Contributions published at Department of Economics (Florian Scheuer)

There is an active policy debate seeking to understand whether Amazon first-party entry in competition with third-party merchants harms these merchants, and ultimately consumers, on Amazon Marketplace. Some argue that the exploitation of third-party data permits seller expropriation and reduces innovation while others claim that such entry permits the internalization of important externalities, benefiting consumers and merchants alike. We seek to inform this debate by measuring the predictors and effects of Amazon first-party retail entry on consumer and third-party merchant outcomes in the Home & Kitchen department of Germany’s Marketplace between 2016 and 2021. We find Amazon entry both within and across products is associated with modest positive effects on both consumer and third-party merchant outcomes more consistent with mild market expansion than with appropriating third-party sales. We find that both Amazon and large third-party merchants’ entry is associated with fewer subsequent new product introductions, but that these are consistent with regression to the mean rather than causal effects on innovation. Finally, we find that the predictors of Amazon’s within-product entry decisions are more consistent with a strategy that makes Marketplace more attractive to consumers than of third-party seller expropriation, including consideration of predictors based on aggregated Marketplace data. While the empirical setting presented challenges for estimating causal effects, our results are broadly inconsistent with systematic adverse effects of Amazon entry on Amazon Marketplace.

Children’s self-regulation abilities are key predictors of educational success and other life outcomes such as income and health. However, self-regulation is not a school subject, and knowledge about how to generate lasting improvements in self-regulation and academic achievements with easily scalable, low-cost interventions is still limited. Here, we report the results of a randomized controlled field study which integrates a short self-regulation teaching unit based on the concept of mental contrasting with implementation intentions into the school curriculum of first graders. We demonstrate that the treatment increases children’s skills in terms of impulse control and self-regulation while also generating lasting improvements in academic skills like reading and monitoring careless mistakes. Moreover, it has a substantial effect on children’s long-term school career by increasing the likelihood of enrolling in an advanced secondary school track three years later. Thus, self-regulation teaching can be integrated into the regular school curriculum at low cost, is easily scalable and can substantially improve important abilities and children’s educational career path.

Overwhelming evidence from the cognitive sciences shows that, in simple discrimination tasks (determining what is louder, longer, brighter, or even which number is larger) humans make more mistakes and decide more slowly when the stimuli are closer along the relevant scale. We investigate to what extent these effects are relevant for economic decisions in a setting where optimal choices are objectively known (and independent of attitudes toward risk). We find that, even for tasks with objectively-correct answers, error rates and response times increase gradually as expected values become closer. Differences in payoff-independent numerical magnitudes also play a role, which however only becomes clear when one accounts for expected values. We conclude that the gradual effects on choice found in cognitive discrimination paradigms are very much present in economic choices, and depend on economic as well as perceptual variables.

The transition to remote learning in the context of coronavirus disease 2019 (COVID-19) might have led to dramatic setbacks in education. Taking advantage of the fact that São Paulo State featured in-person classes for most of the first school quarter of 2020 but not thereafter, we estimate the effects of remote learning in secondary education using a differences-in-differences strategy that contrasts variation in students’ outcomes across different school quarters, before and during the pandemic. We also estimate intention-to-treat effects of reopening schools in the pandemic through a triple-differences strategy, contrasting changes in educational outcomes across municipalities and grades that resumed in-person classes or not over the last school quarter in 2020. We find that, under remote learning, dropout risk increased by 365% while test scores decreased by 0.32 s.d., as if students had only learned 27.5% of the in-person equivalent. Partially resuming in-person classes increased test scores by 20% relative to the control group.

The earnings of individuals depend on the demand for the factor services they supply. International trade may therefore affect earnings inequality because either (i) foreign consumers and firms demand domestic factor services in different proportions than domestic consumers and firms do, an export channel; or (ii) domestic consumers and firms change their demand for domestic factor services in response to the availability of foreign goods, an import channel. Building on this idea, we develop new measures of export and import exposure at the individual level and provide estimates of their incidence across the earnings distribution. The key input fed into our empirical analysis is a unique administrative data set from Ecuador that merges firm-to-firm transaction data, employer-employee matched data, owner-firm matched data, and firm-level customs transaction records. We find that export exposure is pro-middle class, import exposure is pro-rich, and in terms of overall incidence, the import channel is the dominant force. As a result, earnings inequality in Ecuador is higher than it would be in the absence of trade.

