Relative Price Dispersion: Evidence and Theory

By Greg Kaplan, Guido Menzio, Leena Rudanko, and Nicholas Trachter

American Economic Journal: Microeconomics, August 2019

Relative price dispersion refers to persistent differences in the price that different retailers set for one particular good relative to the price they set for other goods. Relative price dispersion accounts for 30 percent of the overall variance of price...

Laboratories of Democracy: Policy Experimentation under Decentralization

By Chen Cheng and Christopher Li

American Economic Journal: Microeconomics, August 2019

We develop a model of policy experimentation in which the policy decisions of local and national politicians are driven by career concerns. When politicians' payoffs are convex in their reputation and policymaking is opaque, local politicians experiment b...

Parents' Beliefs about Their Children's Academic Ability: Implications for Educational Investments

By Rebecca Dizon-Ross

American Economic Review, August 2019

Schools worldwide distribute information to parents about their children's academic performance. Do frictions prevent parents, particularly low-income parents, from accessing this information to make decisions? A field experiment in Malawi shows that, at ...

Crises: Equilibrium Shifts and Large Shocks

By Stephen Morris and Muhamet Yildiz

American Economic Review, August 2019

We study the informational events that trigger equilibrium shifts in coordination games with incomplete information. Assuming that the distribution of the changes in fundamentals has fat tails, we show that majority play shifts either if fundamentals reac...

Optimal Dynamic Allocation of Attention

By Yeon-Koo Che and Konrad Mierendorff

American Economic Review, August 2019

We consider a decision maker (DM) who, before taking an action, seeks information by allocating her limited attention dynamically over different news sources that are biased toward alternative actions. Endogenous choice of information generates rich dynam...

A Bridge from Monty Hall to the Hot Hand: The Principle of Restricted Choice

By Joshua B. Miller and Adam Sanjurjo

Journal of Economic Perspectives, Summer 2019

We show how classic conditional probability puzzles, such as the Monty Hall problem, are intimately related to the recently discovered hot hand selection bias. We explain the connection by way of the principle of restricted choice, an intuitive inferentia...

Family Health Behaviors

By Itzik Fadlon and Torben Heien Nielsen

American Economic Review, September 2019

We study how health behaviors are shaped through family spillovers. We leverage administrative data to identify the effects of health shocks on family members' consumption of preventive care and health-related behaviors, constructing counterfactuals for a...

Bayesian Identification: A Theory for State-Dependent Utilities

By Jay Lu

American Economic Review, September 2019

We provide a revealed preference methodology for identifying beliefs and utilities that can vary across states. A notion of comparative informativeness is introduced that is weaker than the standard Blackwell ranking. We show that beliefs and state-depend...

How Efficient Is Dynamic Competition? The Case of Price as Investment

By David Besanko, Ulrich Doraszelski, and Yaroslav Kryukov

American Economic Review, September 2019

We study industries where the price that a firm sets serves as an investment into lower cost or higher demand. We assess the welfare implications of the ensuing competition for the market using analytical and numerical approaches to compare the equilibria...

Honesty via Choice-Matching

By Jakša Cvitanić, Dražen Prelec, Blake Riley, and Benjamin Tereick

American Economic Review: Insights, September 2019

We introduce choice-matching, a class of mechanisms for eliciting honest responses to a multiple choice question (MCQ), as might appear in a market research study, opinion poll, or economics experiment. Under choice-matching, respondents are compensated t...

Does Cheap Talk Affect Market Outcomes? Evidence from eBay

By Daniel W. Elfenbein, Raymond Fisman, and Brian McManus

American Economic Journal: Applied Economics, October 2019

We study cheap talk by firms and responses by their consumers, focusing on unverifiable promises of charitable donations on eBay during 2005–2006. Cheap talk listings have lower sales probabilities but sell at higher prices when successful. The negative...

The Dynamics of Discrimination: Theory and Evidence

By J. Aislinn Bohren, Alex Imas, and Michael Rosenberg

American Economic Review, October 2019

We model the dynamics of discrimination and show how its evolution can identify the underlying source. We test these theoretical predictions in a field experiment on a large online platform where users post content that is evaluated by other users on the ...

Quantifying Information and Uncertainty

By Alexander Frankel and Emir Kamenica

American Economic Review, October 2019

We examine ways to measure the amount of information generated by a piece of news and the amount of uncertainty implicit in a given belief. Say a measure of information is valid if it corresponds to the value of news in some decision problem. Say a measur...

Information Design

By Ina Taneva

American Economic Journal: Microeconomics, November 2019

A designer commits to a signal distribution that is informative about a payoff-relevant state. Conditional upon the privately observed signals, agents take actions that affect their payoffs as well as those of the designer. We show how to derive the (desi...

Learning Theory and Heterogeneous Play in a Signaling-Game Experiment

By Drew Fudenberg and Emanuel Vespa

American Economic Journal: Microeconomics, November 2019

We study the effect of how types are assigned to participants in a signaling-game experiment. The sender has two actions, In and Out, and two types. In one treatment, types are i.i.d. in every period, and senders gather experience with both types. In the ...

Incentivized Resume Rating: Eliciting Employer Preferences without Deception

By Judd B. Kessler, Corinne Low, and Colin D. Sullivan

American Economic Review, November 2019

We introduce a new experimental paradigm to evaluate employer preferences, called incentivized resume rating (IRR). Employers evaluate resumes they know to be hypothetical in order to be matched with real job seekers, preserving incentives while avoiding ...

Informational Autocrats

[Symposium: Modern Populism]

By Sergei Guriev and Daniel Treisman

Journal of Economic Perspectives, Fall 2019

In recent decades, dictatorships based on mass repression have largely given way to a new model based on the manipulation of information. Instead of terrorizing citizens into submission, "informational autocrats" artificially boost their popularity by c...

New Evidence on Information Disclosure through Restaurant Hygiene Grading

By Daniel E. Ho, Zoe C. Ashwood, and Cassandra Handan-Nader

American Economic Journal: Economic Policy, November 2019

The case of restaurant hygiene grading occupies a central role in information disclosure scholarship. Comparing Los Angeles, which enacted grading in 1998, with California from 1995–1999, Jin and Leslie (2003) found that grading reduced foodborne illnes...

New Evidence on Information Disclosure through Restaurant Hygiene Grading: Reply

By Ginger Zhe Jin and Phillip Leslie

American Economic Journal: Economic Policy, November 2019

Ho, Ashwood, and Handan-Nader (forthcoming) replicates table VI of Jin and Leslie (2003) but questions its research design. Robustness checks support our original conclusion—foodborne hospitalizations, as defined in JL, declined in Los Angeles County (L...

Discriminating against Captive Customers

By Mark Armstrong and John Vickers

American Economic Review: Insights, December 2019

We analyze a market where some consumers only consider buying from a specific seller while other consumers choose the best deal from several sellers. When sellers are able to discriminate against their captive customers, we show that discrimination harms ...