2015

15-01. Manzini, P., Mariotti M., and Ülkü, L., "Stochastic Complementarity"

AbstractClassical definitions of complementarity are based on cross price elasticities, and so they do not apply, for example, when goods are free. This context includes many relevant cases such as online newspapers and public attractions. We look for a complementarity notion that does not rely on price variation and that is: behavioural (based only on observable choice data); and model-free (valid whether the agent is rational or not). We uncover a conflict between properties that complementarity should intuitively possess. We discuss three ways out of the impossibility.

J.E.L. codes: D0.
Keywords: Complements and substitutes; Correlation; Stochastic choice.



15-02. Sharma., T., and Ülkü, L., "Money-Back Guarantees"

Abstract: We provide a framework to evaluate whether or not a seller can increase his revenue in interacting with a privately informed buyer by using money-back guarantees (MBGs). The buyer's value for the good exhibits fir risk and his type is multidimensional giving the probability of fit as well as the value in case of fit. The seller has the option to offer a MBG together with the good. We reformulate the optimal mechanism design problem and show that typically the optimal mechanism contains MBGs. Furthermore choosing the optimal mechanism is tantamaount to choosing two prices: (i) a discount price at which no MBG is offered and (ii) a regular (higher) price which comes with a MBG. We also analyze two limit scenarios where private information is one-dimensional. If the seller knows the probability of fit but not its value, then MBGs are not useful. If, on the other hand, the value of fit is commonly known but its probability is buyer's private information, then MBGs can be used to extract full surplus from the buyer.


15-03. Payro, F., and Ülkü, L.,  "Similarity-Based Mistakes in Choice"

Abstract: We characterize the following choice procedure. The decision maker is endowed with a preference and a similarity - a reflexive binary relation over alternatives. In any choice problem she includes in her choice set all options that are similar to her most preferred feasible alternative. Hence an inferior option may end up, by mistake, being chosen because it is similar to a better one. We characterize this boundedly rational behavior by suitably weakening the rationalizability axiom of Arrow (1959). We also characterize a generalization where the decision maker chooses alternatives potentially on the basis of their similarities to attractive yet infeasible alternatives. We show that if similarity-based mistakes cause a departure from rationalizability, they lead to cyclical behavior.

J.E.L. codes: D0.
Keywords: Bounded rationality, similarity, mistakes, cyclic choice.


15-04. Aguilar, A., Gutierrez, E., y Seira, E., "Taxing Calories in Mexico"

Abstract: We exploit a unique panel dataset of about 8000 households, including detailed information of their purchases of products at the barcode level to estimate the impact of the introduction of a series of taxes on sugary drinks and other products with high caloric density in Mexico using an “event-study” type methodology. We find almost full pass-through of the taxes to prices. We estimate a price-elasticity for the demand of sugary drinks close to -0.5, and for total calories consumed of -0.3, albeit not statistically significant (all these results are preliminary, estimated with 10% of the sample and the caloric content of 72 percent of food purchases).  

JEL Codes: I18, H23, H51
Keywords: Obesity, Taxes, Sugar added drinks.


15-05. Gomberg, A., Gutiérrez, E., López, P., y Vázquez, A., Coattails and the Forces that Drive Them: Evidence from Mexico

Abstract: Coattails and the forces behind them have important implications for the understanding of electoral processes and their outcomes. We estimate coattails from municipal to local congressional elections in Mexico. By assuming that political preferences for the local legislative candidates remain constant across neighboring sections, we exploit variation in the popularity of the municipal candidate across neighboring sections within the same electoral district in the legislative election. Observed coattails are of a considerable magnitude: a one percentage point in votes for a PRI, PAN or PRD’s municipal candidate translates, on average, into a 0.45, 0.67 and 0.78 percentage point increase in vote share for the legislative candidate from the same party, respectively. We show that coattails are not smaller when the legislative candidate’s winning probability is low, and that the degree of shared campaign advertising and information flows between neighboring section pairs does not explain their magnitude