Publications

“Competition Over Time-Inconsistent Consumers” Journal of Public Economic Theory, August 2008, pages 673-684. [download]

(Previous title: “Non-exclusive Contracts for Time-Inconsistent Consumers”)

How do firms respond to consumers' time-inconsistency? This paper studies the optimal design of nonexclusive contracts under competition. It shows that nonexclusivity creates a stark asymmetry between immediate-costs goods and immediate-rewards goods. For immediate-costs goods, nonexclusivity does not affect the equilibrium and, when consumers are sophisticated, the efficient allocation is achieved. When consumers are partially naive, the optimal sales tax may be either positive or negative and depends on parameters that are hard to estimate. In the case of immediate-rewards goods, however, the equilibrium features marginal-cost pricing and is always inefficient. Moreover, the optimal tax does not depend on the consumers’ degree of naivete and is a function of parameters that are easy to assess.

 

“A Model of Mixed Signals with Applications to Countersignaling” (with Aloisio Araujo and Humberto Moreira) RAND Journal of Economics, winter 2007, pages 1020-1043. [download]

(Previous title: “A Model of Mixed Signals with Applications to Countersignaling and the GED”)

We develop a job-market signaling model where signals convey two pieces of information. This model is employed to study the GED exam and countersignaling (signals non-monotonic in ability). A result of the model is that countersignaling is more likely to occur in jobs that require a combination of skills that differs from the combination used in the schooling process. The model also produces testable implications consistent with evidence on the GED: (i) it signals both high cognitive and low non-cognitive skills and (ii) it does not affect wages. Additionally, it suggests modiffications that would make the GED a more effective signal.

 

“Asymmetric Information in late 19th century Cooperative Insurance Societies” Explorations in Economic History, 2007, vol.44, issue 2, pages 270-292. [download]

Between 1880 and 1930, cooperative insurance was the main source of illness, accident, and death insurance in the United States, Canada, and England. This paper tests for asymmetric information in cooperative insurance societies and examines how their pricing policies affected the profile of members. We find strong evidence that, unlike their modern substitutes, cooperative societies were able to overcome the asymmetry of information. Furthermore, as a consequence of non-actuarial pricing, our results suggest that workers deferred their membership until they were about forty years old.