October 26, 2021

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Michael Dickstein, Kate Ho, and Nathaniel Mark's new NBER working paper, "Market Segmentation and Competition in Health Insurance"

In the United States, households obtain health insurance through distinct market segments. We explore the economics of this segmentation by comparing coverage provided through small employers versus the individual marketplace. Using data from Oregon, we find households with group coverage spend 26% less on covered health care than households with individual coverage yet face higher markups. We develop a model of plan choice and health spending to estimate preferences in both markets and...

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May 28, 2021

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Luis Cabral and Lei Xu's "Seller reputation and price gouging: Evidence from the COVID-19 pandemic," published in the Economic Inquiry

From mid-January to March 2020, 3M masks sold on Amazon by third party sellers were priced 2.4 times higher than Amazon's 2019 price. However, this price increase was not uniform across sellers. We estimate that when Amazon is stocked out (one of our measures of scarcity) new (entrant) sellers increase price by 178%, whereas the continuing sellers' increase is limited to 56.7%. This is consistent with the idea that seller reputation limits the extent of profitable price gouging. Similar...

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May 20, 2021

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Niklas Engbom's "Contagious Unemployment," published by the Centre for Economic Policy Research

Recent micro evidence of how workers search for jobs is shown to have critical implications for the macroeconomic propagation of labor market shocks. Unemployed workers send over 10 times as many job applications in a month as their employed peers, but are less than half as likely per application to make a move. I interpret these patterns as the unemployed applying for more jobs that they are less likely to be a good fit for. During periods of high unemployment, it consequently becomes harder...

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May 11, 2021

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Paul Scott, Jonathan Elliott, Georges V. Houngbonon, and Marc Ivaldi's "Market Structure, Investment and Technical Efficiencies in Mobile Telecommunications," published by the Centre for Economic Policy Research

Paul Scott and coauthors develop a model of competition in prices and infrastructural investment among mobile network providers. Market shares and service quality (download speed) are simultaneously determined, for demand affects the network load just as delivered quality affects consumer demand. While consolidation typically has adverse impacts on consumer surplus, economies of scale push in the other direction. Consumer surplus is maximized at a moderate number of firms, and that the...

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February 1, 2021

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Larry White's "Rethinking Antitrust," published in the Milken Institute Review

Antitrust policy in the U.S. has recently gained an unusual amount of media attention. There are critics who have argued that a major overhaul of antitrust policy is needed. This paper argues that instead there are some important but more modest changes that could go a long way toward significantly strengthening the role that antitrust can play in keeping the U.S. economy competitive, vibrant, and innovative.

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February 1, 2021

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Paul Wachtel, Moritz Kuhn, Alina Bartscher, and Moritz Schularick's "Monetary Policy and Racial Inequality," published by the Federal Reserve Bank of New York

This paper aims at an improved understanding of the relationship between monetary policy and racial inequality. We investigate the distributional effects of monetary policy in a unified framework, linking monetary policy shocks both to earnings and wealth differentials between black and white households. Specifically, we show that, although a more accommodative monetary policy increases employment of black households more than white households, the overall effects are small. At the same time...

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December 18, 2020

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Adam Brandenburger, Alexander Danieli, and Amanda Friedenberg's "The Implications of Finite-Order Reasoning," forthcoming in Theoretical Economics

The epistemic conditions of rationality and mth-order strong belief of rationality (RmSBR, Battigalli and Siniscalchi, 2002) formalize the idea that players engage in contextualized forward-induction reasoning. This paper characterizes the behavior consistent with RmSBR across all type structures. In particular, in a class of generic games, R(m −1)SBR is characterized by a new solution concept we call an m-best response sequence (m-BRS). Such sequences are an iterative version of...

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December 18, 2020

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Adam Brandenburger, Amanda Friedenberg, and Terri Kneeland's "Two Approaches to Iterated Reasoning in Games"

Level-k analysis and epistemic game theory are two different ways of investigating iterative reasoning in games. This paper explores the relationship between these two approaches. An important difference between them is that level-k analysis begins with an exogenous anchor on the players’ beliefs, while epistemic analysis begins with arbitrary epistemic types (hierarchies of beliefs). To close the gap, we develop the concept of a level-k epistemic type structure, that incorporates the...

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November 17, 2020

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Larry White and John Kwoka's "The “Antitrust Revolution” and The Antitrust Revolution: A Perspective from the Inside" published in The Antitrust Bulletin

There clearly has been a revolution in the way that modern microeconomics has come to occupy a central role in the development of antitrust policy and in the structuring of antitrust cases over the past forty years or so. And during the past thirty plus years, there have been seven editions of The Antitrust Revolution that we have edited. In this essay, we offer our perspective on the “antitrust revolution,” as well as provide an insiders’ view of those seven editions and how they came to be.

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October 26, 2020

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Luis Cabral, Ajay Bhaskarabhatla, Deepak Hegde, & Thomas Peeters' "Are Inventors or Firms the Engines of Innovation?" published in Management Science

In this study, we empirically assess the contributions of inventors and firms for innovation using a 37-year panel of U.S. patenting activity. We estimate that inventors’ human capital is 5–10 times more important than firm capabilities for explaining the variance in inventor output. We then examine matching between inventors and firms and find highly talented inventors are attracted to firms that (i) have weak firm-specific invention capabilities and (ii) employ other talented inventors...

