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Working Papers

These papers are working drafts of research which often appear in final form in academic journals. The published versions may differ from the working versions provided here.

Propaganda, Alternative Media, and Accountability in Fragile Democracies

Anqi Li, Davin Raiha, Ken Shotts
March 2020

We develop a model of electoral accountability with mainstream and alternative media. In addition to regular high- and low-competence types, the incumbent may be an aspiring autocrat who controls the mainstream media and will...

Market Fragmentation

Daniel Chen, Darrell Duffie
February 19, 2020

We model a simple market setting in which fragmentation of trade of the same asset across multiple exchanges improves allocative efficiency. Fragmentation reduces the inhibiting effect of price-impact avoidance on order submission. Although fragmentation reduces...

Economics, Finance

Uniform Pricing Versus Third-Degree Price Discrimination

Dirk Bergemann, Francisco Castro, Gabriel Weintraub
February 17, 2020

We compare the revenue of the optimal third-degree price discrimination policy against a uniform pricing policy. A uniform pricing policy offers the same price to all segments of the market. Our main result establishes that...

Accounting

Experimental Design in Two-Sided Platforms: An Analysis of Bias

Ramesh Johari, Hannah Li, Gabriel Weintraub
February 13, 2020

We develop an analytical framework to study experimental design in two-sided platforms. In the settings we consider, customers rent listings; rented listings are occupied for some amount of time, then become available. Platforms typically use...

Accounting

Information Acquisition, Efficiency, and Non-Fundamental Volatility

Benjamin Hébert, Jennifer La'O...
February 7, 2020

This paper analyzes non-fundamental volatility and efficiency in a class of large games (including e.g. linear-quadratic beauty contests) that feature strategic interaction and endogenous information acquisition. We adopt the rational inattention approach to information acquisition...

Finance

The Allocation of Decision Authority to Human and Artificial Intelligence

Susan Athey, Kevin Bryan, Joshua S. Gans
January 10, 2020

The allocation of decision authority by a principal to either a human agent or an artificial intelligence (AI) is examined. The principal trades off an AI’s more aligned choice with the need to motivate the...

Economics

Benchmarking Global Production Sourcing Decisions: Where and Why Firms Offshore and Reshore

Morris A. Cohen, Shiliang Cui, Ricardo Ernst, Hau L. Lee, Arnd Huchzermeier, Panos Kouvelis, Hau L. Lee, Hirofumi Matsuo, Marc Steuber
January 8, 2020

This paper reports on the results of a global field study conducted in 2014 and 2015 among leading manufacturers from a wide range of industries. It provides insights on managerial practices that concern production sourcing...

Accounting

Towards a Better Financial System

Anat R. Admati
January 5, 2020

A healthy and stable financial system enables efficient resource allocation and risk sharing. A reckless and distorted system, however, causes enormous harm. The cycles of boom, bust, and crisis that repeatedly plague banking and finance...

Finance

Measuring Risk Information

Kevin Smith, Eric C. So
January 2020

We develop a measure of how information events impact investors’ perceptions of firms’ riskiness. We derive this measure from an option-pricing model where investors anticipate an announcement containing information on the mean and variance of...

Accounting

Adaptive Sequential Experiments with Unknown Information Arrival Processes

Yonatan Gur, Ahmadreza Momeni
2020

Sequential experiments are often designed to strike a balance between maximizing immediate payoffs based on available information, and acquiring new information that is essential for maximizing future payoffs. This trade-off is captured by the multi-armed...

Operations, Information & Technology, Big Data

On the Disclosure of Promotion Value in Platforms with Learning Sellers

Yonatan Gur, Gregory Macnamara, Daniela Saban
2020
In many marketplaces that facilitate trade with the objective of maximizing consumer surplus, prices are set by revenue-maximizing sellers but platforms can influence prices through (i) price-dependent promotion policies that can increase demand for a product...
Operations, Information & Technology

Value Loss in Allocation Systems with Provider Guarantees

Yonatan Gur, Dan A. Iancu, Xavier Warnes
2020

Centralized planning systems routinely allocate tasks to workers or service providers in order to generate the maximum possible value. These allocations can also critically influence the service providers’ well-being, and thus the planning systems are...

Operations, Information & Technology

Evaluating Firm-Level Expected-Return Proxies: Implications for Estitating Treatment Effects

Charles M. C. Lee, Eric C. So, Charles C. Y. Wang
December 30, 2019

We introduce a parsimonious framework for choosing among alternative expected-return proxies (ERPs) when estimating treatment effects. By comparing ERPs’ measurement-error variances in the cross-section and time series, we provide new evidence on the relative performance...

Accounting, Finance

Identification in Auction Models with Interdependent Costs

Paulo Somaini
December 12, 2019

This paper provides a positive identification result for first-price procurement models with asymmetric bidders, statistically dependent private signals,
and interdependent costs. When bidders are risk neutral, the model’s payoff-relevant primitives are: (i) the joint...

Economics

Online Appendix for “Identification in Auction Models with Interdependent Costs”

Paulo Somaini
December 12, 2019

An Empirical Framework for Sequential Assignment: The Allocation of Deceased Donor Kidneys

Nikhil Agarwal, Itai Ashlagi, Michael Rees, Paulo Somaini, Daniel Waldinger
December 10, 2019

A transplant can improve a patient’s life while saving several hundreds of thousands of dollars in healthcare expenditures. Organs from deceased donors, like many other scarce public resources (e.g. public housing, child-care, publicly funded long-term...

Economics

Supplement to “Identification in Auction Models with Interdependent Costs”

Paulo Somaini
December 7, 2019

Quality Selection in Two-Sided Markets: A Constrained Price Discrimination Approach

Ramesh Johari, Bar Light, Gabriel Weintraub
December 4, 2019

Online platforms collect rich information about participants, and then share this information back with participants to improve market outcomes. In this paper we study the following information disclosure problem of a two-sided market: how much...

Operations, Information & Technology

Squaring Venture Capital Valuations with Reality

Ilya A. Strebulaev, Will Gornall
December 2, 2019

We develop a valuation model for venture capital–backed companies and apply it to 135 US unicorns, that is, private companies with reported valuations above $1 billion. We value unicorns using financial terms from legal filings...

Economics

The Decline of Too Big to Fail

Darrell Duffie
December 1, 2019

For globally systemically important banks (G-SIBs) with U.S. headquarters, we find large postLehman reductions in market-implied probabilities of government bailout, along with big increases in debt financing costs for these banks after controlling for insolvency...

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