the impact of mandatory disclosure laws on product choices an analysis of the salad dressing market abstract the nutrition labeling and education act nlea requires most food products to include a nutrition label prior to the nlea labeling was voluntary this study uses nutrition label information and supermarket scanner data pre and post nlea to examine the impact of moving from a voluntary to a mandatory labeling regime on consumer product choice the voluntary unraveling of information is shown to be an important market mechanism prior to the nlea all low fat salad dressings had a nutrition label while the majority of the higher fat dressings did not however there remained large variation in fat content among dressings that did not voluntarily label those with the highest fat levels experienced a significant decline in sales after they were required to disclose the results indicate that even in markets with credible low cost mechanisms to disclose mandatory labeling can have an impact on consumer behavior and health

quality disclosure under consumer loss aversion consumers experience a sense of loss when a product s quality does not match their expectations to alleviate consumer loss aversion cla firms can disclose information to reduce consumers uncer

delivering bad news market responses to negligence abstractone of the goals of the legal liability system is to ensure that sellers provide appropriate care reputation effects may also deter negligence the little available research evidence suggests that reputation effects are minimal however we develop a theory tailored to an environment such as medicine in which sellers are of heterogeneous quality and face two types of demand private consumers who exhibit downward sloping demand for example private health insurance and government consumers who exhibit perfectly elastic demand at a fixed price for example medicaid insurance the theory predicts that high quality sellers who suffer reputation losses will see their caseloads shift from private to government patients while low quality sellers will lose government patients and may gain private patients combining individual patient level data from florida for the years 1994 2003 with physician level litigation data we find evidence that physicians experience reputation effects that are consist

the motivation and bias of bureaucrats many individuals are motivated to exert effort because they care about their jobs rather than because there are monetary consequences to their actions the intrinsic motivation of bureaucrats is the focus of this paper and three primary results are shown first bureaucrats should be biased second sometimes this bias takes the form of advocating for their clients more than would their principal while in other cases they are more hostile to their interests for a range of bureaucracies those who are biased against clients lead to more efficient outcomes third self selection need not produce the desired bias instead selection to bureaucracies is likely to be bifurcated in the sense that it becomes composed of those who are most preferred by the principal and those who are least preferred

information school choice and academic achievement evidence from two experiments we examine a natural experiment and a field experiment that provided direct information on school test scores to lower income families in a public school choice plan receiving information significantly increases the fraction of parents choosing higher performing schools parents with high scoring alternatives nearby were more likely to choose nonguaranteed schools with higher test scores using random variation from each experiment we find that attending a higher scoring school increases student test scores the results imply that school choice will most effectively increase academic achievement for disadvantaged students when parents have easy access to test score information and good options from which to choose

strategic information disclosure the case of multi attribute products with heterogeneous consumers we examine the incentives for firms to voluntarily disclose otherwise private information about quality attributes of differentiated products in particular we focus on the case of differentiated products with multiple attributes and consumers that are heterogeneous in their preferences over these attributes we show that there exist certain configurations of consumer preferences under which a firm producing a high quality product even with zero costs of disclosure may choose not to reveal the quality of its product this failure of firms to voluntarily disclose the quality of their products will arise when providing consumers with more information results in more elastic demands for these products which in turn triggers more intensive price competition and leads to lower prices and profits for all firms as a result the equilibrium in which disclosure is voluntary may diverge from that in which disclosure is mandatory

reacting to rankings evidence from america s best hospitals rankings and report cards have become a popular way of providing information in a variety of domains i estimate the response to rankings in the hospital market and find that hospitals that improve their rank are able to attract significantly more patients the average hospital in my sample experiences a 5 change in non emergency medicare patient volume from year to year due to rank changes these findings have implications regarding the competitiveness of hospital markets and the effect that the dissemination of quality information in hospital markets can have on individual choice

