Junk Fees and Related Pricing Practices

 The White House is taking interest in hidden fees, both  because they interfere with competition on price (e.g. when Ticketmaster reveals fees only as someone tries to complete a purchase), and because they sometimes seem unconscionable.  Here's a White House statement.

The President’s Initiative on Junk Fees and Related Pricing Practices

"The Biden-Harris Administration is taking action on junk fees that hurt Americans’ pocketbooks and the economy."

"Exploitative or predatory fees. Excessive fees that target consumers who have limited alternative options – because they are locked into a product or service, or are otherwise economically vulnerable – can likewise impose a financial burden. As the CFPB explains, a sign of exploitative fees is that they “far exceed the marginal cost of the service they purport to cover.” Bank overdraft fees, which greatly exceed the bank’s cost of credit, and surprise “termination fees” are leading examples."

HT: Susan Athey

********

Regarding bank overdraft fees, my sense is that these drive lots of people away from the formal banking system and into the hands of high-interest-rate check cashing and payday loan services. Since we already regulate some debit card fees, I wonder if banks can't be encouraged to have some kind of debit-card-only "checking" accounts. Those would be able to prevent overdrafts, so they should be very cheap to administer, and would allow people to avoid paying very high fees and interest rates to non-bank financial services.

SITE 2023 Conference Call For Papers

 There are 18 sessions at Stanford SITE this summer, something for everyone. (You can submit papers at the link.)  Regular readers of this blog may be particularly interested in Session 3: Market Design; Session 4: Dynamic Games, Contracts, and Markets; Session 5: Psychology and Economics; Session 6: Experimental Economics, all described below.

SITE 2023 Conference Call For Papers

Session 1: Empirical Implementation of Theoretical Models of Strategic Interaction and Dynamic Behavior

Wednesday, July 12, 2023, 9:00am - Friday, July 14, 2023, 5:00pm

Landau Economics Building, 579 Jane Stanford Way, Stanford, CA 94305

The unifying theme of the papers for this session is a theoretical model of an economic interaction and an empirical implementation of this theoretical model using actual data.  This year will have a more concentrated focus on topics where the theoretical economic model must also respect both technology and legal institutions governing the economic environment as well as the optimizing behavior and strategic behavior of economic agents. For example, in the case of wholesale electricity markets with significant amounts intermittent renewables and storage devices that can either inject or withdraw electricity, simplified economic models that do not account for the physics of power flows, non-convexities dispatchable generation units operate (such as start-up costs, limited range of output levels, and limited rates of change in their output levels), and how forward financial markets can limit the impact of these non-convexities and intermittency risks are increasingly ill-suited for policy analysis or the assessment of market design changes. Recent experience with the simplified markets for both natural gas and electricity in Australia, Europe and the United States provide ample real-world evidence of the need for economic models that incorporate these factors for effective policy analysis and market design.  There is an increasing number of engineers that recognize strategic behavior by market participants that understand the physics of power systems and natural gas systems operation can create economically and environmentally harmful market outcomes.

The goal of this session is to encourage cross-field interaction between the increasing number of engineers with some knowledge of economic models of strategic behavior and economists that understand how to use data to estimate theory-based econometric models of strategic behavior in complex economic environments but do not understand how to incorporate into the empirical models the physical constraints and legal framework that are having a first-order impact on market participant behavior and market outcomes. There are many other examples where these same issues arise in modeling strategic behavior such as air travel and freight transportation where this same interaction between engineers and economist would be particularly fruitful.  The session welcomes these kinds of papers from both economists and engineers as well.

ORGANIZED BY: Christoph Graf, New York University, Frank Wolak, Stanford University

DEADLINE FOR PAPER SUBMISSION April 15, 2023

Session 2: International Macroeconomics and Finance

Monday, July 31, 2023, 9:00am - Tuesday, August 1, 2023, 5:00pm

This session is on international macroeconomics and finance, focusing on global capital allocations, the role of the dollar, the emergence of China, and tax havens. Both empirics and theory.

ORGANIZED BY: Antonio Coppola, Stanford University  Matteo Maggiori, Stanford University  Jesse Schreger, Columbia University  Chenzi Xu, Stanford University

DEADLINE FOR PAPER SUBMISSION May 1, 2023

Session 3: Market Design

August 3, 2023, 9:00am - Friday, August 4, 2023, 5:00pm

Landau Economics Building, 579 Jane Stanford Way, Stanford, CA 94305

This session seeks to bring together researchers in economics, computer science, and operations research working on market design.  We’re aiming for a roughly even split between theory papers and empirical and experimental papers.  In addition to faculty members, we also invite graduate students on the job market to submit their paper for shorter graduate student talks.

ORGANIZED BY: Mohammad Akbarpour, Stanford University  Piotr Dworczak, Northwestern University  Ravi Jagadeesan, Stanford University  Shengwu Li, Harvard University  Ellen Muir, Harvard University

DEADLINE FOR PAPER SUBMISSION May 1, 2023

Session 4: Dynamic Games, Contracts, and Markets

Monday, August 7, 2023, 9:00am - Wednesday, August 9, 2023, 5:00pm

This session is to bring together microeconomic theorists working on dynamic games and contracts with more applied theorists working in macro, finance, organizational economics, and other fields. There are two aims. First, this is a venue to discuss the latest questions and techniques facing researchers working in dynamic games and contracts. Second, to foster interdisciplinary discussion between scholars working on parallel topics in different disciplines and help raise awareness among theorists of the open questions in other fields.

