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on Microeconomics |
| By: | Bo Cowgill |
| Abstract: | Forecasts guide decisions, but an expert who privately values the decision may misreport beliefs to influence it. We study contracts that jointly elicit the expert's belief about a verifiable state and her stake in a binary action. When agents with different stakes can hold the same belief, exact belief-only IC forces the action to ignore the report. Joint screening permits responsiveness but may require implementation rent. For thresholds, minimum implementation rent equals the distribution-weighted positive curvature of the belief-dependent cutoff. Optimal threshold design is rent-adjusted concavification. We give sufficient conditions for unrestricted threshold optimality and, beyond them, bounds and a direct optimality certificate. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.23285 |
| By: | Hattori, Keisuke; Yoshikawa, Takeshi |
| Abstract: | Entry is commonly thought to harm incumbents in Cournot markets. This paper shows that this need not hold under coopetition. We analyze a two-stage Cournot oligopoly where symmetric firms first invest non-cooperatively in shared demand-expanding activities with non-excludable benefits and then compete in quantities. With convex production costs, entry can increase individual-firm profits despite intensified competition. We further show that this non-monotonicity can create a low-entry trap: no firm enters even though an active equilibrium would be profitable for firms and beneficial to consumers. Because the active equilibrium is self-sustaining, a finite one-time "big push" that assembles a critical mass of entrants suffices to escape the trap-whereas in a standard monotone market with unprofitable monopoly entry, every entrant would require support. The push can be implemented through transitional entry subsidies or coordinated public "seed" investment in the shared activity, and we characterize which instrument is cheaper and when each pays for itself in total surplus. |
| Keywords: | Coopetition, Profit-increasing entry, Critical mass, Low-entry trap, Cournot oligopoly |
| JEL: | D43 L13 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:esprep:343408 |
| By: | Steven Kivinen (University of Graz, Austria); Christoph Kuzmics (University of Graz, Austria) |
| Abstract: | We study communication between an informed Expert and an uninformed Decision-Maker who face a sequence of decision problems with conflicting interests. Even when both are patient and monitoring is public the Decision-Maker's most-preferred outcome is not credibly sustainable. Any strategy that implements it necessarily involves threats that are not immune to renegotiation. Any credible and efficient equilibrium entails a compromise, thereby giving the Expert information rents. The Decision-Maker's best credible efficient equilibrium varies with the preferences of the Expert and with the Decision Maker's initial uncertainty. |
| Keywords: | cheap talk, renegotiation, information transmission, persuasion |
| JEL: | C72 C73 D83 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:grz:wpaper:2026-19 |
| By: | David Martimort (TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement, IUF - Institut universitaire de France - M.E.N.E.S.R. - Ministère de l'Education nationale, de l’Enseignement supérieur et de la Recherche); Aggey Semenov (uOttawa - Université d'Ottawa = University of Ottawa [Ontario]) |
| Abstract: | We characterize the optimal contract within the class of fixed-terms mechanisms in a repeated buyer-seller relationship with persistent adverse selection and one-sided limited enforcement. The seller reports his type once, and the corresponding transfer and output are then repeated in every period. After receiving the current transfer, the seller may breach, pay an enforceable penalty, and terminate the relationship. In this benchmark, the enforcement problem collapses to a bound on the transfer targeted to the most efficient type. This yields a three-regime characterization. With strong enforcement, the repeated static second-best contract is feasible. With weak (intermediate) enforcement, the top transfer is capped, inducing bunching among efficient types and additional downward distortions. With very weak enforcement, sustaining compliance through public penalties alone would require excessive quantity distortions, and the optimal contract instead leaves strictly positive continuation rents, including for the least efficient type. We interpret the associated distortion as a virtual enforcement cost. |
| Keywords: | Adverse selection, Limited enforcement, Relational contracts, Contract breach |
| Date: | 2026–10 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05742834 |
| By: | Semin Kim (Yonsei University) |