an empirical examination of quality certification in a lemons market i introduction researchers have long understood that a variety of mechanisms may be used to overcome problems of adverse selection stigler 1961 224 notes that s ome forms of economic organization may be explicable chiefly as devices for eliminating uncertainties in quality and akerlof 1970 cites independent groups such as the consumers union and united laboratories that test and certify the quality of goods there is however little empirical evidence that illustrates the effectiveness of such mechanisms in this article we examine the effect certification has on a market characterized by adverse selection using data from the market for young thoroughbreds we compare the performance of sales where auction houses provide certification services with sales where certification is absent the thoroughbred racehorse market consists of two distinct types of public auctions certified and noncertified sales in a certified sale auction houses physically inspect the horses nominated to their sales selling only the horses they conclude are from the upper end of the quality distribution in noncertified sales auction houses sell all horses nominated to a sale our empirical strategy is to perform tests that indicate whether adverse selection affects market outcomes in either certified or noncertified sales a finding that adverse selection is present in noncertified sales but absent in certified sales is consistent with the hypothesis that certification alleviates problems of adverse selection we adopt three approaches to test for the presence of adverse selection 1 the first approach is in the spirit of chiappori and salanie 2000 who examine the relationship between unobservable factors from participation and performance equations we model adverse selection as a case of sample selection bias and examine the correlation between errors in participation and price equations 2 to accomplish this we use a unique data set that allows us to estimate how breeder decisions to sell or retain horses affect market prices the data set consists of a 10 random sample of all thoroughbreds born in 1993 and includes both horses retained by their breeders who own a horse at the time of its birth and horses that breeders chose to sell our second test follows genesove 1993 and chezum and wimmer 1997 by examining the relationship between seller characteristics and price theoretically when observable seller characteristics are correlated with seller incentives to select goods adversely prices should reflect these differences chezum and wimmer observe that some breeders sell all of their horses whereas others retain a portion to race they find that market prices are inversely related to the extent of a breeder s involvement in racing concluding that adverse selection affects market outcomes we extend this work in two respects first we isolate the effect seller characteristics have on price through the decision to sell or retain a horse second we compare the effect seller characteristics have on observed prices in certified and noncertified sales our last test follows bond 1982 who attempts to identify adverse selection in the market for used trucks by comparing the repair records of trucks that were sold with the records of trucks retained by their original owners because the horses in our sample had not begun their racing careers at the time they were sold we use data on racetrack earnings as an ex post measure of quality and compare the quality of horses sold in noncertified sales with certified horses and horses retained by their breeders the results from each approach are consistent with certification alleviating problems of adverse selection we find that holding observable attributes constant horses that would receive unusually high market prices in noncertified sales are even more valuable in other options and are less likely to be sold in a noncertified sale

demand inducement and the physician patient relationship the physician patient relationship is a paradigm for any expert client relationship the physician both diagnoses the patient s illness and recommends a treatment this dual role gives the physician incentive to recommend treatments whose costs outweigh their medical benefits these socially inefficient treatments correspond to the notion of physician induced demand the level of inducement chosen by the physician is shown to depend on the price and potential medical benefits of treatment and the relative diagnostic skills of physician and patient this model offers several testable hypotheses some of which are confirmed by related studies

the effect of report cards on consumer choice in the health insurance market we test the effect of report cards on consumer choice in the hmo market federal employees were provided with report cards on a limited basis in 1995 and then on a widespread basis in 1996 exploiting this natural experiment we find that subjective measures of quality and coverage influence plan choices after controlling for plan premiums expected out of pocket expenses and service coverages the effect is stronger within a small sample of new hires compared to a larger sample of existing federal employees we also find evidence that report cards increase the price elasticity of demand for health insurance

the trouble with compliance dependence and foreign policy in ecuador the compliance model of dependent foreign policy argues that dependent states will implement the foreign policy preferences of their dominant economic partners despite its failure to deliver strong empirical results compliance remains dominant within the study of dependent foreign policy this article examines compliance s problems and explains its endurance within the subfield of international relations six cases drawn from the hurtado and febres cordero administrations in ecuador during the 1980s are analyzed to evaluate compliance s three critical assumptions about the dependent foreign policy process the unitary actor core periphery bargaining and divergent preferences between core and periphery in only one of the cases do compliance s assumptions hold true and does compliance account for ecuador s foreign policy flaws in the bargaining assumption and the divergent preferences assumption account for the model s poor description of the process behind many dependent states foreign policies

