Research

Publications

"Non-Standard Errors" (with Albert J. Menkveld, Anna Dreber, Felix Holzmeister, Jürgen Huber, Magnus Johannesson, Michael Kirchler, Sebastian Neusüss, Michael Razen, Utz Weitzel, Jessica Shui, and many others, forthcoming at the Journal of Finance)

In statistics, samples are drawn from a population in a data-generating process (DGP). Standard errors measure the uncertainty in sample estimates of population parameters. In science, evidence is generated to test hypotheses in an evidence-generating process (EGP). We claim that EGP variation across researchers adds uncertainty: non-standard errors. To study them, we let 164 teams test six hypotheses on the same sample. We find that non-standard errors are sizeable, on par with standard errors. Their size (i) co-varies only weakly with team merits, reproducibility, or peer rating, (ii) declines significantly after peer-feedback, and (iii) is underestimated by participants. 

"Consumer Exploitation and Notice Periods" (with Takeshi Murooka, Economics Letters, 2019, Vol. 174, Pages 89-92)

Firms often set long notice periods when consumers cancel a contract, and sometimes do so even when the costs of changing or canceling the contract are small. We investigate a model in which a firm offers a contract to consumers who may procrastinate canceling it due to naive present-bias. We show that the firm may set a long notice period to exploit naive consumers.

"Optimal Cost Overruns: Procurement Auctions with Renegotiation" (with Fabian Herweg, International Economic Review, 2018, Vol. 59(4), Pages 1995-2021, recognized as “Top Downloaded Paper 2018-2019” by the International Economic Review )

Cost overrun is ubiquitous in public procurement. We argue that this can be the result of a constrained optimal award procedure: The procurer awards the contract via a price-only auction and cannot commit not to renegotiate. If cost differences are more pronounced for a fancy than a standard design, it is optimal to fix the standard design ex ante. If renegotiation takes place and the fancy design has higher production costs or the contractor's bargaining position is strong, the final price exceeds the initial price. Moreover, the procurer cannot benefit from using a multi-dimensional auction, i.e., under the optimal scoring auction each supplier proposes the standard design.

"The Timing of Choice-Enhancing Policies" (with Takeshi Murooka, Journal of Public Economics, 2018, Vol. 157, Pages 27-40)

Recent studies investigate policies motivating consumers to make an active choice as a way to protect unsophisticated consumers. We analyze the optimal timing of such choice-enhancing policies when a firm can strategically react to them. In the model, a firm provides a contract with automatic renewal. We show that a policy intending to enhance consumers' choices when they choose a contract can be detrimental to welfare. By contrast, a choice-enhancing policy at the time of contract renewal increases welfare more robustly. Our results highlight that policies should be targeted in timing to the actual choice inefficiency.

Working Papers

"Perceived Fairness and Consequences of Affirmative Action Policies" (with Hannah Schildberg-Hörisch, Chi Trieu, and Jana Willrodt, conditionally accepted by the Economic Journal)

Debates about affirmative action often revolve around fairness. Accordingly, we document substantial heterogeneity in the fairness perception of various affirmative action policies. But do these differences translate into different consequences? In a laboratory experiment, we study three different quota rules in tournaments that favor individuals whose performance is low, either due to discrimination, low productivity, or choice of a short working time. Affirmative action favoring discriminated individuals is perceived as fairest, followed by that targeting individuals with a short working time, while favoring low productivity individuals is not perceived as fairer than an absence of affirmative action. Higher fairness perceptions coincide with a higher willingness to compete and less retaliation against winners, underlining that fairness perceptions matter for the consequences of affirmative action. No policy harms overall productivity or post-competition teamwork, but affirmative action may reduce the average output of tournament winners.

"Long-Term Employment Relations When Agents are Present-Biased" (with Florian Englmaier and Matthias Fahn, Revise and Resubmit at the International Economic Review)

We analyze how agents' present bias affects optimal contracting in an infinite-horizon employment setting absent moral hazard. The principal maximizes profits by offering a menu of contracts to naive agents: a virtual contract - which agents plan to choose in the future - and a real contract which they end up choosing. This virtual contract motivates the agent and allows the principal to keep the agent below his outside option. We find that employment protection may hurt the agent. Moreover, under limited liability, implemented effort can be inefficiently high. With a finite time horizon, the degree of exploitation of agents decreases over the life-cycle.

"The Impact of Social Media on Belief Formation"

Social media are becoming increasingly important in our society and change the way people communicate, how they acquire information, and how they form beliefs. Experts are concerned that the rise of social media may make interaction and information exchange among like-minded individuals more pronounced and therefore lead to increased disagreement in a society. This paper analyzes a learning model with endogenous network formation in which people have different types and live in different regions. I show that when the importance of social media increases, the amount of disagreement in the society first decreases and then increases. Simultaneously people of the same type hold increasingly similar beliefs. Furthermore, people who find it hard to communicate with people in the same region may interact with similar people online and consequently hold extreme beliefs. Finally, I propose a simple way to model people who neglect a potential correlation of signals and show that these people may be made worse off by social media.

"The Role of Diagnostic Ability in Markets for Expert Services" (with Fang Liu, Alexander Rasch, and Christian Waibel)

In credence goods markets, experts have better information about the appropriate quality of treatment than their customers. Experts may exploit their informational advantage by defrauding customers. Market institutions have been shown theoretically to be effective in mitigating fraudulent expert behavior. We analyze whether this positive result carries over to when experts are heterogeneous in their diagnostic abilities. We find that efficient market outcomes are always possible. However, inefficient equilibria can also exist. When such inefficient equilibria are played, a larger share of high-ability experts can lead to more inefficiencies relative to the efficient equilibria. 

"A Dynamic Theory of Regulatory Capture" (with Alessandro De Chiara)

Firms have incentives to influence regulators' decisions. In a dynamic setting, we show that a firm may prefer to capture regulators through the promise of a lucrative future job opportunity (i.e., the revolving-door channel) than through a hidden payment (i.e., a bribe). This is because the revolving door publicly signals the firm's eagerness and commitment to reward friendly regulators, which facilitates collusive equilibria. Moreover, the revolving-door channel need not require an explicit agreement between the firm and the regulator, but may work implicitly giving rise to an industry norm. This renders ineffective standard anti-corruption practices, such as whistle-blowing protection policies. We highlight that closing the revolving door may give rise to other inefficiencies. Moreover, we show that cooling-off periods may make all players worse off if timed wrongly. Opening the revolving door conditional on the regulator's report may increase social welfare.

Work in Progress

"Expert Services in the Age of the Internet"

"The Interaction of Reputation and Competition in Markets for Credence Goods" (with Loukas Balafoutas, Rudolf Kerschbamer, Matthias Sutter, and Daniel Woods)

"Expert Heterogeneity in Credence Goods Markets" (with Fang Liu, Vasilisa Petrishcheva, Alexander Rasch, and Christian Waibel)

"Risky Investments and Transparency: The Limits of Banking Regulation"

"Competition in Venture Capital Funding" (with Fabian Herweg)

"Consideration Set Formation" (with Johannes Maier)

"The Spread of Tolerance" (with David Schindler)