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Publications
Short Description
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Strategic Firms and Endogenous Consumer Emulation
with Andrew Postlewaite,
Quarterly Journal of Economics,
2008, Vol. 123(2), pp. 621-661.
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In a model of social learning
with heterogeneous agents and strategic firms, the better informed
consumers get preferential service from firms because their consumption
signals high firm-quality. This changes the search and purchase
decisions of other consumers. For normal goods, wealthier consumers
acquire more information and get treated preferentially. (Tech Appendix)
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A Model of Money with Multilateral Matching
with Manolis Galenianos,
Journal of Monetary Economics, 2008, Vol. 55, pp. 1054-1066.
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We introduce sales mechanisms
that reveal private information (auctions) into a model of monetary
exchange, and show that inflation acts as a regressive tax because
richer consumers effectively price poorer consumers out of the market.
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Directed Search with Multiple Job Applications with Manolis
Galenianos,
Journal of Economic Theory, 2009, 114(2), pp. 445-471.
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While much work in the
(directed) search literature assumes that workers can apply only for one
job at a time, we analyze how workers apply for jobs and how firms set
wages to attract applications in a setting where workers can apply to
many firms. When firms communicate only with one applicant, the
equilibrium is inefficient.
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Efficiency of Simultaneous Search Journal of Political Economy, 2009, Vol. 117(5), pp. 861- 913.
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We analyze simultaneous search: After firms
advertize their wages, workers apply simultaneously for many jobs, and
then get hired in a stable assignment. For small search costs the
outcome is Walrasian, otherwise wage dispersion is necessary for
optimality. Existing one-application models can be justified as
analyzing each wage segment separately.
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Sorting vs Screening – Search Frictions and Competing
Mechanisms with Jan
Eeckhout,
Journal of Economic Theory, 2010, Vol. 145, 1354-1385.
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The search technology is a crucial determinant in
competing mechanisms settings where sellers want to induce buyers to
search for them: When one assumes (as is often done in the search
literature) that meetings of low types reduce the chances to meet with
high types, then price posting and market separation arises. Otherwise,
auctions in a joint market arise.
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Sorting and Decentralized Price Competition with Jan
Eeckhout,
Econometrica,
2010, Vol. 78(2), 539–574.
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We analyze the impact of search frictions in the
standard competitive assignment problem of Becker’s (1973). Assortative
matching depends on a simple trade-off between complementarities in the
match-value and complementarities in the search technology, measured by
their elasticity of substitution. Root-supermodularity is needed to
ensure sorting.
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Identifying Sorting – In Theory with Jan
Eeckhout,
Review of Economic Studies, 2011, Vol. 78 (3), 872-906.
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In a basic search model, we show that wage data alone
does not allow for identification of positive or negative assortative
matching. Nevertheless, the strength of sorting can be identified,
even though not via correlation of fixed effects. Since the strength of
sorting fully determines the output loss from mismatch, it seems a
fruitful direction for further research.
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On the Game-theoretic Foundations of Competitive Search
Equilibrium
with M. Galenianos, International
Economic Review, 2012, Vol 53 (1), 1-21.
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In large class of directed search games where a finite
number of firms strategically competes to attract workers, we prove that
a pure strategy Nash equilibrium exists. We provide novel
characterization and uniqueness results, and show that the limit outcome
as market size grows indeed micro-founds the standard specification for
large directed search economies.
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Efficient Firm Dynamics in a Frictional Labor Market Jan 2011 (first draft 02/10) with
Leo Kaas
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Many recent contributions have analyzed large firms
with decreasing marginal product in a search environment, and have
highlighted large inefficiencies under short-term contracts. We show how
to model long-term contracts in a tractable way even over the business
cycle, document several factual implications, and show that this
eliminates the inefficiencies.
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On the Difference Between Social and Private Goods
Nov 2011 (first draft 10/09),
with
Sandra Ludwig and
Alvaro Sandroni
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Standard economic models have long been applied to choices over private
consumption goods, but have recently been extended to incorporate social
situations as well. We challenge the applicability of standard decision
theoretic models to social settings. In an experiment where choices
affect the payoffs of someone else, we and that a large fraction of
subjects prefer randomization over any of the deterministic outcomes.
This tendency prevails whether the other party knows about the choice
situation or not. Such randomization violates standard decision theory
axioms that require that lotteries are never better than their best
deterministic component. For conceptually similar choices in classical
non-social situations we do not find much evidence for such violations,
suggesting the need for theories of uncertainty that are targeted to
social settings.
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An Equilibrium Model of the African HIV/AIDS Epidemic Dec 2009
with
Jeremy Greenwood,
Cezar Santos
and
Michele Tertilt
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Eleven percent of
the Malawian population is HIV infected. Eighteen percent of sexual
encounters are casual. A condom is used one quarter of the time. A
choice-theoretic general equilibrium search model is constructed to
analyze the Malawian epidemic. In the developed framework, people select
between different sexual practices while knowing the inherent risk. The
analysis suggests that the efficacy of public policy depends upon the
induced behavioral changes and general equilibrium effects that are
typically absent in epidemiological studies and small-scale field
experiments. For some interventions (some forms of promoting condoms or
marriage), the quantitative exercise suggests that these effects may
increase HIV prevalence, while for others (such as male circumcision or
increased incomes) they strengthen the effectiveness of the
intervention. The underlying channels giving rise to these effects are
discussed in detail.
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