that s news to me information revelation in professional certification markets i introduction market economies devote substantial resources to certify product quality educational testing services ets offers sat tests for college applicants u s news world report ranks universities underwriters laboratories certifies consumer and industrial products moody s reports bond ratings and accounting companies audit financial reports for public corporations in theory if one party of the trade possesses superior information about product quality a professional certificate can alleviate the information asymmetry and therefore attenuate the lemons problem and facilitate trade akerlof 1970 1 the informational role of professional certification has profound implications for markets yet little is known empirically how professional certifiers behave and compete indeed while theories have advanced to making welfare comparisons across market structures franzoni 1999 lizzeri 1999 and regulators express concerns about the market power of certifiers u s securities and exchange commission sec 2003 little is known about the primitive facts on market structure and certifier performance for example what information does a monopoly certifier provide who obtains useful information from such a certificate how do subsequent entrants compete with the incumbent and whether and to what extent entrants provide information to the market are all fundamental questions to which we have limited insights the lack of clean empirical evidence is not surprising since observational data alone might confound criteria differences and sorting effects rendering field data suggestive but not entirely compelling indeed even when field data circumvent these problems too many theoretically relevant factors change simultaneously to allow a clean comparative static test the goal of this paper is to use two controlled field experiments to provide empirical insights on these basic questions using sportscard grading as an example we employ an approach field experiments that might prove useful for future scholars studying related phenomena for decades a popular tool in the literature to answer such questions has been an event study event studies infer information content by comparing for example market prices before and after the release of bond ratings or analysts earnings report assuming market price is a sufficient statistic of the information available to the market the event study approach has two caveats it is difficult to control simultaneous information flow and it is difficult to pin down the exact timing of the arrival of the certificate rumors may spread before the official announcement we overcome these difficulties by collecting data from one natural field experiment and one framed field experiment see harrison and list 2004 for a detailed discussion of natural versus framed field experiments both experiments are undertaken in naturally occurring settings where the key theoretical factors are identifiable and arise endogenously our chosen market the sportscard grading industry is attractive in this regard for several reasons first there is a generally agreed upon set of traits for grading sportscards and quality is a major determinant of price second the industry is relatively young and thus far has been unregulated third there has been little change in the grading technology but the industry has evolved dramatically over the last 20 yr specifically the first grading service professional sports authenticators psa began operating in 1987 and now belongs to a publicly traded company due to institutional reasons detailed below psa has not changed its grading system since its inception in 1999 the market expanded and two competitors entered the market sportscard guaranty llc sgc entered in early 1999 and beckett grading services bgs entered later in 1999 all three services continue operating today and at least 14 other fringe grading companies have joined the market since 1999

the perils of transparency in bureaucracies many countries have recently enacted or proposed reforms aimed at increasing citizens information on the quality of some public sector services disclosure of schools and teachers quality is the case that has generated the biggest public debate in the us the no child left behind act nclb requires learning progress to be measured for every child and results from students tests be made available in annual report cards so that parents can evaluate schools performances similar reforms have also been proposed for many other public services in the uk legislation introduced in the year 2000 now requires that the performance of each local government is reviewed and made public with regards to provision of services such as re police housing social services and education but also like the condition of roads the

analyzing the analysts career concerns and biased earnings forecasts this paper examines the career concerns of security analysts we relate long histories of their earnings forecasts to job separations we find that relatively accurate past forecasts lead to favorable career outcomes such as remaining at or moving up to a high status large prestigious brokerage house controlling for accuracy optimistic forecasts relative to the consensus increase the chances of favorable job separations job separations depend much less on accuracy for analysts who cover stocks that are underwritten by their brokerage houses such analysts are also much more likely to be rewarded for optimistic forecasts than other analysts furthermore job separations were much less sensitive to accuracy and somewhat more sensitive to optimism during the stock market mania of the late 1990s these findings suggest that the well documented analyst forecast optimism bias is likely due to incentives to promote stocks

