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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.

Who Sees the Future? A Deep Learning Language Model Demonstrates the Vision Advantage of Being Small

Paul Vicinanza, Amir Goldberg, Sameer B. Srivastava
May 26, 2020

Which groups are most likely to become visionaries that define the future of their field? Because vision is difficult to measure, prior work has reached conflicting conclusions: one perspective emphasizes the benefits of being large,...

Organizational Behavior

Interoperable Payment Systems and the Role of Central Bank Digital Currencies

Darrell Duffie
May 18, 2020

I explain the meaning of an interoperable payment system and why interoperability is crucial for efficiency. I review some alternative approaches to interoperability, including central bank digital currencies (CBDCs), hybrid CBDCs, and two-ledger upgrades of...

Finance

Life-Cycle Cost of Transportation Services

Stephen Comello, Gunther Glenk, Stefan J. Reichelstein
May 2020

The rapid deployment of electric vehicles is widely viewed as a promising path towards decarbonizing the transportation sector. The pace at which electric vehicles will replace those with internal combustion engines will depend to a large...

Accounting, Energy & Environment

Optimal Corporate Taxation Under Financial Frictions

Eduardo Davila, Benjamin Hébert
April 2020

This paper studies the optimal design of corporate taxes when firms are financially constrained. We identify a corporate taxation principle: taxes should be levied on unconstrained firms,

...
Finance

The Future of the Automated Mobility Industry: A Strategic Management Perspective

Sven A. Beiker, Robert A. Burgelman
April 2020

This paper examines the automation and sharing aspects of the competitive dynamics of the emerging automated mobility industry. It applies strategic management, technological innovation and forecasting frameworks to examine how the different categories of industry...

Organizational Behavior

Rational Inattention when Decisions Take Time

Benjamin Hébert, Michael Woodford
March 25, 2020

Decisions take time, and the time taken to reach a decision is likely to be informative about the cost of more precise judgments. We formalize this insight in the context of a dynamic rational inattention...

Finance

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

Neighborhood-Based Information Costs

Benjamin Hébert, Michael Woodford
January 31, 2020

We derive a new cost of information in rational inattention problems, the neighborhood-based cost functions, starting from the observation that many applications involve exogenous states with a

...
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
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