Research
Working Papers
Although cost pass-through is an important concept across many fields in economics, current models cannot explain the common empirical patterns of incomplete pass-through, over-shifting, and pass-through asymmetry. I incorporate imperfect information about costs to a canonical model of consumer search and provide a first unified explanation of these patterns. The central prediction of this model is that changes in costs that consumers are aware of get passed through more completely than those they are unaware of. I then test a novel prediction of this model using US mortgage data. I find that different components of the cost of lending have different average pass-through rates. Widely known costs are passed through nearly completely while more obscure costs have much lower pass-through rates. This pattern is consistent with my model but cannot be explained by existing theory. I estimate that more precise information about lending costs would save borrowers $289 million, annually.
Revision Requested, JEBO
Demand for costly commitment devices is rare. A possible explanation is that individuals are unaware of their present bias and their need for commitment. I test the relationship between perceived intertemporal inconsistency and demand for commitment in a novel context, volunteering. I run an experiment that successfully corrects subjects’ beliefs about their present bias and find that this increased awareness does not increase demand for commitment. This low demand for commitment is not driven by a perceived lack of present bias, but rather subjects’ accurate belief that they may fail to follow through, even with the offered level of commitment.
Existing models of price competition in the presence of endogenous consumer search restrict attention to single-brand firms, ensuring that any consumer who receives multiple price quotes places firms in competition with each other. We extend these models to allow a single firm to own two brands, meaning that a consumer who receives exactly two price quotes may receive two from the same firm, and hence be ``captive'' to that firm. If there are sufficiently many such consumers and there are initially three single-brand firms, requiring two merging firms to consolidate their brands rather than operate them separately would increase competition and benefit consumers. This is also true if consumers operate under an ``illusion of competition'' in which they are unaware that separate brands may be co-owned by the same firm, believing them all to be independent competitors. Breaking such an illusion of competition by advertising the brand ownership structure may help or hurt consumers.
Work in Progress
Noticing when We Discriminate (with Lucas Coffman, Katherine Coffman, and Joshua Schwartzstein)
Are we aware when implicit discrimination affects our behavior? Does raising awareness increase regulation of these subconscious tendencies?