Dynamic Competition and Arbitrage in Electricity Markets: The Role of Financial Players

By Ignacia Mercadal

American Economic Journal: Microeconomics, August 2022

I study the effects of financial players who trade alongside physical buyers and sellers in electricity markets. Using detailed firm-level data, I examine physical and financial firms' responses to regulation that exogenously increased financial trading. ...

Platform Governance

By Tat-How Teh

American Economic Journal: Microeconomics, August 2022

Platforms that intermediate trades—such as Amazon, Airbnb, and eBay—play a regulatory role in deciding how to govern the marketplaces they create. We propose a framework to analyze a platform's nonprice governance design and its incentive to act in a ...

A Theory of Crime and Vigilance

By Jorge Vásquez

American Economic Journal: Microeconomics, August 2022

This paper develops a theory of crime in which potential victims elect their vigilance levels. When vigilance expenses are greater than expected property losses, an increase in penalties raises crime, namely, a criminal Laffer curve emerges. This curve is...

Fairness through the Lens of Cooperative Game Theory: An Experimental Approach

By Geoffroy de Clippel and Kareen Rozen

American Economic Journal: Microeconomics, August 2022

We experimentally investigate how impartial observers allocate money to agents whose complementarity and substitutability determine the surplus that each group can achieve. Analyzing the data through the lens of axioms and solutions from cooperative game ...

Belief Elicitation When More than Money Matters: Controlling for "Control"

By Jean-Pierre Benoît, Juan Dubra, and Giorgia Romagnoli

American Economic Journal: Microeconomics, August 2022

Elicitation mechanisms typically presume only money enters utility functions. However, nonmonetary objectives are confounders. In particular, psychologists argue people favor bets where ability is involved over equivalent random bets—a preference for co...

Searching Forever After

By Yair Antler and Benjamin Bachi

American Economic Journal: Microeconomics, August 2022

We study a model of two-sided search in which agents' strategic reasoning is coarse. In equilibrium, the most desirable agents behave as if they were fully rational, while for all other agents, coarse reasoning results in overoptimism with regard to their...

Competitive Information Disclosure to an Auctioneer

By Stefan Terstiege and Cédric Wasser

American Economic Journal: Microeconomics, August 2022

We analyze how voluntary disclosure of information by bidders affects the outcome of optimally designed auctions. In a single-object auction environment, we assume that before the revenue-maximizing auctioneer designs the auction, bidders noncooperatively...

Political Competition with Endogenous Party Formation and Citizen Activists

By Emanuel Hansen

American Economic Journal: Microeconomics, August 2022

This paper studies the effects of endogenous party formation on political platforms. It develops a model in which parties allow like-minded citizens to, first, share the cost of running in a public election and, second, coordinate on a policy platform. Th...

Trust and Promises over Time

By Florian Ederer and Frédéric Schneider

American Economic Journal: Microeconomics, August 2022

Using a large-scale hybrid laboratory and online trust experiment with and without preplay communication, we investigate how the passage of time affects trust. Communication (predominantly through promises) raises cooperation, trust, and trustworthiness b...

Class Actions and Private Antitrust Litigation

By Albert H. Choi and Kathryn E. Spier

American Economic Journal: Microeconomics, August 2022

When firms collude and charge supracompetitive prices, consumers can bring antitrust lawsuits against the firms. When the litigation cost is low, firms accept the cost as just another cost of doing business, whereas when the cost is high, the firms lower ...

Experience Goods and Consumer Search

By Yongmin Chen, Zhuozheng Li, and Tianle Zhang

American Economic Journal: Microeconomics, August 2022

We introduce a search model where products differ in horizontal attributes and unobserved quality ("experience goods"), and firms can establish quality reputation. We show that the inability of consumers to observe quality before purchase significantly ch...

Adviser Compensation, Endogenous Entry, and the Advice Gap

By Jurre H. Thiel

American Economic Journal: Microeconomics, August 2022

To prevent biased advice, regulators increasingly ban commission payments to financial advisers. Such bans are associated with "advice gaps," meaning that advice becomes less accessible. To understand the trade-off between the quality and accessibility of...

Learning in Games and the Interpretation of Natural Experiments

By Drew Fudenberg and David K. Levine

American Economic Journal: Microeconomics, August 2022

We show that the treatment effect estimated by standard methods such as regression discontinuity analysis or difference-in-differences may contain a transient "learning effect" that is entangled with the long-term effect of the treatment. This learning ef...

The Focal Luce Model

By Matthew Kovach and Gerelt Tserenjigmid

American Economic Journal: Microeconomics, August 2022

We introduce the Focal Luce Model (FLM), a random choice model that generalizes Luce's (1959) model (multinomial logit) to account for menu-dependent focality of alternatives. In the FLM, focal alternatives are relatively more likely to be chosen even aft...

Substitution Effects in Intertemporal Problems

By Davide Dragone and Paolo Vanin

American Economic Journal: Microeconomics, August 2022

We consider a broad class of intertemporal economic problems and characterize the short-run and long-run responses of the demand for a good to a permanent increase in its market price. Depending on the interplay between self-productivity and time discount...

Contract Duration and the Costs of Market Transactions

By Alexander MacKay

American Economic Journal: Microeconomics, August 2022

The optimal duration of a supply contract balances the costs of re-selecting a supplier against the costs of being matched to an inefficient supplier when the contract lasts too long. I develop a structural model of contract duration that captures this tr...

Stability of Experimental Results: Forecasts and Evidence

By Stefano DellaVigna and Devin Pope

American Economic Journal: Microeconomics, August 2022

How robust are experimental results to changes in design? And can researchers anticipate which changes matter most? We consider a real-effort task with multiple behavioral treatments and examine the stability along six dimensions: (i) pure replication, (i...

Attention Oligopoly

By Andrea Prat and Tommaso Valletti

American Economic Journal: Microeconomics, August 2022

We model digital platforms as attention brokers that have proprietary information about their users' product preferences and sell targeted ad space to retail product industries. Retail producers—incumbents or entrants—compete for access to this attent...

Investment and Information Acquisition

By Dimitri Migrow and Sergei Severinov

American Economic Journal: Microeconomics, August 2022

We study the interaction between productive investment and persuasion activities in a principal–agent setting with strategic disclosure. In an attempt to persuade the principal, the agent diverts substantial resources from productive activities to info...

AEA Member Announcements: 2022 Annual Election

[News]

July 15, 2022

View member announcement from July 27, 2022.