrooms? Evidence from a Field Experiment on Undergraduate Economics

By Amanda Bayer, Syon P. Bhanot, and Fernando Lozano

AEA Papers and Proceedings, May 2019

This paper reports the results of a field experiment involving 2,710 students across nine US colleges, in which faculty provided incoming women and URM students with information about economics. We randomly assign students to one of three conditions: a co...

Information and Communication in Organizations

By Inga Deimen and Dezsö Szalay

AEA Papers and Proceedings, May 2019

We study a constrained information design problem in an organization. A designer chooses the information structure. A sender with preferences different from the decision-maker observes and processes the information before he communicates with the decision...

Optimal Information Design for Search Goods

By Michael Choi, Kyungmin Kim, and Marilyn Pease

AEA Papers and Proceedings, May 2019

We consider a monopoly pricing problem in which a consumer with an uncertain valuation of a search good receives a signal of value before deciding whether to visit the seller. She discovers her true value upon visiting and before purchase. We characterize...

Noisy Memory and Over-Reaction to News

By Rava Azeredo da Silveira and Michael Woodford

AEA Papers and Proceedings, May 2019

We propose a model of optimal decision-making subject to a memory constraint. The constraint is a limit on the complexity of memory measured using Shannon's mutual information, as in models of rational inattention. We show that the model implies that both...

Emotional Tagging and Belief Formation: The Long-Lasting Effects of Experiencing Communism

By Christine Laudenbach, Ulrike Malmendier, and Alexandra Niessen-Ruenzi

AEA Papers and Proceedings, May 2019

Growing evidence in macrofinance suggests long-lasting effects of personally experienced outcomes on beliefs. To understand the underlying mechanism we turn to the neurological foundations of memory formation. We propose that emotional tagging plays a cru...

The Culture of Overconfidence

By V. Bhaskar and Caroline Thomas

American Economic Review: Insights, June 2019

Perceptions of overconfidence can exacerbate the tendency of reputationally concerned leaders to continue bad projects. Reputation concerns alone induce a bias toward inefficient continuation in a leader receiving information privately. When she is overco...

Test Design and Minimum Standards

By Peter M. DeMarzo, Ilan Kremer, and Andrzej Skrzypacz

American Economic Review, June 2019

We analyze test design and certification standards when an uninformed seller has the option to generate and disclose costly information regarding asset quality. We characterize equilibria by a minimum principle: the test and disclosure policy are chosen t...

The Impact of Media Censorship: 1984 or Brave New World?

By Yuyu Chen and David Y. Yang

American Economic Review, June 2019

Media censorship is a hallmark of authoritarian regimes. We conduct a field experiment in China to measure the effects of providing citizens with access to an uncensored internet. We track subjects' media consumption, beliefs regarding the media, econom...

Contractual Managerial Incentives with Stock Price Feedback

By Tse-Chun Lin, Qi Liu, and Bo Sun

American Economic Review, July 2019

We study the effect of financial market frictions on managerial compensation. We embed a market microstructure model into an otherwise standard contracting framework, and analyze optimal pay-for-performance when managers use information they learn from th...

Forward Guidance and Heterogeneous Beliefs

By Philippe Andrade, Gaetano Gaballo, Eric Mengus, and Benoît Mojon

American Economic Journal: Macroeconomics, July 2019

Central banks' announcements that rates are expected to remain low could signal either a weak macroeconomic outlook, which would slow expenditures, or a more accommodative stance, which may stimulate economic activity. We use the Survey of Professional Fo...