The Agency Problems of Institutional Investors

[Symposium: The Modern Corporation]

By Lucian A. Bebchuk, Alma Cohen, and Scott Hirst

Journal of Economic Perspectives, Summer 2017

Financial economics and corporate governance have long focused on the agency problems between corporate managers and shareholders that result from the dispersion of ownership in large publicly traded corporations. In this paper, we focus on how the rise o...

Towards a Political Theory of the Firm

[Symposium: The Modern Corporation]

By Luigi Zingales

Journal of Economic Perspectives, Summer 2017

The revenues of large companies often rival those of national governments, and some companies have annual revenues higher than many national governments. Among the largest corporations in 2015, some had private security forces that rivaled the best secret...

A Skeptical View of Financialized Corporate Governance

[Symposium: The Modern Corporation]

By Anat R. Admati

Journal of Economic Perspectives, Summer 2017

Managerial compensation typically relies on financial yardsticks, such as profits, stock prices, and return on equity, to achieve alignment between the interests of managers and shareholders. But financialized governance may not actually work well for m...

The Causes and Costs of Misallocation

By Diego Restuccia and Richard Rogerson

Journal of Economic Perspectives, Summer 2017

Why do living standards differ so much across countries? A consensus in the development literature is that differences in productivity are a dominant source of these differences. But what accounts for productivity differences across countries? One explana...

Federal Budget Policy with an Aging Population and Persistently Low Interest Rates

By Douglas W. Elmendorf and Louise M. Sheiner

Journal of Economic Perspectives, Summer 2017

Some observers have argued that the projections for high and rising debt pose a grave threat to the country's economic future and give the government less fiscal space to respond to recessions or other unexpected developments, so they urge significant cha...

How Digitization Has Created a Golden Age of Music, Movies, Books, and Television

By Joel Waldfogel

Journal of Economic Perspectives, Summer 2017

Digitization is disrupting a number of copyright-protected media industries, including books, music, radio, television, and movies. Once information is transformed into digital form, it can be copied and distributed at near-zero marginal costs. This chang...

Retrospectives: Friedrich Hayek and the Market Algorithm

By Samuel Bowles, Alan Kirman, and Rajiv Sethi

Journal of Economic Perspectives, Summer 2017

Friedrich A. Hayek (1899-1992) is known for his vision of the market economy as an information processing system characterized by spontaneous order: the emergence of coherence through the independent actions of large numbers of individuals, each with limi...

Recommendations for Further Reading

By Timothy Taylor

Journal of Economic Perspectives, Summer 2017

Front Matter

American Economic Journal: Microeconomics, August 2017

Efficient Procurement Auctions with Increasing Returns

By Oleg Baranov, Christina Aperjis, Lawrence M. Ausubel, and Thayer Morrill

American Economic Journal: Microeconomics, August 2017

For procuring from sellers with decreasing returns, there are known efficient dynamic auction formats. In this paper, we design an efficient dynamic procurement auction for the case where goods are homogeneous and bidders have increasing returns. Our moti...

Wheat or Strawberries? Intermediated Trade with Limited Contracting

By Kala Krishna and Yelena Sheveleva

American Economic Journal: Microeconomics, August 2017

Why do developing countries fail to specialize in products in which they appear to have a comparative advantage? We propose a model of agricultural trade with intermediation that explains how hold up resulting from poor contracting environments can produc...

The Double Diamond Paradox

By Daniel Garcia, Jun Honda, and Maarten Janssen

American Economic Journal: Microeconomics, August 2017

We study vertical relations in markets with consumer and retailer search. We obtain three important new results. First, we provide a novel explanation for price dispersion that does not depend on some form of heterogeneity among consumers. Price dispersio...

Bend Them but Don't Break Them: Passionate Workers, Skeptical Managers, and Decision Making in Organizations

By Omar A. Nayeem

American Economic Journal: Microeconomics, August 2017

This paper explores the useful but delicate role of managerial skepticism in hierarchical knowledge-based organizations. In these settings, the decision-maker principal seeks advice from managers, who instruct expert frontline workers to acquire informati...

Choice and Matching

By Christopher P. Chambers and M. Bumin Yenmez

American Economic Journal: Microeconomics, August 2017

We study path-independent choice rules applied to a matching context. We use a classic representation of these choice rules to introduce a powerful technique for matching theory. Using this technique, we provide a deferred acceptance algorithm for many-to...

More Haste, Less Speed? Signaling through Investment Timing

By Catherine Bobtcheff and Raphaël Levy

American Economic Journal: Microeconomics, August 2017

We consider a cash-constrained firm learning on the value of an irreversible project at a privately known speed. Under perfect information, the optimal date of investment may be non-monotonic in the learning speed: better learning increases the value of e...

Public Goods in Endogenous Networks

By Markus Kinateder and Luca Paolo Merlino

American Economic Journal: Microeconomics, August 2017

We study a local public good game in an endogenous network with heterogeneous players. The source of heterogeneity affects the gains from a connection and hence equilibrium networks. When players differ in the cost of producing the public good, active pla...

Collective Self-Control

By Alessandro Lizzeri and Leeat Yariv

American Economic Journal: Microeconomics, August 2017

Behavioral economics presents a "paternalistic" rationale for a benevolent government's intervention. We consider an economy where the only "distortion" is agents' time-inconsistency. We study the desirability of various forms of collective action, ones p...

Simultaneous Search and Efficiency of Entry and Search Intensity

By Pieter A. Gautier and Christian L. Holzner

American Economic Journal: Microeconomics, August 2017

We consider a model where firms open vacancies and post and commit to a wage mechanism. Search is costly and workers simultaneously apply to multiple jobs. Firms can be connected to multiple workers and workers to multiple firms. We use a new method to de...

Front Matter

American Economic Review, August 2017

Partner Choice, Investment in Children, and the Marital College Premium

By Pierre-André Chiappori, Bernard Salanié, and Yoram Weiss

American Economic Review, August 2017

We construct a model of household decision-making in which agents consume a private and a public good, interpreted as children's welfare. Children's utility depends on their human capital, which depends on the time their parents spend with them and on the...