ORGANIZED BY: Arjada Bardhi, Duke University  Simon Board, University of California Los Angeles  Erik Madsen, New York University  Joao Ramos, University of Southern California  Andrzej Skrzypacz, Stanford University  Takuo Sugaya, Stanford University

DEADLINE FOR PAPER SUBMISSION  April 15, 2023

Session 5: Psychology and Economics

Tuesday, August 8, 2023, 9:00am - Wednesday, August 9, 2023, 5:00pm

LOCATION: John A. and Cynthia Fry Gunn Building, 366 Galvez Street, Stanford

This session brings together researchers working on issues at the intersection of psychology and economics. The segment will focus on evidence of and explanations for non-standard choice patterns, as well as the positive and normative implications of those patterns in a wide range of economic decision-making contexts, such as lifecycle consumption and savings, workplace productivity, health, and prosocial behavior. The presentations will frequently build upon insights from other disciplines, including psychology and sociology. Theoretical, empirical, and experimental studies will be included. 

ORGANIZED BY: B. Douglas Bernheim, Stanford University  John Beshears, Harvard University  Vincent Crawford, University of Oxford & University of California San Diego  David Laibson, Harvard University  Ulrike Malmendier, University of California Berkeley

DEADLINE FOR PAPER SUBMISSION  May 8, 2023

Session 6: Experimental Economics

Thursday, August 10, 2023, 9:00am - Friday, August 11, 2023, 5:00pm

LOCATION: John A. and Cynthia Fry Gunn Building, 366 Galvez Street, S

This session will be dedicated to advances in experimental economics combining laboratory and field-experimental methodologies with theoretical and psychological insights on decision-making, strategic interaction and policy. We are inviting papers in lab experiments, field experiments and their combination that test theory, demonstrate the importance of psychological phenomena, and explore social and policy issues. In addition to senior faculty members, invited presenters will include junior faculty as well as graduate students.

ORGANIZED BY:  Christine Exley, Harvard University  Kirby Nielsen, California Institute of Technology  Muriel Niederle, Stanford University  Alvin Roth, Stanford University  Lise Vesterlund, University of Pittsburgh

DEADLINE FOR PAPER SUBMISSION May 8, 2023

Session 7: Political Economic Theory

Thursday, August 10, 2023, 9:00am - Friday, August 11, 2023, 5:00am

LOCATION: Stanford Graduate School of Business, M104,

This session will bring together researchers from political science and economics who apply economic theory to the study of politics. This includes work in the areas of voting theory, political bargaining, policy-making and implementation, lobbying and regulation, and the media and information environment in which politics takes place. The session will encourage productive dialogue between researchers in economic theory that have developed ideas and tools relevant to the study of politics, and those in political science who study questions and topics that can be addressed by economic theory.

ORGANIZED BY: Nina Bobkova, Rice University  Steven Callander, Stanford University Hülya Eraslan, Rice University  Dana Foarta, Stanford University  Federica Izzo, University of California San Diego

DEADLINE FOR PAPER SUBMISSION May 10, 2023

Session 8: Politically Feasible Environmental and Energy Policy

Monday, August 14, 2023, 9:00am - Tuesday, August 15, 2023, 5:00pm

LOCATION: Landau Economics Building, 

This session will feature empirical papers evaluating environmental and energy (E&E) policy decisions by both governments and firms. The session will focus on papers that deliver useful and politically feasible insights on how to make E&E policy more efficient and equitable. We welcome papers studying topics such as the following:

Quantitative evaluations of past or potential future E&E policy changes, 

How to improve the public appeal of economically efficient E&E policies,

Evaluations of voluntary corporate actions such as net-zero commitments and ESG investing screens, and

Empirical evaluations of utility programs, such as energy efficiency, load management, and pricing reform.

One potential downstream impact of this session could be a concrete set of politically feasible suggestions for efficient and equitable E&E policy reforms for governments and firms.

In addition to standard paper presentations, we will leave time for structured conversations to encourage new interactions and collaborations.

ORGANIZED BY: Hunt Allcott, Stanford University  Meredith Fowlie, University of California Berkeley  Lawrence Goulder, Stanford University  Joe Shapiro, University of California Berkeley

DEADLINE FOR PAPER SUBMISSION May 15, 2023

Session 9: Climate Finance, Innovation, and Challenges for Policy

Wednesday, August 16, 2023, 9:00am - Thursday, August 17, 2023, 5:00pm

LOCATION: Landau Economics Building, 579 Jane Stanford Way, Stanford, CA 94305

The session would bring together research on how to best finance companies that innovate on green technologies, the pricing of climate risks in financial markets, banks' exposures to climate risk and their regulation, the impact of monetary policy on climate change, and policies more broadly that help mitigate climate changes.

ORGANIZED BY:

Juliane Begenau, Stanford University    Stefano Giglio, Yale University  Lars Peter Hansen, University of Chicago  Monika Piazzesi, Stanford University

DEADLINE FOR PAPER SUBMISSION May 15, 2023

Session 10: Fiscal Sustainability

Monday, August 21, 2023, 9:00am - Tuesday, August 22, 2023, 5:00pm

As governments emerge from the pandemic, they are dealing with major challenges in regards to fiscal sustainability. We want to organize a session that focuses on topics at the intersection of monetary policy, fiscal policy and sustainability, and the valuation of government debt. What role do central banks play in creating fiscal space for governments? Is there a possibility of fiscal dominance going forward? How does this possibility affect asset prices and the creation of safe assets? Could the erosion of the U.S. fiscal position threaten its reserve currency role? 

ORGANIZED BY: Francesco Bianchi, Johns Hopkins University  Arvind Krishnamurthy, Stanford University  Hanno Nico Lustig, Stanford University

DEADLINE FOR PAPER SUBMISSION May 22, 2023

Session 11: Financial Regulation

Monday, August 28, 2023, 9:00am - Wednesday, August 30, 2023, 12:00pm

LOCATION: Landau Economics Building, 579 Jane Stanford Way, Stanford, CA 94305

This session discusses the latest advances in theoretical and empirical issues related to financial regulation, defined broadly. Topics will include, but will not be limited to, connections of regulation for intermediaries, households and policymakers in the US and outside the US. 