| Abstract: | Under independent generic beliefs, unanimity and ordinal Bayesian incentive compatibility (OBIC) imply dictatorship. We study where this conclusion first fails as genericity is relaxed, in the minimal nontrivial environment of two voters, three alternatives, and the unrestricted domain of strict preferences. We obtain an exact classification of the exceptional balance relations and the mechanisms they support, without imposing any further symmetry on the ranking distribution. Among the 301 reduced genericity relations, only pairwise-balance relations-those equating the probabilities that two alternatives defeat a common benchmark-can support a non-dictatorial unanimous deterministic OBIC rule when exactly one marginal satisfies a single genericity relation and the other remains generic. In this one-sided case, exactly five rules are OBIC, including three non-dictatorial unilateral agenda mechanisms. Under i.i.d. beliefs, the only additional relation type is top balance-equality of first-choice probabilities for two alternatives-which supports a unique non-dictatorial agreement-or-default rule. These two exceptional relation types operate through distinct approval and agreement channels, respectively, and both channels persist in larger lectorates. |
| Keywords: | ordinal Bayesian incentive compatibility; genericity; social choice; voting rules; dictatorship. |
| JEL: | D71 D72 D82 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:yon:wpaper:2026rwp-296 |
| By: | Natalie Collina; Surbhi Goel; Aaron Roth; Sikata Bela Sengupta |
| Abstract: | Long-running AI agents create a control problem: each action they take changes the state, which in turn affects the trajectory of future actions. If the agent is not fully aligned, then guaranteeing safety requires approving consequential actions before allowing them to be executed. But requiring human approval at every step makes attention a bottleneck. Delegating review to other AI agents raises the same alignment problem: the reviewers may themselves be misaligned. We identify a condition on a reviewing panel that is weaker than individual alignment yet necessary and sufficient for a guarantee that the principal fares at least as well in expectation as under a designated baseline policy. Each reviewer agent reports whether an action proposal made by a proposer agent improves its own utility relative to the baseline. We show that a threshold rule tolerating $k$ disapprovals is safe exactly when, after any $k$ reviewers are removed, the principal's utility can be written as a nonnegative combination of the remaining reviewers' utilities, plus a term that is nonnegative on every feasible proposal. We call this property $k$-robust coalitional alignment. The characterization lifts to sequential control: in a discounted MDP with an arbitrary proposer agent, safety at every state is both necessary and sufficient for the induced policy to match or improve on the baseline. When reviewers vote strategically, full-panel coverage in reward-function space guarantees that every Nash equilibrium is safe under the unanimous approval rule; in contrast, more permissive thresholds can admit unsafe equilibria even when reviewers are individually aligned. Experiments with existing reviewer models show that collective review can remain sound without an aligned individual, even when some disapprovals are tolerated. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.15803 |
| By: | Shota Ichihashi; Fei Li; Dihan Zou |
| Abstract: | We study peer monitoring design in knowledge production. A principal leads agents who work on different but related tasks. By working on their own tasks, agents acquire information that is useful for evaluating their peers' performance. We consider robust contracts under which effort by all agents is the unique rationalizable outcome. The optimal contract induces a hierarchy of monitoring authority: agents easier for the principal to monitor directly are assigned greater authority to evaluate other agents. Task diversity improves information value but weakens peer monitoring. This tension distorts optimal public task assignment toward the principal's core expertise. Confidential random assignment relaxes this distortion by decoupling information production from the perceived monitoring structure. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.10499 |
| By: | Dana Sisak (Erasmus University Rotterdam); Philipp Denter (Universidad Carlos III de Madrid) |
| Abstract: | We study how social image concerns shape information sharing among peers. Individuals receive a signal about a binary state with an observable direction and a veracity that can be learned only through costly verification, which depends on type. We analyze two motives: a desire to appear competent and a desire to signal one's worldview. For each, we characterize equilibrium sharing, derive implications for the relative diffusion of true versus false news, and compare welfare. The two motives can both generate greater sharing of false than factual news but imply distinct, testable patterns which we relate to existing empirical evidence. |
| Keywords: | P2P Information Sharing, Social Image, Signaling, Fake News |
| JEL: | D72 D83 |
| Date: | 2026–09–20 |
| URL: | https://d.repec.org/n?u=RePEc:tin:wpaper:20260072 |