the role of sales agents in information disclosure evidence from a field experiment with a large nationwide retailer we run a natural field experiment to measure the effects of energy use information disclosure customer rebates and sales agent incentives on demand for energy efficient durable goods although a combination of large rebates plus sales incentives substantially increases market share information and sales incentives alone each have zero statistical effect and explain at most a small fraction of the low baseline market share sales agents strategically comply only partially with the experiment targeting information to more interested consumers but not discussing energy efficiency with the disinterested majority these results suggest that seller provided information is not a major barrier to energy efficiency investments at current prices in this context data as supplemental material are available at http dx doi org 10 1287 mnsc 2015 2327 this paper was accepted by john list behavioral economics

accountability incentives and behavior the impact of high stakes testing in the chicago public schools the recent federal education bill no child left behind requires states to test students in grades 3 to 8 each year and to judge school performance on the basis of these test scores while intended to maximize student learning there is little empirical evidence about the effectiveness of such policies this study examines the impact of an accountability policy implemented in the chicago public schools in 1996 1997 using a panel of student level administrative data i find that math and reading achievement increased sharply following the introduction of the accountability policy in comparison to both prior achievement trends in the district and to changes experienced by other large urban districts in the mid west however for younger students the policy did not increase performance on a state administered low stakes exam an item level analysis suggests that the observed achievement gains were driven by increases in test specific skills and student effort i also find that teachers responded strategically to the incentives along a variety of dimensions by increasing special education placements preemptively retaining students and substituting away from low stakes subjects like science and social studies

rating the raters are reputation concerns powerful enough to discipline rating agencies abstract credit rating agencies cras are accused of bearing a strong responsibility for contributing to the subprime crisis by having been deliberately too lax in the ratings of some structured products in response to this accusation cras argue that such an attitude would be too dangerous for them since their reputation is at stake the objective of this article is to examine the validity of this argument within a formal model are reputation concerns sufficient to discipline rating agencies we show that the reputation argument only works when a sufficiency large fraction of the cra income comes from other sources than rating complex products by contrast when rating complex products becomes a major source of income for the cra we show that it is always too lax with a positive probability and inflates ratings with probability one when its reputation is good enough we provide some empirical support for this prediction by showing that ceteris paribus the proportion of subprime residential mortgage backed securities rmbs that were rated aaa by the three main cras indeed increased over the last eight years we analyze the policy implications of our findings and advocate for a new business model of cras that we call the platform pays model

certification and market transparency we provide elementary insights into the effectiveness of certification to increase market transparency in a market with opaque product quality sellers use certification as a signaling device while buyers use it as an inspection device this difference alone implies that seller certification yields more transparency and higher social welfare under buyer certification profit maximizing certifiers further limit transparency but because seller certification yields larger profits active regulation concerning the mode of certification is not needed these findings are robust and widely applicable to for instance patents automotive parts and financial products

information gathering externalities for a multi attribute good most goods and services vary in numerous dimensions customers choose to acquire information to assess some characteristics and not others their choices affect firms incentives to invest in quality and so lead to indirect externalities in consumers choices we characterize a model in which a monopolist invests in the quality of a product with two characteristics and consumers are heterogeneous ex ante consumers do not internalize their influence on the firm s investment incentives when choosing which information to acquire cheaper information affects consumers information gathering and thereby firm investment this can paradoxically reduce consumer surplus profits and welfare

strategic certification and provision of quality we study the effect of the presence of a certification intermediary in an environment where information asymmetries are particularly severe the intermediary improves the information that buyers have about quality this in turn increases the incentives that the seller has to provide high quality goods efficiency is increased by the presence of the intermediary but quality is underprovided in equilibrium relative to full information the intermediary can implement the optimal policy in many ways the amount of information revealed ranges from full disclosure to partial noisy disclosure

