But Who Will Monitor the Monitor?

By David Rahman

American Economic Review, October 2012

Suppose that providing incentives for a group of individuals in a strategic context requires a monitor to detect their deviations. What about the monitor's deviations? To address this question, I propose a contract that makes the monitor responsible for m...

Reset Price Inflation and the Impact of Monetary Policy Shocks

By Mark Bils, Peter J. Klenow, and Benjamin A. Malin

American Economic Review, October 2012

Many business cycle models use a flat short-run Phillips curve, due to time-dependent pricing and strategic complementarities, to explain fluctuations in real output. But, in doing so, these models predict unrealistically high persistence and stability of...

Physician Agency and Adoption of Generic Pharmaceuticals

By Toshiaki Iizuka

American Economic Review, October 2012

I examine physician agency in health care services in the context of the choice between brand-name and generic pharmaceuticals. I examine micro-panel data from Japan, where physicians can legally make profits by prescribing and dispensing drugs. The resul...

Is the Volatility of the Market Price of Risk Due to Intermittent Portfolio Rebalancing?

By YiLi Chien, Harold Cole, and Hanno Lustig

American Economic Review, October 2012

Our paper examines whether the failure of unsophisticated investors to rebalance their portfolios can help to explain the countercyclical volatility of aggregate risk compensation in financial markets. To answer this question, we set up a model in which a...

The Strategy of Manipulating Conflict

By Sandeep Baliga and Tomas Sjöström

American Economic Review, October 2012

Two players choose hawkish or dovish actions in a conflict game with incomplete information. An "extremist," who can either be a hawk or a dove, attempts to manipulate decision making. If actions are strategic complements, a hawkish extremist increases th...

Credit Market Consequences of Improved Personal Identification: Field Experimental Evidence from Malawi

By Xavier Giné, Jessica Goldberg, and Dean Yang

American Economic Review, October 2012

We implemented a randomized field experiment in Malawi examining borrower responses to being fingerprinted when applying for loans. This intervention improved the lender's ability to implement dynamic repayment incentives, allowing it to withhold future l...

Testing Models of Consumer Search Using Data on Web Browsing and Purchasing Behavior

By Babur De Los Santos, Ali Hortaçsu, and Matthijs R. Wildenbeest

American Economic Review, October 2012

Using a large dataset on web browsing and purchasing behavior we test to what extent consumers are searching in accordance to various search models. We find that the benchmark model of sequential search with a known price distribution can be rejected base...

Inequality at Work: The Effect of Peer Salaries on Job Satisfaction

By David Card, Alexandre Mas, Enrico Moretti, and Emmanuel Saez

American Economic Review, October 2012

We study the effect of disclosing information on peers' salaries on workers' job satisfaction and job search intentions. A randomly chosen subset of University of California employees was informed about a new website listing the pay of University employee...

Credit Traps

By Efraim Benmelech and Nittai K. Bergman

American Economic Review, October 2012

This paper studies the limitations of monetary policy in stimulating credit and investment. We show that, under certain circumstances, unconventional monetary policies fail in that liquidity injections into the banking sector are hoarded and not lent out...

Economic Growth with Bubbles

By Alberto Martin and Jaume Ventura

American Economic Review, October 2012

We develop a stylized model of economic growth with bubbles in which changes in investor sentiment lead to the appearance and collapse of macroeconomic bubbles or pyramid schemes. These bubbles mitigate the effects of financial frictions. During bubbly ep...

The Colonial Origins of Comparative Development: An Empirical Investigation: Comment

By David Y. Albouy

American Economic Review, October 2012

Acemoglu, Johnson, and Robinson's (2001) seminal article argues property-rights institutions powerfully affect national income, using estimated mortality rates of early European settlers to instrument capital expropriation risk. However, 36 of the 64 coun...

The Colonial Origins of Comparative Development: An Empirical Investigation: Reply

By Daron Acemoglu, Simon Johnson, and James A. Robinson

American Economic Review, October 2012

Acemoglu, Johnson, and Robinson (2001) established that economic institutions today are correlated with expected mortality of European colonialists. David Albouy argues this relationship is not robust. He drops all data from Latin America and much of the ...

Front Matter

American Economic Journal: Microeconomics, November 2012

A Theory of Occupational Choice with Endogenous Fertility

By Dilip Mookherjee, Silvia Prina, and Debraj Ray

American Economic Journal: Microeconomics, November 2012

Theories based on partial equilibrium reasoning alone cannot explain the widespread negative cross-sectional correlation between parental wages and fertility, without restrictive assumptions on preferences and childcare costs. We argue that incorporating ...

Evolutionary Selection of Individual Expectations and Aggregate Outcomes in Asset Pricing Experiments

By Mikhail Anufriev and Cars Hommes

American Economic Journal: Microeconomics, November 2012

In recent "learning to forecast" experiments (Hommes et al. 2005), three different patterns in aggregate price behavior have been observed: slow monotonic convergence, permanent oscillations, and dampened fluctuations. We show that a simple model of indiv...

Information Acquisition in Competitive Markets: An Application to the US Mortgage Market

By Jeremy M. Burke, Curtis R. Taylor, and Liad Wagman

American Economic Journal: Microeconomics, November 2012

How do price commitments impact the amount of information firms acquire about potential customers? We examine this question in the context of a competitive market where firms search for information that may disqualify applicants. Contracts are incomplete ...

Auctions in Markets: Common Outside Options and the Continuation Value Effect

By Stephan Lauermann and Gábor Virág

American Economic Journal: Microeconomics, November 2012

In this paper, we study auctions with outside options provided by future market interaction focusing on the revenue effects of some information revelation policies. We show that auctions with less information revelation may yield higher revenues. In parti...

Equity Aversion: Social Norms and the Desire to Be Ahead

By Chaim Fershtman, Uri Gneezy, and John A. List

American Economic Journal: Microeconomics, November 2012

Inequity aversion models have dominated the behavioral economics landscape in the last decade. This study uses variants of dictator and trust games to provide empirical content to these models. We manipulate market features—such as competition over ...

Truth in Consequentiality: Theory and Field Evidence on Discrete Choice Experiments

By Christian A. Vossler, Maurice Doyon, and Daniel Rondeau

American Economic Journal: Microeconomics, November 2012

This paper explores methodological issues surrounding the use of discrete choice experiments to elicit values for public goods. We develop an explicit game theoretic model of individual decisions, providing conditions under which surveys with a single bi...

The Evolutionary Basis of Time Preference: Intergenerational Transfers and Sex

By Arthur J. Robson, Balazs Szentes, and Emil Iantchev

American Economic Journal: Microeconomics, November 2012

We consider the evolutionary basis of time discounting with intergenerational transfers. We show that the notion of "reproductive value" from biology provides the utility criterion for a parent to optimize the allocation of resources between transfers to...