This paper analyzes the decision of growing startups to either scale up on their own or sell to an established company. The model shows that in a closed economy, the number of scaleups is efficient. In an open economy, foreign buyers increase demand and raise acquisition prices. This stimulates startup formation but also encourages too many growing startups to sell instead of scale. In a dynamic equilibrium without externalities, foreign acquirers are a net benefit to the domestic ecosystem. Two model extensions identify conditions under which they can weaken it: (i) intergenerational externalities in the accumulation of scaleup experience and (ii) significant brain drain of serial entrepreneurs.
{"title":"Scaling versus Selling Startups: The Role of Foreign Acquirers in Entrepreneurial Ecosystems","authors":"Thomas Hellmann, Veikko Thiele","doi":"10.1086/721807","DOIUrl":"https://doi.org/10.1086/721807","url":null,"abstract":"This paper analyzes the decision of growing startups to either scale up on their own or sell to an established company. The model shows that in a closed economy, the number of scaleups is efficient. In an open economy, foreign buyers increase demand and raise acquisition prices. This stimulates startup formation but also encourages too many growing startups to sell instead of scale. In a dynamic equilibrium without externalities, foreign acquirers are a net benefit to the domestic ecosystem. Two model extensions identify conditions under which they can weaken it: (i) intergenerational externalities in the accumulation of scaleup experience and (ii) significant brain drain of serial entrepreneurs.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2022-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126354170","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Need fluctuates over the business cycle. We conduct a survey revealing a desire for nonprofit activities to countercyclically expand during downturns. We then demonstrate, using comprehensive US nonprofit data drawn from millions of tax returns, that the public’s hopes are disappointed. Nonprofit expenditure, revenue, and balance sheets fluctuate procyclically: contracting during national and local downturns. This finding is evident even for a narrow group of nonprofits that the public most wishes would expand during downturns, for example, those providing critical needs such as food or housing. Our new facts contribute to the charitable giving, nonprofit, and business cycle literatures.
{"title":"Nonprofits in Good Times and Bad Times","authors":"C. Exley, Nils Haakon Lehr, Stephen Terry","doi":"10.1086/721805","DOIUrl":"https://doi.org/10.1086/721805","url":null,"abstract":"Need fluctuates over the business cycle. We conduct a survey revealing a desire for nonprofit activities to countercyclically expand during downturns. We then demonstrate, using comprehensive US nonprofit data drawn from millions of tax returns, that the public’s hopes are disappointed. Nonprofit expenditure, revenue, and balance sheets fluctuate procyclically: contracting during national and local downturns. This finding is evident even for a narrow group of nonprofits that the public most wishes would expand during downturns, for example, those providing critical needs such as food or housing. Our new facts contribute to the charitable giving, nonprofit, and business cycle literatures.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"45 3","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2022-07-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"113987882","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Difference-in-differences is a common method for estimating treatment effects, and the parallel trends condition is its main identifying assumption: the trend in mean untreated outcomes is independent of the observed treatment status. In observational settings, treatment is often a dynamic choice made or influenced by rational actors, such as policy-makers, firms, or individual agents. This paper relates parallel trends to economic models of dynamic choice. We clarify the implications of parallel trends on agent behavior and study when dynamic selection motives lead to violations of parallel trends. Finally, we consider identification under alternative assumptions that accommodate features of dynamic choice.
{"title":"Parallel Trends and Dynamic Choices","authors":"P. Marx, E. Tamer, Xun Tang","doi":"10.1086/727363","DOIUrl":"https://doi.org/10.1086/727363","url":null,"abstract":"Difference-in-differences is a common method for estimating treatment effects, and the parallel trends condition is its main identifying assumption: the trend in mean untreated outcomes is independent of the observed treatment status. In observational settings, treatment is often a dynamic choice made or influenced by rational actors, such as policy-makers, firms, or individual agents. This paper relates parallel trends to economic models of dynamic choice. We clarify the implications of parallel trends on agent behavior and study when dynamic selection motives lead to violations of parallel trends. Finally, we consider identification under alternative assumptions that accommodate features of dynamic choice.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"32 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2022-07-14","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"121108978","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In this paper, we design and implement an experiment aimed at testing the level-k model of auctions. We begin by identifying (simple) environments that optimally disentangle the predictions of the level-k model from the natural benchmark of Bayes-Nash equilibrium. We then implement these environments within a virtual laboratory in order to see which theory can best explain observed bidding behavior. Overall, our findings suggest that, despite its notable success in predicting behavior in other strategic settings, the level-k model (and its close cousin, cognitive hierarchy) cannot explain behavior in auctions.