voluntary quality disclosure and market interaction marketers disclose quality information directly to potential consumers using a variety of communication channels this study investigates how competition may influence duopoly firms incentive to voluntarily reveal quality information we show that firms in competitive markets reveal less information than a monopoly firm in addition sequential disclosure leads to asymmetric equilibrium disclosure behavior the disclosure leader reveals unambiguously less information than in the simultaneous disclosure case whereas the follower ex ante reveals less more private information than that released by the leader or by the firms in the simultaneous case when the disclosure cost is sufficiently low high we also examine the equilibrium firm profits and social welfare we demonstrate that there may be a u shaped relationship between equilibrium monopoly profits or social welfare under both monopoly and duopoly and the disclosure cost moreover in comparison to the simultaneous disclosure case sequential disclosure can lead to increasingly softened competition improving both firm profitability and social welfare

the advertising mix for a search good we extend the persuasion game to bring it squarely into the economics of advertising we model advertising as exciting consumer interest into learning more about the product and determine a firm s equilibrium choice of advertising content over quality information price information and horizontal match information equilibrium is unique whenever advertising is necessary the outcome is a separating equilibrium with quality unravelling lower quality firms need to provide more information for a given quality level as a function of consumer visit costs first quality information is disclosed then price information and then horizontal product information are added to the advertising mix some suggestive evidence is provided from airline ads in newspapers this paper was accepted by j miguel villas boas marketing

price quality and reputation evidence from an online field experiment we examine the link between price quality seller claims and seller reputation in internet auctions after purchasing actual baseball cards and having them professionally graded we find that some buyers in the online graded market are misled by incredible claims of quality they pay higher prices but do not receive better quality and in fact are defrauded more often online seller reputation is effective for identifying good faith sellers but conditional on completed auctions reputable sellers do not provide better quality evidence also suggests that high claim sellers target less experienced buyers we attribute these patterns to two loopholes in the ebay rating system we benefited from the comments of austan goolsbee raphael thomadsen john shea dan vincent david reiley larry ausubel peter cramton v joseph hotz jeff smith jimmy chan vincent crawford mark duggan and attendees at numerous seminars and conferences we are particularly grateful to seth sanders and john list for their constructive advice at the early stage of the research to timothy bresnahan rachel kranton and thomas hubbard for their detailed suggestions in reshaping earlier versions and to editor ariel pakes and two anonymous referees for their careful readings special thanks to eight friends who acted as our agents in purchasing baseball cards in retail markets and to numerous sports card store owners who shared their insights on the sportscard industry excellent research assistance from randy alexander moore and krzysztof fizyta is gratefully acknowledged any remaining errors are ours

the effect of information on product quality evidence from restaurant hygiene grade cards this study examines the effect of an increase in product quality information to consumers on e rms choices of product quality in 1998 los angeles county introduced hygiene quality grade cards to be displayed in restaurant windows we show that the grade cards cause i restaurant health inspection scores to increase ii consumer demand to become sensitive to changes in restaurants hygiene quality and iii the number of foodborne illness hospitalizations to decrease we also provide evidence that this improvement in health outcomes is not fully explained by consumers substituting from poor hygiene restaurants to good hygiene restaurants these results imply that the grade cards cause restaurants to make hygiene quality improvements

growth trade and international transfers abstract this paper analyzes the simplest neoclassical economy in which agents have finite lives and there is sustained per capita growth the growth rate of the world economy depends upon countries savings propensities and common technology trade can reverse an economy s autarkic growth trajectory and a country with a high savings rate runs a current account surplus if a surplus country expands aggregate demand while a deficit country contracts analogously world growth increases an appropriate international policy can change the path of the world economy from stagnation to growth

truth telling by third party auditors and the response of polluting firms experimental evidence from india in many regulated markets private third party auditors are chosen and paid by the firms that they audit potentially creating a conflict of interest this article reports on a two year field experiment in the indian state of gujarat that sought to curb such a conflict by altering the market structure for environmental audits of industrial plants to incentivize accurate reporting there are three main results first the status quo system was largely corrupted with auditors systematically reporting plant emissions just below the standard although true emissions were typically higher second the treatment caused auditors to report more truthfully and very significantly lowered the fraction of plants that were falsely reported as compliant with pollution standards third treatment plants in turn reduced their pollution emissions the results suggest reformed incentives for third party auditors can improve their reporting and make regulation more effective jel codes q56 m42 d22 copyright 2013 oxford university press

