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Featured Publications

Movers and Shakers

Akerlof, Robert and Richard Holden, Quarterly Journal of Economics

Most projects, in most walks of life, require the participation of multiple parties.While it is difficult to unite individuals in a common endeavor, some people, whomwe call “movers and shakers,” seem able to do it. The paper specifically examinesmoving and shaking of an investment project, whose return depends both on itsquality and the total capital invested in it. We analyze a model with two types ofagents: managers and investors. Managers and investors initially form social connections.Managers then bid to buy control of the project and the winning bidderputs effort into making investors aware of it. Finally, a subset of aware investors aregiven the chance to invest and they decide whether to do so after receiving privatesignals of the project’s quality. We first show that connections are valuable sincethey make it easier for a manager to “move and shake” the project (i.e., obtain capitalfrom investors). When we endogenize the network, we find that, while managersare identical ex ante, a single manager emerges as most connected; he consequentlyearns a rent. In extensions, we move away from the assumption of ex ante identicalmanagers to highlight forces that lead one manager or another to become a moverand shaker. Our theory sheds light on a range of topics including: entrepreneurship,venture capital, and anchor investments.

Endogenous entry to security-bid auctions

Bernhardt, Dan, Takeharu Sogo, and Tingjun Liu, American Economic Review (2016)

We endogenize entry to a security-bid auction, where participationis costly, and bidders must decide given their private valuationswhether to participate. We first consider any minimum reservesecurity-bid of a fixed expected value that weakly exceeds the asset’svalue when retained by the seller. Demarzo, Kremer and Skrzypacz(2005) establish that with a fixed number of bidders, auctionswith steeper securities yield the seller more revenues. Counterintuitively,we find that auctions with steeper securities also attractmore entry, further enhancing the revenues from such auctions.We then establish that with optimal reserve securities, auctionswith steeper securities always yield higher expected revenues.

Trade-Induced technical Change: The Impact of Chinese Imports on Innovation, IT and Productivity, The Review of Economic Studies

Draca, Mirko, Nick Bloom, and John Van Reenen, The Review of Economic Studies (2016)

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