Susan Athey is an applied theorist who has made important contributions to economic theory, empirical economics, and econometrics. She has built a research program focused on using theory to understand substantive economic issues, especially in industrial organization. She has developed tools and techniques that provide the basis for empirical work grounded in sound economic theory. She has made particularly important advances in developing and applying tools that replace strong functional form assumptions in models with more plausible conditions such as monotonicity, thereby facilitating the development of more robust empirical results.

This paper constructs an e cient, budget-balanced, Bayesian incentive-compatible mechanism for a general dynamic environment with private information.As an intermediate result, we construct an e cient, ex post incentive-compatible mechanism, which is not budget balanced.We also provide conditions under which participation constraints can be satis ed in each period, so that the mechanism can be made self-enforcing if the horizon is in nite and players are su ciently patient.In our dynamic environment, agents observe a sequence of private signals over a number of periods (either nite or countable).In each period, the agents report their private signals, and make public (contractible) and private decisions based on the reports.The probability distribution over future signals may depend on both past signals and past decisions.The construction of an e cient mechanism hinges on the assumption of \private values" (each agent's payo is determined by his own observations).Balancing the budget relies on the assumption of \independent types" (the distribution of each agent's private signals does not depend on the other agents' private information, except through public decisions).

This paper derives sufficient conditions for a class of games of incomplete information, such as first price auctions, to have pure strategy Nash equilibria (PSNE).The paper treats games between two or more heterogeneous agents, each with private information about his own type (for example, a bidder's value for an object or a firm's marginal cost of production), and the types are drawn from an atomless joint probability distribution which potentially allows for correlation between types.Agents' utility may depend directly on the realizations of other agents' types, as in MUgrom and Weber's (1982) formulation of the "mineral rights" auction.The restriction we consider is that each player's expected payoffs satisfy the following single crossing condition: whenever each opponent uses a nondecreasing strategy (that is, an opponent who has a higher type chooses a higher action), then a player's best response strategy is also nondecreasing in her type.The paper has two main results.The first result shows that, when players are restricted to choose among a finite set of actions (for example, bidding or pricing where the smallest unit is a penny), games where players' objective functions satisfy this single crossing condition wUl have PSNE.The second result demonstrates that when players' utility functions are continuous, as well as in mineral rights auction games and other games where "winning" creates a discontinuity in payoffs, the existence result can be extended to the case where players choose from a continuum of actions.The paper then applies the theory to several classes of games, providing conditions on utility ftanctions and joint distributions over types under which each class of games satisfies the single crossing condition.In particular, the single crossing condition is shown to hold in all first-price, private value auctions with potentially heterogeneous, risk-averse bidders, with either independent or affiliated values, and with reserve prices which may differ across bidders; mineral rights auctions with two heterogeneous bidders and affiliated values; a class of pricing games with incomplete information about costs; a class of all-pay auction games; and a class of noisy signaling games.Finally, the formulation of the problem introduced in this paper suggests a straightforward algorithm for numerically computing equilibrium bidding stiategies in games such as first price auctions, and we present numerical analyses of several auctions under alternative assumptions about the joint distribution of types.

This paper provides an economic perspective on data-driven innovation in digital products, focusing on the role of complex experiments in measuring and improving social impact. The discussion highlights how tools and insights from economics contribute to each stage of the innovation process. Key contributions include identifying problems, developing theoretical frameworks, translating goals into measurable outcomes, analyzing historical data, and estimating counterfactual outcomes. The paper also surveys recently developed tools designed to address challenges in designing and analyzing data from complex experiments.

We consider a dynamic Bertrand game in which prices are publicly observed and each firm receives a privately observed cost shock in each period. Although cost shocks are independent across firms, within a firm costs follow a first-order Markov process. We analyze the set of collusive equilibria available to firms, emphasizing the best collusive scheme for the firms at the start of the game. In general, there is a trade-off between productive efficiency, whereby the low-cost firm serves the market in a given period, and high prices. We show that when costs are perfectly correlated over time within a firm, if the distribution of costs is log-concave and firms are sufficiently patient, then the optimal collusive scheme entails price rigidity: firms set the same price and share the market equally, regardless of their respective costs. When serial correlation of costs is imperfect, partial productive efficiency is optimal. For the case of two cost types, first-best collusion is possible if the firms are patient relative to the persistence of cost shocks, but not otherwise. We present numerical examples of first-best collusive schemes.

