Search Results
Working Paper
Overconfidence, Subjective Perception, and Pricing Behavior
We study the implications of overconfidence for price setting in a monopolistic competition setup with incomplete information. Our price-setters overestimate their abilities to infer aggregate shocks from private signals. The fraction of uninformed firms is endogenous; firms can obtain information by paying a fixed cost. We find two results: (1) overconfident firms are less inclined to acquire information, and (2) prices might exhibit excess volatility driven by nonfundamental noise. We explore the empirical predictions of our model for idiosyncratic price volatility.
Working Paper
Faster Payments : Market Structure and Policy Considerations
The U.S. payments industry is in the process of developing ubiquitous, safe, faster electronic solutions for making a broad variety of business and personal payments. How this market for faster payments will evolve will be shaped by a range of economic forces, such as economies of scale and scope, network effects, switching costs, and product differentiation. Emerging technologies could alter these forces and lead to new organizational arrangements or market structures that are different from those in legacy payment markets to date. In light of this uncertainty, this paper examines three ...
Working Paper
Estimates of Cost-Price Passthrough from Business Survey Data
We examine businesses' price-setting practices via open-ended interviews and in a quantitative survey module with business contacts from the Federal Reserve Banks of Atlanta, Cleveland, and New York in December 2022 and January 2023. Businesses indicated that their prices were strongly influenced by demand, a desire to maintain steady profit margins, and wages and labor costs. Survey respondents expected reduced growth in costs and prices of about 5 percent on average over the next year. Backward-looking, forward-looking, and hypothetical scenarios reveal average cost-price passthrough of ...
Report
Estimates of Cost-Price Passthrough from Business Survey Data
We examine businesses’ price-setting practices via open-ended interviews and in a quantitative survey module with business contacts from the Federal Reserve Banks of Atlanta, Cleveland, and New York in December 2022 and January 2023. Businesses indicated that their prices were strongly influenced by demand, a desire to maintain steady profit margins, and wages and labor costs. Survey respondents expected reduced growth in costs and prices of about 5 percent on average over the next year. Backward-looking, forward-looking, and hypothetical scenarios reveal average cost-price passthrough of ...
Report
Faster payments: market structure and policy considerations
The U.S. payments industry is in the process of developing ubiquitous, safe, faster electronic solutions for making a broad variety of business and personal payments. How this market for faster payments will evolve will be shaped by a range of economic forces, such as economies of scale and scope, network effects, switching costs, and product differentiation. Emerging technologies could alter these forces and lead to new organizational arrangements or market structures that are different from those in legacy payment markets to date. In light of this uncertainty, this paper examines three ...
Working Paper
Token-Based Platform Governance
develop a model to compare the governance of traditional shareholder-owned plat forms to that of platforms that issue tokens. The owners of a traditional platform have incentives to implement policies that extract rents from users. If the platform’s owners can commit to future policies, they can implement a more efficient outcome by issuing a token that offers claims on the platform’s services. Such a token alleviates conflicts of interest between the platform’s owners and its users, mitigating inefficiencies: a policy that benefits users increases the value of tokens and therefore the ...
Working Paper
Estimates of Cost-Price Passthrough from Business Survey Data
We examine businesses' price-setting practices via open-ended interviews and in a quantitative survey module with business contacts from the Federal Reserve Banks of Atlanta, Cleveland, and New York in December 2022 and January 2023. Businesses indicated that their prices were strongly influenced by demand, a desire to maintain steady profit margins, and wages and labor costs. Survey respondents expected reduced growth in costs and prices of about 5 percent on average over the next year. Backward-looking, forward-looking, and hypothetical scenarios reveal average cost-price passthrough of ...
Working Paper
A Theory of Sticky Rents: Search and Bargaining with Incomplete Information
The housing rental market offers a unique laboratory for studying price stickiness. This paper is motivated by two facts: 1. Tenants? rents are remarkably sticky even though regular and expected recontracting would, by itself, suggest substantial rent flexibility. 2. Rent stickiness varies significantly across structure type; for example, detached unit rents are far stickier than large apartment unit rents. We offer the first theoretical explanation of rent stickiness that is consistent with these facts. In this theory, search and bargaining with incomplete information generates stickiness in ...
Working Paper
Time Use and the Efficiency of Heterogeneous Markups
What are the welfare implications of markup heterogeneity across firms? In standard monopolistic competition models, such heterogeneity implies inefficiency even in the presence of free entry. We enrich the standard model with heterogeneous firms so that preferences are non-separable in off-market time and market consumption and show that this changes the welfare implications of markup heterogeneity. In this context, homogeneity of markups is neither necessary nor sufficient for efficiency. The marginal cost of the marginal firm is weakly inefficiently high when off-market time and market ...
Working Paper
Project modifications and bidding in highway procurement auctions
This paper examines bidding behavior in a setting where post-bid-letting project modifications occur. These modifications change both the costs and payouts to the winning contractor, making the contract incomplete. Recent empirical research shows that bidders incorporate the likelihood of such changes in contracts into their bidding strategies. In particular, contractors may adjust bids to compensate for renegotiation, resequencing of tasks, and other costs associated with project modifications. This paper extends this literature by examining bidding behavior and project modifications in ...