Affiliated Common Value Auctions with Costly Entry 21 February 2025 Pauli Murto and Juuso VälimäkiMany auctions and procurement contests entail nontrivial bidding costs, which makes the bidders’ participation decisions endogenous to the auction design. We analyze the effect of different auction rules on potential bidders’ incentives to participate. We focus on first-price auctions with affiliated common values and a large pool of potential bidders. Our main interest is on auctions where the realized number of bidders is unknown at the bidding stage.
Industrial Policy Implementation: Empirical Evidence from China’s Shipbuilding Industry 18 February 2025 Panle Jia Barwick, Myrto Kalouptsidi, and Nahim Bin ZahurIndustrial policies are widely used across the world. In practice, designing and implementing these policies is a complicated task. In this paper, we assess the long-term performance of different industrial policy instruments, which include production subsidies, investment subsidies, entry subsidies, and consolidation policies. To do so, we examine a recent industrial policy in China aiming to propel the country’s shipbuilding industry to the largest globally.
Arbitration with Uninformed Consumers 9 February 2025 Mark Egan, Gregor Matvos, and Amit SeruThis 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.
“Bid Shopping” in Procurement Auctions with Subcontracting 25 January 2025 Raymond Deneckere and Daniel QuintWe 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.
A Theory of Cash Flow-Based Financing with Distress Resolution 25 January 2025 Barney Hartman-Glaser, Simon Mayer, and Konstantin MilbradtWe 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).
Wealth Inequality and Asset Prices 25 January 2025 Matthieu GomezWealthy 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.
Melons as Lemons: Asymmetric Information, Consumer Learning and Seller Reputation 15 January 2025 Jie BaiQuality 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 SampaioWe 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.