This paper constructs a new estimator for large covariance matrices by drawing a bridge between the classic (Stein (1975)) estimator in finite samples and recent progress under large-dimensional asymptotics. The estimator keeps the eigenvectors of the sample covariance matrix and applies shrinkage to the inverse sample eigenvalues. The corresponding formula is quadratic: it has two shrinkage targets weighted by quadratic functions of the concentration (that is, matrix dimension divided by sample size). The first target dominates mid-level concentrations and the second one higher levels. This extra degree of freedom enables us to outperform linear shrinkage when the optimal shrinkage is not linear, which is the general case. Both of our targets are based on what we term the “Stein shrinker”, a local attraction operator that pulls sample covariance matrix eigenvalues towards their nearest neighbors, but whose force diminishes with distance (like gravitation). We prove that no cubic or higher-order nonlinearities beat quadratic with respect to Frobenius loss under large-dimensional asymptotics. Non-normality and the case where the matrix dimension exceeds the sample size are accommodated. Monte Carlo simulations confirm state-of-the-art performance in terms of accuracy, speed, and scalability.

To understand students’ motives in obtaining postgraduate qualifications, we elicit intentions to pursue postgraduate education and beliefs about its returns in a sample of 1002 university students. We find large gaps in perceptions about the immediate and later-life benefits of postgraduate education, both between first- and continuing-generation students and within the latter group. Differences in student beliefs about returns can account for 70% of the socioeconomic gaps in intentions to pursue postgraduate studies. We document large differences in students’ current undergraduate experiences by socioeconomic background and find these to be predictive of perceived returns to postgraduate education.

Negative symptoms in the psychosis continuum are linked to impairments in reward processing and cognitive function. Processes at the interface of reward processing and cognition and their relation to negative symptoms remain little studied, despite evidence suggestive of integration in mechanisms and neural circuitry. Here, we investigated brain activation during reward-dependent modulation of working memory (WM) and their relationship to negative symptoms in subclinical and early stages of the psychosis continuum. We included 27 persons with high schizotypal personality traits and 23 patients with first episode psychosis as well as 27 healthy controls. Participants underwent functional magnetic resonance imaging while performing an established 2-back WM task with two reward levels (5 CHF vs. no reward), which allowed us to assess common reward-cognition regions through whole-brain conjunction analyses and to investigate relations with clinical scores of negative symptoms. As expected for behavior, reward facilitated performance while cognitive load diminished it. At the neural level, the conjunction of high reward and high cognitive load contrasts across the psychosis continuum showed increased hemodynamic activity in the thalamus and the cerebellar vermis. During high cognitive load, more severe apathy but not diminished expression in the psychosis continuum was associated with reduced activity in right lateral orbitofrontal cortex, midbrain, posterior vermal cerebellum, caudate and lateral parietal cortex. Our results suggest that hypoactivity in the cerebellar vermis and the cortical-striatal-midbrain-circuitry in the psychosis continuum relates to apathy possibly via impaired flexible cognitive resource allocation for effective goal pursuit.

Payoff security combined with reciprocal upper semicontinuity is sufficient for better-reply security, and consequently for the existence of a pure strategy Nash equilibrium in compact, quasiconcave games by Reny's (1999) theorem. Analogously, diagonal payoff security combined with upper semicontinuity of the diagonal payoff function has been widely understood to be sufficient for diagonal better-reply security, and consequently for the existence of a symmetric pure strategy Nash equilibrium in compact, diagonally quasiconcave, quasi-symmetric games. We show by example that this is incorrect. Specifically, diagonal better-reply security may fail to hold, and a symmetric pure strategy equilibrium may fail to exist, if some player's payoff function lacks lower semicontinuity, with respect to the opponents' symmetric strategy profile, at all strategy profiles reached from a non-equilibrium profile on the diagonal by a unilateral better response of that player. These difficulties disappear, both in the game and in its mixed extension, if the lower bound on a player's payoff in the definition of diagonal payoff security is raised to reflect the higher levels that arbitrary better responses may achieve. We also discuss the relationship between our strengthened condition and diagonal payoff security.

