Knowledge that Transforms

We consider a classical auction setting in which an asset/project is sold to buyers who privately receive signals about expected payoffs, and payoffs are more sensitive to a bidder's signal if he runs the project than if another bidder does. We show that a seller can increase revenues by sometimes allocating cash‐flow rights and control to different bidders, for example, with the highest bidder receiving cash flows and the second‐highest receiving control. Separation reduces a bidder's information rent, which depends on the importance of his private information for the value of his awarded cash flows. As project payoffs are most sensitive to a bidder's information if he controls the project, allocating cash flow to another bidder lowers bidders' informational advantage. As a result, when signals are close, the seller can increase revenues by splitting rights between the top two bidders.

We recover valuations of time using detailed data from a large ride‐hail platform, where drivers bid on trips and consumers choose between a set of rides with different prices and wait times. Leveraging a consumer panel, we estimate demand as a function of both prices and wait times and use the resulting estimates to recover heterogeneity in the value of time across consumers. We study the welfare implications of personalized pricing and its effect on the platform, drivers, and consumers. Taking into account drivers' optimal reaction to the platform's pricing policy, personalized pricing lowers consumer surplus by 2.5% and increases overall surplus by 5.2%. Like the platform, drivers benefit from personalized pricing. By conditioning prices on drivers' wait times and not on consumers' data, the platform can capture a significant portion of the profits garnered from personalized pricing, and simultaneously benefit consumers.

We study random assignment of indivisible objects among a set of agents, when each agent is to receive one object and has strict preferences over the objects. Random Serial Dictatorship (RSD) satisfies equal treatment of equals, ex post efficiency, and strategy‐proofness. Answering a longstanding open question, we show that RSD is not characterized by those properties—there are other mechanisms satisfying equal treatment of equals, ex post efficiency, and strategy‐proofness which are not welfare‐equivalent to RSD. On the other hand, we show that RSD is not Pareto dominated by any mechanism that is (i) strategy‐proof and (ii) boundedly invariant. Moreover, the same holds for all mechanisms that are ex post efficient, strategy‐proof, and boundedly invariant: no such mechanism is dominated by any other mechanism that is strategy‐proof and boundedly invariant.

Renewable energy and battery storage are seen as complementary technologies that can together facilitate reductions in carbon emissions. We develop and estimate a framework to calculate the equilibrium effects of large‐scale battery storage. Using data from California, we find that the first storage unit breaks even by 2024 without subsidies when the renewable energy share reaches 50%. Equilibrium effects are important: the first 5000 MWh of storage capacity would reduce wholesale electricity prices by 5.6%, but an increase from 25,000 to 50,000 MWh would only reduce these prices by 2.6%. Large‐scale batteries will reduce revenues to both dispatchable generators and renewable energy sources. The equilibrium effects lead battery adoption to be virtually non‐existent until 2030, without a storage mandate or subsidy. A 30% capital cost subsidy—such as the one in the U.S. Inflation Reduction Act—achieves 5000 MWh of battery capacity by 2024, similar to the level required under California's storage mandate.

We create a novel reign‐level data set for European monarchs, covering all major European states between the 10th and 18th centuries. We first document a strong positive relationship between rulers' cognitive ability and state performance. To address endogeneity issues, we exploit the facts that (i) rulers were appointed according to hereditary succession, independent of their ability, and (ii) the widespread inbreeding among the ruling dynasties of Europe led over centuries to quasirandom variation in ruler ability. We code the degree of blood relationship between the parents of rulers, which also reflects “hidden” layers of inbreeding from previous generations. The coefficient of inbreeding is a strong predictor of ruler ability, and the corresponding instrumental variable results imply that ruler ability had a sizeable effect on the performance of states and their borders. This supports the view that “leaders made history,” shaping the European map until its consolidation into nation states. We also show that rulers mattered only where their power was largely unconstrained. In reigns where parliaments checked the power of monarchs, ruler ability no longer affected their state's performance.

I propose a method for selecting seeds to maximize contagion. First, fit a random graph model using a coarse categorization of individuals. Next, compute a seed multiplier for each category—this is the average number of new infections a seed generates. Finally, seed the category with the highest multiplier. Relative to the most common methods, my approach requires far less granular data, and it consumes less computing power—the problem scales with the number of categories, not the number of individuals. I validate the methodology through simulations using real network data.

We consider the problem of repeatedly choosing policies to maximize social welfare. Welfare is a weighted sum of private utility and public revenue. Earlier outcomes inform later policies. Utility is not observed, but indirectly inferred. Response functions are learned through experimentation. We derive a lower bound on regret, and a matching adversarial upper bound for a variant of the Exp3 algorithm. Cumulative regret grows at a rate of T 2/3 . This implies that (i) welfare maximization is harder than the multiarmed bandit problem (with a rate of T 1/2 for finite policy sets), and (ii) our algorithm achieves the optimal rate. For the stochastic setting, if social welfare is concave, we can achieve a rate of T 1/2 (for continuous policy sets), using a dyadic search algorithm. We analyze an extension to nonlinear income taxation, and sketch an extension to commodity taxation. We compare our setting to monopoly pricing (which is easier), and price setting for bilateral trade (which is harder).

The Mussa (1986) puzzle is the observation of a sharp and simultaneous increase in the volatility of both nominal and real exchange rates following the end of the Bretton Woods System of pegged exchange rates in 1973. It is commonly viewed as a central piece of evidence in favor of monetary non‐neutrality because it is an instance in which a change in the monetary regime caused a dramatic change in the equilibrium behavior of a real variable—the real exchange rate—and is often further interpreted as direct evidence in favor of models with nominal rigidities in price setting. This paper shows that the data do not support this latter conclusion because there was no simultaneous change in the properties of the other macro variables, nominal or real; an extended set of Mussa facts falsifies both conventional flexible‐price RBC models and sticky‐price New Keynesian models. We present a resolution to the broader Mussa puzzle based on a model of segmented financial market, in which the bulk of the nominal exchange rate risk is held by financial intermediaries and is not shared smoothly throughout the economy, emphasizing the importance of monetary transmission via the risk premium channel.

This paper investigates how children affect women in science, using biographies in the American Men of Science (MoS 1956), linked with publications. First, we show that mothers have a unique life cycle pattern of productivity: While other scientists peak in their mid‐30s, mothers become less productive at that age and reach peak productivity in their early‐40s. Next, we estimate event studies of marriage, comparing mothers and fathers with other married scientists. Event study estimates show that the productivity of mothers declines until children reach school age, while fathers experience no change. These differences have important implications for tenure and participation: Just 27% of mothers achieve tenure, compared with 48% of fathers and 46% of other women. When women carried the full burden of childcare, the time costs of raising the baby boom led to a great loss of female scientists.

We estimate valence measures of candidates running in U.S. House elections from data on vote shares. Our identification and estimation strategy builds on ideas developed for estimating production functions, allowing us to control for possible endogeneity of campaign spending and sample selection of candidates due to endogenous entry. We find that incumbents have substantially higher valence measures than challengers running against them, resulting in about 3.5 percentage‐point differences in the vote share, on average. Eliminating differences in the valence of challengers and incumbents results in an increase in the winning probability of a challenger from 6.5% to 12.1%. Our measure of candidate valence can be used to study various substantive questions of political economy. We illustrate its usefulness by studying the source of incumbency advantage in U.S. House elections.