Recovering the Anchoring of Economic Valuations

By Liang Guo

American Economic Journal: Microeconomics, November 2024

We revisit the interpretation of the anchoring effect as evidence for nonexisting or arbitrary preferences. A theory of endogenous information acquisition (i.e., deliberation) is developed to rationalize the causal dependence of economic valuations on arb...

The Inverse Product Differentiation Logit Model

By Mogens Fosgerau, Julien Monardo, and André de Palma

American Economic Journal: Microeconomics, November 2024

We introduce the inverse product differentiation logit (IPDL) model, a micro-founded inverse market share model for differentiated products that captures market segmentation according to one or more characteristics. The IPDL model generalizes the nested l...

Consistent Depth of Reasoning in Level-k Models

By David J. Cooper, Enrique Fatas, Antonio J. Morales, and Shi Qi

American Economic Journal: Microeconomics, November 2024

Level-k models often assume that individuals employ a fixed depth of reasoning across different games. We study this assumption by having subjects make choices in five classes of games chosen to identify inconsistent depth of reasoning. We demonstr...

The Status Quo and Belief Polarization of Inattentive Agents: Theory and Experiment

By Vladimír Novák, Andrei Matveenko, and Silvio Ravaioli

American Economic Journal: Microeconomics, November 2024

We show that rational but inattentive agents can become polarized ex ante. We present how optimal information acquisition and subsequent belief formation depend crucially on the agent-specific status quo valuation. Beliefs can systematically—in expectat...

Noncompete Agreements and the Welfare of Consumers

By Michael Lipsitz and Mark J. Tremblay

American Economic Journal: Microeconomics, November 2024

Employee spin-offs harm incumbent firms by increasing competition (benefiting consumers) and preventing firm owners from making beneficial investments in workers who may later spin off (harming consumers). We model noncompete agreements (NCAs) as solution...

A New Era of Midnight Mergers: Antitrust Risk and Investor Disclosures

By John M. Barrios and Thomas G. Wollmann

American Economic Journal: Microeconomics, November 2024

Antitrust authorities search public documents to discover anti-competitive mergers. Thus, investor disclosures may alert them to deals that would otherwise go undetected, creating disincentives for managers to divulge certain transactions. We study this b...

A Revealed Preference Test for Choquet and Max-Min Expected Utility with Ambiguity Aversion

By Thomas Demuynck and Clément Staner

American Economic Journal: Microeconomics, November 2024

We develop a revealed preference test for the Choquet expected utility model with ambiguity aversion, which does not rely on specific functional form assumptions on the utility index. It is computationally efficient if the number of states is not too larg...

Secure Survey Design in Organizations: Theory and Experiments

By Sylvain Chassang and Christian Zehnder

American Economic Journal: Microeconomics, November 2024

We study secure survey designs in organizational settings where fear of retaliation makes it hard to elicit truth. Theory predicts that (i) randomized-response techniques offer no improvement because they are strategically equivalent to direct elicitation...

Fair Shares and Selective Attention

By Dianna R. Amasino, Davide D. Pace, and Joël J. van der Weele

American Economic Journal: Microeconomics, November 2024

Attitudes toward fairness and redistribution differ along socioeconomic lines. To understand their formation, we conduct a large-scale experiment on attention to merit and luck and the effect of attention on fairness decisions. Randomly advantaged subject...

Bargaining in the Shadow of Uncertainty

By Marina Agranov, Hülya Eraslan, and Chloe Tergiman

American Economic Journal: Microeconomics, November 2024

In bargaining environments with stochastic future surplus, failing to delay agreement can be inefficient when the expected future surplus is sufficiently high. Theoretically, such inefficiencies never arise under unanimity rule but can arise under majorit...

Dual Moral Hazard and the Tyranny of Success

By Enrique Ide

American Economic Journal: Microeconomics, November 2024

I explain why current success can undermine an organization's ability to innovate. I consider a standard bandit problem between a safe and a risky arm with two modifications. First, a principal allocates resources. Second, an agent must install the risky ...

Decentralized Matching with Transfers: Experimental and Noncooperative Analyses

By Simin He, Jiabin Wu, Hanzhe Zhang, and Xun Zhu

American Economic Journal: Microeconomics, November 2024

We experimentally examine the Becker-Shapley-Shubik two-sided matching model. In the experiment, the aggregate outcomes of matching and surplus are affected by whether equal split is in the core and whether efficient matching is assortative; the canonical...

On Optimal Scheduling

By Kfir Eliaz, Daniel Fershtman, and Alexander Frug

American Economic Journal: Microeconomics, November 2024

We consider a decision-maker sequentially choosing among alternatives when periodic payoffs depend on both chosen and unchosen alternatives in that period. We show that when flow payoffs are the sum or product of payoffs from chosen and unchosen alternati...

Front Matter

American Economic Review, November 2024

Institution Building without Commitment

By Marco Bassetto, Zhen Huo, and José-Víctor Ríos-Rull

American Economic Review, November 2024

We propose a theory of gradualism in the implementation of good policies, suitable for environments featuring time consistency. We downplay the role of the initial period by allowing agents both to wait for future agents to start equilibrium play and to r...

Financial Technology Adoption: Network Externalities of Cashless Payments in Mexico

By Sean Higgins

American Economic Review, November 2024

Do coordination failures constrain financial technology adoption? Exploiting the Mexican government's rollout of 1 million debit cards to poor households from 2009 to 2012, I examine responses on both sides of the market and find important spillovers and ...

Sticky Spending, Sequestration, and Government Debt

By Facundo Piguillem and Alessandro Riboni

American Economic Review, November 2024

Once established, government spending programs tend to continue. A commonly held view is that spending inertia leads to unsustainable debt, ultimately requiring fiscal adjustments such as "sequestration." We show that by insuring against political turnove...

Generalized Social Marginal Welfare Weights Imply Inconsistent Comparisons of Tax Policies

By Itai Sher

American Economic Review, November 2024

This paper concerns Saez and Stantcheva's (2016) generalized social marginal welfare weights, which aggregate losses and gains due to tax policies while incorporating nonutilitarian ethical considerations. The approach evaluates local tax changes without ...

Merchants of Death: The Effect of Credit Supply Shocks on Hospital Outcomes

By Cyrus Aghamolla, Pinar Karaca-Mandic, Xuelin Li, and Richard T. Thakor

American Economic Review, November 2024

This study examines the link between credit supply and hospital health outcomes. We use bank stress tests as exogenous shocks to credit access for hospitals that have lending relationships with tested banks. We find that affected hospitals shift their ope...

Polity Size and Local Government Performance: Evidence from India

By Veda Narasimhan and Jeffrey Weaver

American Economic Review, November 2024

Developing countries have increasingly decentralized power to local governments. This paper studies the implications of a central element of decentralization (polity size) using population-based discontinuities that determine local government boundaries f...