ORGANIZED BY:  Gregor Matvos, Northwestern University  Amit Seru, Stanford University

DEADLINE FOR PAPER SUBMISSION May 29, 2023

Session 12: IO of Healthcare and Credit Markets

Wednesday, August 30, 2023, 1:00pm - Thursday, August 31, 2023, 5:00pm

LOCATION: Landau Economics Building, 579 Jane Stanford Way, Stanford, CA 94305

This session will bring together researchers working on the IO of healthcare and credit markets. These markets share similar features, including selection, market power, behavioral consumers, among others. We believe there are opportunities for fruitful interaction between researchers studying these environments. 

ORGANIZED BY: Jose Ignacio Cuesta, Stanford University  Liran Einav, Stanford University  Gaston Illanes, Northwestern University Pietro Tebaldi, Columbia University

DEADLINE FOR PAPER SUBMISSION May 22, 2023

Session 13: The Macroeconomics of Uncertainty and Volatility

Wednesday, September 6, 2023, 9:00am - Friday, September 8, 2023, 5:00pm

LOCATION: John A. and Cynthia Fry Gunn Building, 366 Galvez Street 

The session will cover recent work on the causes and effects of changes in volatility and uncertainty. This can cover everything from the COVID pandemic, Monetary, Fiscal shocks to Wars, and Regulatory changes. This session will focus on measuring changes in uncertainty, evaluating its mechanisms and impacts on firms, consumers, national or global economies, discussing policy responses and any other related topics. The mix of academics and policy makers across multiple institutions reflects this broad interest. Papers or presentation slides are required (abstracts only will not be accepted).

ORGANIZED BY:  Nicholas Bloom, Stanford University  Steven Davis, University of Chicago  Jesus Fernandez-Villaverde, University of Pennsylvania  Zheng Liu, Federal Reserve Bank of San Francisco  Bo Sun, University of Virginia  Nancy R. Xu, Boston College

DEADLINE FOR PAPER SUBMISSION June 5, 2023

Session 14: New Frontiers in Asset Pricing

Wednesday, September 6, 2023, 9:00am - Friday, September 8, 2023, 5:00pm

This session is for asset pricing papers on the frontier of the discipline. Particular areas of focus are macrofinance, computation, machine learning, and climate finance. Possible topics include but are not limited to the following: asset pricing, investor heterogeneity, learning and ambiguity, new preference structures for pricing models, or using machine learning to understand the cross-section of returns. A particular area of interest is climate finance, where both climate change and the policy responses to climate change present new risks in asset pricing markets.  Topics of interest include asset pricing with heterogeneous agents and disaster risks, credit risk modeling for possibly stranded assets, the implications of integrated assessment models for financial risks, and methodological advances in solution methods for complex analyses of climate finance models. As the analysis of such models often requires the use of computational methods, we encourage submissions that develop and make use of new numerical techniques.

ORGANIZED BY: Kenneth Judd, Hoover Institution at Stanford University Walter Pohl, Norwegian School of Economics Karl Schmedders, IMD Lausanne Ole Wilms, University of Hamburg & Tilburg University

DEADLINE FOR PAPER SUBMISSION June 5, 2023

Session 15: The Micro and Macro of Labor Markets

Thursday, September 7, 2023, 9:00am - Friday, September 8, 2023, 5:00pm

LOCATION: Landau Economics Building, 579 Jane Stanford Way, Stanford, CA 94305

The idea of this session is to bring together labor economists and macroeconomists with interests in labor markets with two goals. The first goal is to be a venue to discuss the latest research about labor markets. The second goal is to promote intellectual exchange among scholars working on similar topics, but with different approaches. Specific topics will depend on the submissions. 

ORGANIZED BY: Gregor Jarosch, Duke University  Isaac Sorkin, Stanford University

DEADLINE FOR PAPER SUBMISSION May 15, 2023

Session 16: Frontiers of Macroeconomic Research

Monday, September 11, 2023, 9:00am - Wednesday, September 13, 2023, 5:00pm

LOCATION: Landau Economics Building, 579 Jane Stanford Way, Stanford, CA 94305

The goal of the session is to bring together researchers working in macroeconomics, broadly defined. The session will focus on both short-run macroeconomic fluctuations, as well as open questions in economic growth. We welcome submissions that are quantitative, theoretical or empirical in nature. We hope that the diverse research topics within macroeconomics covered in the session will foster engaging and productive discussion. 

ORGANIZED BY: Adrien Auclert, Stanford University Luigi Bocola, Stanford University  Kurt Mitman, Stockholm University

DEADLINE FOR PAPER SUBMISSION June 12, 2023

Session 17: Labor Markets and Policies

Thursday, September 14, 2023, 9:00am - Saturday, September 16, 2023, 5:00pm

This session offers a forum for scholars interested in the use of general equilibrium models disciplined by micro data to carefully analyze important labor market issues and reforms to address them. The use of these models to conduct comprehensive quantitative analyses of policy reforms is still in its infancy. The goal of this session is to bring together a diverse group of scholars, both young and established, engaged in frontier research in this area. The session is organized around three themes, all of which have implications for the observed increase in wage and wealth inequality in the United States. The first theme is about the dynamic effects of increases in the minimum wage and of the taxation of wealth of the types now being discussed and implemented in the United States, in both the short and the long run. The second theme is about how the growth and diffusion of automation will lead to changes in the structure of wages, work, and employment in developed industrial economies. The third theme is about the effect on labor markets of the adoption of trade reforms that differentially expose some sectors of an economy to much more intense international competition.

ORGANIZED BY:  Erik Hurst, University of Chicago  Patrick Kehoe, Stanford University Elena Pastorino, Stanford University

DEADLINE FOR PAPER SUBMISSION June 30, 2023

Session 18: Gender

Friday, September 15, 2023, 9:00am - Saturday, September 16, 2023, 5:00pm

LOCATION: Landau Economics Building, 579 Jane Stanford Way, Stanford, CA 94305

This session will be dedicated to understanding how gender influences economic outcomes and decision-making. We invite submissions of papers whose main focus is on gender, regardless of field, to foster dialogue across fields. In addition to senior faculty members, invited presenters will include junior faculty as well as graduate students. 

