Front Matter

American Economic Journal: Applied Economics, January 2010

Front Matter

American Economic Journal: Macroeconomics, January 2010

A Theory of Deception

By David Ettinger and Philippe Jehiel

American Economic Journal: Microeconomics, February 2010

This paper proposes an equilibrium approach to belief manipulation and deception in which agents only have coarse knowledge of their opponent's strategy. Equilibrium requires the coarse knowledge available to agents to be correct, and the inferences an...

Investor Sentiments

By Sergei Izmalkov and Muhamet Yildiz

American Economic Journal: Microeconomics, February 2010

We consider a general class of games that have been used to model many economic problems where players' sentiments are believed to play an important role. Dropping the common prior assumption, we identify the relevant notion of sentiments for strategic...

An Experimental Test of Flexible Combinatorial Spectrum Auction Formats

By Christoph Brunner, Jacob K. Goeree, Charles A. Holt, and John O. Ledyard

American Economic Journal: Microeconomics, February 2010

This paper reports laboratory experiments that evaluate the performance of a flexible package bidding format developed by the FCC, in comparison with other combinatorial formats. In general, the interest of policy makers in combinatorial auctions is ju...

Noise, Information, and the Favorite-Longshot Bias in Parimutuel Predictions

By Marco Ottaviani and Peter Norman Sorensen

American Economic Journal: Microeconomics, February 2010

According to the favorite-longshot bias, the expected return on an outcome tends to increase in the fraction of bets laid on that outcome. We derive testable implications for the direction and extent of the bias depending on the ratio of private inform...

Social Reinforcement: Cascades, Entrapment, and Tipping

By Geoffrey Heal and Howard Kunreuther

American Economic Journal: Microeconomics, February 2010

The actions of different agents sometimes reinforce each other. Examples are network effects and the threshold models used by sociologists as well as (Harvey) Leibenstein's "bandwagon effects." We model such situations as a game with increasing differe...

Information Percolation

By Darrell Duffie, Gaston Giroux, and Gustavo Manso

American Economic Journal: Microeconomics, February 2010

We study the "percolation" of information of common interest through a large market as agents encounter and reveal information to each other over time. We provide an explicit solution for the dynamics of the cross-sectional distribution of posterior be...

Naïve Learning in Social Networks and the Wisdom of Crowds

By Benjamin Golub and Matthew O. Jackson

American Economic Journal: Microeconomics, February 2010

We study learning in a setting where agents receive independent noisy signals about the true value of a variable and then communicate in a network. They naïvely update beliefs by repeatedly taking weighted averages of neighbors' opinions. We show ...

Optimal Sales Schemes against Interdependent Buyers

By Masaki Aoyagi

American Economic Journal: Microeconomics, February 2010

This paper studies a monopoly pricing problem when the seller can choose the timing of a trade with each buyer, and a buyer's valuation of the seller's good is the weighted sum of his and other buyers' private signals. We show that it is optimal for th...

The 1/d Law of Giving

By Jacob K. Goeree, Margaret A. McConnell, Tiffany Mitchell, Tracey Tromp, and Leeat Yariv

American Economic Journal: Microeconomics, February 2010

We combine survey data on friendship networks and individual characteristics with experimental observations from dictator games. Dictator offers are primarily explained by social distance, giving follows a simple inverse distance law. While student dem...

The Strategic Value of Quantity Forcing Contracts

By David Martimort and Salvatore Piccolo

American Economic Journal: Microeconomics, February 2010

We explore the strategic value of quantity forcing contracts in a manufacturer-retailer environment under both adverse selection and moral hazard. Manufacturers dealing with (exclusive) competing retailers may prefer to leave contracts silent on retail...

Competition, Monopoly Maintenance, and Consumer Switching Costs

By Hodaka Morita and Michael Waldman

American Economic Journal: Microeconomics, February 2010

Significant attention has been paid to why a durable goods producer with little or no market power would monopolize the maintenance market for its own product. This paper investigates an explanation for the practice based on consumer switching costs an...

Pitfalls of Participatory Programs: Evidence from a Randomized Evaluation in Education in India

By Abhijit V. Banerjee, Rukmini Banerji, Esther Duflo, Rachel Glennerster, and Stuti Khemani

American Economic Journal: Economic Policy, February 2010

Participation of beneficiaries in the monitoring of public services is increasingly seen as a key to improving their quality. We conducted a randomized evaluation of three interventions to encourage beneficiaries' participation to India: providing info...

Tagging and Income Taxation: Theory and an Application

By Helmuth Cremer, Firouz Gahvari, and Jean-Marie Lozachmeur

American Economic Journal: Economic Policy, February 2010

We derive a set of analytical results for optimal income taxation with tags using quasilinear preferences and a Rawlsian social welfare function. Secondly, assuming a constant elasticity of labor supply and log-normality of the skills distribution, we ...

Input Constraints and the Efficiency of Entry: Lessons from Cardiac Surgery

By David M. Cutler, Robert S. Huckman, and Jonathan T. Kolstad

American Economic Journal: Economic Policy, February 2010

Prior studies suggest that with elastically supplied inputs free entry may lead to an inefficiently high number of firms in equilibrium. Under input scarcity, however, the welfare loss from free entry is reduced. Further, free entry may increase use of...

Tax Competition for Heterogeneous Firms with Endogenous Entry

By Ronald B. Davies and Carsten Eckel

American Economic Journal: Economic Policy, February 2010

This paper models tax competition for mobile firms that are differentiated by their productivities. Because taxes affect the distribution of firms, they affect wages, prices, and the number of firms. From the social planner's perspective, optimal taxes...

Time Is Money: Choosing between Charitable Activities

By Naomi E. Feldman

American Economic Journal: Economic Policy, February 2010

This paper analyzes the impact of a preferential tax-price for monetary donations on the joint decision to donate time (volunteer) and money. The methodological approach takes into account that consumption of each charitable good affects consumption of...

Playing with Fire: Cigarettes, Taxes, and Competition from the Internet

By Austan Goolsbee, Michael F. Lovenheim, and Joel Slemrod

American Economic Journal: Economic Policy, February 2010

This paper documents the rise of the Internet as a source of state tax-free cigarettes and its impact on taxed sales elasticities. Using data on cigarette tax rates, taxable cigarette sales and individual smoking rates by state from 1980 to 2005 merged...

The Optimal Taxation of Height: A Case Study of Utilitarian Income Redistribution

By N. Gregory Mankiw and Matthew Weinzierl

American Economic Journal: Economic Policy, February 2010

Should the income tax include a credit for short taxpayers and a surcharge for tall ones? The standard utilitarian framework for tax analysis answers this question in the affirmative. Moreover, a plausible parameterization using data on height and wage...