Contingent Thinking and the Sure-Thing Principle: Revisiting Classic Anomalies in the Laboratory 22 October 2023 Ignacio Esponda and Emanuel VespaWe present an experimental framework to study the extent to which failures of contingent thinking explain classic anomalies in a broad class of environments, including overbidding in auctions and the Ellsberg paradox. We study environments in which the subject’s choices affect payoffs only in some states, but not in others.
Multi-Dimensional Screening: Buyer-Optimal Learning and Informational Robustness 9 October 2023 Rahul Deb and Anne-Katrin RoeslerA monopolist seller of multiple goods screens a buyer whose type vector is initially unknown to both but drawn from a commonly known prior distribution. The seller chooses a mechanism to maximize her worst-case profits against all possible signals from which the buyer can learn about his values for the goods. We show that it is robustly optimal for the seller to bundle goods with identical demands (these are goods that can be permuted without changing the buyer’s prior type distribution).
Competition and Career Advancement 9 October 2023 Julian V. Johnsen, Hyejin Ku, and Kjell G. SalvanesIn standard promotion tournaments, contestants are ranked based on their output or productivity. We argue that workers’ career progression may also depend on their relative rankings in dimensions a priori unrelated to their job performance, such as visibility or in-person presence. Such implicit tournaments may rationalize a variety of seemingly counterproductive practices in the workplace, including long working hours, low uptake of statutory leave, and presenteeism.
Incorporating Diagnostic Expectations into the New Keynesian Framework 9 October 2023 Jean-Paul L'Huillier, Sanjay R. Singh, and Donghoon YooDiagnostic expectations constitute a realistic behavioral model of inference. This paper shows that this approach to expectation formation can be productively integrated into the New Keynesian framework. Diagnostic expectations generate endogenous extrapolation in general equilibrium.
Unequal expenditure switching: Evidence from Switzerland 1 October 2023 Raphael Auer, Ariel Burstein, Sarah Lein, and Jonathan VogelWhat are the unequal effects of changes in consumer prices on the cost of living? In the context of changes in import prices (driven by, e.g., changes in trade costs or exchange rates), most analyses focus on variation across households in initial expenditure shares on imported goods.
Path dependency in physician decisions 24 September 2023 Lawrence Jin, Rui Tang, Han Ye, Junjian Yi, and Songfa ZhongWe examine path dependency in physician decisions in an emergency department setting, and find that physicians’ treatment decisions for the current and previous patients are positively correlated. We show that the positive autocorrelation is higher when the current patient is of greater medical uncertainty or more similar to the previous patient in terms of observed characteristics and when the physician is less experienced or more fatigued.
Exploiting Growth Opportunities: The Role of Internal Labor Markets 12 September 2023 Giacinta Cestone, Chiara Fumagalli, Francis Kramarz, and Giovanni PicaWe explore how business groups use internal labor markets (ILMs) in response to changing economic conditions. We show that following the exit of a large industry competitor, group-affiliated firms expand and gain market share by increasing their reliance on the ILM to ensure swift hiring, especially of technical managers and skilled blue collar workers.
Informality, Consumption Taxes and Redistribution 12 September 2023 Pierre Bachas, Lucie Gadenne, and Anders JensenCan taxes on consumption redistribute in developing countries? Contrary to consensus, we show that taxing consumption is progressive once we account for informal consumption. Using household expenditure surveys in 32 countries we proxy for informal consumption using the type of store where purchases occur.
