​​Research Interests​

Search Theory
Auction Theory
Game Theory
Public Finance and Political Economy


Queue-Rationed Equilibria with Fixed Cost of Waiting. Economic Theory

Spoilers, Blocking Coalitions, and the Core. Social Choice and Welfare

The n-Person Kalai-Smorodinsky Bargaining Solution under Pre-Donations. Review of Economic Design

Running out of Time:  Limited Unemployment Benefits and Wage Dispersion. Review of Economic Dynamics

The Role of Risk Preferences in Pay-to-Bid Auctions.  Management Science

Rushing to Overpay: Modeling and Measuring the REIT Premium. Journal of Real Estate Finance and Economics

A Theory of Search with Deadlines and Uncertain Recall.  Economic Theory

Search, Moral Hazard, and Equilibrium Price Dispersion.  Journal of Risk and Insurance

Sticking with What (Barely) Worked.   Management Science

Accounting for Age in Marital Search Decision. European Economic Review

Working Papers

Auctions for Priority Access

Outcome-Based Accountability: Theory and Evidence

A Theory of Discounts and Deadlines in Retail Search

Unemployment Insurance Eligibility and Wage Dynamics

Inferring Ascending Auction Participation from Observed Bidding

Cherry - Picking with Asymmetric Information: A Model of Wage Dispersion, Sorting and Unemployment Stigma​​​​

Publications (in chronological order)

"Queue-Rationed Equilibria with Fixed Cost of Waiting" Economic Theory, August 2009. (40:247-274)

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The welfare impact of price controls is examined here in an exchange economy where agents may need to queue in order to make a transaction. Time spent in the queue is an endogenously-determined transaction cost, which agents take as given and which adjusts so as to clear markets when prices are prevented from performing this function. When queuing is required, it enters the household's decision as a fixed cost, rather than increasing in proportion to the amount of good exchanged, as is far more common in the previous literature. Existence of competitive equilibrium is established for this general equilibrium model. Price controls are shown to cause notable inefficiencies, which differ from those of a proportional cost model. Moreover, in certain environments, price controls will unambiguously harm all individuals relative to a Walrasian equilibrium.

"Spoilers, Blocking Coalitions, and the Core" Social Choice and Welfare, September 2009. (33:361-381)

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This paper surveys noncooperative implementations of the core which tell an intuitive story of coalition formation. Under the core solution concept, if a blocking coalition exists those agents abandon the current allocation without regard for the consequences to players outside the blocking coalition. Yet in certain circumstances, these players have an incentive to prevent formation of any blocking coalition; a game analyzed in Lagunoff (1994) is vulnerable to such circumstances. To obtain all core allocations and only core allocations, a mechanism must either restrict the actions of non-members of a proposed coalition, or ensure that non-members are unharmed by the departure of the coalition. These requirements illustrate the core's nonchalance towards agents not in blocking coalitions.

"The n-Person Kalai-Smorodinsky Bargaining Solution under Pre-Donations" Review of Economic Design, June 2011. (15:147-162)  With S. Nuray Akin.

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This study examines the behavior of simple n-person bargaining problems under pre-donations where the Kalai-Smorodinsky (KS) solution is operant. Pre-donations are a unilateral commitment to transfer a portion of one's utility to someone else, and are used to distort the bargaining set and thereby influence the bargaining solution. In equilibrium, these pre-donations are Pareto-improving over the undistorted solution; moreover, when the agents' preferences are sufficiently distinct, the equilibrium solution coincides with the concessionary division rule.

"Running Out of Time: Limited Unemployment Benefits and Reservation Wages" Review of Economics Dynamics, April 2012. (15:149:170) With S. Nuray Akin.

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We study unemployment insurance (UI) in a general equilibrium environment in which unemployed workers only receive benefits for a finite length of time.  Although all workers have identical productivity and leisure value, the random arrival of job offers creates ex-post differences with respect to their time remaining until benefit expiration.  Firms, which are also homogeneous, can exploit these differences, leading to an endogenous wage distribution.

This allows us to examine the equilibrium effect of policy changes in both the size and length of UI benefits.  Surprisingly, an increase in benefits can actually cause wages to fall, which is contrary to the predictions of on-the-job-search models.    Moreover, we explain well-documented patterns of how the hazard rate of exiting unemployment responds to these policy changes.  Our theory also explains why this hazard rate jumps at the time of benefit exhaustion.

"The Role of Risk Preferences in Pay-to-Bid Auctions" Management Science, September 2013 (59:2117-2134). With Joseph Price and Henry Tappen.

