Financial reporting by early-stage ventures provides limited information to outside investors: revenues and profits are uncommon, intangible assets are underrepresented, and human capital is unrecognized, weakening traditional accounting-based signals. This paper studies government startup grants as an external disclosure signal that supplements early-stage ventures sparse financial reporting. Drawing on signalling theory, we argue that grant approval conveys third-party validation that is observable, credible, and costly to obtain. To identify the causal effect of grant receipt, we exploit quasi-random variation in approval likelihood induced by fiscal-year budgeting cycles. Startups applying early in the fiscal year, particularly in January, face higher approval rates due to renewed public funding availability. We use application timing as an instrument for grant receipt in a two-stage least squares framework. The results show that grant receipt, rather than the monetary value of the grant, significantly increases the probability of a successful IPO. These findings indicate that the primary economic role of government grants in capital markets operates through signalling channels, via certification and visibility, rather than through direct financial support.

When class actions settle, the defendant and class counsel have a strong joint incentive to appropriate part of the class's entitlement. The problem is long recognized, but neither existing mechanisms nor those suggested in the literature address it effectively. The current article proposes a market-based solution to the problem: Once a settlement is struck, any attorney of the plaintiffs' bar may replace the original class counsel, nullify the settlement, and litigate the case. This is done by paying the original class counsel the fees stipulated in the settlement. When litigation concludes, the new class counsel is rewarded on the basis of the percentage increase in the class's remuneration. The mechanism deters the formation of any settlement detrimental to the class while preserving the incentives to reach all socially desirable settlements.

We investigate subjects' decisions to forgo costless information in interactive situations through laboratory experiments utilizing both within-subject and between-subjects designs. We created three strategic environments, each with two games: one environment with games of common interests, one with games of conflicting interests, and a third with one game of each type. In each environment, participants were paired and presented with the two games. They were then asked individually to choose whether or not to learn (at no cost) which game was being played. This choice was communicated to the other player before the actual game was played. Our results indicate that subjects understand the potential negative value of information in interactive contexts; specifically, they recognize that forgoing information can induce their counterpart to play more cooperatively. Furthermore, we demonstrate that the observed tendency to forgo information aligns with the predictions of rational behavior.

We study the strategic advantages of coarsening one's utility by clustering nearby payoffs together (i.e., classifying them the same way). Our solution concept, coarse-utility equilibrium (CUE) requires that (1) each player maximizes her coarse utility, given the opponent's strategy, and (2) the classifications form best replies to one another. We characterize CUEs in various games. In particular, we show that there is a qualitative difference between CUEs in which only one of the players clusters payoffs, and those in which all players cluster their payoffs, and that the latter type induce players to treat co-players better than in Nash equilibria in the large class of games with monotone externalities.

We explore strategic betting in competitive environments with multiple participants and potential winners. We examine two scenarios: an 'inclusive' low-competition scenario with many winners and an 'exclusive' high-competition scenario with few winners. Using a simple model, we illustrate the strategic insights in these scenarios and present experimental results that align with our predictions. In the experiment, participants made repeated bets with feedback on past results and their payoffs. In the inclusive scenario, all but the worst guessers were rewarded, while in the exclusive scenario, only the top guessers received rewards. Our findings show that in the inclusive scenario, participants exhibit herding behavior by coordinating their bets, while in the exclusive scenario, they diversify their bets across multiple options. The main general insight of our findings is that in moderate competitions, one tends to join the majority to avoid standing out in case of failure, whereas in intense competitions, one tends to differentiate oneself from one's peers to ensure that success stands out. This insight is relevant for a broad domain of strategic interactions.

This study presents evidence from a field experiment investigating the effectiveness of a novel “gradualism” approach to addressing emotionally motivated procrastination in a real-world setting. Participants in retirement workshops were randomly assigned to draft and dispose of a virtual will during the workshop, serving as a preliminary step toward completing an actual will. Our results indicate that this gradualism approach increases the likelihood of completing an actual will within 150 days by 8 percentage points compared to those who did not draft a virtual will. Given the emotionally challenging nature of will-making — requiring contemplation of death, relationships, and personal achievements — the notable effect size demonstrates the potential of gradualism to mitigate procrastination in emotionally charged financial decisions. These findings have broader implications for financial planning, suggesting that similar strategies could be employed to encourage long-term financial behaviors such as retirement savings and investment planning. By breaking down complex financial tasks into smaller, manageable steps, gradualism can enhance engagement and completion rates, addressing issues of financial illiteracy and preparedness highlighted in the literature. Our study contributes to the field of behavioral finance by providing evidence on the effectiveness of gradualism in improving financial decision-making and preparedness.

