Working Papers

[1] Consumer Search and the Uncertainty Effect, joint with Heiko Karle and Rune Vølund [pdf]

We consider a model of Bertrand competition where consumers are uncertain about the qualities and prices of firms‘ products. Consumers can inspect all products at zero cost. A share of consumers is expectation-based loss averse. For these consumers, a purchase plan, which involves buying products of varying quality and price with positive probability, creates scale-dependent disutility from gain-loss sensations. Even if their degree of loss aversion is modest, they may refrain from inspecting all products and choose an individual default that is first-order stochastically dominated. Firms‘ strategic behavior can exacerbate the scope for this uncertainty effect, and sellers of inferior products may earn positive profits despite Bertrand competition. We find suggestive evidence for the predicted association between consumer behavior and loss aversion in new survey data.

[2] Reservation Wages and Labor Supply, joint with Iris Kesternich, Bettina Siflinger and Franziska Valder [pdf]

Survey measures of the reservation wage may reflect both the consumption-leisure trade-off and job search concerns (the arrival rate of job offers and the wage distribution). We examine what a survey measure of the reservation wage reveals about labor supply when search concerns are absent. To this end, we combine the reservation wage measure from a large labor market survey with the reservation wage for a one-hour job that we elicit in an online experiment. The two measures show a strong positive association. For unemployed individuals, the experimental reservation wage increases on average by around one Euro for every Euro increase in the survey measure. For employed individuals, the association between the two measures is weaker, but still positive and statistically significant. We show that these results are robust to selection into the experiment, and that demographic variables have a similar influence on both reservation wage measures.

[3] Social Preferences of Young Professionals and the Financial Industry, joint with Andrej Gill, Matthias Heinz and Matthias Sutter [pdf] [Online Appendix]

The financial industry has been struggling with widespread misconduct and public mistrust. One explanation for these phenomena could be the selection of individuals who wish to work in and get job offers from the financial industry. In this paper, we examine the selection into the financial industry based on social preferences. We identify the social preferences of business and economics students, and, for six years, follow up on their early career choices as well as on their job placement after graduation. Students eager to work in the financial industry exhibit substantially less reciprocity and less willingness to cooperate than those with other career plans. The job market does not alleviate this selection. Those subjects who find their first permanent job in finance are significantly less reciprocal than those working in other industries.