Research
Research interests: Industrial Organization, Public Economics, Economics of attention.
Working Papers
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“Endogenous Inertia in Complex Choices”
November 2023 | PaperAbstract
Inertia is pervasive in many settings that share two features: complex products and a dynamic nature. To understand why switching is limited even in the absence of observable financial costs and to quantify the impact of policies aimed at making inertia less costly, this paper presents a theory of endogenous inertia in complex choices. Consumers' inertia is driven by the persistency of the environment and the cost of learning about the unobserved characteristics of the alternatives. The endogenous nature of inertia implies that consumers' switching depends on the choice environment and reacts to policies that change the characteristics of the choice set. The model is estimated using Medicare Part D prescription drug insurance data. Consistent with the presence of learning frictions, estimates suggest that beneficiaries are more responsive to characteristics that are easier to observe, with endogenous virtual switching costs averaging $350.67. Using the model to simulate the impact of an Inflation Reduction Act policy to reduce overspending in this program by capping out-of-pocket costs, I find the policy leads to a 22.88% reduction in total spending and a 20% increase in switching rates. Compared to a scenario in which consumers do not optimally respond to the policy by chaning switching behavior and choices, the model predicts an additional 30% savings on average.
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“An Economic View of Corporate Social Impact”
(with Hunt Allcott, Bora Ozaltun and Brandon Tan)
NBER Working Paper 31803
Revise and Resubmit at Journal of Finance
October 2023 | Paper | ReplicationAbstract
The growing discussions of impact investing and stakeholder capitalism have increased interest in measuring companies' social impact. We conceptualize corporate social impact as the welfare loss that would be caused by a firm's exit. To illustrate, we quantify the social impacts of 74 firms in 12 industries using a new survey measuring consumer and worker substitution patterns combined with models of product and labor markets. We find that consumer surplus is the primary component of social impact (dwarfing profits, worker surplus, and externalities), suggesting that consumer impacts deserve more attention from impact investors. Existing ESG and social impact ratings are essentially unrelated to our economically grounded measures.
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“Audi Alteram Partem: an Experiment on Selective Exposure to Information”
(with Salvatore Nunnari)
CESifo Working Paper 10699
August 2023 | Paper | SlidesAbstract
This paper presents a model of selective exposure to information and an experiment to test its predictions. An agent interested in learning about an uncertain state of the world can acquire information from one of two sources which have opposite biases: when informed on the state, they report it truthfully; when uninformed, they report their favorite state. When sources have the same reliability, a Bayesian agent is better off seeking confirmatory information. On the other hand, it is optimal to seek contradictory information if and only if the source biased against the prior is sufficiently more reliable. We test these predictions with an online experiment. When sources are symmetrically reliable, subjects are more likely to seek confirmatory information but they listen to the other side too frequently. When sources are asymmetrically reliable, subjects are more likely to consult the more reliable source even when prior beliefs are strongly unbalanced and listening to the less reliable source is more informative. Moreover, subjects follow contradictory advice sub-optimally; are too trusting of information in line with a source bias; and too skeptic of information misaligned with a source bias. Our experiment suggests that biases in information processing and simple heuristics — e.g., listen to the more reliable source — are important drivers of the endogenous acquisition of information.