Discussion Paper No. 554
November 25, 2025
Oligopolistic Information Markets
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Abstract:
In modern information markets, buyers routinely combine signals from multiple sellers. We develop a model of ``portfolio competition'' to analyze this distinctive feature. We show that the combinability of information overturns standard oligopoly intuition. Unlike traditional markets, competitive pressure does not necessarily protect buyers: when signals are complements, sellers can leverage the buyer's desire for the joint portfolio to extract the full social surplus, regardless of the number of competitors. We characterize the precise conditions for rent extraction, which reduce to a simple geometric test for symmetric sellers. Furthermore, we find that the canonical logic of market entry fails. Entry is never socially excessive because efficient portfolio choices eliminate business-stealing effects. Paradoxically, entry can reduce competitive pressure: when entrants provide strong complementarities, they shift the buyer's threat point, allowing all sellers to extract higher rents.
Keywords:
information markets; portfolio competition; market entry; data economy; complementarity;
JEL-Classification:
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Discussion Paper No. 553
Demand-Investment in Distribution Channels
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Abstract:
We study a manufacturer's demand-investment decisions in distribution channels subject to double marginalization. Casting this as a mechanism design problem, we show that demand-enhancing investments strengthen retailers' incentives to exploit market power, forcing manufacturers to concede greater rents. Manufacturers therefore optimally restrict product quality or market coverage. We fully characterize which demand parameters create these perverse incentives: increases benefit manufacturers in segments where they control pricing but harm them in segments with binding incentive constraints. This reveals fundamental limits to demand-side investment in vertical relationships.
Keywords:
demand; investment incentives; distribution channels; double marginalization;
JEL-Classification:
D21; D82; L11;
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Discussion Paper No. 552
November 20, 2025
The Elusive Returns to AI Skills: Evidence from a Field Experiment
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As firms increasingly adopt Artificial Intelligence (AI) technologies, how they adjust hiring practices for skilled workers remains unclear. This paper investigates whether AI-related skills are rewarded in talent recruitment by conducting a large-scale correspondence study in the United Kingdom. We submit 1,185 résumés to vacancies across a range of occupations, randomly assigning the presence or absence of advanced AI-related qualifications. These AI qualifications are added to résumés as voluntary signals and not explicitly requested in the job postings. We find no statistically significant effect of listing AI qualifications in résumés on interview callback rates. However, a heterogeneity analysis reveals some positive and significant effects for positions in Engineering and Marketing. These results are robust to controlling for the total number of skills listed in job ads, the degree of match between résumés and job descriptions, and the level of expertise required. In an exploratory analysis, we find stronger employer responses to AI-related skills in industries with lower exposure to AI technologies. These findings suggest that the labor market valuation of AI-related qualifications is context-dependent and shaped by sectoral innovation dynamics.
Keywords:
return to skills; technological change; labor market; hiring; signaling; human capital; field experiment; ai-related skills;
JEL-Classification:
O33; J23; J24; I26;
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Discussion Paper No. 551
Training or Retiring? How Labor Markets Adjust to Trade and Technology Shocks
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How do firms and workers adjust to trade and technology shocks? We analyze two mechanisms that have received little attention: training that upgrades skills and early retirement that shifts adjustment costs to public pension systems. We combine novel data on training participation and early retirement in German local labor markets with established measures of exposure to trade competition and robot adoption. Results indicate that negative trade shocks reduce training—particularly in manufacturing—while robot exposure increases training—particularly in indirectly affected services. Both shocks raise early retirement among manufacturing workers. Structural change thus induces both productivity-enhancing and productivity-reducing responses, challenging simple narratives of labor market adaptation and highlighting the scope for policy to promote adjustment mechanisms conducive to aggregate productivity.
Keywords:
training; retirement; trade; technological change; automation; robots; firms; workers; labor market;
JEL-Classification:
J24; J26; O33; F16; R11;
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Discussion Paper No. 550
Rising Inequality, Declining Mobility: The Evolution of Intergenerational Mobility in Germany
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This paper is the first to show that intergenerational income mobility in Germany has decreased over time. We estimate intergenerational persistence for the birth cohorts 1968-1987 and find that it rises sharply for cohorts born in the late 1970s and early 1980s, after which it stabilizes at a higher level. As a step towards understanding the mechanisms behind this increase, we show that parental income has become more important for educational outcomes of children. Moreover, we show that the increase in intergenerational persistence coincided with a surge in cross-sectional income inequality, providing novel evidence for an "Intertemporal Great Gatsby Curve''.