{"title":"Going…Going…Wrong: A Test of the Level-k (and Cognitive-Hierarchy) Models of Bidding Behavior","authors":"I. Rasooly","doi":"10.1086/723716","DOIUrl":"https://doi.org/10.1086/723716","url":null,"abstract":"In this paper, we design and implement an experiment aimed at testing the level-k model of auctions. We begin by identifying (simple) environments that optimally disentangle the predictions of the level-k model from the natural benchmark of Bayes-Nash equilibrium. We then implement these environments within a virtual laboratory in order to see which theory can best explain observed bidding behavior. Overall, our findings suggest that, despite its notable success in predicting behavior in other strategic settings, the level-k model (and its close cousin, cognitive hierarchy) cannot explain behavior in auctions.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-08-06","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"134230808","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study estimation of causal effects in staggered rollout designs, i.e. settings where there is staggered treatment adoption and the timing of treatment is as-good-as randomly assigned. We derive the most efficient estimator in a class of estimators that nests several popular generalized difference-in-differences methods. A feasible plug-in version of the efficient estimator is asymptotically unbiased with efficiency (weakly) dominating that of existing approaches. We provide both $t$-based and permutation-test-based methods for inference. In an application to a training program for police officers, confidence intervals for the proposed estimator are as much as eight times shorter than for existing approaches.
{"title":"Efficient Estimation for Staggered Rollout Designs","authors":"J. Roth, Pedro H. C. Sant’Anna","doi":"10.1086/726581","DOIUrl":"https://doi.org/10.1086/726581","url":null,"abstract":"We study estimation of causal effects in staggered rollout designs, i.e. settings where there is staggered treatment adoption and the timing of treatment is as-good-as randomly assigned. We derive the most efficient estimator in a class of estimators that nests several popular generalized difference-in-differences methods. A feasible plug-in version of the efficient estimator is asymptotically unbiased with efficiency (weakly) dominating that of existing approaches. We provide both $t$-based and permutation-test-based methods for inference. In an application to a training program for police officers, confidence intervals for the proposed estimator are as much as eight times shorter than for existing approaches.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"12 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-02","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"128311485","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Most industrial organization research, including applications to competition policy, undertakes partial equilibrium analysis in a single sector, often with a fixed number of firms. For welfare analysis, this approach is valid only if the rest of the economy is perfectly competitive, an assumption far from reality. This article examines competition policy in a simple, multisector, general equilibrium model with free entry and exit, allowing for differing distortions in each sector. Flows between sectors readily reverse standard prescriptions. But such results may be partially offset or overturned yet again when incorporating free entry and exit. Analysis of efficiencies also changes qualitatively.
{"title":"Competition Policy in a Simple General Equilibrium Model","authors":"L. Kaplow","doi":"10.1086/722154","DOIUrl":"https://doi.org/10.1086/722154","url":null,"abstract":"Most industrial organization research, including applications to competition policy, undertakes partial equilibrium analysis in a single sector, often with a fixed number of firms. For welfare analysis, this approach is valid only if the rest of the economy is perfectly competitive, an assumption far from reality. This article examines competition policy in a simple, multisector, general equilibrium model with free entry and exit, allowing for differing distortions in each sector. Flows between sectors readily reverse standard prescriptions. But such results may be partially offset or overturned yet again when incorporating free entry and exit. Analysis of efficiencies also changes qualitatively.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2021-02-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"124124840","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We introduce a solution concept for extensive-form games of incomplete information in which players need not assign likelihoods to what they do not know about the game. This is embedded in a model in which players can hold multiple priors. Players make choices by looking for compromises that yield a good performance under each of their updated priors. Our solution concept is called perfect compromise equilibrium. It generalizes perfect Bayesian equilibrium. We show how it deals with ambiguity in Cournot and Bertrand markets, public good provision, Spence's job market signaling, bilateral trade with common value, and forecasting.
