A Fast Literature Search Engine based on top-quality journals, by Dr. Mingze Gao.

• Forbes, S. J., & Lederman, M. (2009). Adaptation and Vertical Integration in the Airline Industry. American Economic Review, 99, 1831–1849.

  We explore patterns of vertical integration in the US airline industry. Major airlinessubcontract portions of their network to regional partners, which may ormay not be owned. We investigate if ownership economizes on ex post renegotiationcosts. We estimate whether airlines are more likely to use owned regionalson city pairs with adverse weather (which makes adaptation decisions morefrequent) and on city pairs that are more integrated into the major's network(which raises the costs of having adaptation decisions resolved suboptimally).Our results suggest a robust empirical relationship between adaptation andvertical integration in this setting. (JEL L14, L22, L24, L93)

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• Gayle, G.-L., & Miller, R. A. (2009). Has Moral Hazard Become a More Important Factor in Managerial Compensation? American Economic Review, 99, 1740–1769.

  We estimate a principal-agent model of moral hazard with longitudinal dataon firms and managerial compensation over two disjoint periods spanning 60years to investigate increased value and variability in managerial compensation.We find exogenous growth in firm size largely explains these seculartrends in compensation. In our framework, exogenous firm size works throughtwo channels. First, conflicts of interest between shareholders and managersare magnified in large firms, so optimal compensation plans are now moreclosely linked to insider wealth. Second, the market for managers has becomemore differentiated, increasing the premium paid to managers of large versussmall firms. (JEL D82, L25, M12, M52)

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• Grubb, M. D. (2009). Selling to Overconfident Consumers. American Economic Review, 99, 1770–1807.

  Consumers may overestimate the precision of their demand forecasts. Thisoverconfidence creates an incentive for both monopolists and competitive firmsto offer tariffs with included quantities at zero marginal cost, followed by steepmarginal charges. This matches observed cellular phone service pricing plansin the United States and elsewhere. An alternative explanation with commonpriors can be ruled out in favor of overconfidence based on observed customerusage patterns for a major US cellular phone service provider. The model canbe reinterpreted to explain the use of flat rates and late fees in rental markets,and teaser rates on loans. Nevertheless, firms may benefit from consumers losingtheir overconfidence. (JEL D12, L11, L96)

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• Hendel, I., Nevo, A., & Ortalo-Magné, F. (2009). The Relative Performance of Real Estate Marketing Platforms: MLS versus FSBOMadison.com. American Economic Review, 99, 1878–1898.

  We compare house sales on a For-Sale-By-Owner (FSBO) platform to MultipleListing Service (MLS) sales and find that FSBO precommission prices are nolower, but that FSBO is less effective in terms of time to sell and probability ofa sale. We do not find direct evidence of the importance of network size as areason for the lower effectiveness of FSBO. We do find evidence of endogenousplatform differentiation: patient sellers use FSBO while patient buyers transactmore often on the MLS (where they avoid patient sellers). We discuss theimplications for platform competition, two-sided markets, and welfare. (JELL85, M31, R31)

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• Ho, T.-H., & Su, X. (2009). Peer-Induced Fairness in Games. American Economic Review, 99, 2022–2049.

  People exhibit peer-induced fairness concerns when they look to their peers asa reference to evaluate their endowments. We analyze two independent ultimatumgames played sequentially by a leader and two followers. With peer-inducedfairness, the second follower is averse to receiving less than the firstfollower. Using laboratory experimental data, we estimate that peer-inducedfairness between followers is two times stronger than distributional fairnessbetween leader and follower. Allowing for heterogeneity, we find that 50 percentof subjects are fairness-minded. We discuss how peer-induced fairnessmight limit price discrimination, account for low variability in CEO compensation,and explain pattern bargaining. (JEL C72, D63 )

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• Hopenhayn, H. A., & Vereshchagina, G. (2009). Risk Taking by Entrepreneurs. American Economic Review, 99, 1808–1830.

  Entrepreneurs bear substantial risk, but empirical evidence shows no sign of apositive premium. This paper develops a theory of endogenous entrepreneurialrisk taking that explains why self-financed entrepreneurs may find it optimalto invest in risky projects offering no risk premium. Consistently with empiricalevidence, the model predicts that poorer entrepreneurs are more likely toundertake risky projects. It also finds that incentives for risk taking are strongerwhen agents are impatient. (JEL G31, G32, L25, L26)

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• Jeanne, O. (2009). Debt Maturity and the International Financial Architecture. American Economic Review, 99, 2135–2148.

  This paper presents a theory of the maturity of international sovereign debt, and derives its implications for the reform of the international financial architecture. The analysis is based on a model in which the need to roll over external debt disciplines the policies of debtor countries, but makes them vulnerable to unwarranted debt crises due to bad shocks. The paper presents a welfare analysis of several measures that have been discussed in recent debates, such as international lending-in-last-resort or the establishment of a mechanism for suspending payments on the external debt of crisis countries. (JEL F34, O19)

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• Kvaløy, O., & Olsen, T. E. (2009). Endogenous Verifiability and Relational Contracting. American Economic Review, 99, 2193–2208.

  Principal-agent models usually invoke the strong assumption that the parties know for sure ex ante whether a variable is verifiable or not. This paper assumes that only the probability of verification is known, and that this probability is endogenously determined. We analyze a principal-agent relationship where the verifiability of the agent's output is determined by the principal's investment in drafting an explicit contract. The model is well suited for analyzing the relationship between explicit contracting, legal courts, trust, and relational contracting. In particular, we show how trust – established through repeated interaction – and legal courts may induce contractual incompleteness. (JEL D82, D86)

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• Landeo, C. M., & Spier, K. E. (2009). Naked Exclusion: An Experimental Study of Contracts with Externalities. American Economic Review, 99, 1850–1877.

  This paper reports the results of an experiment on exclusive contracts. We replicatethe strategic environment described by Rasmusen, Ramseyer, and Wiley(1991) and Segal and Whinston (2000). Our findings are as follows. First, whenthe buyers can communicate, discrimination raises the likelihood of exclusion.Second, when the incumbent seller is unable to discriminate and must makethe same offers to the buyers, communication reduces the likelihood of exclusion.Communication also induces more generous offers when the seller cannotdiscriminate, and divide-and-conquer offers when the seller can discriminate.Third, when communication is allowed, payoff endogeneity increases the likelihoodof exclusion. (JEL C72, C91, D62, D86, K12, K21, L12, L42)

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• Lavy, V. (2009). Performance Pay and Teachers’ Effort, Productivity, and Grading Ethics. American Economic Review, 99, 1979–2011.

  This paper presents evidence about the effect of individual monetary incentiveson English and math teachers in Israel. Teachers were rewarded with cashbonuses for improving their students' performance in high-school matriculationexams. The main identification strategy is based on measurement errorin the assignment to treatment variable that produced a randomized treatmentsample. The incentives led to significant improvements in test taking rates, conditionalpass rates, and mean test scores. Improvements were mediated throughchanges in teaching methods, enhanced after-school teaching, and increasedresponsiveness to students' needs. No evidence was found of manipulation oftest scores by teachers. (JEL I21, J31, J45)

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