Accepted Papers

New

Arbitration with Uninformed Consumers

9 February 2025

Mark Egan, Gregor Matvos, and Amit Seru

This paper studies the impact of the arbitrator selection process on consumer outcomes. Using data from consumer arbitration cases in the securities industry over the past two decades, where we observe detailed information on case characteristics, the randomly generated list of potential arbitrators presented to both parties, the selected arbitrator, and case outcomes, we establish several motivating facts. These facts suggest that firms hold an informational advantage over consumers in selecting arbitrators, resulting in industry-friendly arbitration outcomes.

New

“Bid Shopping” in Procurement Auctions with Subcontracting

25 January 2025

Raymond Deneckere and Daniel Quint

We analyze the equilibrium effects of “bid shopping” – a contractor soliciting a subcontractor bid for part of a project prior to a procurement auction, then showing that bid to a competing subcontractor in an attempt to secure a lower price. Such conduct is widely criticized as unethical by professional organizations, and has been the target of legislation at both the federal and state level, but is widespread in procurement auctions in many places.

New

A Theory of Cash Flow-Based Financing with Distress Resolution

25 January 2025

Barney Hartman-Glaser, Simon Mayer, and Konstantin Milbradt

We develop a dynamic contracting theory of asset- and cash flow-based financing that demonstrates how firm, intermediary, and capital market characteristics jointly shape firms’ financing constraints. A firm with imperfect access to equity financing covers financing needs through costly sources: an intermediary and retained cash. The firm’s financing capacity is endogenously determined by either the liquidation value of assets (asset-based) or the intermediary’s going-concern valuation of the firm’s cash flows (cash flow-based).

New

Wealth Inequality and Asset Prices

25 January 2025

Matthieu Gomez

Wealthy households disproportionately invest in equity, causing equity returns to generate large and persistent fluctuations in top wealth inequality. Motivated by this observation, I study the joint dynamics of asset prices and wealth inequality in a model where a subset of agents (“entrepreneurs”) hold levered positions on the economy. In the model, as in the data, the wealth distribution is stochastic and it exhibits a Pareto tail, with a tail index that depends on the logarithmic average return of top households.

New

Melons as Lemons: Asymmetric Information, Consumer Learning and Seller Reputation

15 January 2025

Jie Bai

Quality provision is often low in many developing markets, and firms commonly lack a reputation for quality. This paper examines this issue both theoretically and empirically in the context of retail watermelon markets in China. I first demonstrate the existence of significant asymmetric information on quality between sellers and buyers, as well as the absence of a quality premium at baseline. To explain this, I develop a theoretical model that highlights the role of consumer beliefs and costly signaling in influencing sellers’ reputation incentives.

Job Displacement, Unemployment Benefits and Domestic Violence

10 January 2025

Sonia Bhalotra, Diogo Britto, Paolo Pinotti, and Breno Sampaio

We estimate impacts of male job loss, female job loss, and male unemployment benefits on domestic violence (DV) in Brazil. We merge individual-level employment and welfare registers with different measures of domestic violence: judicial cases brought to criminal courts, the use of public shelters by victims, and mandatory DV notifications by health providers. Leveraging mass layoffs for identification, we first show that both male and female job loss, independently, lead to large and pervasive increases in DV.

Voting on a Trade Agreement: Firm Networks and Attitudes Toward Openness

9 January 2025

Esteban Méndez and Diana Van Patten

We exploit a unique event to study the extent to which popular attitudes toward trade are driven by economic fundamentals. In 2007, Costa Rica put a free trade agreement (FTA) to a national referendum. With a single question on the ballot, 59% of Costa Rican adult citizens cast a vote on whether they wanted an FTA with the United States to be ratified or not. We merge disaggregated referendum results, which break new ground on anonymity-compatible voting data, with employer-employee, customs, and firm-to-firm transactions data, and data on household composition and expenditures.

Inference with a single treated cluster

3 January 2025

Andreas Hagemann

I introduce a generic method for inference about a scalar parameter in research designs with a finite number of heterogeneous clusters where only a single cluster received treatment. This situation is commonplace in difference-in-differences estimation but the test developed here applies more broadly. I show that the test controls size and has power under asymptotics where the number of observations within each cluster is large but the number of clusters is fixed. The test combines weighted, approximately Gaussian parameter estimates with a rearrangement procedure to obtain its critical values.