quality disclosure and competition we analyze costly quality disclosure with horizontally differentiated products under duopoly and a cartel and characterize the effect of competition on disclosure and welfare we show that expected disclosure is higher under a cartel than under duopoly and the welfare comparison depends on the level of disclosure cost when the disclosure cost is low welfare is higher under a cartel than duopoly but when the disclosure cost is high welfare is higher under duopoly in either market structure disclosure is excessive in terms of total surplus but insufficient in terms of consumer surplus

adverse selection in electronic markets evidence from online stamp auctions we analyze adverse selection costs in online stamp auctions based on a comparison of prices on ebay with those of matched stamps at a specialty stamps auction site in the u s michael rogers inc mr which we know a priori has low quality uncertainty we find that buyer prices are 10 15 lower on ebay as compared to mr and the price difference increases with the value of the stamps consistent with this adverse selection discount we find that the seller reputation mechanism on ebay has an economically modest although statistically significant effect on auction price and probability of sale

asymmetric information adverse selection and online disclosure the case of ebay motors since the pioneering work of akerlof 1970 economists have been aware of the adverse selection problem that information asymmetries can create in used goods markets the remarkable growth in online auctions of used goods where buyers generally purchase sight unseen therefore poses a puzzle i argue that given a means for credible information disclosure sellers will voluntarily disclose their private information to buyers through online media this limits information asymmetries and adverse selection to test this theory i examine the role of information in a large online used car market ebay motors i nd that sellers selectively disclose information that information asymmetries are reduced by these disclosures and that online media such as photos text and graphics provide a rich environment for information disclosure

does conflict of interest lead to biased coverage evidence from movie reviews media outlets are increasingly owned by conglomerates inducing a conflict of interest a media outlet can bias its coverage to benefit companies in the same group we test for bias by examining movie reviews in media outlets owned by news corp such as the wall street journal and time warner such as time we find higher ratings for 20th century fox movies in news corp outlets compared to movies by other studios to disentangle bias from correlation of taste we introduce and validate a novel matching procedure using individual movie ratings from online platforms using this procedure we find no evidence of bias in news corp nor time warner outlets we reject even small effects such as bias of one extra star out of four every thirteen movies we test for differential bias when the return to bias is plausibly higher examine bias by media outlet and by journalist as well as editorial bias we also consider bias by omission whether media outlets are more likely to review highly rated movies by affiliated studios and conflict of interest within a movie aggregator in none of these dimensions do we find evidence of bias we relate to previous work and discuss three explanations for the lack of bias in our setting high values of media reputation organizational features in a conglomerate and low returns to bias

quality disclosure and certification theory and practice this essay reviews the theoretical and empirical literature on quality disclosure and certification after comparing quality disclosure with other quality assurance mechanisms and describing a brief history of quality disclosure we address two sets of theoretical issues first why don t sellers voluntarily disclose through a process of unraveling and given the lack of unraveling is it desirable to mandate seller disclosure second when we rely on certifiers to act as the intermediary of quality disclosure do certifiers necessarily report unbiased and accurate information we further review empirical evidence on these issues with a particular focus on healthcare education and finance the empirical review covers quality measurement the effect of third party disclosure on consumer choice and seller behavior as well as the economics of certifiers jel d18 k32 l15 m31