{"title":"Compromise, Don't Optimize: Generalizing Perfect Bayesian Equilibrium to Allow for Ambiguity","authors":"K. Schlag, Andriy Zapechelnyuk","doi":"10.1086/726841","DOIUrl":"https://doi.org/10.1086/726841","url":null,"abstract":"We introduce a solution concept for extensive-form games of incomplete information in which players need not assign likelihoods to what they do not know about the game. This is embedded in a model in which players can hold multiple priors. Players make choices by looking for compromises that yield a good performance under each of their updated priors. Our solution concept is called perfect compromise equilibrium. It generalizes perfect Bayesian equilibrium. We show how it deals with ambiguity in Cournot and Bertrand markets, public good provision, Spence's job market signaling, bilateral trade with common value, and forecasting.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"23 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-03-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"132059826","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study how personalized news aggregation for rationally inattentive voters (NARI) affects policy polarization. In a two-candidate electoral competition model, an attention-maximizing infomediary aggregates source data about candidates’ valence into easy-to-digest news. Voters decide whether to consume news, trading off the expected gain from improved expressive voting against the attention cost. NARI generates policy polarization even if candidates are office motivated. Personalized news aggregation makes extreme voters the disciplining entity of policy polarization. The skewness of their signals helps sustain a high degree of policy polarization in equilibrium. Analysis of disciplining voters informs the equilibrium and welfare consequences of regulating infomediaries.
{"title":"The Politics of Personalized News Aggregation","authors":"Lin Hu, Anqi Li, I. Segal","doi":"10.1086/724326","DOIUrl":"https://doi.org/10.1086/724326","url":null,"abstract":"We study how personalized news aggregation for rationally inattentive voters (NARI) affects policy polarization. In a two-candidate electoral competition model, an attention-maximizing infomediary aggregates source data about candidates’ valence into easy-to-digest news. Voters decide whether to consume news, trading off the expected gain from improved expressive voting against the attention cost. NARI generates policy polarization even if candidates are office motivated. Personalized news aggregation makes extreme voters the disciplining entity of policy polarization. The skewness of their signals helps sustain a high degree of policy polarization in equilibrium. Analysis of disciplining voters informs the equilibrium and welfare consequences of regulating infomediaries.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"145 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2019-10-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123069858","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Jonathan Chapman, M. Dean, Pietro Ortoleva, E. Snowberg, Colin Camerer
We study the pattern of correlations across a large number of behavioral regularities, with the goal of creating an empirical basis for more comprehensive theories of decision-making. We elicit 21 behaviors, using an incentivized survey on a representative sample (n=1,000) of the US population. Our data show a clear and relatively simple structure underlying the correlations between these measures. Using principal components analysis, we reduce the 21 variables to six components corresponding to clear clusters of high correlations. We examine the relationship between these components, cognitive ability, and demographics. Common extant theories are not compatible with all the patterns in our data.
{"title":"Econographics","authors":"Jonathan Chapman, M. Dean, Pietro Ortoleva, E. Snowberg, Colin Camerer","doi":"10.1086/723044","DOIUrl":"https://doi.org/10.1086/723044","url":null,"abstract":"We study the pattern of correlations across a large number of behavioral regularities, with the goal of creating an empirical basis for more comprehensive theories of decision-making. We elicit 21 behaviors, using an incentivized survey on a representative sample (n=1,000) of the US population. Our data show a clear and relatively simple structure underlying the correlations between these measures. Using principal components analysis, we reduce the 21 variables to six components corresponding to clear clusters of high correlations. We examine the relationship between these components, cognitive ability, and demographics. Common extant theories are not compatible with all the patterns in our data.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2018-08-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126588779","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Applying basic techniques from convex analysis and majorization theory we develop a novel approach to mechanism design that is geometric in nature. This geometric approach provides a simple and unified treatment of the optimal mechanisms for general social choice problems with arbitrary linear objectives, including revenue and welfare maximization. We further present applications and extensions to nonlinear objectives.
{"title":"A Geometric Approach to Mechanism Design","authors":"J. Goeree, Alexey Kushnir","doi":"10.1086/721806","DOIUrl":"https://doi.org/10.1086/721806","url":null,"abstract":"Applying basic techniques from convex analysis and majorization theory we develop a novel approach to mechanism design that is geometric in nature. This geometric approach provides a simple and unified treatment of the optimal mechanisms for general social choice problems with arbitrary linear objectives, including revenue and welfare maximization. We further present applications and extensions to nonlinear objectives.","PeriodicalId":289840,"journal":{"name":"Journal of Political Economy Microeconomics","volume":"71 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2013-06-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129139303","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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