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We analyze a new auction format in which bidders pay a fee each time they increase the auction price. Bidding fees are the primary source of revenue for the seller, but produce the same expected revenue as standard auctions (assuming risk-neutral bidders). If risk-loving preferences are incorporated in the model, expected revenue increases. Our model predicts a particular distribution of ending prices, which we test against observed auction data. The degree of fit depends on how unobserved parameters are chosen; in particular, a slight preference for risk has the biggest impact in explaining auction behavior, suggesting that pay-to-bid auctions are a mild form of gambling.

"Rushing to Overpay: Modeling and Measuring the REIT Premium" Journal of Real Estate Finance and Economics, October 2013 (47:506-537). With S. Nuray Akin, Val Lambson, Grant McQueen, Barrett Slade, and Justin Wood.

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We explore the questions of why Real Estate Investment Trusts (REITs) pay more for real estate than non-REIT buyers and by how much. First, we develop a search model where REITs optimally pay more for property because (1) they are willing, due to cost of capital advantages and, (2) they are occasionally rushed, due to external regulatory time constraints and internal incentives to deploy capital quickly. Second, using commercial real estate transactions, we find that the extant hedonic pricing models contain an unobserved explanatory variables bias leading to inflated estimates of the REIT premium. Third, using a repeat-sales methodology that controls for unobserved property characteristics, we derive more plausible estimates of the REIT premium. Consistent with our model, we also find the REIT-buyer premium depends on the size of the REIT advantage, the rush to deploy, and the relative presence of REITs in the market. 
"A Theory of Search with Deadlines and Uncertain Recall" Economic Theory, January 2014 (55:101-133). With S. Nuray Akin.

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We ask how the ability to recall past prices affects the dynamics of search and price formation. In the model, buyers have limited time to purchase a good and face uncertainty regarding the availability of past price quotes in the future. Sellers cannot observe a potential buyer's remaining time until deadline nor her quote history, and hence post prices that weigh the probability of sale versus the profit once sold. We find that, in contrast to conventional wisdom, reducing the consumer's recall ability may actually improve his expected utility because it lowers the average expected price in the market and reduces the duration of search.

nb — provides algebraic details in proofs and computations for the numerical example.  (Mathematica file, can be opened using Wolfram's freeCDF Player

Alternate environment in continuous time with no recall

"Insurance, Consumer Search, and Equilibrium Price Distributions " Journal of Risk and Insurance, June 2014 (81:397-429). With S. Nuray Akin.

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We examine a service market with two frictions: search is required to obtain price quotes, and insurance coverage for the service reduces household search effort. While fewer draws from a price distribution will directly raise a house- hold's average price, the indirect effect of reduced search on price competition has a much greater impact, accounting for at least 89% of increased average expenditures. In this environment, a monopolist insurer will exacerbate the moral hazard by offering full insurance. A competitive insurance market typically results in partial insurance and significant price dispersion; yet a second-best contract would offer even less insurance coverage.

MoralHazardTA.nb — provides algebraic details in proofs and computations for the numerical example.  (Mathematica file, can be opened using Wolfram's free CDF Player )

"Sticking with What (Barely) Worked: A Test of Outcome Bias" Management Science, May 2015 (61:1121-1136). With Lars Lefgren and Joseph Price.

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Outcome bias occurs when an evaluator considers ex-post outcomes when judging whether a choice was correct, ex-ante. We formalize this cognitive bias in a simple model of distorted Bayesian updating. We then examine strategy changes made by professional football coaches. We find they are more likely to revise their strategy after a loss than a win — even for narrow losses, which are uninformative about future success. This increased revision following a loss occurs even when a loss was expected, and the offensive strategy is revised even when failure is attributable to the defense. These results are all consistent with our model's predictions.
"Accounting for Age in Marital Search Decisions"European Economic Review, June 2016 (85:245–271​). With S. Nuray Akin.

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Spouse quality, measured by educational attainment, varies significantly with the age at which an individual marries, peaking in the mid-twenties then declining through the early-forties. Interestingly, this decline is muc​h sharper for women than men, meaning women increasingly marry less educated men as they age. Moreover, quality has worsened for educated women over several decades, while it has improved for men. Using a non-stationary sequential search model, we identify and quantify the search frictions that generate these age-dependent marriage outcomes.  We find that single-life utility is typically the dominant friction, though college women in the 1950 and 1970 cohorts are affected even more by deteriorating suitor quality.  Regardless of educational status, individual choice (as opposed to pure luck) is pivotal in explaining marriage market outcomes earlier in life.