school quality and information disclosure evidence from the housing market i introduction tiebout s 1956 theory tying residential sorting patterns to the provision of local public goods provided the foundation for a large and growing literature assessing the relationship between school quality and housing markets many of these studies have used housing prices to directly estimate the monetary value of improvements in student test scores to parents and homeowners few have focused on the role of information in mediating relationships between buyers sellers schools and housing values 1 fewer still have examined the behavior of home sellers and their role in the provision of information on school quality this article takes a step toward filling these gaps in the literature building on the unraveling theory of information disclosure in the industrial organization literature grossman 1981 milgrom 1981 we first investigate the behavior of home sellers in revealing information about local schools we ask whether and how school quality affects the likelihood that a seller will reveal the identity of a property s assigned school in an online real estate listing empirical tests of unraveling are rare as the true quality of a product is typically unobserved the housing market provides a novel context to test this theory if sellers selectively reveal information on schools then information on its own controlling for school quality may have an impact on sales prices if the cost to buyers of obtaining information on school quality is sufficiently high we explore these issues empirically both in a period where the costs of gathering information are relatively high years 2001 and 2002 and in a period where these costs are presumably much lower years 2006 and 2007 between these two periods the mandates of the 2001 no child left behind nclb act coupled with the growth of the internet undoubtedly reduced the cost of information gathering for potential buyers and perhaps also lowered the costs of disclosure for sellers drawing on multiple listing service mls data of residential sales in fairfax county virginia the largest suburb of washington dc our results confirm that sellers of units located in high quality school assignment zones are on average more likely to disclose the school s identity in an online listing an increase of just ten points in an elementary school s passage rate on statewide tests increases the likelihood of information disclosure by a sizeable 5 percentage points in the 2001 2002 period a finding that is robust to a variety of alternative specifications and controls including the addition of real estate agent fixed effects predictably selective disclosure appears to be present but weaker in the 2006 2007 period when the cost of gathering information on school quality was likely lower a ten point increase in test scores yields a 2 to 4 percentage point increase in the likelihood of disclosure our findings of moderate selective disclosure in the latter period hold even when we apply a school boundary discontinuity design and are robust to alternate measures of school quality including measures of adequate yearly progress under nclb in both periods we observe more selective disclosure for single family homes and those with three or more bedrooms presumably families with children than for smaller units we also find more selective disclosure in neighborhoods with high concentrations of young children our results support the findings of several previous studies bayer ferreira and mcmillan 2007 figlio and lucas 2000 confirming that school quality is more important in housing transactions involving families with children than for those without we also investigate the extent to which information disclosure is capitalized in housing prices using school fixed effects to control for school quality we find that information disclosure does not have an independent effect on a home s price

the promise and pitfalls of using imprecise school accountability measures in recent years most states have constructed elaborate accountability systems using school level test scores however because the median elementary school contains only 69 children per grade level such measures are quite imprecise we evaluate the implications for school accountability systems for instance rewards or sanctions for schools with scores at either extreme primarily affect small schools and provide weak incentives to large ones nevertheless we conclude that accountability systems may be worthwhile even in states with aggressive financial incentives the marginal reward to schools for raising student performance is a small fraction of the potential labor market value for students

conflict of interest and the credibility of underwriter analyst recommendations brokerage analysts frequently comment on and sometimes recommend companies that their firms have recently taken public we show that stocks that underwriter analysts recommend perform more poorly than buy recommendations by unaffiliated brokers prior to at the time of and subsequent to the recommendation date we conclude that the recommendations by underwriter analysts show significant evidence of bias we show also that the market does not recognize the full extent of this bias the results suggest a potential conflict of interest inherent in the different functions that investment bankers perform

rationality and analysts forecast bias this paper proposes and tests a quadratic loos utility function for modeling corporate earnings forecasting where financial analysts trade off bias to improve management access and forecast accuracy optimal forecasts with minimum expected error are optimistically biased and exhibit predictable cross sectional variation related to analyst and company characteristics empirical evidence from individual analyst forecasts is consistent with the model s predictions these results suggest that positive and predictable bias may be a rational property of optimal earnings forecasts prior studies using classical notions of unbiasedness may have prematurely dismissed analysts forecasts as being irrational or inaccurate

eliciting informative feedback the peer prediction method many recommendation and decision processes depend on eliciting evaluations of opportunities products and vendors a scoring system is devised that induces honest reporting of feedback each rater merely reports a signal and the system applies proper scoring rules to the implied posterior beliefs about another rater s report honest reporting proves to be a nash equilibrium the scoring schemes can be scaled to induce appropriate effort by raters and can be extended to handle sequential interaction and continuous signals we also address a number of practical implementation issues that arise in settings such as academic reviewing and online recommender and reputation systems

