An Event Long-Short Index: Theory and Applications

By Raymond Fisman and Eric Zitzewitz

American Economic Review: Insights, December 2019

We propose a stock market-based measure to capture initial beliefs about an event's effect on firm profits, which may be used to measure whether initial expectations are subsequently realized. Our "Event Long-Short Index" is the difference in market-capit...

Diffusion Games

By Evan Sadler

American Economic Review, January 2020

Behaviors and information often spread via person-to-person diffusion. This paper highlights how diffusion processes can facilitate coordination. I study contagion in a discrete network with Bayesian players. In addition to characterizing the extent and r...

Rational Inattention in Hiring Decisions

By Sushant Acharya and Shu Lin Wee

American Economic Journal: Macroeconomics, January 2020

We provide an information-based theory of matching efficiency fluctuations. Rationally inattentive firms have limited capacity to process information and cannot perfectly identify suitable applicants. During recessions, higher losses from hiring unsuitabl...

Heterogeneity, Inattention, and Bayesian Updates

By Raffaella Giacomini, Vasiliki Skreta, and Javier Turen

American Economic Journal: Macroeconomics, January 2020

We formulate a theory of expectations updating that fits the dynamics of accuracy and disagreement in a new survey of professional forecasters. We document new stylized facts, including the puzzling persistence of disagreement as uncertainty resolves. Our...

The Dynamics of Motivated Beliefs

By Florian Zimmermann

American Economic Review, February 2020

A key question in the literature on motivated reasoning and self-deception is how motivated beliefs are sustained in the presence of feedback. In this paper, we explore dynamic motivated belief patterns after feedback. We establish that positive feedback ...

Bargaining and News

By Brendan Daley and Brett Green

American Economic Review, February 2020

We study a bargaining model in which a buyer makes frequent offers to a privately informed seller, while gradually learning about the seller's type from "news." We show that the buyer's ability to leverage this information to extract more surplus from the...

A Single-Judge Solution to Beauty Contests

By Zhen Huo and Marcelo Pedroni

American Economic Review, February 2020

We show that the equilibrium policy rule in beauty contest models is equivalent to that of a single agent's forecast of the economic fundamental. This forecast is conditional on a modified information process, which simply discounts the precision of idios...

Online Privacy and Information Disclosure by Consumers

By Shota Ichihashi

American Economic Review, February 2020

I study the welfare and price implications of consumer privacy. A consumer discloses information to a multiproduct seller, which learns about his preferences, sets prices, and makes product recommendations. Although the consumer benefits from accurate rec...

Searching for Service

By Maarten C. W. Janssen and T. Tony Ke

American Economic Journal: Microeconomics, February 2020

Since Telser (1960), there is a well-established argument that a competitive market will not provide service due to freeriding. We show that with search frictions, the market may well provide service if the cost of doing so is not too large. Any market eq...

Experimenting with Career Concerns

By Marina Halac and Ilan Kremer

American Economic Journal: Microeconomics, February 2020

A manager who learns privately about a project over time may want to delay quitting it if recognizing failure/lack of success hurts his reputation. In the banking industry, managers may want to roll over bad loans. How do distortions depend on expected pr...

Advertising and Environmental Stewardship: Evidence from the BP Oil Spill

By Lint Barrage, Eric Chyn, and Justine Hastings

American Economic Journal: Economic Policy, February 2020

This paper explores whether private markets can incentivize environmental stewardship. We examine the consumer response to the 2010 BP oil spill and test how BP's investment in the 2000–2008 "Beyond Petroleum" green advertising campaign affected this re...

The Economics of Maps

By Abhishek Nagaraj and Scott Stern

Journal of Economic Perspectives, Winter 2020

For centuries, maps have codified the extent of human geographic knowledge and shaped discovery and economic decision-making. Economists across many fields, including urban economics, public finance, political economy, and economic geography, have long ...

Attention Management

By Elliot Lipnowski, Laurent Mathevet, and Dong Wei

American Economic Review: Insights, March 2020

Attention costs can cause some information to be ignored and decisions to be imperfect. Can we improve the material welfare of a rationally inattentive agent by restricting his information in the first place? In our model, a well-intentioned principal pro...

Segmented Housing Search

By Monika Piazzesi, Martin Schneider, and Johannes Stroebel

American Economic Review, March 2020

We study housing markets with multiple segments searched by heterogeneous clienteles. In the San Francisco Bay Area, search activity and inventory covary negatively across cities, but positively across market segments within cities. A quantitative search ...

The Paper Trail of Knowledge Spillovers: Evidence from Patent Interferences

By Ina Ganguli, Jeffrey Lin, and Nicholas Reynolds

American Economic Journal: Applied Economics, April 2020

We show evidence of localized knowledge spillovers using a new database of US patent interferences terminated between 1998 and 2014. Interferences resulted when two or more independent parties submitted identical claims of invention nearly simultaneously....

Deconstructing Monetary Policy Surprises—The Role of Information Shocks

By Marek Jarociński and Peter Karadi

American Economic Journal: Macroeconomics, April 2020

Central bank announcements simultaneously convey information about monetary policy and the central bank's assessment of the economic outlook. This paper disentangles these two components and studies their effect on the economy using a structural vector au...

Who Acquires Information in Dealer Markets?

By Jesper Rüdiger and Adrien Vigier

American Economic Review, April 2020

We study information acquisition in dealer markets. We first identify a one-sided strategic complementarity in information acquisition: the more informed traders are, the larger market makers' gain from becoming informed. When quotes are observable, this ...

Biased-Belief Equilibrium

By Yuval Heller and Eyal Winter

American Economic Journal: Microeconomics, May 2020

We investigate how distorted, yet structured, beliefs can persist in strategic situations. Specifically, we study two-player games in which each player is endowed with a biased-belief function that represents the discrepancy between a player's beliefs abo...

Digitizing Disclosure: The Case of Restaurant Hygiene Scores

By Weijia Dai and Michael Luca

American Economic Journal: Microeconomics, May 2020

Collaborating with Yelp and the City of San Francisco, we revisit a canonical example of quality disclosure by evaluating and helping to redesign the posting of restaurant hygiene scores on Yelp.com. We implement a two-stage intervention that separately i...

Incomplete Information Games with Ambiguity Averse Players

By Eran Hanany, Peter Klibanoff, and Sujoy Mukerji

American Economic Journal: Microeconomics, May 2020

We study incomplete information games with ambiguity averse players. Our focus is on equilibrium concepts satisfying sequential optimality—each player's strategy is optimal at each information set given opponents' strategies. We show sequential optimali...