— analyzes marriage decisions among those without college educations and provides additional information on older cohorts.

BioClockData.zip — data and scripts used in our analysis

Working Papers

"Contests for Priority Access"

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This paper analyzes two contests in which customers make non-refundable bids to determine the order in which they are served.  In the auction for priority access, customers are served in descending order of their bids, where each in turn is allowed to purchase any amount of a divisible good at an exogenous per-unit price, until the fixed supply is exhausted.  This model is immediately applicable to kickbacks paid to circumvent price controls, allocation by queuing, and other forms of rent seeking.

This auction implements a two-part tariff, allowing the seller to capture nearly all rents.  Revenue is greatest when bidders have similar valuations, and when exactly one customer is unable to make a purchase.  Unlike all-pay auctions of an indivisible prize, the exclusion principle --- that revenues increase when the strictly-highest-valuation bidder is excluded from participation --- does not always hold.

The auction is also compared to lotteries for priority access, an extension of single prize contests.  The auction raises more revenue than the lottery when agents' valuations are not too different.  Also, the auction is typically more efficient, resulting in higher expected total welfare.

"Coaches on the Hot Seat: Testing a Screening Model of Employee Terminations" With Lars Lefgren and Joe Price.

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In many settings a firm’s revenue depends on whether or not they exceed a certain threshold of performance. We develop a principal-agent model that examines the optimal labor contract in these settings. The optimal contract induces efficient effort by basing firing decisions solely on whether or not the agent was successful, even though the absolute level of performance provides important information on the underlying quality of the agent. We test the predictions of our model using twenty-five seasons of data from the National Football League. We use a regression discontinuity approach and find that a close loss increases the probability of a coach being fired by 6 percentage points. Once we condition on whether the game was won or lost, changes in the margin of victory have no significant impact on whether the coach is fired, even though this information provides an important signal of the quality of the coach. 

CoachesTA.pdf — provides algebraic details for the proof of the main proposition.
"A Theory of Discounts and Deadlines in Retail Search" With Dominic Coey and Bradley Larsen

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We present a new equilibrium search model where consumers initially search among discount opportunities, but are willing to pay more as a deadline approaches, and eventually turn to full-price sellers.  Even with homogeneous sellers and buyers, the model predicts equilibrium price dispersion and rationalizes the coexistence of discount and non-discount sellers.  We apply the model to online retail sales via auctions/posted prices and find robust evidence supporting the theory. Fitting the model to the data, we find that the presence of the discount channel increases total welfare if intermediation is costly, but reduces welfare if intermediation is costless.​

Working paper version includes a Supplemental Appendix.

"Unemployment Insurance Eligibility and Wage Dynamics"

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We investigate the influence of unemployment insurance (UI) eligibility rules on the labor market in an equilibrium search model.  In particular, UI systems only distribute benefits to workers whose prior employment spell was sufficiently long.  This feature alone can generate wage dispersion in the labor market among otherwise homogenous workers and firms.  After accounting for the equilibrium response of firms, changes to the UI system have surprising consequences.  For instance, more generous benefits raise the wages received by ineligible workers, but lower them for the eligible workers.  Increasing the minimum spell for eligibility has the same effect, assisting the very workers currently excluded.
​"Inferring Ascending Auction Participation from Observed Bidders"
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Participation in internet auctions goes well beyond those who place a bid. Participants arrive in random order, and if the auction’s standing price has already exceeded a participant’s valuation, she will not bid. Even so, her unreported valuation is a relevant part of demand for the item, and in an alternate random order, her bid would have been registered. Assuming a fixed distribution of participants, I provide a method to estimate the average number of participants from the average number of bidders per auction. This enables non-parametric estimation of the distribution of bidder valuations from either the distribution of closing prices or the distribution of all observed bids.
​"Cherry-Picking with Asymmetric Information: A Model of Wage Dispersion, Sorting and Unemployment Stigma"​With Shuaizhang Feng, Lars Lefgren, and Bingyong Zheng​
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We present a model of directed job search with asymmetric information regarding worker type.  While job applicants know their productivity type, firms can only observe the duration of unemployment as well as a noisy signal of worker type.  Firms can offer an unscreened wage or a wage that is conditioned on passing the screening and the duration of unemployment.  This framework leads to four possible equilibria which depend on model parameter values.  We describe the circumstances under which each equilibrium may result and the empirical implications of each equilibrium.  Our model sheds light into wage scarring, unemployment duration, and wage dispersion, as well as the effects of unemployment insurance and minimum wages on search behavior and the distribution of wages.


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