| By: | Achille Basile; K. P. S. Bhaskara Rao; Surekha Rao |
| Abstract: | We study anonymous binary social choice functions on the universal weak-preference domain when the society of voters is countably infinite. Voters may strictly support one of the two alternatives or be indifferent, and non-manipulability is required in the form of coalitional strategy-proofness. Full anonymity reduces the relevant information about a coalition not to its cardinality alone, but to its cardinality signature: finite of size \(k\), infinite with infinite complement, or cofinite with complement of size \(k\). Recording the signatures of the two strict-support coalitions yields an infinite triangular grid, ordered by increasing support for one alternative and decreasing support for the other. We prove that anonymous coalition strategy-proof binary social choice functions are exactly those obtained from super order closed subsets, i.e. upper sets, of this grid. We then give a geometric classification of these subsets. Unlike in the finite-voter case, they need not be generated by their minimal elements: countable infinity creates missing-boundary regions corresponding to finite opposition or cofinite strict support. We prove an exact representation of these subsets by genuine or missing-boundary corners, and derive a nonredundant parametrization by an antichain and, when necessary, one exceptional missing-boundary region. This yields four generalized zigzag forms and completes the infinite-society counterpart of the known geometric representation for finite electorates. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.17836 |
| By: | Hey, Florian; Budzinski, Oliver |
| Abstract: | We develop a sequential game-theoretic model to analyze the compliance incentives of digital gatekeepers under the European Union's Digital Markets Act (DMA). A gatekeeper chooses between full compliance and strategic compliance - a strategy of tactical, superficially lawful implementation that preserves a larger share of monopoly rents. The European Commission decides whether to accept the gatekeeper's compliance or initiate enforcement proceedings. Using backward induction, we show that in high-impact markets, the gatekeeper's equilibrium strategy is strategic compliance, investing in legal complexity to deter enforcement. In low-impact markets, full compliance is the equilibrium outcome. We extend the base model by endogenizing the Commission's enforcement incentives, modeled as increasing in the fine imposed, and derive conditions under which raising fines may paradoxically fail to induce full compliance. The model contributes to an emerging literature on regulatory compliance in digital markets and identifies the negotiation-oriented nature of DMA enforcement as a key determinant of strategic gatekeeper behavior. |
| Keywords: | antitrust, Digital Markets Act (DMA), gatekeeper, platform regulation, strategic compliance |
| JEL: | C72 K20 K21 L40 L51 L86 M21 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:tuiedp:343557 |
| By: | Ayca Kaya (University of Vienna); Santanu Roy (Southern Methodist University) |
| Abstract: | In a lemons market with repeated trading by sellers with persistent private information, price transparency affects gains from trade and the market's ability to learn the seller's type. With price transparency, a class of complete-learning equilibria approaches the upper bound on gains from trade imposed by private information when the seller is patient. Without price transparency, prior work shows that complete learning is impossible and gains from trade cannot reach this bound. Price transparency changes incentives by inducing sellers to reject profitable but lower-than-expected offers to preserve future rents, allowing high quality to trade slowly without distorting low quality's trade. |
| Keywords: | Repeated sales, adverse selection, lemons market, price transparency. |
| JEL: | D82 C73 D61 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:smu:ecowpa:2601 |
| By: | Frank Stähler; Andrea Tulli |
| Abstract: | We study bidding in a broad class of price-based procurement mechanisms in which the lowest bid does not always win. These mechanisms are used when cost overruns and non-compliance affect contract execution. We first characterize equilibrium bidding behavior in a general setting with endogenous winning probabilities. We then analyze mixed auction formats in which bidders face uncertainty about the allocation rule, as in the Italian system where a lowest-price or average bid rule is selected based on participation. We show that increasing reliance on the latter can improve compliance but raises bids and expected payments, highlighting a trade-off between contract performance and low award prices. |
| Keywords: | procurement, average bid auction, cost overrun |
| JEL: | H57 D44 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:ces:ceswps:_12970 |
| By: | Doruk Cetemen; Emre Ozdenoren |