Der Einsatz von Klimaanlagen in Wohnräumen und Büros wird bei uns mit dem Stromfresser- und Klimazerstörer-Argument verhindert. Dann lieber zwei Monate leiden – für den Planeten, so das Motto. Doch diese moralinsaure Selbstkasteiung läuft ins Leere. Sie ignoriert die Solarstrom-Option.

Early Childhood Development (ECD) programs are currently understood as critical for children’s cognitive and socioemotional development, especially for those from disadvantaged backgrounds or most at risk for poor outcomes. Nevertheless, while the pioneering ECD programs evaluated in the literature have shown large and long-lasting impacts, replicating their successes has proven challenging in more recent years. We characterize this replication crisis and provide perspectives on how wearable technologies could help overcome it.

Regional banking integration allows credit to be reallocated to regions with high credit demand. Using the natural experiment of Japan's lost decade, we show that this reallocation channel mitigated the real effects from the bank liquidity shock in prefectures with many bank-dependent small firms. We propose an instrument for modern-day regional banking integration that exploits the fact that regional segmentation of banking markets in Japan goes back to the institutions set up for silk export finance in the late 19th century. We illustrate how the difference between the OLS and IV estimates can provide information about unobserved cross-regional heterogeneity in bank-firm matches when only aggregate regional data is available. Our results highlight that well-integrated banking markets are important and complementary to bond markets in limiting macroeconomic asymmetries in a monetary union, in particular during major financial crises.

After the inception of the euro, the real economy in most member countries remained dependent on credit by domestic banks, which increasingly funded themselves through cross-border interbank funding. We find that this pattern of ‘double-decker’ banking integration exposed domestic banks to sharp declines in cross-border interbank lending during the eurozone crisis. As a result, domestic banks reduced lending, which led to large declines in output in sectors with many small (bank-dependent) firms. We propose a quantitative small open economy model to account for these patterns and conclude that a global banking shock leading to a sudden stop in cross-border interbank lending in the eurozone is required to account for them.

Empirical evidence has shown that visually enhancing the saliency of reward probabilities can ease the cognitive demands of value comparisons and improve value-based decisions in old age. In the present study, we used a time-varying drift diffusion model that includes starting time parameters to better understand (1) how increasing the saliency of reward probabilities may affect the dynamics of value-based decision-making and (2) how these effects may interact with age. We examined choices made by younger and older adults in a mixed lottery choice task. On a subset of trials, we used a color-coding scheme to highlight the saliency of reward probabilities, which served as a decision-aid. The results showed that, in control trials, older adults started to consider probability relative to magnitude information sooner than younger adults, but that their evidence accumulation processes were less sensitive to reward probabilities than that of younger adults. This may indicate a noisier and more stochastic information accumulation process during value-based decisions in old age. The decision-aid increased the influence of probability information on evidence accumulation rates in both age groups, but did not alter the relative timing of accumulation for probability versus magnitude in either group.

BACKGROUND: Predicting adverse events from past experience is fundamental for many biological organisms. However, some individuals suffer from maladaptive memories that impair behavioral control and well-being, e.g., after psychological trauma. Inhibiting the formation and maintenance of such memories would have high clinical relevance. Previous preclinical research has focused on systemically administered pharmacological interventions, which cannot be targeted to specific neural circuits in humans. Here, we investigated the potential of noninvasive neural stimulation on the human sensory cortex in inhibiting aversive memory in a laboratory threat conditioning model. METHODS: We build on an emerging nonhuman literature suggesting that primary sensory cortices may be crucially required for threat memory formation and consolidation. Immediately before conditioning innocuous somatosensory stimuli (conditioned stimuli [CS]) to aversive electric stimulation, healthy human participants received continuous theta-burst transcranial magnetic stimulation (cTBS) to individually localized primary somatosensory cortex in either the CS-contralateral (experimental) or CS-ipsilateral (control) hemisphere. We measured fear-potentiated startle to infer threat memory retention on the next day, as well as skin conductance and pupil size during learning. RESULTS: After overnight consolidation, threat memory was attenuated in the experimental group compared with the control cTBS group. There was no evidence that this differed between simple and complex CS or that CS identifi- cation or initial learning were affected by cTBS. CONCLUSIONS: Our results suggest that cTBS to the primary sensory cortex inhibits threat memory, likely by an impact on postlearning consolidation. We propose that noninvasive targeted stimulation of the sensory cortex may provide a new avenue for interfering with aversive memories in humans.

