This paper studies the intermediation of auto loans through auto dealers using new and comprehensive administrative data. The arrangements between auto dealers and lenders incentivize dealers to increase loan prices. We leverage details of the corresponding contracts to demonstrate that many consumers are less responsive to finance charges than to vehicle charges. Taking this behavior into account, we estimate an equilibrium model of dealer price setting and lender competition. We explore counterfactuals where dealers have no discretion to price loans and final rates are set by lenders instead. We find large gains in consumer surplus from such a policy.
This paper provides evidence that involuntary unemployment, and the segmentation of labor markets into firms offering "good" and "bad" jobs, may both arise as a consequence of contractual incompleteness. We provide a simple model that illustrates how unemployment and market segmentation may jointly emerge as part of a market equilibrium in environments where contracts are incomplete, in the sense that work effort is not third-party verifiable. Using experimental labor markets that differ only in the verifiability of work effort, we demonstrate empirically that contractual incompleteness can cause unemployment and segmentation. Our data are also consistent with the key channels through which the model explains the emergence of both phenomena. These include firms adopting a particular type of implicit contracting strategy, and feedback from market conditions to worker behavior.
This paper investigates how incentives and behavioral policy interventions affect individuals’ allocation of scarce cognitive resources. Based on experimental evidence, we demonstrate that incentives systematically influence individuals’ allocation of cognitive resources, and their propensity to actively engage with a decision or to stay passive. Policies that steer individuals’ attention to a specific decision lead to more active decision-making and better choices in the targeted choice domain, but induce negative cognitive spillovers on the quality of choices in other domains. In our setting, these two countervailing effects offset each other, such that the overall payoff consequences of the interventions are essentially zero. We further document that cognitive spillovers are especially pronounced for complex choices and for subgroups of the population with a smaller stock of cognitive resources. We discuss implications for the design and evaluation of behavioral policy interventions.
Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. This paper provides a comprehensive analysis regarding strategic interaction under expectation-based loss-aversion. First, we develop a coherent framework for the analysis by extending the equilibrium concepts of Kőszegi and Rabin (2006, 2007) to strategic interaction and demonstrate how to derive equilibria. Second, we delineate how expectation-based loss-averse players differ in their strategic behavior from their counterparts with standard expected-utility preferences. Third, we analyze equilibrium play under expectation-based loss aversion and comment on the existence of equilibria. Terms of use: Documents in EconStor mayJEL classification: C72, D01, D03, D81 Keywords: Non-Cooperative Games, Expectation-Based Loss Aversion, Reference-Dependent Preferences, Mixed Strategies * We thank Armin Falk, Paul Heidhues, Fabian Herweg, Daniel Krähmer, Matthias Kräkel, Simone Quercia, and Matthew Rabin for helpful comments and suggestions. Furthermore, we have benefited from comments made by the seminar audience at the University of Bonn. All errors are of course our own.
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