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.

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Susan Athey, Christian Catalini, Catherine E. Tucker
February 13, 2017

This paper uses data from the MIT digital currency experiment to shed light on consumer behavior regarding commercial, public and government surveillance. The setting allows us to explore the apparent contradiction that many cryptocurrencies offer...

Susan Athey, Mark Mobius
January 11, 2017

A policy debate centers around the question whether news aggregators such as
Google News decrease or increase traffic to online news sites. One side of the debate, typically espoused by publishers, views aggregators as...

Jess Benhabib, Jesse Perla, Christopher Tonetti
January 2017

We study how innovation and technology diffusion interact to endogenously determine the productivity distribution and generate aggregate growth. We model firms that choose to innovate, adopt technology, or produce with their existing technology. Costly adoption...

Susan Athey, Julie Tibshirani, Stefan Wager
January 2017

We propose a method for non-parametric statistical estimation, based on random forests (Breiman, 2001), that can be used to fit any heterogeneous parameter of interest identified as the solution to a set of local estimating...

Sebastian Di Tella, Pablo Kurlat
January 2017

We propose a model of banks’ exposure to movements in interest rates and their role in the transmission of monetary shocks. Since bank deposits provide liquidity, higher interest rates allow banks to earn larger spreads...

Yuliy Sannikov, Andrzej Skrzypacz
December 7, 2016

We build a linear-quadratic model to analyze trading in a market with private information and heterogeneous agents. Agents receive private taste/inventory shocks and trade continuously. Agents differ in their need for trade as well as...

Yuliy Sannikov, Sebastian Di Tella
November 2016

Revise and Resubmit at Econometrica

We characterize optimal asset management contracts in a classic portfolio-investment setting. When the agent has access to hidden savings, his incentives to misbehave depend on his precautionary saving motive. The...

Anat R. Admati, Peter M. DeMarzo, Martin F. Hellwig, Paul Pfleiderer
October 11, 2016

Firms’ inability to commit to future funding choices has profound consequences for capital structure dynamics. With debt in place, shareholders pervasively resist leverage reductions no matter how much such reductions may enhance firm value. Shareholders...

John Ameriks, Joseph Briggs, Andrew Caplin, Matthew D. Shapiro, Christopher Tonetti
September 2016

Individuals face significant late-in-life risks, including needing long-term care (LTC). Yet, they hold little long-term care insurance (LTCI). Using both “strategic survey questions,” which identify preferences, and stated demand questions, this paper investigates the degree...

Sebastian Di Tella
September 2016

Revise and Resubmit at American Economic Review

I characterize the optimal financial regulation policy in an economy where financial intermediaries trade capital assets on behalf of households, but must retain an equity stake for incentive...

Susan Athey, Emilio Calvano, Saumitra Jha
August 6, 2016

We analyze the classic problem of sustaining trust when cheating and leaving trading partners is easy, and outside enforcement is difficult. We construct equilibria where individuals are loyal to smaller groups– communities– that allow repeated...

Susan Athey, Iva Parashkevov, Vishnu Sarukkai, Jing Xia
August 2016

This paper develops a model of user adoption and use of virtual currency (such as Bitcoin), and focusing on the dynamics of adoption in the presence of frictions arising from exchange rate uncertainty. The theoretical model can...

Yuliy Sannikov, Peter M. DeMarzo
May 2, 2016

We study a principal-agent setting in which both sides learn about future profitability from output, and the project can be abandoned/terminated if profitability is too low. With learning, shirking by the agent both reduces output...

Dilip Abreu, Benjamin Brooks, Yuliy Sannikov
April 28, 2016

We study the subgame perfect equilibria of two player stochastic games with perfect monitoring and geometric discounting. A novel algorithm is developed for calculating the discounted payoffs that can be attained in equilibrium. This algorithm...

Susan Athey, Emilio Calvano, Joshua S. Gans
April 20, 2016

We develop a model of advertising markets in an environment where consumers may switch (or “multi-home”) across publishers. Consumer switching generates inefficiency in the process of matching advertisers to consumers, because advertisers may not reach...

Renee Bowen, Jackie M.L. Chan, Oeindrilla Dube, Nicolas S. Lambert
March 28, 2016

We present a rational theory of reform fatigue. At each instant a politician chooses to divide effort between reforms and the status quo, and this choice is modeled as a two-armed bandit problem. Reforms are...

Dmitry Orlov, Andrzej Skrzypacz, Pavel Zryumov
February 13, 2016

We study a Bayesian persuasion game in the context of real options. The Sender (firm) chooses signals to reveal to the Receiver (regulator) each period but has no long-term commitment power. The Receiver chooses when...

Zhiguo He, Arvind Krishnamurthy, Konstantin Milbradt
January 28, 2016

U.S. government bonds are considered to be the world’s safe store of value, especially during periods of economic turmoil such as the events of 2008. But what makes U.S. government bonds “safe assets?” We highlight...

Markus K. Brunnermeier, Yuliy Sannikov
January 12, 2016

A theory of money needs a proper place for financial intermediaries. Intermediaries create inside money and their ability to take risks determines the money multiplier. In downturns, intermediaries shrink their lending activity and fire-sell assets....

Edward Lazear
January 2016

A statistical theory of overconfidence is proposed and applied to the issue of occupational choice. Individuals who can choose whether to engage in an activity or not must estimate their performance. The estimates have error...