Dynamic Incentives and Permit Market Equilibrium in Cap-and-Trade Regulation

By Yuta Toyama

American Economic Journal: Microeconomics, August 2024

This paper develops and estimates a dynamic structural model of emissions abatement, investment, and permit trading with banking under cap-and-trade regulation. The model accounts for forward-looking behavior and transaction costs in the permit market, wh...

Everyday Econometricians: Selection Neglect and Overoptimism When Learning from Others

By Kai Barron, Steffen Huck, and Philippe Jehiel

American Economic Journal: Microeconomics, August 2024

This study explores selection neglect in an experimental investment game where individuals can learn from others' outcomes. Experiment 1 examines aggregate-level equilibrium behavior. We find strong evidence of selection neglect and corroborate several co...

Selling Dreams: Endogenous Optimism in Lending Markets

By Luc Bridet and Peter Schwardmann

American Economic Journal: Microeconomics, August 2024

We propose a model of borrower optimism in competitive lending markets with asymmetric information. Borrowers engage in self-deception to arrive at beliefs that optimally trade off the anticipatory utility benefits and material costs of optimism. Lenders'...

The Dynamic Effects of Recycling on Oligopoly Competition: Evidence from the US Paper Industry

By Eddie Watkins

American Economic Journal: Microeconomics, August 2024

Consumer recycling generates new intermediate inputs. If some of the inputs are used to manufacture a substitute for the original product, the primary seller faces an incentive to reduce current output and raise rivals' future costs. I find that firms in ...

Correlation Neglect in Student-to-School Matching

By Alex Rees-Jones, Ran Shorrer, and Chloe Tergiman

American Economic Journal: Microeconomics, August 2024

We present results from three experiments containing incentivized school choice scenarios. In these scenarios, we vary whether schools' assessments of students are based on a common priority (inducing correlation in admissions decisions) or are based on i...

Negotiating Cooperation under Uncertainty: Communication in Noisy, Indefinitely Repeated Interactions

By Fabian Dvorak and Sebastian Fehrler

American Economic Journal: Microeconomics, August 2024

Case studies of cartels and recent theory suggest that communication is a key factor for cooperation under imperfect monitoring, where actions can only be observed with noise. We conduct a laboratory experiment to study how communication affects cooperati...

Beliefs, Learning, and Personality in the Indefinitely Repeated Prisoner's Dilemma

By David Gill and Yaroslav Rosokha

American Economic Journal: Microeconomics, August 2024

We aim to understand the role and evolution of beliefs in the indefinitely repeated prisoner's dilemma (IRPD). To do so, we elicit beliefs about the supergame strategies chosen by others. We find heterogeneity in beliefs and changes in beliefs with experi...

Limited Strategic Thinking and the Cursed Match

By Olivier Bochet and Jacopo Magnani

American Economic Journal: Microeconomics, August 2024

In vertically differentiated matching markets with private information, agents face an acceptance curse: being accepted as a partner conveys bad news. We experimentally investigate whether individuals anticipate the acceptance curse in such an environment...

Dynamic Oligopoly Pricing with Asymmetric Information: Implications for Horizontal Mergers

By Andrew Sweeting, Xuezhen Tao, and Xinlu Yao

American Economic Journal: Microeconomics, August 2024

We model repeated pricing by differentiated product firms when each firm has private information about its serially correlated marginal cost. In a fully separating equilibrium of the dynamic game, signaling incentives can lead equilibrium prices to be sig...

A Kinky Consistency: Experimental Evidence of Behavior under Linear and Nonlinear Budget Constraints

By Emiliano Huet-Vaughn, Ethan M. L. McClure, and Juan Carlos Suárez Serrato

American Economic Journal: Microeconomics, August 2024

Individuals face nonlinear incentives in myriad situations. We test a fundamental assumption in such settings: that individuals display stable preferences when facing linear and nonlinear incentives. We use a laboratory experiment to characterize how reve...

Concentration and Geographic Proximity in Antitrust Policy: Evidence from Bank Mergers

By David Benson, Samuel Blattner, Serafin Grundl, You Suk Kim, and Ken Onishi

American Economic Journal: Microeconomics, August 2024

Antitrust often uses the Herfindahl-Hirschman Index (HHI) for merger screening and review. We argue that HHI-based antitrust policy using predefined markets in the banking industry misses anticompetitive effects that are predicted by the proximity of merg...

Communicating about Confidence: Cheap Talk with an Ambiguity-Averse Receiver

By Philippe Colo

American Economic Journal: Microeconomics, August 2024

An expert, who is only informed of the probability of possible states, communicates with a decision-maker through cheap talk. The decision-maker considers different probability distributions over states as possible and is ambiguity averse. I show that all...

Public Debt and the Political Economy of Reforms

By Pierre C. Boyer, Brian Roberson, and Christoph Esslinger

American Economic Journal: Microeconomics, August 2024

How do electoral incentives influence the choice to experiment with a policy reform that generates uncertain future benefits? To answer this question, we examine a two-period model of redistributive politics with uncertain policy outcomes involving a mixt...

Intelligence Disclosure and Cooperation in Repeated Interactions

By Marco Lambrecht, Eugenio Proto, Aldo Rustichini, and Andis Sofianos

American Economic Journal: Microeconomics, August 2024

How does information about players' intelligence affect strategic behavior? Game theory, based on the assumption of common knowledge of rationality, does not provide useful predictions. We experimentally show that, in the Prisoner's Dilemma, disclosure ha...

Monitoring Teams

By Marina Halac, Ilan Kremer, and Eyal Winter

American Economic Journal: Microeconomics, August 2024

A principal incentivizes a group of agents to work by choosing a monitoring structure and a scheme of performance-contingent rewards. The monitoring structure partitions the set of agents into monitoring teams, each delivering a signal of joint performanc...

Monopolization with Must-Haves

By Enrique Ide and Juan-Pablo Montero

American Economic Journal: Microeconomics, August 2024

An increasing number of monopolization cases have been constructed around the notion of "must-have" items: products that distributors must carry to "compete effectively." Motivated by these cases, we consider a multiproduct setting where upstream supplier...

Call for Papers: Sydney Annual Business Research Conference (SABRC) 2025

[News]

July 29, 2024

The submission deadline is October 25, 2024.

2024 Annual National HBCU Week Conference

[News]

July 29, 2024

The conference will be held on September 15–19, 2024, in Philadelphia, Pennsylvania.

Front Matter

American Economic Review, August 2024

Crowding in School Choice

By William Phan, Ryan Tierney, and Yu Zhou

American Economic Review, August 2024

We consider the market design problem of matching students to schools in the presence of crowding effects. These effects are salient in parents' decision-making and the empirical literature; however, they cause difficulties in the design of satisfactory m...