VAT Pass-through and Competition: Evidence from the Greek Islands (with Lydia Dimitrakopoulou, Christos Genakos and Themistoklis Kampouris)
International Journal of Industrial Organization, vol. 97, December 2024, 103110.
We examine how competition affects VAT pass-through in isolated oligopolistic markets as defined by the Greek islands. Using daily gasoline prices and a difference-in-differences methodology, we investigate how changes in VAT rates are passed through to consumers in islands with different market structure. We show that pass-through increases with competition, going from 50% in monopoly to around 80% in more competitive markets, but remains incomplete. We also discover a rapid rate of adjustment for VAT changes, as well as a positive relationship between competition and the rate of price adjustment. Finally, we document higher pass-through for products with more inelastic demand.
European Economic Review, vol. 160, November 2023, 104611.
An agent may strategically employ a vague message to mislead an audience’s belief about the state of the world, but this may cause the agent to feel guilt or negatively impact how the audience perceives the agent. Using a novel experimental design that allows participants to be vague while at the same time isolating the internal cost of lying from the social identity cost of appearing dishonest, we explore the extent to which these two types of lying costs affect communication. We find that participants exploit vagueness to be consistent with the truth, while at the same time leveraging the imprecision to their own benefit. More participants use vague messages in treatments where concern with social identity is relevant. In addition, we find that social identity concerns substantially affect the length and patterns of vague messages used across the treatments.
I design an experiment to study how the information structure impacts the formation of motivated beliefs. Subjects receive noisy signals about an ego-relevant state (their IQ test performance) and an ego-irrelevant state (suitcase prices) and are asked to update their beliefs. The experiment includes three treatments: (i) certain accuracy, where information is correct 70% of the time; (ii) compound uncertainty, where it is correct 50% or 90% of the time with equal probability; and (iii) ambiguity, where the accuracy is also 50% or 90%, but the probability of each is unknown. In certain accuracy and ambiguous information treatments, subjects respond rationally to positive feedback but update too little after negative feedback, resulting in optimism. In contrast, in the compound uncertainty treatment, subjects update too little after all types of signals, with no significant difference between them, resulting in conservatism. In addition, I find evidence of confirmation bias, which appears to be linked to motivated reasoning in the certain accuracy and ambiguity treatments but not in the compound uncertainty treatment. The non-monotonic relationship between uncertainty and motivated beliefs is likely driven by the fact that, while people generally dislike uncertainty, which may lead to more pessimistic interpretations as ambiguity increases, greater ambiguity also provides more flexibility for them to interpret information in ways that support their preferred beliefs.
Price ceiling regulation: Evidence from the retail gasoline market (with Georgios Gatsios and Christos Genakos)
We study the short-run effects of price ceilings on retail gasoline prices in isolated, oligopolistic markets. Using daily pricing data and a difference-in-differences methodology, we analyze the regulation’s introduction, tightening, and repeal. Uniquely, we observe stations for which the ceiling was non-binding. We document that while stations for which the regulation was binding naturally reduced prices, non-binding stations raise theirs. We provide evidence that the most likely explanation for the price increases at non-binding stations is tacit collusion. These results highlight that even well-intentioned regulation can have unintended, adverse competition effects.
Self-Presentation (with Leah Cao) [Job Market Paper]
Strategic Decisions Under Time Pressure: Evidence from Online Chess Games (with Brian Rogers)