Keywords:
intergenerational mobility; social mobility; income; education; inequality;
JEL-Classification:
J62; I24; D63;
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Discussion Paper No. 549
Rare Disasters, Tail Aversion, and Asset Pricing Puzzles
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This paper integrates tail aversion, implemented via a one-period entropic tilt, with rare disasters in a consumption-based asset pricing model with CRRA utility to jointly address the equity premium and risk-free rate puzzles. The model delivers closed-form expressions for the risk-free rate and asset moments, pushes out the Hansen-Jagannathan bound, implies a low risk-free rate via diffusion and disaster channels, and delivers natural upper and lower bounds of risk aversion. Calibrated to long-run return data and disciplined by disaster evidence, the model matches average returns, volatility, and a low real risk-free rate with very modest risk aversion.
Keywords:
equity premium puzzle; risk-free rate puzzle; rare disasters; entropic tilt; multiplier (kl) preferences; robust control; consumption-based asset pricing;
JEL-Classification:
G12; E44; E43; E21; D81;
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Discussion Paper No. 548
October 16, 2025
Management Practices and Firm Performance During the Great Recession
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This paper empirically examines how management practices affect firm productivity over the business cycle. Using plant-level high-dimensional human resource policies survey data collected in Spain in 2006, we employ unsupervised machine learning to describe clusters of management practices (“management styles”). We establish a positive correlation between a management style associated with structured management and performance prior to the 2008 financial crisis. Interestingly, this correlation turns negative during the financial crisis and positive again in the economic recovery post-2013. Our evidence suggests firms with more structured management are more likely to have practices fostering culture and intangible investments such that they focus in long-run profitability, prioritizing innovation over cost reduction, while having higher adjustment costs in the short-run through higher share of fixed assets and lower employee turnover.
Keywords:
management practices; culture; unsupervised machine learning; productivity; great recession;
JEL-Classification:
M12; D22; C38;
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Discussion Paper No. 547
October 9, 2025
Gratitude in Fundraising: Do 'Thank You in Advance' and Handwritten Thank-You Notes Impact Fundraising Success?
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While almost all charities rely on a set of donor appreciation strategies, their effectiveness for the success of fundraising campaigns is underresearched. Through two preregistered field studies conducted in collaboration with a leading German opera house (N=10,000), we explore the significance of expressing gratitude and examine two different approaches to doing so. Our first study investigates the impact of a "thank you in advance" statement in fundraising letters, a common strategy among fundraisers. In the second study, we explore the effectiveness of handwritten thank-you postcards versus printed postcards, shedding light on the roles of personalization and handwriting in donor appeals. Our findings challenge conventional wisdom, revealing that neither “thank you in advance” nor handwritten thank-you notes significantly affect donor contributions.
Keywords:
fundraising; charitable giving; gratitude; field experiment;
JEL-Classification:
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Discussion Paper No. 546
Confidence and Information in Strategy-Proof School Choice
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Contrary to classical theory, we provide experimental evidence that preference reports in a strategy-proof school-choice mechanism systematically depend on beliefs. We employ a "hard-easy gap" to exogenously vary students' beliefs about their priority rank. As predicted, underconfidence induces more manipulation and thus more justified envy than overconfidence. The effect of priority information on justified envy crucially depends on the initial beliefs and the real priority ranks: while top students always gain, non-top students lose from this information. In total, correcting overconfidence/underconfidence increases/decreases justified envy. Finally, we confirm that additionally providing information on school availability through a dynamic implementation of the mechanism reduces justified envy compared to priority information alone.
Keywords:
market design; school choice; overconfidence; strategy-proofness; information;
JEL-Classification:
C92; D47;
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Discussion Paper No. 545
September 27, 2025
Identity and Institutional Change: Evidence from First Names in Germany, 1700–1850
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How does culture respond to institutional change? We study the collapse of the Holy Roman Empire (1789–1815), when half of Central Europe changed rulers. Using 44 million birth records from hundreds of cities between 1700 and 1850, we measure cultural traits in real time. Cities that experienced ruler change saw greater naming turnover, dispersion, and novelty. We construct control groups using diplomatic records to isolate these effects, which emerged immediately and persisted. The collapse of hegemonic authority weakened state-aligned identities while strengthening religiosity and nationalism. These shifts undermined subsequent state building, highlighting challenges of ideological integration after regime change.
Keywords:
institutional change; cultural persistence; identity formation;
JEL-Classification:
N33; P16; Z10;