Optimal Pricing of a New Utility Service: The Case of Piped Water in Vietnam 24 June 2024 Quy-Toan Do and Hanan G. JacobyAs utility services expand throughout the developing world, providers must grapple with how to set prices to recover average costs. Data from a multi-year randomized pricing experiment among nearly 1500 recently-connected piped water customers in Vietnam reveal month-to-month demand persistence. Based on structural demand estimation, we document how endogenous preferences, if unaccounted for, can lead to low take-up and thereby threaten the financial viability of the new water utility.
Excess Capacity and Demand Driven Business Cycles 14 June 2024 Tiancheng SunI build a macroeconomic model that features chronic excess capacity. Firms can use capacity to compete for buyers who are not fully attentive to prices. If one firm expands capacity while other firms do not, it “steals” or attracts profitable demand from others. Theoretically, I show that this capacity competition can cause an over-accumulation of capacity. In the presence of chronic excess capacity, capital resources can be slack, and demand shocks can have large effects on output.
A Structural Analysis of Mental Health and Labor Market Trajectories 14 June 2024 Gregory Jolivet and Fabien Postel-VinayWe analyze the joint life-cycle dynamics of labor market and mental health outcomes while allowing for two-way interactions between work and mental health. We model selection into jobs on a labor market with search frictions, accounting for the level of exposure to stress in each job using data on occupational health contents. Taking our model to British data from Understanding Society combined with information from O*NET, we estimate the impact of job characteristics on health dynamics and the effects of health and job stress contents on career choices.
Feedback and Learning: The Causal Effects of Reversals on Judicial Decision-Making 14 June 2024 Manudeep Bhuller and Henrik SigstadDo judges respond to reversals of their decisions? Using random assignment of cases across two stages of the criminal justice system in Norway and a novel dataset linking trial court decisions to reversals in appeals courts, we provide causal evidence on feedback effects in judicial decision-making. By exploiting differences in the tendencies of randomly assigned appeal panels to reverse trial court decisions, we show that trial court judges who receive a reversal of a sentence respond by updating the likelihood of imposing a prison sentence in the direction of the reversal in future cases.
Imagining the Future: Memory, Simulation, and Beliefs 12 June 2024 Pedro Bordalo, Giovanni Burro, Katherine Cofmann, Nicola Gennaioli, and Andrei ShleiferHow do people form beliefs about novel risks, with which they have little or no experience? Motivated by survey data on beliefs about Covid we collected in 2020, we build a model based on the psychology of selective memory. When a person thinks about an event, different experiences compete for retrieval, and retrieved experiences are used to simulate the event based on how similar they are to it. The model predicts that different experiences interfere with each other in recall and that non domain-specific experiences can bias beliefs based on their similarity to the assessed event.
Convicting Corrupt Officials: Evidence from Randomly Assigned Cases 12 June 2024 Sebastian AxbardCan the judiciary help root out government corruption? This paper exploits the random assignment of court cases to justices who exhibit varying degrees of strictness to examine how convicting corrupt officials affects local government outcomes in the Philippines. I document that convictions improve the management of local public finances and reduce associated corruption. An exploration of mechanisms suggests that legal deterrence effects contribute to these findings.
Stock Market Participation, Inequality, and Monetary Policy 11 June 2024 Davide Melcangi and Vincent SterkRecent literature has shown that the fraction of liquidity-constrained households in the population critically determines the mix of transmission channels of monetary policy. In this paper, we bring a different but important dimension of heterogeneity to the forefront: stock market participation. We show that the stock market participation rate not only shapes the mix of policy channels, but also heavily affects the aggregate responses.
‘You Will:’ A Macroeconomic Analysis of Digital Advertising 11 June 2024 Jeremy Greenwood, Yueyuan Ma, and Mehmet YorukogluAn information-based model is developed where traditional and digital advertising finance the provision of free media goods and affect price competition. Digital advertising is directed toward consumers while traditional advertising is undirected. The equilibrium is suboptimal. Media goods, if valued by the consumer, are under provided with both types of advertising.