A principal incentivizes a group of agents to work by choosing a monitoring structure and a scheme of performance-contingent rewards. The monitoring structure partitions the set of agents into monitoring teams, each delivering a signal of joint performance. We show that unlike under partial implementation, the principal always exhausts her monitoring capacity to optimally implement work as a unique outcome. Optimal monitoring teams are homogeneous between them: equally sized and with agents allocated in an anti-assortative fashion. Higher-effort-cost agents receive lower rents, and they tend to be monitored more closely than lower-effort-cost agents when the principal’s allocation is constrained. (JEL D82, D86, M54)

This paper investigates the impact of monitoring intensity on individuals’ motivation to exert effort. Using an experimental approach, we designed a test comprising six problems, with varied levels of monitoring and success criteria, to evaluate performance as an indicator of effort. The results reveal a nonlinear relationship between the stringency of monitoring criteria and worker performance. Interestingly, we found that optimal performance is attained when participants are required to answer correctly only one of the six problems. This study enhances our understanding of performance monitoring strategies and their effects in modern work settings.

The neuropeptide hormone oxytocin and the steroid hormone testosterone have received attention as modulators of behavior in the context of intergroup conflict. However, to date, their interactive effect has yet to be tested. Here, in a double-blind placebo-control design, 204 participants (102 female participants) self-administrated oxytocin or placebo and completed an experimental economic game modeling intergroup conflict. Salivary testosterone ( n = 192) was measured throughout the task to assess endogenous reactivity. As a caveat, even at this sample size, our derived power to detect small effects for 2- and 3-way interactions was relatively low. For male participants, changes in testosterone predicted willingness to sacrifice investments for the betterment of the group. Intranasal administration of oxytocin strongly diminished this effect. In female participants, we found no credible evidence for association between changes in testosterone and investments, rather, oxytocin effects were independent of testosterone. This 3-way interaction was of medium to large effect size (Odds Ratio 5.11). Behavior was also affected by social cues such as signaling of ingroup and outgroup members. Our findings provide insights as to the biological processes underpinning parochial altruism and suggest an additional path for the dual influence of oxytocin and testosterone on human social behavior.

We analyze the implications of priority service (PS) on customers' welfare. In monopoly markets, PS can often decrease consumer surplus and can even yield a loss of welfare to all consumers. This happens despite its efficiency gains, as monopolists levy in revenue more than the total efficiency gains. PS can increase consumer surplus if it expands the consumption coverage-that is, if it introduces new customers who would not purchase the service otherwise. In duopoly markets, the price competition over PS can be severely eroded. Under homogeneity, firms act as if they were monopolists serving half of the market.

Since the onset of the COVID-19 pandemic, the world has seen a dramatic increase in the prevalence of remote work, with far-reaching financial, economic, social, and environmental consequences. This has also resulted in an unprecedented expansion of the use of digital monitoring tools by employers who wish to make sure that their remotely employed workers remain productive. In this study, we create an experimental setting resembling a remote work environment, and randomly assign participants to four groups, simulating different levels of digital monitoring. We find that while the presence of monitoring both increases participants’ effort and improves their performance, a higher level of monitoring beyond the bare minimum does not. These findings have broad ramifications for both policymakers and employers looking for optimal incentives for remote workers.

The paper studies strategic betting in competitive environments. We consider competitive environments with multiple participants and potentially multiple winners in which the outcome of the competition depends on the outcomes of bets taken by the competitors (e.g., grant proposers making bets on which topic to propose without knowing the preferences of the granting authority). We consider two distinct scenarios: an “inclusive” scenario characterized by low-intensity competition and a larger proportion of winners, and an “exclusive” scenario marked by high competition intensity and fewer winners. Our findings reveal that in the inclusive scenario, participants tend to coordinate their bets, exhibiting herding behavior. In contrast, in the exclusive scenario, contestants demonstrate a divergence in their betting strategies, opting to spread their bets across multiple options. We start with a simple model that highlights the main strategic insight, and report on experimental results that are consistent with this insight. In the experiment, participants are grouped together and repeatedly asked to guess the results of a coin toss, and are informed of the distribution of guesses in previous rounds. In some versions, participants are assigned to an inclusive scenario, where all but the worst guessers receive a reward. In other versions, participants are assigned to an exclusive scenario, where only a small number of top guessers are rewarded. The experimental results are consistent with our theoretical predictions. These findings have implications for a variety of real life economic and social environments.

In recent years super-PACs jumped into the political fray by making significant donations to political parties and candidates thus tilting political outcomes to suit their agendas. Super-PACs raise their money from individuals and corporations and spend it to promote their cause. Numerous commentators studied their impact on the American political landscape and highlighted its implications from a constitutionally driven perspective, anchored in the Free Speech clause of the First Amendment as it applies to corporate persons. In this Essay we analyze the phenomenon from a different vantage point, the prohibition to spend other people’s money in support of a cause which they refuse to endorse. We prove that although contributions made by private donors to super-PACs may sometimes be justified, no such redeeming grace is tenable in the case of contributions made by large public corporations. The distortion is caused by inviting corporations to identify their presumed political preferences by employing the decision rule current in corporate matters of “one share one vote” which allocates disproportionate power to the holders of large blocks of shares. Since political controversies ought to be governed by a different decision rule- “one person one vote” the distortion cannot be remedied through the intermediation of corporate players.