| Abstract: | Early-career work both signals a worker's ability and builds long-run skills. We introduce an AI industry into a career signaling model. The industry sells tokens, which workers convert into output indistinguishable from their own. We compare three regimes: no token trade, purchases only, and open trade with side sales. With no token trade, market learns every type, signalling incentives create a rat race and workers work above the full information level. With token purchases only, lower types buy output but the market still learns every type. Buying by lower types raises the signal higher types must post, so the high types can work harder than before AI. Buyers work less with AI, even below the full-information level. With side sales and abundant AI, the signal no longer depends on effort and every type under-invests in skill. Workers gain from token trade only when welfare improves, never the reverse, and the difference is the AI industry's profit. In education, where output has no value, every worker loses in the separating equilibrium, but with valuable output and cheap tokens everyone gains. Token taxes, wage taxes, and watermarking have ambiguous effects on workers' payoffs and welfare, and their effects depend on whether workers can sell output on the side. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.17752 |
| By: | Kevin Dano; Bryan S. Graham; Yassine Sbai Sassi |
| Abstract: | In social and economic networks linked agents often share connections in common. There are two competing explanations for this phenomenon. First, agents may have a structural taste for transitive links - the returns to linking may be higher if two agents share a common connection. Second, agents may assortatively match on unobserved attributes, a process called homophily. We study parameter identifiability in a simple model of dynamic network formation with both effects. Agents form, maintain, and dissolve links over time to maximize utility. The return to linking may be higher if agents share connections in common. A pair-specific utility component allows for arbitrary homophily on time-invariant agent attributes. We derive conditions under which it is possible to detect the presence of a taste for transitivity in the presence of assortative matching on unobservables. We leave the joint distribution of the initial network and the pair-specific utility component, both high dimensional nuisance parameters, unrestricted. Our identification result is constructive, suggesting an analog estimator, whose finite and (single) large network properties we characterize. We show, via examples, the delicacy of information accumulation in the single (large) network setting. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14049 |
| By: | Mira Frick; Ryota Iijima; Yuhta Ishii; Nicholas Wu |
| Abstract: | Consider an auction with buyers whose values depend on an underlying state (e.g., market fundamentals). How does the auction format shape the information that buyers' bids reveal about the state? We recast auctions as statistical experiments and compare different auction formats in terms of the (Lehmann) informativeness of the induced experiments. Our main finding is that among a large class of auctions (e.g., $k$th-price, all-pay), the first-price auction is the most informative. As a result, this auction guarantees the highest payoffs to a decision-maker who uses the information revealed by buyers' bids in a monotone decision problem (e.g., a prediction problem or the choice of a reserve price in a future auction). |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.21168 |
| By: | Antonio Cabrales; Gregorio Curello; Olivier Gossner; Roberto Serrano |
| Abstract: | We study how willingness to pay for information depends on risk aversion when a decision maker faces background risk and can acquire information before choosing from a menu of assets. We distinguish investment menus, whose payoffs are procyclical with background wealth, from insurance menus, whose payoffs are countercyclical. Our main results show that the interaction between asset cyclicality and the tail geometry of background risk determines the direction of the comparative statics. When the density of background risk is log-concave, willingness to pay for information decreases with risk aversion for investment menus, whereas with downward-log-convex background risk it increases with risk aversion for insurance menus. The proofs compare the distributions of terminal wealth with and without information and develop new aggregation arguments for state-dependent single-crossing comparisons. We also construct reversals under strictly log-convex tails for investment menus and super-exponential left tails for insurance menus. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.12149 |
| By: | Meryem Essaidi |
