Consumers rely on intermediaries (“influencers”) such as social media recommendations to provide information about products. The advice may be mixed with endorsement in a way that is unobservable to the follower, creating a trade‐off for influencers between the best advice and the most revenue. This article models the dynamic relationship between an influencer and a follower. The relationship evolves

This article studies moral hazard in teams where workers' wages depend on two types of performance measures: objective team output and subjective evaluations. The evaluations include both self‐ and peer evaluations. I find that when evaluations become less subjective, workers' wages should be more sensitive not only to their evaluations but also to the team's output. I also show that subjective evaluations

Optimally reallocating human capital to tasks is key for an organization to successfully navigate a transition. We study how to design employment contracts to allocate employees to different valuable projects within an organization given two simultaneous challenges: The employees have private information about their cost of effort, and they exert unobservable effort. The optimal contract menu pairs

We examine the adoption of fuel‐efficient precalciner kilns in the cement industry using the universe of adoption decisions in the United States over 1973–2013. We find that cement plants are more likely to adopt the technology if fuel costs are high, nearby competitors are few, and local demand conditions are favorable. We relate the findings to the Schumpeterian and induced innovation hypotheses

We analyze welfare under differential versus uniform pricing across oligopoly markets that differ in costs of service, and establish general demand conditions for differential pricing by symmetric firms to increase consumer surplus, profit, and total welfare. The analysis reveals why competitive differential pricing is generally beneficial—more than price discrimination—but not always, including why

We consider demand function competition with a finite number of agents and private information. We show that any degree of market power can arise in the unique equilibrium under an information structure that is arbitrarily close to complete information. Regardless of the number of agents and the correlation of payoff shocks, market power may be arbitrarily close to zero (the competitive outcome) or

We estimate the effects of hospital mergers, using detailed data containing medical supply transactions (representing 23% of operating costs) from a sample of US hospitals, 2009–2015. Pre‐merger price variation across hospitals (Gini coefficient 7%) suggests significant opportunities for cost decreases. However, we observe limited evidence of actual savings. In this retrospective study, targets realized

Unlike standard auctions, we show that competitive procurement may optimally limit competition or use inefficient allocation rules that award the project to a less efficient firm with positive probability. Procurement projects often involve ex post moral hazard after the competitive process is over. A procurement mechanism must combine an incentive scheme with the auction to guard against firms bidding

This study presents and provides an explanation for a novel stylized fact: both high‐performing and troubled companies withhold issuing earnings guidance. We assume that the manager's ability affects the level of earnings and the accuracy of guidance, but issuing a forecast is costless for all manager types. Managers are thus able to signal their ability through accuracy in their forecasts. While high

This corrigendum corrects the following article: Archsmith, J., Gillingham, K.T., Knittel, C.R. and Rapson, D.S. “Attribute substitution in household vehicle portfolios.” The RAND Journal of Economics, Vol. 51 (2020), pp. 1162–1196. https://doi.org/10.1111/1756‐2171.12353 In the original publication, Panel A of Tables 9 and 10 mistakenly duplicated the data from the respective Panel B. The two corrected

Roughly three quarters of vehicles are purchased into multi‐car households. We study whether households are willing to substitute attributes, such as fuel economy, across vehicles within their portfolio. We develop a novel strategy to separately identify idiosyncratic preferences for an attribute from these within‐portfolio effects. Using the universe of household vehicle registration records in California

Before purchase, a buyer of an experience good learns about the product's fit using various information sources, including some of which the seller may be unaware of. The buyer, however, can conclusively learn the fit only after purchasing and trying out the product. We show that the seller can use a simple mechanism to take best advantage of the buyer's post‐purchase learning to maximize his guaranteed‐profit

A social planner selects heterogeneously biased experts to (either sequentially or simultaneously) acquire costly signals, and then agents vote between two alternatives. To maximize social welfare, the social planner adopts an alternating mechanism—choosing extremely biased experts whose preferences oppose the pivotal voter's current preference—in the optimal sequential mechanism, whereas she chooses

Seller reputation, generated by buyer feedback, is critical to fostering trust in online marketplaces. Marketplaces or sellers may choose to compensate buyers for providing feedback. Signaling theory predicts that only sellers of high‐quality products will reward buyers for truthful feedback, especially when a product lacks any feedback and when the seller is not established. We confirm these hypotheses

Differentiated products demand systems are a workhorse for understanding the price effects of mergers, the value of new goods, and the contribution of products to seller networks. Berry, Levinsohn, and Pakes (1995) provide a flexible random coefficients logit model which accounts for the endogeneity of prices. This article reviews and combines several recent advances related to the estimation of BLP‐type

We consider a cheap‐talk setting with two senders and a continuum of receivers with heterogenous preferences. Each receiver is constrained to listen to one of the senders but can choose which sender to listen to. The introduction of a second sender facilitates more informative communication and even enables full communication for a large set of sender preference pairs. We use the model to assess the

