Antitrust in Innovative Industries

By Ilya Segal and Michael D. Whinston

American Economic Review, December 2007

We study the effects of antitrust policy in industries with continual innovation. Antitrust policies that restrict incumbent behavior toward new entrants may have conflicting effects on innovation incentives, raising the profits of new entrants, but lo...

Fatal Attraction: Salience, Naïveté, and Sophistication in Experimental "Hide-and-Seek" Games

By Vincent P. Crawford and Nagore Iriberri

American Economic Review, December 2007

"Hide-and-seek" games are zero-sum two-person games in which one player wins by matching the other's decision and the other wins by mismatching. Although such games are often played on cultural or geographic "landscapes" that frame decisions nonneutral...

Group Reputations, Stereotypes, and Cooperation in a Repeated Labor Market

By Paul J. Healy

American Economic Review, December 2007

Reputation effects and other-regarding preferences have both been used to predict cooperative outcomes in markets with inefficient equilibria. Existing reputation-building models require either infinite time horizons or publicly observed identities, bu...

Does Price Matter in Charitable Giving? Evidence from a Large-Scale Natural Field Experiment

By Dean Karlan and John A. List

American Economic Review, December 2007

We conducted a natural field experiment to further our understanding of the economics of charity. Using direct mail solicitations to over 50,000 prior donors of a nonprofit organization, we tested the effectiveness of a matching grant on charitable giv...

Impossibility of Collusion under Imperfect Monitoring with Flexible Production

By Yuliy Sannikov and Andrzej Skrzypacz

American Economic Review, December 2007

We show that it is impossible to achieve collusion in a duopoly when (a) goods are homogenous and firms compete in quantities; (b) new, noisy information arrives continuously, without sudden events; and (c) firms are able to respond to new information ...

Sequentially Rationalizable Choice

By Paola Manzini and Marco Mariotti

American Economic Review, December 2007

A sequentially rationalizable choice function is a choice function that can be retrieved by applying sequentially to each choice problem the same fixed set of asymmetric binary relations (rationales) to remove inferior alternatives. These concepts tran...

Vertical Control of Price and Inventory

By Harish Krishnan and Ralph A. Winter

American Economic Review, December 2007

This paper offers a simple approach to the theory of decentralizing inventory and pricing decisions along a supply chain. We consider an upstream manufacturer selling to two outlets, which compete as differentiated duopolists and face uncertain demand....

Individual Preferences for Giving

By Raymond Fisman, Shachar Kariv, and Daniel Markovits

American Economic Review, December 2007

We utilize graphical representations of Dictator Games which generate rich individual- level data. Our baseline experiment employs budget sets over feasible payoff- pairs. We test these data for consistency with utility maximization, and we recover th...

Consensus Building: How to Persuade a Group

By Bernard Caillaud and Jean Tirole

American Economic Review, December 2007

The paper explores strategies that the sponsor of a proposal may employ to convince a qualified majority of members in a group to approve the proposal. Adopting a mechanism design approach to communication, it emphasizes the need to distill information...

Traders' Expectations in Asset Markets: Experimental Evidence

By Ernan Haruvy, Yaron Lahav, and Charles N. Noussair

American Economic Review, December 2007

We elicit traders' predictions of future price trajectories in repeated experimental markets for a 15-period-lived asset. We find that individuals' beliefs about prices are adaptive, and primarily based on past trends in the current and previous markets...

Consistency and Heterogeneity of Individual Behavior under Uncertainty

By Syngjoo Choi, Raymond Fisman, Douglas Gale, and Shachar Kariv

American Economic Review, December 2007

By using graphical representations of simple portfolio choice problems, we generate a very rich dataset to study behavior under uncertainty at the level of the individual subject. We test the data for consistency with the maximization hypothesis, and w...

Heterogeneity and Aggregation: Implications for Labor-Market Fluctuations

By Yongsung Chang and Sun-Bin Kim

American Economic Review, December 2007

We demonstrate that aggregate employment and consumption can increase without a corresponding movement in productivity in a model with heterogeneous agents where the only aggregate disturbance is a productivity shock. The interaction between incomplete ca...

Competitive Wages in a Match with Ordered Contracts

By Muriel Niederle

American Economic Review, December 2007

Following the recently dismissed antitrust lawsuit against the National Residency Matching Program (NRMP), Jeremy Bulow and Jonathan Levin (2006) propose a simple matching model in which firms set impersonal salaries simultaneously before matching with...

Another Look at Airport Congestion Pricing

By Steven A. Morrison and Clifford Winston

American Economic Review, December 2007

We study alternate approaches to implement congestion pricing at US airports. Conventional formulations toll all aircraft without determining whether a plane operated by a given airline delays other planes that it operates or planes operated by other airl...

Diamonds Are Forever, Wars Are Not: Is Conflict Bad for Private Firms?

By Massimo Guidolin and Eliana La Ferrara

American Economic Review, December 2007

This paper studies the relationship between civil war and the value of firms in a poor, resource-abundant country using microeconomic data for Angola. We focus on diamond mining firms and conduct an event study on the sudden end of the conflict, marked ...

Overconfidence, Insurance, and Paternalism

By Alvaro Sandroni and Francesco Squintani

American Economic Review, December 2007

It is well known that when agents are fully rational, compulsory public insurance may make all agents better off in the Rothschild and Stiglitz (1976) model of insurance markets. We find that when sufficiently many agents underestimate their personal ri...

Do We Really Know That the WTO Increases Trade? Comment

By Michael Tomz, Judith L. Goldstein, and Douglas Rivers

American Economic Review, December 2007

Do We Really Know That the WTO Increases Trade? Reply

By Andrew K. Rose

American Economic Review, December 2007

Does Competition Among Public Schools Benefit Students and Taxpayers? Comment

By Jesse Rothstein

American Economic Review, December 2007

Does Competition Among Public Schools Benefit Students and Taxpayers? Reply

By Caroline M. Hoxby

American Economic Review, December 2007