Knowledge that Transforms

The U.S. Supreme Court's 2010 decision in Citizens United v. Federal Election Commission deregulated campaign finance, enabling the rise of a new political action committee (the Super PAC) with broad freedom to raise and spend money. This led to an unprecedented surge in spending in primary and general elections. To evaluate the impact of Super PACs, I estimate a multistage model of political competition using data from U.S. Congressional elections between 2010 and 2020. I find that Super PAC spending by both sides prompts offsetting responses, resulting in limited net equilibrium effects. However, by amplifying the role of donors, Super PACs still have the potential to reshape the electoral landscape.

This paper explores the impact of information design on the auctioneer's revenue in the U.S. offshore oil/gas lease auctions where, post‐auction, the winner decides whether to explore the auctioned tract and must pay the government a royalty on its production value. I first document that there is a positive correlation between the exploration rate and publicly observed losing bids. This suggests that the winning bidder uses the rivals' bids to infer their private information about the tract's potential. I then characterize the equilibrium bidding strategy when the auctioneer designs and commits to how to reveal information on losing bids to the winning bidder. Counterfactual exercises reveal that alternative bid disclosure policies significantly improve auctioneer revenue.

Evidence from the laboratory and the field has uncovered both underreaction and overreaction to new information. We provide new experimental evidence on the underlying mechanisms of under‐ and overreaction by comparing how people make inferences and revise forecasts in the same information environment. Participants underreact to signals when inferring about underlying states, but overreact to the same signals when revising forecasts about future outcomes—a phenomenon we term “the inference‐forecast gap.” We show that this gap is largely driven by different simplifying heuristics used in the two tasks. Additional treatments suggest that the choice of heuristics is affected by the similarity between statistics in the information environment and the statistic elicited by the belief‐updating problem.

Biopharmaceuticals advance health and economic growth. Unlike central bargaining abroad, the United States uses private firms, pharmacy benefit managers (PBMs), to manage medicine access and spending. Yet, PBMs' roles in advancing efficiency are understudied. Ho and Lee model PBMs' use of tiered formularies, lists of covered medicines, without the use of proprietary data on the price concessions drug makers offer for preferred placement. They find PBMs' use of tiered formularies generate significant payor savings through competition. Complementing Ho and Lee, Feng and Maini (2024) model how patient demand inertia limits PBMs' ability to extract price concessions from drug makers which consequently erodes the efficacy gains of PBM formularies. Conti, Frandsen, Powell, and Rebitzer (2021) model formulary auctions where PBM size drives payor savings, but also spurs endogenously set high list prices, reducing patient access. Future economic research should focus on PBM market entry and vertical integration, pharmacy steering, and effects on innovation.