Notes

Journal of Economic Perspectives, Fall 2009

Front Matter

American Economic Review, December 2009

Investment in Schooling and the Marriage Market

By Pierre-André Chiappori, Murat Iyigun, and Yoram Weiss

American Economic Review, December 2009

We present a model in which investment in schooling generates two kinds of returns: the labor-market return, resulting from higher wages, and a marriage-market return, defined as the impact of schooling on the marital surplus share one can extract. Men...

Efficient Pollution Regulation: Getting the Prices Right

By Nicholas Z. Muller and Robert Mendelsohn

American Economic Review, December 2009

This paper argues for efficient environmental regulations that equate the marginal damage of pollution to marginal abatement costs across space. The paper estimates the source-specific marginal damages of air pollution and calculates the welfare gain f...

Has Moral Hazard Become a More Important Factor in Managerial Compensation?

By George-Levi Gayle and Robert A. Miller

American Economic Review, December 2009

We estimate a principal-agent model of moral hazard with longitudinal data on firms and managerial compensation over two disjoint periods spanning 60 years to investigate increased value and variability in managerial compensation. We find exogenous gro...

Selling to Overconfident Consumers

By Michael D. Grubb

American Economic Review, December 2009

Consumers may overestimate the precision of their demand forecasts. This overconfidence creates an incentive for both monopolists and competitive firms to offer tariffs with included quantities at zero marginal cost, followed by steep marginal charges....

Risk Taking by Entrepreneurs

By Galina Vereshchagina and Hugo A. Hopenhayn

American Economic Review, December 2009

Entrepreneurs bear substantial risk, but empirical evidence shows no sign of a positive premium. This paper develops a theory of endogenous entrepreneurial risk taking that explains why self-financed entrepreneurs may find it optimal to invest in risky...

Adaptation and Vertical Integration in the Airline Industry

By Silke Januszewski Forbes and Mara Lederman

American Economic Review, December 2009

We explore patterns of vertical integration in the US airline industry. Major airlines subcontract portions of their network to regional partners, which may or may not be owned. We investigate if ownership economizes on ex post renegotiation costs. We ...

Naked Exclusion: An Experimental Study of Contracts with Externalities

By Claudia M. Landeo and Kathryn E. Spier

American Economic Review, December 2009

This paper reports the results of an experiment on exclusive contracts. We replicate the strategic environment described by Rasmusen, Ramseyer, and Wiley (1991) and Segal and Whinston (2000). Our findings are as follows. First, when the buyers can comm...

The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com

By Igal Hendel, Aviv Nevo, and François Ortalo-Magné

American Economic Review, December 2009

We compare house sales on a For-Sale-By-Owner (FSBO) platform to Multiple Listing Service (MLS) sales and find that FSBO precommission prices are no lower, but that FSBO is less effective in terms of time to sell and probability of a sale. We do not fi...

Innovation Diffusion in Heterogeneous Populations: Contagion, Social Influence, and Social Learning

By H. Peyton Young

American Economic Review, December 2009

New ideas, products, and practices take time to diffuse, a fact that is often attributed to some form of heterogeneity among potential adopters. This paper examines three broad classes of diffusion models -- contagion, social influence, and social lear...

The Evolution of Time Preference with Aggregate Uncertainty

By Arthur J. Robson and Larry Samuelson

American Economic Review, December 2009

We examine the evolutionary foundations of intertemporal preferences. When all the risk affecting survival and reproduction is idiosyncratic, evolution selects for agents who maximize the discounted sum of expected utility, discounting at the sum of th...

Strategy-Proofness versus Efficiency in Matching with Indifferences: Redesigning the NYC High School Match

By Atila Abdulkadiroğlu, Parag A. Pathak, and Alvin E. Roth

American Economic Review, December 2009

The design of the New York City (NYC) high school match involved trade-offs among efficiency, stability, and strategy-proofness that raise new theoretical questions. We analyze a model with indifferences -- ties -- in school preferences. Simulations wi...

Performance Pay and Teachers' Effort, Productivity, and Grading Ethics

By Victor Lavy

American Economic Review, December 2009

This paper presents evidence about the effect of individual monetary incentives on English and math teachers in Israel. Teachers were rewarded with cash bonuses for improving their students' performance in high-school matriculation exams. The main iden...

On the Possibility of Credit Rationing in the Stiglitz-Weiss Model

By Lutz G. Arnold and John G. Riley

American Economic Review, December 2009

Contrary to what is usually assumed, the expected revenue for lenders as a function of the loan rate cannot be globally hump-shaped in the Stiglitz-Weiss (1981) adverse selection model with a continuum of types. This has important implications. First, ...

Peer-Induced Fairness in Games

By Teck-Hua Ho and Xuanming Su

American Economic Review, December 2009

People exhibit peer-induced fairness concerns when they look to their peers as a reference to evaluate their endowments. We analyze two independent ultimatum games played sequentially by a leader and two followers. With peer-induced fairness, the secon...

A Theory of Demand Shocks

By Guido Lorenzoni

American Economic Review, December 2009

This paper presents a model of business cycles driven by shocks to consumer expectations regarding aggregate productivity. Agents are hit by heterogeneous productivity shocks, they observe their own productivity and a noisy public signal regarding aggr...

Mental Accounting in Portfolio Choice: Evidence from a Flypaper Effect

By James J. Choi, David Laibson, and Brigitte C. Madrian

American Economic Review, December 2009

Consistent with mental accounting, we document that investors sometimes choose the asset allocation for one account without considering the asset allocation of their other accounts. The setting is a firm that changed its 401(k) matching rules. Initially, ...

Intra-industry Foreign Direct Investment

By Laura Alfaro and Andrew Charlton

American Economic Review, December 2009

We use a new firm-level dataset that establishes the location, ownership, and activity of 650,000 multinational subsidiaries. Using a combination of four-digit-level information and input-output tables, we find the share of vertical FDI (subsidiaries that...

Media Markets and Localism: Does Local News en Español Boost Hispanic Voter Turnout?

By Felix Oberholzer-Gee and Joel Waldfogel

American Economic Review, December 2009

In the past decade Americans have increasingly turned their attention to nonlocal information sources, raising concerns about disengagement from local communities. Regulation sometimes seeks to curtail the integration of media markets through the promotio...