| Abstract: | Complementary resources are often allocated by agencies that see different coordinates of an individual's needs. If an intervention requires complementary resources, an agency may know if said person lacks its own resource; yet not know if supplying completes a useful bundle. We study allocation of $m$ divisible complementary goods when each agency observes only its own coordinate of a baseline-access profile. To isolate information from incentives, we measure the welfare cost of this split against a generous decentralized benchmark DEC: the best rule that acts on local information alone, with cooperative agencies and known population distribution and capacities. Even so, local observation alone can make optimally coordinated policies arbitrarily inefficient: a factor linear in $m$ (even with equal capacities), and a factor inverse in OPT (with but three agencies). Threshold referrals recover much of this loss: an agency reports if its value lies below a public threshold, and a clearing rule uses only the joint reports. Aggregating types by their reports captures a rectangle under the optimal half-utility survival curve. Our main tool is a profile-level charging certificate: if optimal utility is at least twice a threshold, OPT pays at least that on every deficient coordinate. This yields welfare at least ${\rm OPT}/[4(1+\ln(2/{\rm OPT}))]$ with one bit per agency; and an equal-revenue family shows this log-loss tight for one threshold. A geometric threshold ladder improves this to a constant fraction of OPT with doubly-logarithmic messages: a staircase recovers ${\rm OPT}/8$ with $\Theta(\log\log(1/{\rm OPT}))$ bits, and this is necessary within the class. The results isolate how a simple reporting language turns large local-info losses into constant-factor recovery. In short: One threshold gets a log-approximation. A staircase, with log-of-log bits, a constant-factor. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.14301 |
| By: | Le Breton, Michel; Konishi, H.; Weber, Shlomo |
| Abstract: | In this paper, we define additive dyadic social interactions games (ADG), in which each player cares not only about the selected action, but also about interactions with other players, especially those who choose the same action. This class of games includes alliance formation games, network games, and discrete choice problems with network externalities. While it is known that games in the ADG class admit a pure strategy Nash equilibrium that is a maximizer of the game ís potential, the potential approach does not always apply if all coalitional deviations are allowed. In this paper, we systematically identify both restrictions on possible coalitional deviations to preserve the potential function and types of equilibria that ensures their existence for various subclasses of ADG or its subclasses, extending the approach taken by Le Breton et al. (2021). An additional avenue of our results is the examination of games with outside option which expand the set of alternatives. Although this modification complicates the analysis significantly, positive results are obtained with different class of restrictions. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:132076 |
| By: | Pingyang Gao; Jinzhi Lu; Zhenpeng Yang |
| Abstract: | This paper provides a theoretical framework to evaluate the trade-off between the self-regulated peer review system and independent government inspection (PCAOB) in the auditing profession. We model the peer review system as a Judgment Regime, where a stakeholder utilizes professional expertise, captured as a private signal, to make ex-post decisions on verifying audit failures. In contrast, PCAOB inspection is modeled as a Commitment Regime, where the stakeholder lacks private information but can commit ex-ante to a predetermined level of verification. We find that the Judgment Regime benefits from a resource-allocation effect and a deterrence effect driven by informed verification, whereas the Commitment Regime deters audit failures through the first-mover advantage of ex-ante commitment. Our analysis demonstrates that the stakeholder prefers the peer review system if and only if the private signal is sufficiently informative. Furthermore, comparative statics reveal that higher verification costs or stronger audit incentives shift the stakeholder's preference toward PCAOB inspection. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.24020 |
| By: | Villeneuve, Stéphane; Bovo, Andrea; De Angelis, Tiziano |
| Abstract: | We perform a detailed study of a principal–agent problem in a continuous time version of the celebrated Holmstr¨om–Milgrom model (Econometrica 55 (2), 1987) where we add limited liability for the Agent. We develop a probabilistic methodology to prove that the Principal’s value function is the unique classical solution to a fully nonlinear and fully degenerate partial differential equation (PDE) with Cauchy-Dirichlet boundary conditions on [0, T ]×[0, ∞). Indeed, we also prove infinite continuous differentiability of the solution in the interior of the domain. The strength of our regularity result is such that we can ensure existence of optimal controls in strong form—a rare occurrence in dynamic contracting—and we obtain fine properties of the optimal control map, including a characterisation via a further nonlinear degenerate PDE. |
| Keywords: | fully nonlinear and fully degenerate HJB équations; finite horizon; time-changed diffusions; dynamic contracting; limited liability |
