A Reputational Theory of Firm Dynamics

By Simon Board and Moritz Meyer-ter-Vehn

American Economic Journal: Microeconomics, May 2022

We study the life cycle of a firm that produces a good of unknown quality. The firm manages its quality by investing while consumers learn via public breakthroughs; if the firm fails to generate such breakthroughs, its revenue falls and it eventually exit...

Start-up Search Costs

By David P. Byrne and Nicolas de Roos

American Economic Journal: Microeconomics, May 2022

Workhorse economic models used for studying the market impacts of search frictions assume constant search costs: individuals pay the same cost to obtain price information each time they search. This paper provides evidence on a new form of search costs: s...

Preference Conditions for Invertible Demand Functions

By Theodoros M. Diasakos and Georgios Gerasimou

American Economic Journal: Microeconomics, May 2022

It is frequently assumed in several domains of economics that demand functions are invertible in prices. At the primitive level of preferences, however, the corresponding characterization has remained elusive. We identify necessary and sufficient conditio...

Group Hug: Platform Competition with User Groups

By Sarit Markovich and Yaron Yehezkel

American Economic Journal: Microeconomics, May 2022

We consider platform competition for small users and a user group. One platform enjoys a quality advantage and the other benefits from favorable beliefs. We study whether the group mitigates the users' coordination problem⁠—i.e., joining a low-quality...

Friend-Based Ranking

By Francis Bloch and Matthew Olckers

American Economic Journal: Microeconomics, May 2022

We analyze the design of a mechanism to extract a ranking of individuals according to a unidimensional characteristic, such as ability or need. Individuals, connected on a social network, only have local information about the ranking. We show that a plann...

An Index of Competitiveness and Cooperativeness for Normal-Form Games

By Thomas Demuynck, Christian Seel, and Giang Tran

American Economic Journal: Microeconomics, May 2022

We develop an index of competitiveness and cooperativeness that is based on the primitives of a normal-form game, i.e., players, strategies and payoffs. The index relies on the unique decomposition of a given game into a zero-sum game and a common interes...

Technical Change, Inequality, and the Labor Market

By Daron Acemoglu

Journal of Economic Literature, March 2002

This essay discusses the effect of technical change on wage inequality. I argue that the behavior of wages and returns to schooling indicates that technical change has been skill-biased during the past sixty years. Furthermore, the recent increase in ineq...

Optimal Nonlinear Pricing by a Dominant Firm under Competition

By Yong Chao, Guofu Tan, and Adam Chi Leung Wong

American Economic Journal: Microeconomics, May 2022

We consider a nonlinear pricing problem faced by a dominant firm competing with a minor firm. The dominant firm offers a general tariff first, and then the minor firm responds with a per-unit price, followed by a buyer choosing her purchases. By developin...

Intermediation and Steering: Competition in Prices and Commissions

By Tat-How Teh and Julian Wright

American Economic Journal: Microeconomics, May 2022

We explore the implications of steering by an informed profit-maximizing intermediary. The intermediary steers consumers by recommending firms, taking into account both the commissions firms offer and the prices they set. Such steering results in higher c...

Second-Degree Price Discrimination by a Two-Sided Monopoly Platform

By Doh-Shin Jeon, Byung-Cheol Kim, and Domenico Menicucci

American Economic Journal: Microeconomics, May 2022

We study second-degree price discrimination by a two-sided monopoly platform. The incentive constraints of the agents on the value creation side may be in conflict with internalizing externalities on the value capture side, which may render pooling optima...

Heterogeneous Impacts of Cost Shocks, Strategic Bidding, and Pass-Through: Evidence from the New England Electricity Market

By Harim Kim

American Economic Journal: Microeconomics, May 2022

Industry-wide shocks can have heterogeneous impacts on firms' costs due to different firm characteristics. The heterogeneity of these impacts is crucial for understanding the pass-through of the shock because of its implications for strategic competition....

Hump-Shaped Cross-Price Effects and the Extensive Margin in Cross-Border Shopping

By Richard Friberg, Frode Steen, and Simen A. Ulsaker

American Economic Journal: Microeconomics, May 2022

This paper examines the effect of cross-border shopping on grocery demand in Norway using monthly store × category sales data from Norway's largest grocery chain 2012–2016. The sensitivity of demand to the foreign price is hump-shaped and greatest 30�...

Promoting Wellness or Waste? Evidence from Antidepressant Advertising

By Bradley T. Shapiro

American Economic Journal: Microeconomics, May 2022

It is taken as given by many policy makers that Direct-to-Consumer Advertising of prescription drugs drives inappropriate patients to treatment. Alternatively, advertising may provide useful information that causes appropriate patients to seek treatment. ...

False Positives and Transparency

By Jonathan Libgober

American Economic Journal: Microeconomics, May 2022

I develop a theoretical model of costly information acquisition in order to evaluate transparency requirements in empirical research. A sender chooses an experiment characterized by multiple dimensions, while a receiver observes the experiment's outcome (...

Bad News Turned Good: Reversal under Censorship

By Aleksei Smirnov and Egor Starkov

American Economic Journal: Microeconomics, May 2022

Sellers often have the power to censor the reviews of their products. We explore the effect of these censorship policies in markets where some consumers are unaware of possible censorship. We find that if the share of such "naïve" consumers is not too la...

Transforming Ordinal Riskless Utility into Cardinal Risky Utility: A Comment on Chung, Glimcher, and Tymula (2019)

By Peter P. Wakker

American Economic Journal: Microeconomics, May 2022

Chung, Glimcher, and Tymula (2019) observed both consumers' choices over commodity bundles and choices under risk. They assumed a cardinal riskless utility function V representing consumer choices and a cardinal risky utility function U. The two were inco...

Delegated Monitors, Large and Small: Germany's Banking System, 1800-1914

By Timothy W. Guinnane

Journal of Economic Literature, March 2002

Banks play a greater role in the German financial system than in those of the United States or Britain. Germany's large universal banks are admired by those who advocate bank deregulation in the United States. Others admire the universal banks for their s...

Front Matter

American Economic Review, May 2022

A Special Introduction

American Economic Review, May 2022

Supply and Demand in Disaggregated Keynesian Economies with an Application to the COVID-19 Crisis

By David Baqaee and Emmanuel Farhi

American Economic Review, May 2022

We study supply and demand shocks in a disaggregated model with multiple sectors, multiple factors, input-output linkages, downward nominal wage rigidities, credit-constraints, and a zero lower bound. We use the model to understand how the COVID-19 cris...