We study a recent case where most gynecologists in one city formed a trade association to bargain for better rates with insurance companies. After unsuccessful negotiations, the physicians jointly terminated their insurer contracts and set a minimum price. We find that subsequent realized prices coincided with Nash‐Bertrand prices, and that the minimum price was barely binding. We show that these actions

We analyze how insurance law can mitigate moral hazard by allowing insurers to reduce or cancel coverage in some circumstances. We consider an incomplete contract setting in which the insurer may obtain information related to the policyholder's behavior through a costly audit of the circumstances of the loss. Court decisions are based on a standard of proof such as the balance of probabilities. We

We explore the optimal disclosure policy of a certification intermediary where (i) the seller decides on entry and investment in product quality, and (ii) the buyers observe an additional public signal on quality. The optimal policy maximizes rent extraction from the seller by trading off incentives for entry and investment. We identify conditions under which full, partial or no disclosure can be optimal

A decision maker makes a ruling on a random case in each period. She is uncertain about the correct ruling until conducting a costly investigation. A ruling establishes a precedent, which cannot be violated under binding precedent. We compare the information acquisition incentives, the evolution of standards and the social welfare under nonbinding and binding precedents. Compared to nonbinding precedent

In auctions with externalities, it is well‐known that the core can be empty, which is undesirable both in terms of stability and “fairness.” Nevertheless, some auction outcome must be chosen. We separate deviations into two types: deviations by paying more and deviations by refusing to pay. In high‐stakes auctions where bidders also care about their reputation, the latter are unlikely to occur, or

In 2010, the US Supreme Court loosened contribution limits to Political Action Committees (PACs), sparking fears that big donors could exert outsize influence on elections by funding PAC advertising. However, PACs are potentially handicapped when buying advertising time; data from 2012 reveal that PACs pay 32% above regulated campaign rates. I estimate a model of demand for advertising by PACs, exploiting

We develop a word‐of‐mouth search model where information flows from the old to the new generation for an experience good with unknown quality. We study the features of the social network that determine product quality and welfare and characterize the demand‐side (under provision of search effort) and supply‐side (inefficient entry by firms) factors that result in inefficiencies. One striking result

This article unifies various approaches to the analysis of exclusive dealing that so far have been regarded as distinct. The common element of these approaches is that firms depart from efficient pricing, raising marginal prices above marginal costs. We show that with distorted prices, exclusive dealing can be directly profitable and anticompetitive provided that the dominant firm enjoys a competitive

We propose a framework for identification and estimation of a private values model with unobserved heterogeneity from bid data in English auctions, using variation in the number of bidders across auctions, and extend the framework to settings where the number of bidders is not cleanly observed in each auction. We illustrate our method on data from eBay Motors auctions. We find that unobserved heterogeneity

This article develops a computational framework to analyze dynamic auctions and uses it to investigate the impact of information sharing among bidders. We show that allowing for the dynamics implicit in many auction environments enables the emergence of equilibrium states that can only be reached when firms are responding to dynamic incentives. The impact of information sharing depends on the extent

This article studies how vertical integration and upstream R&D subsidy affect innovation and welfare in vertically separated industries. I formulate a dynamic structural model of a dominant upstream firm and oligopolistic downstream firms that invest in complementary innovations. I estimate the model using data on the System‐on‐Chip (SoC) and smartphone industries. The results suggest that a vertical

We consider a preemption game between competing groups; firms lobbying individually for their groups' interests provide an empirical example. Among symmetric groups, the first firm to take action bears an (unobserved) cost and wins the prize on behalf of its group. In equilibrium, the firm with the lowest cost takes action, but with delay. More competition and a smaller ratio of costs to benefits reduce

We show that a monopolist's profit is higher if he refrains from collecting coarse information on his customers, sticking to constant uniform pricing rather than recognizing customers' segments through their purchase history. In the Markov perfect equilibrium with coarse information collection, after each commitment period, a new introductory price is offered to attract new customers, creating a new

We present empirical evidence supporting that used cars sold by dealers have higher quality: (i) dealer transaction prices are higher than unmediated market prices, and this dealer premium increases in the age of the car as a ratio and is hump‐shaped in dollar value, and (ii) used cars purchased from dealers are less likely to be resold. In a model, we show that these empirical facts can be rationalized

In a government auction program where first‐price auctions generate significantly higher revenue than English auctions, I document evidence that bidders are uncertain about the number of auction entrants. Motivated by additional data evidence, I estimate a structural model of auctions in which rivals' participation is stochastic, allowing for bidders' risk aversion and asymmetry. Counterfactual simulations

We study commodity taxation in markets where firms, such as Internet Service Providers, energy suppliers, and payment card platforms, adopt multi‐part tariffs. We show that ad valorem taxes can correct underprovision and hence increase welfare, provided the government applies differentiated tax rates to the usage and access parts of the tariff. We obtain this result in different settings, including