ORGANIZED BY:

Alejandro Martinez-Marquina, University of Southern California  Muriel Niederle, Stanford University  Alessandra Voena, Stanford University

DEADLINE FOR PAPER SUBMISSION June 16, 2023

Domestic abusers have the right to bear arms--5th Circuit Court of Appeals

 In the U.S., the right to bear arms is a protected transaction. That can lead to some controversial decisions. 

Here's the story from Bloomberg:

Gun Ruling Giving Domestic Abusers Rights Prompts Garland Rebuke By Erik Larson

"The decades-old US law barring domestic abusers from possessing firearms contradicts the nation’s “historical tradition” of access to guns even for people who may not be “model citizens,” an appeals court said in a ruling that prompted a Justice Department rebuke.

"The statute is unconstitutional because it gives too much power to Congress to determine who qualifies as “law-abiding, responsible citizens” when it comes to gun ownership, the 5th US Circuit Court of Appeals said Thursday.

...

"The ruling vacated the conviction of a Texas man, Zackey Rahimi, who pleaded guilty to violating the law by keeping a pistol at home despite being subject to a civil domestic-violence restraining order for assaulting his former girlfriend. It’s the latest fallout from a US Supreme Court ruling in June that paved the way for courts to reconsider a wide variety of gun restrictions.

...

“Rahimi, while hardly a model citizen, is nonetheless part of the political community entitled to the Second Amendment’s guarantees, all other things equal,” said the appellate panel, comprised of two judges appointed by former President Donald Trump and one by Ronald Reagan.

"Rahimi’s home was searched after he was involved in five shootings in a two-month span, including firing at a law enforcement vehicle in December 2020, firing at a driver after getting in a car accident and shooting multiple rounds in the air in January 2021 “after his friend’s credit card was declined at a Whataburger restaurant,” the appeals court said."

********

Here's the Supreme Court decision, NRA v. Bruen on which the 5th Circuit relied:

NEW YORK STATE RIFLE & PISTOL ASSOCIATION, INC., ET AL. v. BRUEN, SUPERINTENDENT OF NEW YORK STATE POLICE, ET AL.

No. 20–843. Argued November 3, 2021—Decided June 23, 2022 

Syllabus:

"New York’s proper-cause requirement violates the Fourteenth Amendment by preventing law-abiding citizens with ordinary self-defense needs from exercising their Second Amendment right to keep and bear arms in public for self-defense."

Blood Money, by John Dooley and Emily Gallagher

 Are paid plasma donors being exploited? Here's a paper that suggests not, but rather that the payments that plasma donors receive can improve their financial well being not merely by providing additional income, but also by helping them avoid going into expensive debt.

 Dooley, John and  Emily Gallagher, Blood Money (October 11, 2021). Available at SSRN: https://ssrn.com/abstract=3940369 or http://dx.doi.org/10.2139/ssrn.3940369

Abstract: "Little is known about the motivations and outcomes of sellers in remunerated markets for human materials. We exploit dramatic growth in the number of commercial blood plasma centers in the U.S. to study the individuals who sell plasma. We find sellers tend to be young and liquidity constrained with low incomes and credit scores; they also report less access to traditional bank credit. Plasma centers absorb demand for non-traditional credit. The opening of a nearby plasma center reduces payday loan inquires and transactions by 13–18% among young borrowers. Meanwhile, foot traffic increases by over 9% at both essential and non-essential goods establishments when a new plasma center opens nearby. Our findings suggest that, at least in the short-term, constrained households use the discretionary income from plasma centers to smooth consumption without appealing to high-cost debt."

HT: Mario Macis

Update: here's the published version

John M Dooley, Emily A Gallagher, Blood Money: Selling Plasma to Avoid High-Interest Loans, The Review of Financial Studies, 2024;, hhae018, https://doi.org/10.1093/rfs/hhae018

The Allocation of Food to Food Banks by Canice Prendergast in the JPE

 The Allocation of Food to Food Banks by Canice Prendergast, Journal of Political Economy 130, 8, 1993-2017.

Abstract: "Feeding America allocates donated food to over 200 food banks. In 2005, it transitioned from a queueing mechanism to one where food banks use a specialized currency to bid for food. Food banks chose very different food than they received before. Small food banks acquired 72% more pounds per client than large food banks at little nutritional cost. This reallocation of food is estimated to have increased its value by 21%, or $115 million per annum. Food banks also sourced food much closer, saving an additional $16 million per annum. Finally, donations of food rose by over 100 million pounds."

"The old assignment algorithm gave each food bank an equal number of (random) pounds of food per needy client. This was problematic for a variety of reasons, despite its perceived fairness. First, food banks differ in their needs. The [old assignment algorithm] allocated an average of 10% of food distributed to food banks, but Feeding America knew little about the other food. This was further complicated by food richness, where some food banks had better access to outside food donations and had different residual needs. Second, food was randomly assigned on the basis of geography, leading to high transportation costs. Third, the allocation system was slow and deterred some donations. 

"Instead of equal pounds per client, the Choice System gives food banks an equal number of shares per client. These are used to bid in first-price sealed bid auctions, run twice a day. Shares can be saved and borrowed, and any shares spent on a given day are recirculated back to food banks that night. Bids can be negative, a feature used to ease donor relations. Through this mechanism, shares allow a food bank to match its purchases to both its permanent and transitory needs and to the geographic location of the donor.

"Despite the benefits that choice allows, many of the practitioners involved in the redesign were initially skeptical of a market-based system. Their concerns were primarily focused on the fear that smaller or less sophisticated food banks would suffer. To ensure equity across food banks, a series of safeguards outlined below were used, among them access to credit and the ability to bid jointly with other food banks. 

