Research
Publications
Journal of Economic Behavior & Organization, 228 (December 2024)
Low demand for pure commitment in real markets presents a puzzle. 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.
Working Papers
R&R at AEJ:Micro
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.
In markets where consumers must search sequentially for prices, whether a firm sells its product under one brand name or two distinct brands is consequential for market outcomes. If each firm sells a single brand then any consumer who receives multiple price quotes places firms in competition with each other. However, a two-brand firm can exhaust the search capacity of a consumer who searches for exactly two price quotes, making them "captive" to that firm. Moreover, if consumers are under an "illusion of competition" in which they believe all brands to be independent competitors, then a two-brand firm can lower consumers' estimates of price dispersion, discouraging them from searching further, by setting identical prices. We extend canonical search models to show that multi-brand firms can raise equilibrium prices by both mechanisms. As a result, breaking the illusion of competition by advertising brand ownership may lower prices. Alternatively, requiring two merging firms to consolidate their brands rather than operate them separately or curtailing brand proliferation by limiting the visibility of such duplicate brands on online platforms can intensify price competition and benefit consumers. In some cases, however, such policies may be counterproductive.
Work in Progress
In this paper, we study how heterogeneity across households affects the refinancing channel of monetary policy. We show that the correlation between two key parameters -- the Likelihood of Refinancing a Mortgage (LRM) and the Marginal Propensity to Consume (MPC) -- determines the strength of the refinancing channel. Using novel survey data, we uncover a small positive correlation, implying a more effective channel than previously accounted for. This positive correlation masks two opposing effects: financial (un)sophistication generates a negative relationship, while liquidity preferences generate a larger, positive relationship. These two mechanisms affect time-dependent and state-dependent refinancing inaction, respectively, affecting the size and speed of monetary policy pass-through.