BACKGROUND: The effect of psychological health on cardiovascular disease is an underappreciated yet important area of study. Understanding the relationship between these two entities may allow for more comprehensive care of those with cardiovascular disease. The primary objective of this meta-analysis is to evaluate the relationship between optimism and risk of developing adverse events such as all-cause mortality or fatal and non-fatal cardiovascular disease in community-based populations. METHOD: A systematic search of electronic databases was conducted from inception through November 2021 for prospective studies evaluating optimism and adverse outcomes. Two reviewers independently selected prospective cohort studies that evaluated optimism and either all-cause mortality or cardiovascular disease and reported hazard ratios of these outcomes between optimistic and non-optimistic groups. Studies that reported odds ratio or other risk assessments were excluded. Pooled hazard ratios were calculated in random-effects meta-analyses. RESULTS: Pooled analysis of six studies (n = 181,709) showed a pooled hazard ratio of 0.87 (95% confidence interval [CI], 0.82-0.92) for all-cause mortality among those with more optimistic mindset. Analysis of seven studies (n = 201,210) showed a pooled hazard ratio of 0.59 (95% CI, 0.37-0.93) for cardiovascular disease and pooled hazard ratio of 0.57 (95% CI, 0.07-4.56) for stroke. CONCLUSIONS: In this pooled meta-analysis, optimism was associated with a reduced risk of all-cause mortality and of cardiovascular disease. These results suggest an important relationship between psychological health and cardiovascular disease that may serve as an area for intervention by clinicians.

Although cooperation can lead to mutually beneficial outcomes, cooperative actions only pay off for the individual if others can be trusted to cooperate as well. Identifying trustworthy interaction partners is therefore a central challenge in human social life. How do people navigate this challenge? Prior work suggests that people rely on facial appearance to judge the trustworthiness of strangers. However, the question of whether these judgments are actually accurate remains debated. The present research examines accuracy in trustworthiness detection from faces and three moderators proposed by previous research. We investigate whether people show above-chance accuracy (a) when they make trust decisions and when they provide explicit trustworthiness ratings, (b) when judging male and female counterparts, and (c) when rating cropped images (with non-facial features removed) and uncropped images. Two studies showed that incentivized trust decisions (Study 1, n = 131 university students) and incentivized trustworthiness predictions (Study 2, n = 266 university students) were unrelated to the actual trustworthiness of counterparts. Accuracy was not moderated by stimulus type (cropped vs. uncropped faces) or counterparts' gender. Overall, these findings suggest that people are unable to detect the trustworthiness of strangers based on their facial appearance, when this is the only information available to them.

Firms often discourage certain categories of individuals from buying their products, seemingly at odds with typical assumptions about profit maximization. This paper provides a potential rationale for such firm behavior: Consumers seek to signal that they have “desirable” ideological values to themselves and others by avoiding products popular among people with “undesirable” values. In laboratory experiments and surveys, I provide causal evidence that consumption can be diagnostic of consumers’ ideologies and that demand for a product is lower if its customer base consists of individuals whose ideological values are widely considered undesirable. These effects occur for both observable and unobservable consumption and for products that do not possess any inherent ideological or undesirable qualities.

The endowment and attachment effect are empirically well-documented in bilateral trade situations. Yet, the theoretical literature has so far failed to formally identify these effects. We fill this gap by introducing expectations-based loss aversion, which can explain both effects, into the classical setting by Myerson and Satterthwaite (1983). This allows us to formally identify the endowment and attachment effect and study their impact on information rents, allowing us to show that, in contrast to other behavioral approaches to the bilateral trade problem, the impossibility of inducing materially efficient trade persists in the presence of loss aversion. We then turn to the design of optimal mechanisms and consider the problem of maximizing the designer's revenue as well as gains from trade. We find that the designer optimally provides the agents with full insurance in the money dimension and, depending on the distribution of types, optimally increases or decreases the trade frequency in the presence of loss aversion.