We present new identification resiilts for models of first-price, second-price, ascending (English), and descending (Dutch) auctions.We analyze a general specification of bidders' preferences and the underlying information structure, nesting as special cases the pure private values and pure common values models, and allowing both ex ante symmetric and asymmetric bidders.We address identification of a series of such models and propose strategies for discriminating between them on the basis of observed data.In the simplest case, the symmetric independent pri- vate values model is nonparametrically identified even if only the transaction price from each auction is observed.For more complex models, we provide conditions for identification and testing when additional information of one of the following types is available: (i) one or more bids in addition to the transaction price; (ii) exogenous variation in the number of bidders; (iii) bidder-specific covariates that shift the distribution of valuations; (iv) the ex post reahzation of the value of the object sold.Our results include new tests that distinguish between private and common values models.

This paper presents new identification results for models of first–price, second–price, ascending (English), and descending (Dutch) auctions. We consider a general specification of the latent demand and information structure, nesting both private values and common values models, and allowing correlated types as well as ex ante asymmetry. We address identification of a series of nested models and derive testable restrictions enabling discrimination between models on the basis of observed data. The simplest model—symmetric independent private values—is nonparametrically identified even if only the transaction price from each auction is observed. For richer models, identification and testable restrictions may be obtained when additional information of one or more of the following types is available: (i) the identity of the winning bidder or other bidders; (ii) one or more bids in addition to the transaction price; (iii) exogenous variation in the number of bidders; (iv) bidder–specific covariates. While many private values (PV) models are nonparametrically identified and testable with commonly available data, identification of common values (CV) models requires stringent assumptions. Nonetheless, the PV model can be tested against the CV alternative, even when neither model is identified.

We consider an infinitely repeated Bertrand game, in which prices are publicly observed and each firm receives a privately observed, i.i.d. cost shock in each period. We focus on symmetric perfect public equilibria, wherein any “punishments” are borne equally by all firms. We identify a tradeoff that is associated with collusive pricing schemes in which the price to be charged by each firm is strictly increasing in its cost level: such “fully sorting” schemes offer efficiency benefits, as they ensure that the lowest-cost firm makes the current sale, but they also imply an informational cost (distorted pricing and/or equilibrium-path price wars), since a higher-cost firm must be deterred from mimicking a lower-cost firm by charging a lower price. A rigid-pricing scheme, where a firm's collusive price is independent of its current cost position, sacrifices efficiency benefits but also diminishes the informational cost. For a wide range of settings, the optimal symmetric collusive scheme requires (i) the absence of equilibrium-path price wars and (ii) a rigid price. If firms are sufficiently impatient, however, the rigid-pricing scheme cannot be enforced, and the collusive price of lower-cost firms may be distorted downward in order to diminish the incentive to cheat. When the model is modified to include i.i.d. public demand shocks, the downward pricing distortion that accompanies a firm's lower-cost realization may occur only when current demand is high.

Online search as well as keyword-based contextual advertising on third-party publishers is primarily priced using pay-per-click (PPC): advertisers pay only when a consumer clicks on the advertisement. Slots for advertisements are auctioned, and per-click bids are weighted by the probability of a click given that the advertisement is displayed (the “click-through rate”) in addition to other factors. The PPC method allows the advertising platform (e.g. Google) to bundle together otherwise heterogeneous items (impressions on different positions on a search page, on different search phrases sharing common “keywords,” and on different publishers) into more homogeneous units, simplifying the advertiser's bidding problem. However, PPC pricing has some drawbacks. First, all clicks are not created equal: clicks on a Paris, France hotel website that is displayed on a search for Paris Hilton may result in lower profit conditional on the click. Second, for infrequently searched phrases on search engines or small content providers, it is difficult for the advertiser to accurately estimate conversion rates, increasing the risk and monitoring costs for the advertiser and diminishing their incentives to advertise broadly (indeed, on contextual networks, the advertising platform may not even provide the advertiser with sufficient accounting data about where the advertisements were displayed to allow the advertiser to distinguish sources of clicks, and the publisher mix may change on an ongoing basis.) Third, the problem of click fraud is fairly pervasive: when publishers receive a share of advertising revenue, advertisers place a single bid applying to many publishers, and revenue