Behavioral Contract Theory

By Botond Koszegi

Journal of Economic Literature, December 2014

This review provides a critical survey of psychology-and-economics ("behavioral-economics") research in contract theory. First, I introduce the theories of individual decision making most frequently used in behavioral contract theory, and formally illustr...

Strategy in History and (versus?) in Economics: A Review of Lawrence Freedman's Strategy: A History

By Avinash Dixit

Journal of Economic Literature, December 2014

This essay reviews Lawrence Freedman's book "Strategy: A History". The main themes—definitions, strategies in war, business, politics, and revolutions—are overviewed. The value of game-theoretic thinking for practical strategy is assessed. A critical ...

The Ethics of Efficient Markets and Commons Tragedies: A Review of John Broome's Climate Matters: Ethics in a Warming World

By William Nordhaus

Journal of Economic Literature, December 2014

What are the ethical implications of our contributions to global warming on an individual level? In his extended essay, John Broome analyzes the moral implications of our imposing damages on future generations through our greenhouse-gas emissions. He argu...

What's the Future of Public Higher Education? A Review Essay on Gary C. Fethke and Andrew J. Policano's Public No More: A New Path to Excellence for America's Public Universities

By Ronald G. Ehrenberg

Journal of Economic Literature, December 2014

Gary Fethke and Andrew Policano's book "Public No More: A New Path to Excellence for America's Public Universities" paints a picture of a future for public research universities that is very different than what many people will want to see. Their message ...

A Review of Peter Temin's The Roman Market Economy

By François Velde

Journal of Economic Literature, December 2014

Herein, I review Peter Temin's book, "The Roman Market Economy", and take the occasion to alert economists to the exciting work that is being done and could be done in the economic history of the ancient world. (JEL C80, N01, N13, N73)

Book Reviews

Journal of Economic Literature, December 2014

Front Matter

Journal of Economic Literature, December 2014

Annotated Listing of New Books

Journal of Economic Literature, December 2014

JEL Classification System

Journal of Economic Literature, December 2014

Doctoral Dissertations in Economics

Journal of Economic Literature, December 2014

Price Reaction to Information with Heterogeneous Beliefs and Wealth Effects: Underreaction, Momentum, and Reversal

By Marco Ottaviani and Peter Norman Sørensen

American Economic Review, January 2015

This paper analyzes how asset prices in a binary market react to information when traders have heterogeneous prior beliefs. We show that the competitive equilibrium price underreacts to information when there is a bound to the amount of money traders are ...

Infrastructure Quality and the Subsidy Trap

By Shaun McRae

American Economic Review, January 2015

Electricity and water are often subsidized in developing countries to increase their affordability for low-income households. Ideally, such subsidies would create sufficient demand in poor neighborhoods to encourage private investment in their infrastruct...

Efficient Matching under Distributional Constraints: Theory and Applications

By Yuichiro Kamada and Fuhito Kojima

American Economic Review, January 2015

Many real matching markets are subject to distributional constraints. These constraints often take the form of restrictions on the numbers of agents on one side of the market matched to certain subsets on the other side. Real-life examples include restric...

Teacher Quality Policy When Supply Matters

By Jesse Rothstein

American Economic Review, January 2015

Teacher contracts that condition pay and retention on demonstrated performance can improve selection into and out of teaching. I study alternative contracts in a simulated teacher labor market that incorporates dynamic self-selection and Bayesian learning...

Reallocation and Technology: Evidence from the US Steel Industry

By Allan Collard-Wexler and Jan De Loecker

American Economic Review, January 2015

We measure the impact of a drastic new technology for producing steel—the minimill—on industry-wide productivity in the US steel industry, using unique plant-level data between 1963 and 2002. The sharp increase in the industry's productivity is linked...

Mergers When Prices Are Negotiated: Evidence from the Hospital Industry

By Gautam Gowrisankaran, Aviv Nevo, and Robert Town

American Economic Review, January 2015

We estimate a bargaining model of competition between hospitals and managed care organizations (MCOs) and use the estimates to evaluate the effects of hospital mergers. We find that MCO bargaining restrains hospital prices significantly. The model demonst...

Paying Attention or Paying Too Much in Medicare Part D

By Jonathan D. Ketcham, Claudio Lucarelli, and Christopher A. Powers

American Economic Review, January 2015

We study whether people became less likely to switch Medicare prescription drug plans (PDPs) due to more options and more time in Part D. Panel data for a random 20 percent sample of enrollees from 2006-2010 show that 50 percent were not in their original...

Cellular Service Demand: Biased Beliefs, Learning, and Bill Shock

By Michael D. Grubb and Matthew Osborne

American Economic Review, January 2015

Following FCC pressure to end bill shock, cellular carriers now alert customers when they exceed usage allowances. We estimate a model of plan choice, usage, and learning using a 2002-2004 panel of cellular bills. Accounting for firm price adjustment, we ...

Rational Inattention to Discrete Choices: A New Foundation for the Multinomial Logit Model

By Filip Matějka and Alisdair McKay

American Economic Review, January 2015

Individuals must often choose among discrete actions with imperfect information about their payoffs. Before choosing, they have an opportunity to study the payoffs, but doing so is costly. This creates new choices such as the number of and types of questi...

Revealed (P)Reference Theory

By Efe A. Ok, Pietro Ortoleva, and Gil Riella

American Economic Review, January 2015

This paper develops axiomatically a revealed preference theory of reference-dependent choice behavior. Instead of taking the reference for an agent as exogenously given in the description of a choice problem, we suitably relax the Weak Axiom of Revealed P...