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October 21, 2020

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Larry White's "Antitrust Economics and Consumer Protection Economics in Policy and Litigation: Why the Disparity?" published in the Economic Inquiry

The article argues that the disparity between the greater attention that economics has given to antitrust policy versus the lesser attention to consumer protection policy is due to 3 causes: a) the longer intellectual history and development of industrial organization; the history and culture of the Federal Trade Commission (where both policies are supposed to be pursued); and the splintering of consumer protection policy among a large number of federal and state agencies.

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September 28, 2020

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Thomas Cooley and Vincenzo Quadrini on The twenty-fifth anniversary of “Frontiers of Business Cycle Research"

Preface by Tom Cooley
It is very gratifying to have a conference celebrating the 25th Anniversary of the publication of Frontiers of Business Cycle Research (Cooley (1995)). I am deeply grateful to all who have contributed papers to the conference and to this special Volume of The Review of Economic Dynamics. It is especially significant to me since, in addition to putting together Frontiers, I was the founding editor of RED. It is clear from the diverse set of papers presented here that...

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September 24, 2020

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Richard Sylla on changes in the structure of US banking, forthcoming in the Financial History Review

A century ago the US commercial banking system was exceptional in two ways. It was by good measure the largest commercial banking system of any country. And it was different from the commercial banking systems of other leading countries in having tens of thousands of independent banks with very few branches rather than the more typical pattern of a far smaller number of banks with many branches. Today, a century later, the US system is more normal than exceptional, dominated by a small number...

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September 21, 2020

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Thomas Cooley, Ramon Marimon, and Vincenzo Quadrini's "Commitment in Organizations and the Competition for Talent," published in the Review of Economic Studies

We show that a change in organizational structure from partnerships to public companies—which weakens contractual commitment—can lead to higher investment in high return-and-risk activities, higher productivity (value added per employee) and greater income dispersion (inequality). These predictions are consistent with the observed evolution of the financial sector where the switch from partnerships to public companies has been especially important in the decades that preceded the 21st Century...

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September 10, 2020

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Nicholas Economides and Ioannis Lianos on Privacy and Antitrust, forthcoming in the Journal of Competition Law and Economics

We discuss how the acquisition of private information by default without compensation by digital platforms such as Google and Facebook results in a market failure and can be grounds for antitrust enforcement. To avoid the market failure, the default in the collection of personal information should be changed by law to “opt-out.” This would allow the creation of a vibrant market for the sale of users’ personal information to digital platforms. Assuming that all parties are perfectly informed...

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August 18, 2020

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Paul Scott, Myrto Kalouptsidi, and Eduardo Souza-Rodrigues' paper on dynamic discrete models, forthcoming in the Journal of Econometrics

Prevailing approaches to estimating dynamic discrete models have difficulty accommodating endogeneity problems and omitted variables. In the context of single agent models, we show that Euler Equations in Conditional Choice Probabilities (ECCP equations) allow researchers to address these challenges in much the same way they are dealt with in the context of static econometric models: using linear regressions and instrumental variables.

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August 6, 2020

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Petra Moser and Michela Giorcelli's paper on the effects of copyrights on creativity, forthcoming in the Journal of Political Economy

Copyrights establish intellectual property rights in creative goods ranging from literature and science to images, music, and film. Although their primary purpose is to encourage creativity, the causal effects of copyrights on creativity have proven difficult to establish. This is due primarily to a lack of experimental variation today, when copyrights are modified in response to lobbying by the owners of particularly valuable creative goods. To address this issue, this paper exploits...

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july 17, 2020

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Petra Moser and Barbara Biasi's paper on the effects of copyrights on science, forthcoming in the American Economic Journal: Microeconomics

Copyrights, which establish intellectual property in music, science, and other creative goods, are intended to encourage creativity. Yet, copyrights also raise the cost of accessing existing work— potentially discouraging future innovation. This paper uses an exogenous shift towards weak copyrights (and low access costs) during WWII to examine the potentially adverse effects of copyrights on science. Using two alternative identification strategies, we show that weaker copyrights encouraged...

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July 17, 2020

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Walker Hanlon and Taylor Jaworski's new NBER working paper on IP Protection

Intellectual property (IP) protection, achieved through mechanisms such as patents and copyrights, is a central feature of modern innovation systems. Yet there are important aspects of IP protection that remain poorly understood. One of these is the impact of offering protection to producers of one type of good on innovation rates in other complementary goods. In "Spillover Effects of Intellectual Property Protection in the Interwar Aircraft Industry", joint with Taylor Jaworski...

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July 14, 2020

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Michael Dickstein and David Chan's paper on Medicare forthcoming in the Quarterly Journal of Economics

The American Medical Association’s Relative Value Scale Update Committee (RUC) has been called “the most important health-care group you’ve never heard of.” When Medicare needs to set a price for a new or existing procedure, it turns to the physician committee for advice on the relative value of the procedure. RUC recommendations influence the annual $70 billion in Medicare spending and half a trillion dollars in other public and private spending for physician services that generally follow...

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