JOB MARKET PAPER
I model persuasive advertising for conspicuous goods that can either be made more attractive by greater popularity ("conformist markets'') or by greater exclusivity ("snobbish markets''). Consumers are endowed with a latent attribute measuring some aspect of their identity, and a social status implied by this attribute. Consumers wish to signal a high social status, and the function of advertising is to render brands a signaling device by linking products with social groups. In a conformist market, I find that advertising increases demand elasticity, inducing firms to converge on low prices, and can be used by a first mover to deter entry and gain monopoly rents. In this setting, advertising creates a cutthroat environment in which only one product can survive. In a snobbish market, advertising reduces demand elasticity, dampens price competition and promotes firm entry. In this setting, advertising can act as a public good to firms, increasing all firms' prices and profits. Additionally, it can lead to asymmetric equilibria where a firm appealing to high status consumers advertises more heavily, capturing a greater market share and charging a higher price. Furthermore, I bring micro-foundation to persuasive advertising, allowing analysis of the channels through which it impacts welfare. Finally, I show that the model can help explain well-documented empirical puzzles in the marketing and empirical industrial organization literatures.
Presented: 14th Bass FORMS Conference (scheduled 2020), Georgetown (2019), Economic Graduate Student Conference at Washington University in St. Louis (2019), Villanova Meeting on Behavioral and Experimental Economics (2019)
We study how an individual’s effort choice is impacted by feedback on her own past performance and another individual’s past performance. In an effort choice problem where effort is costly but increases the chance of receiving a prize, subjects who failed in the previous period increase their effort in the next period. More interestingly, failed subjects who observe that their partner succeeded exert higher effort in the next period than failed subjects who observe that their partner also failed — behavior consistent with behindness aversion. This effect is more pronounced for female subjects than male subjects, suggesting that failing women are more motivated by the success of others than failing men. Rather than letting subjects work in isolation, we find that the highest joint effort can be achieved by matching failed and successful subjects into pairs and providing feedback about the other’s performance. Our results suggest that social comparisons in independently performed and paid tasks may mitigate moral hazard.
Presented: Economic Science Association North America Meetings (2019, coauthor presented)
Funded (in part): UMD Dean's Research Initiative
We perform a laboratory experiment to study how reelection concerns affect the reciprocity of elected leaders to the voters who elected them. If reciprocating to past voters by enacting policies favorable to them reduces the chances of reelection, will an elected leader reduce or eliminate such intrinsic reciprocity by enacting policies they favor less? We present a signaling model of candidate behavior in sequential elections. Candidates can be of two types, unknown to voters ex ante, those with policy preferences congruent with past voters and incongruent with future voters, or those with policy preferences incongruent with past voters and congruent with future voters. We show that the latter, candidates with policy preferences congruent (incongruent) with future (past) voters, may reduce or limit intrinsic reciprocity to past voters in order to signal their congruence of policy preference with future voters and improve their chances of reelection. We then present an experiment that tests these ideas in the laboratory and finds support for the model. Both candidates and voters behave as the signaling model predicts. Our key finding is that the desire to be reelected may constrain the intrinsic reciprocity of an elected leader to the voters who put her in office, but does not eliminate it entirely.
Presented: Economic Science Association World Meetings (2019), Economic Science Association North America Meetings (2019), Stanford GSB Political Economy Seminar (2019, coauthor presented), Barcelona GSE Summer Forum (2019, coauthor presented), CREST Malinvaud-Adres Seminar (2018, coauthor presented), Fourth Taxation Theory Conference at Washington University in St. Louis (2018, coauthor presented)
Funding: NSF Social and Economic Sciences Grant 1534132
This paper studies a buyer-seller ultimatum game where the buyer (“responder") may delegate negotiation authority to an agent with social preferences for the fairness of the outcome. This paper investigates the types of delegation contracts that can provide the buyer strategic benefits when her agent has social preferences. It is found that delegation can give the buyer a strategic gain. This is because if the agent has less payoff at stake than the buyer, then he is freer to reject unfair surplus divisions, which serves as a commitment to induce a fairer split. Furthermore, a contingency fee contract and a retainer contract are compared, and the latter is found to have greater strategic bite because it divorces the agent’s payoff from his strategy, giving him more freedom to reject unfair offers.