NBER Working Papers by Daniel Gottlieb

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Working Papers

September 2014The Informativeness Principle Under Limited Liability
with Pierre Chaigneau, Alex Edmans: w20456
This paper shows that the informativeness principle does not automatically extend to settings with limited liability. Even if a signal is informative about effort, it may have no value for contracting. An agent with limited liability is paid zero for certain output realizations. Thus, even if these output realizations are accompanied by an unfavorable signal, the payment cannot fall further and so the principal cannot make use of the signal. Similarly, a principal with limited liability may be unable to increase payments after a favorable signal. We derive necessary and sufficient conditions for signals to have positive value. Under bilateral limited liability and a monotone likelihood ratio, the value of information is non-monotonic in output, and the principal is willing to pay more for ...
December 2012Narrow Framing and Life Insurance
with Kent Smetters: w18601
Life insurance is a large yet poorly understood industry. A final death benefit is not paid for a majority of policies. Insurers make money on customers that lapse their policies and lose money on customers that keep their coverage. Policy loads are inverted relative to the dynamic pattern consistent with reclassification risk insurance. As an industry, insurers lobby to ban secondary markets despite the liquidity provided. These (and other) stylized facts cannot easily be explained by information problems alone. We demonstrate that a simple model of narrow framing, where consumers do not fully account for their need for future liquidity when purchasing insurance, offers a simple and unified explanation.
September 2011Grade Non-Disclosure
with Kent Smetters: w17465
This paper documents and explains the existence of grade non-disclosure policies in Masters in Business Administration programs, why these policies are concentrated in highly-ranked programs, and why these policies are not prevalent in most other professional degree programs. Related policies, including honors and minimum grade requirements, are also consistent with our model.

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