Economics - Research Publications

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    When Walras meets Vickrey
    Delacrétaz, D ; Loertscher, S ; Mezzetti, C (The Econometric Society, 2022-11)
    We consider general asset market environments in which agents with quasilinear payoffs are endowed with objects and have demands for other agents' objects. We show that if all agents have a maximum demand of one object and are endowed with at most one object, the VCG transfer of each agent is equal to the largest net Walrasian price of this agent. Consequently, the VCG deficit is equal to the sum of the largest net Walrasian prices over all agents. Generally, whenever Walrasian prices exist, the sum of the largest net Walrasian prices is a nonnegative lower bound for the deficit, implying that no dominant‐strategy mechanism runs a budget surplus while respecting agents' ex post individual rationality constraints.
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    Bilateral Trade with Multiunit Demand and Supply
    Loertscher, S ; Marx, LM (INFORMS, 2022-05-02)
    We study a bilateral trade problem with multiunit demand and supply and one-dimensional private information. Each agent geometrically discounts additional units by a constant factor. We show that when goods are complements, the incentive problem—measured as the ratio of second-best to first-best social surplus—becomes less severe as the degree of complementarity increases. In contrast, if goods are substitutes and each agent’s distribution exhibits linear virtual types, then this ratio is a constant. If the bilateral trade setup arises from prior vertical integration between a buyer and a supplier, with the vertically integrated firm being a buyer facing an independent supplier, then the ratio of second-best to first-best social surplus is, in general, not monotone in the degree of complementarity when products are substitutes and is increasing when products are complements. Extensions to profit maximization by a market maker and a discrete public good problem show that the broad insight that complementarity of goods mitigates the incentive problem generalizes to these settings. This paper was accepted by Joshua Gans, business strategy. Funding: Financial support from the Samuel and June Hordern Endowment, the University of Melbourne Faculty of Business & Economics [Eminent Research Scholar Grant], and the Australian Research Council [Grant DP200103574] is acknowledged.
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    Overriding in Teams: The Role of Beliefs, Social Image, and Gender
    Guo, J ; Recalde, MP (INFORMS, 2023-04)
    To shed light on the factors that affect who speaks up in teams in the workplace, we study willingness to speak up after someone has raised an opinion. We call voicing disagreement overriding and study this behavior in a laboratory experiment where participants answer multiple choice questions in pairs. In a control treatment, participants interact anonymously. In a photo treatment, both participants see the photo of the person they are matched with at the beginning of the group task. Using a series of incentivized tasks, we elicit beliefs about the likelihood that each possible answer option to a question is correct. This allows us to measure disagreement and to tease apart the role of disagreement versus preferences in the decision to override ideas in teams. Results show that anonymity increases overriding. This treatment effect is driven by social image costs. Analysis of heterogeneity in behavior by gender reveals no differences between the likelihood that men and women override. However, we find some evidence that men and women are treated differently; when participants disagree with their partner, they are more likely to override a woman than a man. Preferences seem to in part explain the differential treatment of men and women. Studying group performance, we find that overriding helps groups on average, while the gender composition of teams does not affect team performance. This paper was accepted by Yan Chen, behavioral economics and decision analysis. Funding: This work was supported by the University of Melbourne and the Australian Research Council [Grant DE190100585]. J. Guo received a Kinsman Studentship from the University of Melbourne to conduct this research. Supplemental Material: The online appendix and data files are available at https://doi.org/10.1287/mnsc.2022.4434 .
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    Double Markups, Information, and Vertical Mergers
    Loertscher, S ; Marx, LM (SAGE Publications, 2022-09-01)
    In vertical contracting models with complete information and linear prices, double markups that arise between independent firms provide an efficiency rationale for vertical mergers since these eliminate double markups (EDM). However, the double markups vanish even without vertical integration if the firms are allowed to use two-part tariffs. Hence, the efficiency rationale for vertical mergers in models of complete information requires restrictions on the contracts that firms can use. In a sense, with complete information, two-part tariffs are simply too powerful. If instead one allows incomplete information and removes the restriction on contract forms, then vertical mergers continue to have an effect that is analogous to EDM, but they also have the potential to affect the overall efficiency of the market to the detriment of society. Consequently, the social surplus effects of vertical integration depend on the underlying market structure, and vertical mergers are, in and of themselves, neither good nor bad. We illustrate through an example that with incomplete information, the private benefits from vertical integration tend to be excessive; that is, vertical mergers remain profitable even when they are socially harmful.
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    Monopoly Pricing, Optimal Randomization, and Resale
    Loertscher, S ; Muir, EV (UNIV CHICAGO PRESS, 2022-03-01)
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    Better understanding how uncertainty impacts the economy: Insights from internet search data on the importance of disaggregation
    Shields, K ; Trung, DT (CAMBRIDGE UNIV PRESS, 2022-06-21)
    Abstract We study the impact of uncertainty shocks using a disaggregated model featuring US state-level unemployment, and uncertainty measured using state-level Google search data. Importantly, the model captures spillovers across states and identifies substantial differences in peak responses and time dynamics. Moreover, the importance of national factors in propagating the effect of uncertainty is also heterogeneous across states, but less relevant than state-level factors. These heterogeneous effects are related to state-specific industry compositions and fiscal positions. In addition, we highlight the usefulness of disaggregated data in models of uncertainty and economic activity for the USA, based on the superior ability of the disaggregate model to predict aggregate uncertainty and unemployment.
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    Leadership selection: Can changing the default break the glass ceiling?
    Erkal, N ; Gangadharan, L ; Xiao, E (ELSEVIER SCIENCE INC, 2022-03-17)
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    Income and saving responses to tax incentives for private retirement savings
    Chan, MK ; Morris, T ; Polidano, C ; Vu, H (ELSEVIER SCIENCE SA, 2022-01-20)
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    Do women receive less blame than men? Attribution of outcomes in a prosocial setting
    Erkal, N ; Gangadharan, L ; Koh, BH (Elsevier BV, 2023-06-01)
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    Asymptotically optimal prior-free asset market mechanisms
    Loertscher, S ; Marx, LM (Elsevier BV, 2023-01-01)