"The Choice System went live on July 1, 2005. We consider a variety of outcomes from 2002 to 2011. A feature of the design is that any food bank can purchase its old allocation, assuming that food banks face common prices. As a result, all food banks are at least as well off as before. This assumes that transactions costs are low enough that all food banks engaged with Choice, and a concern raised was that smaller food banks may not do so. We show that food banks quickly engaged, bidding over 200 times a year and winning more than 70 times. Furthermore, small food banks bid more per client than do large ones. We also show that the safeguards implemented to encourage the participation of small food banks were used as intended. We then quantify how different outcomes were under Choice. "

**********

Earlier:

Tuesday, December 4, 2018

Feeding America: Podcast on HBS case study of Canice Prendergast and Feeding America

Friday, November 13, 2015

Canice Prendergast on The Allocation of Food to Food Banks

Ideas to Increase Transplant Organ Donation, in Regulation / SUMMER 2022

 Frank McCormick points out this recent collection of short pieces in the summer issue of Regulation.

Ideas to Increase Transplant Organ Donation, edited by Ike Brannon, in Regulation / SUMMER 2022

Introduction  BY IKE BRANNON

Emulate Israel’s Program of Covering Donors’ Expenses BY JOSH MORRISON AND SAMMY BEYDA

Give Donors a Tax Credit BY SALLY SATEL AND ALAN D. VIARD

Expose OPOs to Competition BY ABE SUTTON

Help People Understand the Benefits of Donation  BY MARIO MACIS

Opioid deaths are behind increases in deceased organ donation

 Medpage Today warns us not to take credit for increases in organ donation that are due to rising numbers of opioid overdose deaths. 

'Shocking Mismanagement' in Our Organ Donation System Is Causing Needless Death— OPTN and OPOs are mischaracterizing organ donation data to block system reform  by DJ Patil, PhD, Greg Segal, Ebony Hilton, MD, and Lachlan Forrow, MD

"The magnitude of the opioid crisis shows no signs of peaking. New data from the CDC's National Center for Health Statistics show that deaths from the opioid epidemic soared by 50% from October 2019 to October 2021, some of which reflected second-order effects of the COVID-19 pandemic. Similarly, alcohol-related deaths, according to recent CDC reports, were also up by a shocking 25% in 2020, from an average increase of 3.6% per year from 1999-2019.

"What does this have to do with organ donation? Drug overdoses and alcohol-related deaths fall into the subset of deaths that allow for organ donation to occur, so this sharp rise in opioid deaths has driven record-breaking organ donation numbers. That might sound like a silver lining to a very dark cloud, but as is often the case with public health data, the picture is much more complex.

"The government contractors in charge of organ donation -- both organ procurement organizations (OPOs), which oversee local organ recovery, and the organ procurement transplantation network (OPTN), which manages the system -- are hiding behind increases in these deaths of despair to deflect criticism from what the House Oversight Committee has characterized as "shocking mismanagement" in organ procurement.

"In fact, HHS has deemed the majority of OPOs to be failing key performance metrics, contributing to 33 Americans dying every day for lack of an organ transplant. And the Senate Finance Committee is investigating the United Network for Organ Sharing (UNOS), the OPTN contractor, over "serious concerns related to [its] role in overseeing our nation's OPOs, which have been severely underperforming for decades."

...

"We have more organ donors in America not because we have a strong -- or even remotely adequate -- organ procurement system, but because on a per capita basis among wealthy nations, we have many times more deaths in those subsets of deaths that allow for organ donation to occur. This includes 20 to 30 times more opioid deaths, 25 times as many gun deaths, the highest suicides rates, and more than twice as many fatal car accidents -- a number that spiked again precipitously last year."

Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field By Reshmaan Hussam, Natalia Rigol, and Benjamin N. Roth

 Mechanisms designed to elicit truthful reporting in the laboratory sometimes are cumbersome to administer and difficult to explain.  Here's a paper that finds that simple attempts to incentivize truthful reporting (including allowing other participants to hear each report, as well as small payments for reports that conform to community consensus) can help eliminate incentives to boost family and friends, when reports concern who could make most effective use of a cash grant.

Targeting High Ability Entrepreneurs Using Community Information: Mechanism Design in the Field By Reshmaan Hussam, Natalia Rigol, and Benjamin N. Roth   American Economic Review 2022, 112(3): 861–898   https://doi.org/10.1257/aer.20200751

Abstract: "Identifying high-growth microentrepreneurs in low-income countries remains a challenge due to a scarcity of verifiable information. With a cash grant experiment in India we demonstrate that community knowledge can help target high-growth microentrepreneurs; while the average marginal return to capital in our sample is 9.4 percent per month, microentrepreneurs reported in the top third of the community are estimated to have marginal returns to capital between 24 percent and 30 percent per month. Further we find evidence that community members distort their predictions when they can influence the distribution of resources. Finally, we demonstrate that simple mechanisms can realign incentives for truthful reporting."

"Not everyone has what it takes to be a successful entrepreneur. Numerous experimental studies of microentrepreneurs in the developing world find widely heterogeneous returns to cash and credit.1  Yet governments, lenders, and nongovernmental organizations often lack hard information with which to target resources to high-growth entrepreneurs.

...

"In this paper we argue that harnessing community information directly from a microentrepreneur’s peers may provide a viable approach to identifying high-growth microentrepreneurs.

"Our argument has three parts. First, we demonstrate that entrepreneurs in peri-urban Maharashtra have high quality information about one another along a variety of dimensions including marginal returns to capital. Their information is valuable for identifying high-growth microentrepreneurs even after controlling for a wide range of demographic and business characteristics. Second we demonstrate that entrepreneurs manipulate their reports to favor themselves, their friends, and their family when the distribution of resources is at stake. Finally we identify several simple techniques motivated by mechanism design that effectively realign incentives for accuracy.

...