reforming payments to healthcare providers the key to slowing healthcare cost growth while improving quality the seemingly intractable debate about how to slow the growth of healthhe seemingly intractable debate about how to slow the growth of healthcare costs in the united states and elsewhere has traditionally boiled care costs in the united states and elsewhere has traditionally boiled down to efforts to limit prices and quantities directly in public healthdown to efforts to limit prices and quantities directly in public healthcare programs the focus in the united states is often on tighter price regulation care programs the focus in the united states is often on tighter price regulation for example the balanced budget act of 1997 achieved most of its savings by for example the balanced budget act of 1997 achieved most of its savings by reducing the growth of regulated prices in medicare for physicians hospitals reducing the growth of regulated prices in medicare for physicians hospitals and most other healthcare providers the affordable care act of 2010 also and most other healthcare providers the affordable care act of 2010 also achieved most of its scored budgetary savings which were used as a partial achieved most of its scored budgetary savings which were used as a partial offset for the costs of coverage expansions through reducing medicare price offset for the costs of coverage expansions through reducing medicare price growth elmendorf 2010 a

a structural model of the retail market for illicit drugs we estimate a model of illicit drugs markets using data on purchases of crack cocaine buyers are searching for high quality drugs but they determine drugs quality i e their purity only after consuming them hence sellers can rip off first time buyers or can offer higher quality drugs to induce buyers to purchase from them again in equilibrium a distribution of qualities persists the estimated model implies that if drugs were legalized in which case purity could be regulated and hence observable the average purity of drugs would increase by approximately 20 percent and the dispersion would decrease by approximately 80 percent moreover increasing penalties may raise the purity and affordability of the drugs traded by increasing sellers relative profitability of targeting loyal buyers versus first time buyers

relying on the information of interested parties we investigate the conventional wisdom that competition among interested parties attempting to influence a decisionmaker by providing verifiable information elicits all relevant information we find that if the decisionmaker is strategically sophisticated and well informed about the relevant variables and about the preferences of the interested party or parties competition may be unnecessary to achieve this result if the decisionmaker is unsophisticated or not well informed competition is not generally sufficient if the interested parties interests are sufficiently opposed however or if the decisionmaker is seeking to advance the parties welfare then competition can reduce or even eliminate the decisionmaker s need for prior knowledge about the relevant variables and for strategic sophistication in other settings only the combination of competition among information providers and a sophisticated skepticism is sufficient to allow effective decisionmaking

using privileged information to manipulate markets insiders gurus and credibility access to private information is shown to generate both the incentives and the ability to manipulate asset markets through strategically distorted announcements the fact that privileged information is noisy interferes with the public s attempts to learn whether such announcements are honest it allows opportunistic individuals to manipulate prices repeatedly without ever being fully found out this leads us to extend sobel s 1985 model of strategic communication to the case of noisy private signals our results show that when truthfulness is not easily verifiable restrictions on trading by insiders may be needed to preserve the integrity of information embodied in prices

how do consumers motivate experts reputational incentives in an auto repair market abstract moral hazard exists in expert service markets because sellers have an incentive to shade their reports of the buyer s condition to increase the short run demand for their services the california vehicle emission inspection market offers a rare opportunity to examine how reputational incentives work in such a market i show that consumers are 30 percent more likely to return to a firm at which they previously passed than to one at which they previously failed and that demand is sensitive to a firm s failure rate across all consumers these and other results suggest that demand incentives are strong in this market because consumers believe that firms differ greatly in their consumer friendliness and are skeptical even about those they choose weak demand incentives in other expert service markets are not a direct consequence of moral hazard but rather of its interaction with switching costs and consumers belief that firms are relatively homogeneous

disclosure of information in matching markets with non transferable utility we present a model of two sided matching where utility is non transferable and information about individuals skills is private utilities are strictly increasing in the partner s skill and satisfy increasing differences skills can be either revealed or kept hidden but while agents on one side have verifiable skills agents on the other side have skills that are unverifiable unless certified and certification is costly agents who have revealed their skill enter a standard matching market while others are matched randomly we find that in equilibrium only agents with skills above a cutoff reveal and then they match assortatively we show that an equilibrium always exists and we discuss multiplicity increasing differences play an important role to shape equilibria and we remark that this is unusual in matching models with non transferable utility we close the paper with some comparative statics exercises where we show the existence of non trivial externalities and welfare implications