Imperfect Competition, Compensating Differentials, and Rent Sharing in the US Labor Market

We quantify the importance of imperfect competition in the US labor market by estimating the size of labor market rents earned by American firms and workers. We construct a matched employer-employee panel dataset by combining the universe of US business and worker tax records for the period 2001–2015. Using this panel data, we identify and estimate an equilibrium model of the labor market with two-sided heterogeneity where workers view firms as imperfect substitutes because of heterogeneous preferences over nonwage job characteristics. The model allows us to draw inference about imperfect competition, worker sorting, compensating differentials, and rent sharing. (JEL D24, H24, H25, J22, J24, J31, J42)

Examining Preference Heterogeneity in Best-Worst Scaling: Case of Preferences for Job Opportunities in Artisanal Small-Scale Gold Mining (ASGM) Communities in Indonesia

This research empirically examines the preferences for job-related attributes among rural villagers living close to artisanal and small-scale gold mining (ASGM) in Indonesia. Based on hypothetical scenarios in which a private company collaborates with the local government to establish a food processing industry in these villages, a questionnaire survey designed with best–worst scaling (BWS) was administered to households to determine their preferences. Additionally, the heterogeneity among the villagers was examined by applying a latent class logit (LCL) model. The main household survey was conducted in 2019 in Bone Bolango Regency, Gorontalo Province. The estimation results revealed that villagers are separated into four classes, and each class has different and unique preferences. Creating more job opportunities for society is a highly evaluated attribute; however, the preference for skill acquisition differs among groups. The results indicate that accounting for heterogeneous preferences regarding job opportunities is helpful to delink dependency on ASGM and health hazards and improve the livelihoods of rural villagers. The study yields key information to substantially reduce environmental and health hazards in the poverty-plagued ASGM community by facilitating job opportunities in Indonesia.

Choice Experiment Performed on the Fresh Black Slavonian Pig’s Meat: A Preliminary Study

Until now, no research has been carried out in Croatia into consumer preferences for a particular agricultural and food product by a choice experiment. Therefore, little data are available about Croatian consumers' preferences for social concerns (sustainability, biodiversity, rural development and animal welfare) with regard to the consumer choice and behavior favoring local pig breeds, in this case the Black Slavonian Pig breed. A survey was the method used to collect the data, and a survey questionnaire was used as an instrument. The survey was performed on a sample of n = 100 Croatian consumers surveyed online using a hypothetical choice experiment. The data were analyzed using the three logit models: a multinomial logit model (MNL), random parameter logit (RPL), and an error component random parameter logit model (RPL-EC) in order to examine the consumers’ heterogeneous preferences for fresh ham meat of the Black Slavonian Pig. The results suggest that the Croatian consumers appreciated a darker red fresh pork meat than the one obtained from the Black Slavonian Pig reared outdoors and semi-outdoor. They also prefer a fresh meat bearing a geographical information label, such as the continental Croatia and continental Croatia + PDO, to a fresh meat without a label.

Customer Review Provision Policies with Heterogeneous Cluster Preferences

Companies often post user-generated reviews online so that potential buyers in different clusters (age, geographic region, occupation, etc.) can learn from existing customers about the quality of an experience good and cluster preferences before purchasing. In this paper, we evaluate two common user-generated review provision policies for selling experience goods to customers in different clusters with heterogeneous preferences. The first policy is called the association-based policy (AP) under which a customer in a cluster can only observe the aggregate review (i.e., average rating) generated by users within the same cluster. The second policy is called the global-based policy (GP) under which each customer is presented with the aggregate review generated by all users across clusters. We find that, in general, the firm benefits from a policy that provides a larger number of “relevant reviews” to customers. When customers are more certain about the product quality and when clusters are more diverse, AP is more profitable than GP because it provides cluster-specific reviews to customers. Otherwise, GP is more profitable as it provides a larger number of less relevant reviews. Moreover, we propose a third provision policy that imparts the union of the information by AP and GP and show that it is more profitable for the firm. Although the third policy always renders a higher consumer welfare than GP, it may generate a lower consumer welfare than AP. This paper was accepted by Martínez-de-Albéniz Victor, operations management.

EXPRESS: Context Information can Increase Revenue in Online Display Advertising Auctions: Evidence from a Policy Change

Ad exchanges where real-time auctions for display ad impressions take place historically emphasized user targeting, and advertisers sometimes did not know which sites their ads would appear on, i.e., the ad context. More recently, some ad exchanges have been encouraging publishers to provide context information to ad buyers, allowing them to adjust their bids for ads at specific sites. This paper explores the empirical effect of a change in context information provided by a private European ad exchange. Analyzing this as a quasi-experiment using difference-in-differences, the authors find that average revenue per impression rose when the exchange provided subdomain information to ad buyers. Thus, ad context information is important to ad buyers, and they will act on it. Revenue per impression rises for nearly all sites, which is what is predicted by auction theory when rational buyers with heterogeneous preferences are given more information. The exception to this are sites with thin markets prior to the policy change; consistent with theory, these sites do not show a rise in prices. This paper adds evidence that ad exchanges with reputable publishers, particularly smaller volume, highquality sites, should provide ad buyers with context information, which can be done at almost no cost.

Segregation and clustering of preferences erode socially beneficial coordination

Polarization on various issues has increased in many Western democracies over the last decades, leading to divergent beliefs, preferences, and behaviors within societies. We develop a model to investigate the effects of polarization on the likelihood that a society will coordinate on a welfare-improving action in a context in which collective benefits are acquired only if enough individuals take that action. We examine the impacts of different manifestations of polarization: heterogeneity of preferences, segregation of the social network, and the interaction between the two. In this context, heterogeneity captures differential perceived benefits from coordinating, which can lead to different intentions and sensitivity regarding the intentions of others. Segregation of the social network can create a bottleneck in information flows about others’ preferences, as individuals may base their decisions only on their close neighbors. Additionally, heterogeneous preferences can be evenly distributed in the population or clustered in the local network, respectively reflecting or systematically departing from the views of the broader society. The model predicts that heterogeneity of preferences alone is innocuous and it can even be beneficial, while segregation can hamper coordination, mainly when local networks distort the distribution of valuations. We base these results on a multimethod approach including an online group experiment with 750 individuals. We randomize the range of valuations associated with different choice options and the information respondents have about others. The experimental results reinforce the idea that, even in a situation in which all could stand to gain from coordination, polarization can impede social progress.

Cobb-Douglas Preferences and Pollution in a Bilateral Oligopoly Market

In this paper, we investigate how pollution changes with preferences, focusing on a finite bilateral oligopoly model where agents have asymmetric Cobb-Douglas preferences. Producers are also consumers and the choice of heterogeneous preferences is related to the psychological foundations and identity aspects of group membership. We compare two strategic equilibria: the Stackelberg-Cournot equilibrium with pollution (SCEP) and the Cournot equilibrium with pollution (CEP). We show that considering the asymmetric preferences helps the public decision-maker to identify precisely the category of agents (consumer–producers or pure-consumers) for which a change in environmental preference parameters will most effectively reduce pollution. Furthermore, we find that firms’ emissions’ elasticity decreases with market power (when the market power increases) if their marginal cost is lower than their competitor. Finally, we show that when producers are also consumers, an action on pure-consumers’ preference parameters reduces more emissions than a similar action on consumer–producers, and this regardless of the timing of interaction.