"Our first main finding is that community members can identify high-return entrepreneurs. While the average marginal return to the grant was about 9.4 percent per month, our point estimates of the marginal returns to capital of entrepreneurs ranked in the top third range from 24 percent to 30 percent. Had we distributed our grants using community reports instead of random assignment, we would have roughly tripled the total return on our investment.

...

"Our second main finding is that strategic misreporting is a first-order concern when eliciting community information. By random assignment, half of respondents were told that their reports would be used only for research purposes (the “no stakes” treatment) and the other half were told that their reports would be used to allocate US$100 grants to members of their community (the “high stakes” treatment). The correlation between community reports and true outcomes is on average 27 percent to 35 percent lower when allocation of resources is at stake, which significantly lowers the value of peer elicitation.

...

"Our third main finding is that methods grounded in mechanism design theory can be used to design a peer-elicitation environment in which truth telling is incentive compatible. Monetary payments and public reporting do little to improve the accuracy of self-reports. But payments substantially increase the predictive power of reports that entrepreneurs make about other group members. We provide direct evidence that monetary payments reduce the likelihood that respondents favor their family members or their close friends. Finally, we find that public reporting increases the predictive accuracy of reports about others when there are no stakes, but has no effect in a high stakes setting. This nuanced finding may reflect a heterogeneous treatment effect, or a noisily estimated impact of observability on the quality of reports."

Erotic movies versus porn -- times and terms are changing

In a 1964 case, Jacobellis v. Ohio, Supreme Court Justice  Potter Stewart famously declared that it was difficult to define pornography, but that "I know it when I see it " (Less well known is how he continued that sentence: "I know it when I see it, and the motion picture involved in this case is not that.”

But "porn" has now become such a big category that it isn't even clear that the word retains its original repugnance.  A New York Times story that considers its redeeming features is about a film director whose website characterizes her this way: "Female provocateur and porn film director Erika Lust is creating a new world of indie adult cinema" (It turns out that Lust isn't her original family name...)

 Here's the story from the NY Times:

‘There’s Not Just One Type of Porn’: Erika Lust’s Alternative Vision. The Swedish moviemaker thinks pornography can create a society that sees sexuality as myriad and joyful, and where women’s pleasure matters.  By Mary Katharine Tramontana

*******

And here's another story, which features the megasite Pornhub, in Vanity Fair:

XXX-Files: Who Torched the Pornhub Palace?  BY ADAM GOLLNER

"Pornhub, with its undulating ocean of explicit content, is often ranked among the 10 most viewed websites in the world. More Americans use it than use Twitter, Netflix, or Instagram.

...

"starting in December, a series of legal and P.R. scandals slammed the company. First, a New York Times exposé accused the firm of knowingly hosting child sex abuse materials (CSAM). Antoon denied the charges: “Any suggestion that we allow or encourage illegal content is completely untrue and defies rational reason, from both a moral and business standpoint,” he told me. Still, Canadian senators and MPs called for a criminal investigation. In the uproar, credit card processors suspended payments on the site.

...

"Forty years ago, debates about porn focused on the idea that the sex industry was inherently dehumanizing and rife with abuse. Activist Andrea Dworkin famously argued that porn was detrimental to women, full stop. But not all second-wave feminists agreed. A vocal faction argued for an erotic-positive approach to rejecting sexual repression. The phrase “pornography is violence against women,” wrote Ellen Willis, an influential pro-sex feminist, “was code for the neo-Victorian idea that men want sex and women endure it.”

"The argument remains as contentious as it is unresolved. This fall, the Times published an op-ed by Michelle Goldberg—“Why Sex-Positive Feminism Is Falling Out of Fashion”—citing a TikTok-based “Cancel Porn” movement. Then again, Cosmo contended that “As we all know, women enjoy porn just as much as guys do.” In fact, an estimated one third of Pornhub’s users are women. And the current feminist perspective on the porn debate might best be summarized by Oxford philosopher Amia Srinivasan in her new book, The Right to Sex: Feminism in the 21st Century: “If a woman says she enjoys working in porn, or being paid to have sex with men, or engaging in rape fantasies, or wearing stilettos—and even that she doesn’t just enjoy these things but finds them emancipatory, part of her feminist praxis—then we are required, many feminists think, to trust her. 

...

"The most seismic attack on the company came a year ago—in the form of a Nicholas Kristof New York Times op-ed stating that Pornhub was “infested with rape videos. 

...

"Soon, a merry-go-round of lawsuits started being filed on behalf of underage or nonconsenting victims: an Alabama case invoked the Trafficking Victims Protection Reauthorization Act

...

"When Pornhub released an app last summer directing museumgoers to classic nude paintings, legal action was threatened by the Louvre and the Uffizi. As one Montreal source put it: “They’re in trouble all over the world.”

...

"The new crusaders aim to outlaw the commercial sex industry altogether, regardless of how that might affect sex workers, already a marginalized group. The main outcome of credit card bans on Pornhub—which Mickelwait considers an important victory—was that content creators stopped getting paid. The fallout extended to OnlyFans, the booming subscription-based platform that connects users directly with content creators. In August, OnlyFans threatened to remove all “sexually explicit” content, which would have had a chilling effect on free speech, open expression, and private digital commerce. Under pressure, the company reversed that decision

...

"While the internet continues its Wild West resistance to law and order, porn keeps getting ever more mainstream. (When Facebook and Instagram both went down one day last fall, for instance, Pornhub saw a 10.5 percent traffic spike.) Meanwhile, making porn has become America’s “side hustle,” Ruby told me, describing an expanding movement of makers selling their sexuality online. “People figured out that they could just document that part of their lives and earn an extra two or three thousand dollars a month and feed their families.” Pornhub, OnlyFans, and other digital portals played an integral part in that phenomenon."

