NewAuctions with Frictions: Recruitment, Entry, and Limited Commitment 15 June 2025 Stephan Lauermann and Asher WolinskyAuction models are convenient abstractions of informal price-formation processes that arise in markets for assets or services. These processes involve frictions like bidder recruitment costs for sellers, participation costs for bidders, and limitations on sellers’ commitment abilities. This paper develops an auction model that captures such frictions.
NewSearch Direction: Position Externalities and Position Auction Bias 15 June 2025 Simon P. Anderson and Régis RenaultWe formulate a tractable model of pricing under directed search with heterogeneous firm demands. Demand characteristics drive bids in a position auction and enable us to bridge insights from the ordered search literature to those in the position auction literature. Equilibrium pricing implies that the marginal consumer’s surplus decreases down the search order, so consumers optimally follow the firms’ position ordering. A firm suffers from “business stealing” by firms that precede it and “search appeal” from subsequent firms.
NewRevisiting the Non-Parametric Analysis of Time-Inconsistent Preferences 9 June 2025 Federico Echenique and Gerelt TserenjigmidWe revisit the recent revealed preference analysis of sophisticated quasi-hyperbolic consumers by Blow, Browning, and Crawford (2021) (BBC). We show that BBC’s revealed preference test is too lax. There are non-rationalizable data that would pass their test. A basic problem with their test is that it requires finding a certain endogenous elasticity, without regard to the rationalizing utility. Their approach motivates a more stringent test, also based on first-order conditions, that would connect the endogenous elasticity and utility: We show that this test is also too lax.
NewOverconfidence and Prejudice 9 June 2025 Paul Heidhues, Botond Kőszegi, and Philipp StrackWe develop a model of multi-dimensional misspecified learning in which an overconfident agent learns about groups in society from observations of his and others’ successes. We show that the average person sees his group relative to other groups too positively, and this in-group bias exhibits systematic comparative-statics patterns. First, a person is most likely to have negative opinions about other groups he competes with. Second, while information about another group’s achievements does not lower a person’s prejudice, information about economic or social forces affecting the group can, and personal contact with group members has a beneficial effect that is larger than in classical settings.
NewCommunity Enforcement with Endogenous Records 9 June 2025 Harry PeiI study repeated games with anonymous random matching where players can add or remove signals from their records. The ability to manipulate records introduces monotonicity constraints on players’ continuation values, under which sufficiently long-lived players will almost never cooperate. When players’ expected lifespans are intermediate, their ability to sustain cooperation depends on (i) whether their actions are complements or substitutes and (ii) whether manipulation takes the form of adding or removing signals.
NewBehavioral Causal Inference 9 June 2025 Ran SpieglerWhen inferring causal effects from correlational data, a common practice by professional researchers but also lay people is to control for potential confounders. Inappropriate controls produce erroneous causal inferences. I model decision-makers who use endogenous observational data to learn actions’ causal effect on payoff-relevant outcomes. Different decision-maker types use different controls. Their resulting choices affect the very correlations they learn from, thus calling for equilibrium analysis of the steady-state welfare cost of bad controls.
NewMaking Decisions under Model Misspecification 9 June 2025 Simone Cerreia-Vioglio, Lars Peter Hansen, Fabio Maccheroni, and Massimo MarinacciWe use decision theory to confront uncertainty that is sufficiently broad to incorporate “models as approximations.” We presume the existence of a featured collection of what we call “structured models” that have explicit substantive motivations. The decision maker confronts uncertainty through the lens of these models, but also views these models as simplifications, and hence, as misspecified.