We study a market of investments on networks, where each agent (vertex) can invest in any enterprise linked to her, and at the same time, raise capital for her firm’s enterprise from other agents she is linked to. Failing to raise sufficient capital results with the firm defaulting, being unable to invest in others. Our main objective is to examine the role of collateral contracts in handling the strategic risk that can propagate to a systemic risk throughout the network in a cascade of defaults. We take a mechanism-design approach and solve for the optimal scheme of collateral contracts that capital raisers offer their investors. These contracts aim at sustaining the efficient level of investment as a unique Nash equilibrium, while minimizing the total collateral. Our main results contrast the network environment with its non-network counterpart (where the sets of investors and capital raisers are disjoint). We show that for acyclic investment networks, the network environment does not necessitate any additional collaterals, and systemic risk can be fully handled by optimal bilateral collateral contracts between capital raisers and their investors. This is, unfortunately, not the case for cyclic investment networks. We show that bilateral contracting will not suffice to resolve systemic risk, and the market will need an external entity to design a global collateral scheme for all capital raisers. Furthermore, the minimum total collateral that will sustain the efficient level of investment as a unique equilibrium may be arbitrarily higher, even in simple cyclic investment networks, compared with the corresponding non-network environment. Additionally, we prove computational-complexity results, both for a single enterprise and for networks.

We characterize the revenue-maximizing information structure in the second-price auction. The seller faces a trade-off: more information improves the efficiency of the allocation but creates higher information rents for bidders. The information disclosure policy that maximizes the revenue of the seller is to fully reveal low values (where competition is high) but to pool high values (where competition is low). The size of the pool is determined by a critical quantile that is independent of the distribution of values and only dependent on the number of bidders. We discuss how this policy provides a rationale for conflation in digital advertising. (JEL D44, D82, D83, M37)

In digital advertising, a publisher selling impressions faces a trade-off in deciding how precisely to match advertisers with viewers. A more precise match generates effi ciency gains that the publisher can hope to exploit. A coarser match will generate a thicker market and thus more competition. The publisher can control the precision of the match by controlling the amount of information that advertisers have about viewers. We characterize the optimal tradeoffwhen impressions are sold by auction. The publisher pools premium matches for advertisers (when there will be less competition on average) but gives advertisers full information about lower quality matches. Jel Classification: D44, D47, D83, D84.

We study mechanisms that exploit social influence in networks to coordinate agents to act. Agents’ social benefit from taking action increases with any additional friend who acts. On top of the social benefits, the principal offers external rewards to sustain a unique Nash equilibrium where everyone acts. We first show that in the influence mechanism that minimizes the principal’s expenses, popular agents receive preferential treatment from the principal. We use this observation to identify networks that are most favorable for the principal to induce action. Such networks, “galaxies”, partition nodes into core and periphery, with every core node being linked to all nodes, and every periphery node being linked only to core nodes. We discuss the relevance of this finding to social media platforms (such as Facebook and Twitter) in terms of manipulating the network, as well as to regulators who would attempt to prevent such manipulation.

This study utilizes the crowdfunding setting, and examines gender differences with regard to the perceived meaning of donations. The crowdfunding mechanism creates a singular reciprocal interaction where motivations can be examined and compared. We show that women's perceived meaning is more sensitive to the existence of gift rewards than that of men. When the gift incentive is nonexistent, women attribute a greater sense of meaning to their contribution, whereas this effect is largely absent or even reversed in men. Our findings have far-reaching implications in all aspects of donor retention strategies. Specifically, our findings indicate that women are more aligned with the Kantian doctrine of rejecting self-interest considerations of altruistic behavior than men.

Competitiveness is an essential feature of human social interactions. Despite an extensive body of research on the underlying psychological and cultural factors regulating competitive behavior, the role of biological factors remains poorly understood. Extant research has focused primarily on sex hormones, with equivocal findings. Here, we examined if intranasal administration of the neuropeptide oxytocin (OT) - a key regulator of human social behavior and cognition - interacts with changes in endogenous testosterone (T) levels in regulating the willingness to engage in competition. In a double-blind placebo-control design, 204 subjects (102 females) self-administrated OT or placebo and were assessed for their willingness to compete via an extensively-validated economic laboratory competition paradigm, in which, before completing a set of incentivized arithmetic tasks, subjects are asked to decide what percentage of their payoffs will be based on tournament paying-scheme. Salivary T concentrations (n = 197) were measured throughout the task to assess endogenous reactivity. Under both OT and placebo, T-reactivity during competition was not associated with competitiveness in females. However, in males, the association between T-reactivity and competitiveness was OT-dependent. That is, males under placebo demonstrated a positive correlation between T-reactivity and the willingness to engage in competition, while no association was observed in males receiving OT. The interaction between OT, T-reactivity, and sex on competitive preferences remained significant even after controlling for potential mediators such as performance, self-confidence, and risk-aversion, suggesting that this three-way interaction effect was specific to competitive motivation rather than to other generalized processes. These findings deepen our understanding of the biological processes underlying human preferences for competition and extend the evidence base for the interplay between hormones in affecting human social behavior.