Stanford SITE Seminar: Psychology and Economics, Aug 9-10

 

Session 4: Psychology and Economics

Date

Monday, August 9, 2021, 9am - Tuesday, August 10, 2021, 12:30pm

ORGANIZED BY

• B. Douglas Bernheim, Stanford University
• John Beshears, Harvard Business School
• Vincent Crawford, University of Oxford and University of California, San Diego
• David Laibson, Harvard University
• Ulrike Malmendier, University of California, Berkeley

As we have done for many years, this workshop brings together researchers working on issues at the intersection of psychology and economics. The segment will focus on evidence of and explanations for non-standard choice patterns, as well as the positive and normative implications of those patterns in a wide range of economic decision-making contexts, such as lifecycle consumption and savings, workplace productivity, health, and prosocial behavior. The presentations will frequently build upon insights from other disciplines, including psychology and sociology. Theoretical, empirical, and experimental studies will be included.

In This Session

Monday, August 9, 2021

AUG 9

9:00 AM - 9:30 AM

The Gender Gap in Self-Promotion

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Presented by: Christine Exley (Harvard Business School)

Co-author(s): Judd B. Kessler (The Wharton School, University of Pennsylvania)

In applications, interviews, performance reviews, and many other environments, individuals subjectively describe their ability and performance to others. We run a series of experiments, involving over 4,000 participants from online labor markets and over 10,000 school-aged youth. We find a large gender gap in self-promotion: Women subjectively describe their ability and performance to potential employers less favorably than equally performing men. Even when all incentives to promote are removed, however, the gender gap remains. The gender gap in self-promotion is reflective of an underlying gender gap in how individuals subjectively evaluate their own performance. This underlying gender gap proves persistent and arises as early as the sixth grade.

AUG 9

9:30 AM - 10:00 AM

Partial Equilibrium Thinking in General Equilibrium

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Presented by: Francesca Bastianello (Harvard University)

Co-author(s): Paul Fontanier (Harvard University)

We develop a theory of “Partial Equilibrium Thinking” (PET), whereby agents fail to understand the general equilibrium consequences of their actions when inferring information from endogenous outcomes. PET generates a two-way feedback effect between outcomes and beliefs, which can lead to arbitrarily large deviations from fundamentals. In financial markets, PET equilibrium outcomes exhibit over-reaction, excess volatility, high trading volume, and return predictability. We extend our model to allow for rationality of higher-order beliefs, general forms of model misspecification, and heterogenous agents. We show that more sophisticated agents may contribute to greater departures from rationality. We also draw a distinction between models of misinference and models with biases in Bayesian updating, and study how these two departures from rationality interact. Misinference from mistakenly assuming the world is rational amplifies biases in Bayesian updating.

AUG 9

10:00 AM - 10:15 AM

Break

AUG 9

10:15 AM - 10:45 AM

Belief-Updating: Inference versus Extrapolation

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Presented by: Tony Q. Fan (Stanford University),

Co-author(s): Yucheng Liang (Carnegie Mellon University) and Cameron Peng (London School of Economics and Political Science)

Survey forecasts of macroeconomic and financial variables show widespread overreaction to news, but laboratory experiments on belief updating typically find underinference from signals. We provide new experimental evidence to connect these two seemingly inconsistent phenomena. Building on a classic experimental paradigm, we study how people make inferences and revise forecasts in the same fully-specified information environment. Subjects underreact to signals when inferring about fundamental states (“underinference”), but overreact to signals when revising forecasts about future outcomes (“overextrapolation”). In the latter task, subjects appear to be using a mix of simplifying heuristics, such as focusing on the representative state (the state most consistent with the signal) and anchoring on the signal. Additional treatments link our results to the difficulty of recognizing the conceptual connection between inference and forecast revision problems.

AUG 9

10:45 AM - 11:15 AM

Learning in the Household

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Presented by: Gautam Rao (Harvard University)

Co-author(s): John J. Conlon (Harvard University), Malavika Mani (Columbia University), Matthew Ridley (MIT), and Frank Schilbach (MIT)

This paper studies social learning and information pooling within the household using a lab experiment with 400 married couples in Chennai, India. Participants are asked to guess the fraction of red balls in an urn after each spouse privately receives draws from the urn and then has a chance to learn their spouse’s draws through a face-to-face discussion. Guesses are paid for accuracy and the payoff is split equally between the spouses, aligning their incentives. We find that husbands’ beliefs respond less than half as much to information that was collected by their wives, relative to ‘own’ information. This failure of learning is not due to communication frictions: when we directly share their wife’s information with husbands, they continue to under-weight it relative to their own draws. Wives do not display this behavior, and instead equally weight their own and their spouse’s information. In a follow-up experiment with pairs of strangers, individuals of both genders put more weight on their own information than on their partner’s. We conclude that people have a general tendency to under-weight others’ information relative to their own, and speculate that a norm of wives deferring to their husbands may play a countervailing role in our context.

AUG 9

11:15 AM - 11:30 AM

Break

AUG 9

11:30 AM - 12:00 PM

Does Saving Cause Borrowing?

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Presented by: Michaela Pagel (Columbia GSB)

Co-author(s): Paolina Medina (Mays Business School of Texas A&M University)

We study whether or not nudging individuals to save more has the unintended consequence of additional borrowing in high-interest unsecured consumer credit. We analyze the effects of a large-scale experiment in which 3.1 million bank customers were nudged to save more via (bi-)weekly SMS and ATM messages. Using Machine Learning methods for causal inference, we build a score to sort individuals according to their predicted treatment effect. We then focus on the individuals in the top quartile of the distribution of predicted treatment effects who have a credit card and were paying interest at baseline. Relative to their control, this group increased their savings by 5.7% on average or 61.84 USD per month. At the same time, we can rule out increases in credit card interest larger than 1.25 USD with 95% statistical confidence. We thus estimate that for every additional dollar of savings, individuals incur less than 2 cents in additional borrowing cost. This is a direct test test of the predictions of rational co-holding models, and is an important result to evaluate policy proposals to increase savings via nudges or more forceful measures.

