The Power of Communication

By David Rahman

American Economic Review, November 2014

In this paper, I offer two ways in which firms can collude: secret monitoring and infrequent coordination. Such collusion is enforceable with intuitive communication protocols. I make my case in the context of a repeated Cournotoligopoly with flexible pr...

The Human Capital Stock: A Generalized Approach

By Benjamin F. Jones

American Economic Review, November 2014

This paper reconsiders the traditional approach to human capital measurement in the study of cross-country income differences. Within a broader class of neoclassical human capital aggregators, traditional accounting is found to be a theoretical lower boun...

Front Matter

American Economic Review, November 2014

Credit Market Speculation and the Cost of Capital

By Yeon-Koo Che and Rajiv Sethi

American Economic Journal: Microeconomics, November 2014

We examine the effect of speculation using credit derivatives on the cost of debt and the likelihood of default. The availability of credit default swaps induces investors who are optimistic about borrower revenues to sell protection instead of buying b...

Effects of Mergers in Two-Sided Markets: The US Radio Industry

By PrzemysŁaw Jeziorski

American Economic Journal: Microeconomics, November 2014

This study examines mergers in two-sided markets using a structural supply-and-demand model that employs data from the 1996-2006 merger wave in the U.S. radio industry. In particular, it identities the conflicting incentives for merged firms to exercise m...

Strategic Private Experimentation

By Mike Felgenhauer and Elisabeth Schulte

American Economic Journal: Microeconomics, November 2014

We consider a model of persuasion in which an agent who tries to persuade a decision maker can sequentially acquire imperfect signals. The agent's information acquisition is unobservable and he has the option to hide unfavorable signals. Nevertheless, if ...

Internet Penetration and Capacity Utilization in the US Airline Industry

By James D. Dana Jr. and Eugene Orlov

American Economic Journal: Microeconomics, November 2014

Airline capacity utilization increased dramatically between 1993 and 2007, after staying fairly level following deregulation. We argue that consumers' use of the Internet to investigate and purchase airline tickets reduces market frictions and allows a...

The Control Premium: A Preference for Payoff Autonomy

By David Owens, Zachary Grossman, and Ryan Fackler

American Economic Journal: Microeconomics, November 2014

We document individuals' willingness to pay to control their own payoff. Experiment participants choose whether to bet on themselves or on a partner answering a quiz question correctly. Given participants' beliefs, which we elicit separately, expected-mo...

The Strategic Dis/advantage of Voting Early

By Eddie Dekel and Michele Piccione

American Economic Journal: Microeconomics, November 2014

Under sequential voting, voting late enables conditioning on which candidates are viable, while voting early can influence the field of candidates. But the latter effect can be harmful: shrinking the field increases not only the likelihood that future ...

Hypothetical Thinking and Information Extraction in the Laboratory

By Ignacio Esponda and Emanuel Vespa

American Economic Journal: Microeconomics, November 2014

In several common-value environments (e.g., auctions or elections), players should make informational inferences from opponents' strategies under certain hypothetical events (e.g., winning the auction or being pivotal). We design a voting experiment that ...

Voter Preferences, Polarization, and Electoral Policies

By Yuichiro Kamada and Fuhito Kojima

American Economic Journal: Microeconomics, November 2014

In most variants of the Hotelling-Downs model of election, it is assumed that voters have concave utility functions. This assumption is arguably justified in issues such as economic policies, but convex utilities are perhaps more appropriate in others suc...

Pride and Diversity in Social Economies

By Fabio Maccheroni, Massimo Marinacci, and Aldo Rustichini

American Economic Journal: Microeconomics, November 2014

We study a two-period economy in which agents preferences take into account their relative economic position. The study builds on a decision theoretic analysis of the social emotions that underlie these relative concerns. These emotions, envy and pride...

Competitive Altruism, Mentalizing, and Signaling

By Ed Hopkins

American Economic Journal: Microeconomics, November 2014

One explanation of altruism is that it arises from "mentalizing", the process of understanding the mental states of others. Another is based on sexual selection: altruism is a costly signal of good genes. This paper shows that these two arguments are s...

(Good and Bad) Reputation for a Servant of Two Masters

By Heski Bar-Isaac and Joyee Deb

American Economic Journal: Microeconomics, November 2014

We present a model in which an agent takes actions to affect her reputation with two audiences with diverse preferences. This contrasts with standard reputation models that consider a homogeneous audience. A new aspect that arises is that different audie...

Wasteful Sanctions, Underperformance, and Endogenous Supervision

By David A. Miller and Kareen Rozen

American Economic Journal: Microeconomics, November 2014

We study optimal contracting in team settings where agents have many opportunities to shirk, task-level monitoring is needed to provide useful incentives, and it is difficult to write individual performance into formal contracts. Incentives are provided ...

The Day Care Assignment: A Dynamic Matching Problem

By John Kennes, Daniel Monte, and Norovsambuu Tumennasan

American Economic Journal: Microeconomics, November 2014

We study the problem of centralized allocation of children to public daycare centers, illustrated by the case of Denmark. Our framework applies to problems of dynamic matching in which there is entry and exit of agents over time; for example, the schoo...

Mergers and Sunk Costs: An Application to the Ready-Mix Concrete Industry

By Allan Collard-Wexler

American Economic Journal: Microeconomics, November 2014

Horizontal mergers have a large impact by inducing a long-lasting change in market structure. Only in an industry with substantial entry barriers is a merger not immediately counteracted by post-merger entry. To evaluate the duration of the effects of a...

Front Matter

American Economic Journal: Microeconomics, November 2014

Efficiency and Substitutability of Transit Subsidies and Other Urban Transport Policies

By Leonardo J. Basso and Hugo E. Silva

American Economic Journal: Economic Policy, November 2014

This paper analyzes the efficiency of and the substitutability between three urban congestion management policies: transit subsidization, car congestion pricing, and dedicated bus lanes. The model features user heterogeneity, cross-congestion effects b...

Social Support Substitution and the Earnings Rebound: Evidence from a Regression Discontinuity in Disability Insurance Reform

By Lex Borghans, Anne C. Gielen, and Erzo F. P. Luttmer

American Economic Journal: Economic Policy, November 2014

We exploit a cohort discontinuity in the stringency of Dutch disability reforms to estimate the effects of decreased DI (disability insurance) generosity on behavior of existing recipients. We find evidence of social support substitution: individuals o...