| Date: | 2026–09–16 |
| URL: | https://d.repec.org/n?u=RePEc:tse:wpaper:132158 |
| By: | George-Marios Angeletos; Matias Bayas-Erazo |
| Abstract: | We study optimal commodity taxation when consumers are rationally inattentive and the planner internalizes their attention costs. In our setting, consumers may underreact to taxes, may allocate attention unevenly across goods, and may display sparse behavior or mental accounting. Our main result is that this need not change tax design: in a benchmark, optimal taxes satisfy the same sufficient-statistics formulas as in classical public finance, regardless of the extent and endogeneity of inattention. Away from this benchmark, we offer a dual rationale for state-dependent taxes and a new lens on tax salience; but we still find no room for the adjustments emphasized in recent work on behavioral public finance. |
| JEL: | D03 D90 E03 H21 H23 |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:35741 |
| By: | Zhongheng Qiao |
| Abstract: | People often face environments where multiple models compete to explain the same observations. This paper examines how people update beliefs in such settings and how preferences over payoff-relevant states shape model selection and belief updating. This paper first develops a framework where preference-driven bias distorts the perceived model, affecting Bayesian and best-fit updating differently. In a laboratory experiment, most participants are classified as Bayesian updaters, who average across models, while a substantial minority are classified as best-fit updaters, who select the model that best fits the observed signal. Within-participant comparisons between the symmetric payoff and asymmetric payoff conditions indicate that asymmetric payoffs shift reported beliefs toward the preferred state, particularly among participants classified as best-fit updaters. Relative to symmetric payoffs, asymmetric payoffs increase the reported belief of the preferred state by about 8 percentage points among best-fit updaters, while the estimated effect among Bayesian updaters is close to zero. These findings help us better understand model-based learning and have implications for domains such as political polarization and financial investment, where competing narratives and strong preferences often coexist. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.22446 |
| By: | Shuaijie Qian; Guan Qiao |
| Abstract: | This paper studies the regularity of the value function arising from a multidimensional continuous-time principal-agent model with separable, nonquadratic effort costs. The associated stochastic control problem has the output and the agent's continuation utility as state variables, and its Hamilton-Jacobi-Bellman equation is fully nonlinear and degenerate, with potentially unbounded coefficients. We address these difficulties by adding an independent regularization noise and bounding the effort. For the resulting problem, we establish classical regularity of the value function and show that the optimal effort is unique, positive and remains in a fixed compact subset, uniformly with respect to both the control restriction and the regularization parameter. These estimates allow us first to remove the control restriction and then to let the additional noise vanish. Consequently, we prove that the regularized value function converges to the original value function and conclude that the latter belongs locally to the Sobolev space $W^{2, 1}_{\infty, \mathrm{loc}}$, thereby extending the regularity analysis to separable nonquadratic effort costs, for which the arguments yielding classical solutions in the quadratic-cost setting no longer apply. |
| Date: | 2026–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2609.18770 |
| By: | Hassan Afrouzi (Columbia University Department of Economics and NBER); Andres Blanco (Federal Reserve Bank of Atlanta and Emory University); Andrés Drenik (University of Texas at Austin Department of Economics and NBER); Erik Hurst (The University of Chicago Booth School of Business and NBER) |
| Abstract: | We study how an automating technology affects career dynamics, human capital, and welfare in an economy where workers acquire skill through the tasks they perform. In a continuous-time general equilibrium model, learning-by-doing is determined jointly with the share of tasks automated, the frontier of tasks managers maintain, and the worker-to-manager career transition. Economies with high learning capacity admit pairs of stationary equilibria strictly ranked by the aggregate learning rate. Cheaper technology has opposite effects across the two: in the high-learning equilibrium, it raises welfare through the learning channel itself; in the low-learning equilibrium, it tips the economy into a human-capital trap. The planner's first-best combines a tax on automation profits with a subsidy on frontier-maintenance expenditures at a common rate. |
| JEL: | E23 E24 J24 |
| Date: | 2026 |
| URL: | https://d.repec.org/n?u=RePEc:bfi:wpaper:2026-61 |