AUG 9

12:00 PM - 12:30 PM

Dynamic Preference "Reversals" and Time Inconsistency

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Presented by: Dmitry Taubinsky (UC Berkeley)

Co-author(s): Philipp Strack (Yale University)

We study identification of time preferences from data sets where an agent at time 0 makes an advance commitment, and later at time 1 can revise their choice. A common intuition, motivating many empirical studies, is that systematic reversals toward certain alternatives imply time inconsistency. We show that this intuition is generally incorrect in environments with random taste shocks. Roughly speaking, the only data that rejects time-consistent expected utility maximization is when a time-0 choice is revealed to be strictly dominated at time 1 with probability 1. This result applies to rich choice sets; to cases where the analyst observes the complete ranking of alternatives in every period and state of the world; to environments where it is natural to impose additional assumptions like concavity; and to cases where the analyst has access to supplementary cardinal information. However, we prove that there is a class of empirical designs that does produce robust point identification of the degree of time inconsistency: designs that estimate agents’ willingness to pay for different alternatives at both time 0 and time 1, and where the marginal utility of money can be assumed to not vary with agents’ time-1 preferences for the different alternatives.

Tuesday, August 10, 2021

AUG 10

9:00 AM - 9:30 AM

Safe Spaces: Shelters or Tribes?

Presented by: Jean Tirole (Toulouse School of Economics)

AUG 10

9:30 AM - 10:00 AM

A Model of Justification

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Presented by: Sarah Ridout (Harvard University)

I model decision-making constrained by morality, rationality, or other virtues. In addition to a primary preference over outcomes, the decision maker (DM) is characterized by a set of preferences that he considers justifiable. In each choice setting, he maximizes his primary preference over the subset of alternatives that maximize at least one of the justifiable preferences. The justification model unites a broad class of empirical work on distributional preferences, charitable donations, prejudice/discrimination, and corruption/bribery. I provide full behavioral characterizations of several variants of the justification model as well as practical tools for identifying primary preferences and justifications from choice behavior. I show that identification is partial in general, but full identification can be achieved by including lotteries in the domain and allowing for heterogeneity in both primary preferences and justifications. Since the heterogeneous model uses between-subject data, it is robust to consistency motives that may arise in within-subject experiments. I extend the heterogeneous model to information choice and show that it accounts for observed patterns of information demand and avoidance on ethical domains.

AUG 10

10:00 AM - 10:15 AM

Break

AUG 10

10:15 AM - 10:45 AM

How Flexible is that Functional Form? Measuring the Restrictiveness of Theories

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Presented by: Annie Liang (Northwestern University)

Co-author(s): Drew Fudenberg (MIT) and Wayne Gao (University of Pennsylvania)

We propose a new way to quantify the restrictiveness of an economic model, based on how well the model fits simulated, hypothetical data sets. The data sets are drawn at random from a distribution that satisfies some application-dependent content restrictions (such as that people prefer more money to less). Models that can fit almost all hypothetical data well are not restrictive. To illustrate our approach, we evaluate the restrictiveness of popular behavioral models in two experimental settings—certainty equivalents and initial play— and explain how restrictiveness reveals new insights about each of the models.

AUG 10

10:45 AM - 11:15 AM

Choice and Complexity

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Presented by: Jörg L. Spenkuch (Northwestern University)

Co-author(s): Yuval Salant (Northwestern University)

We study two dimensions of complexity that may affect individual decision-making. The first one is object complexity, which corresponds to the difficulty of evaluating any given object in the choice set. The second dimension is composition complexity, which refers to the difficulty of finding the best among similar alternatives. We develop a satisficing-with-evaluation-errors model that incorporates both dimensions and delivers sharp empirical predictions about their effect on choice behavior. We test these predictions in a novel data set with information on hundreds of millions of decisions in chess endgames. Chess endgames admit an objective measure of choice quality and, most importantly, have ample variation in object and composition complexity. Consistent with the theory, we document that even highly experienced decision makers are significantly more likely to make suboptimal choices as complexity increases along either dimension. Our analysis, therefore, helps to shed some of the first light on the role of complexity in decision-making outside of the laboratory.

AUG 10

11:15 AM - 11:30 AM

Break

AUG 10

11:30 AM - 12:00 PM

Incentive Complexity, Bounded Rationality, and Effort Provision

Presented by: David Huffman (University of Pittsburgh)

Co-author(s): Johannes Abeler (University of Oxford) and Collin Raymond (Purdue University)

This paper shows that dynamic incentives embedded in an organization’s workplace incentive scheme can be a shrouded attribute, due to contract complexity and worker bounded rationality. This is true in field experiments within the firm, and in complementary online experiments with real eort tasks. Structural estimates indicate that rational agents who fully understand the incentive scheme would behave sigificantly dierent from what we observe. A response to dynamic incentives does emerge when we reduce complexity or look at workers with higher cognitive ability. The results illustrate the potential value of complexity to organizations, they demonstrate that complex incentive contracts may allow firms to be achieve better than second-best, they identify specific features of contracts that can influence the eectiveness of incentives through the channel of complexity, and they imply heterogeneous eects of incentives depending on worker cognitive ability.

AUG 10

12:00 PM - 12:30 PM

The Negative Consequences of Loss-Framed Performance Incentives

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Presented by: Alex Rees-Jones (The Wharton School, University of Pennsylvania)

Co-author(s): Lamar Pierce (Olin Business School, Washington University in St Louis) and Charlotte Blank (Maritz)

Behavioral economists have proposed that incentive contracts result in higher productivity when bonuses are "loss framed" prepaid then clawed back if targets are unmet. We test this claim in a large-scale field experiment. Holding financial incentives fixed, we randomized the pre- or postpayment of sales bonuses at 294 car dealerships. Prepayment was estimated to reduce sales by 5%, generating a revenue loss of $45 million over 4 months. We document, both empirically and theoretically, that negative effects of loss framing can arise due to an increase in incentives for "gaming" behaviors. Based on these claims, we reassess the common wisdom regarding the desirability of loss framing.