CRC Rationality & Competition

How political passion can backfire on democracy: Our new model shows that when guardrails are weak, high political engagement makes governments surprisingly fragile, allowing tiny sparks to trigger a sudden, massive wave of opposition.

How immigration can make essential services more affordable: Our new study on German elder care shows that hiring foreign caregivers significantly lowers nursing home prices for families, without cutting care quality or staffing levels.

Yesterday we concluded our 19th retreat for CRC TRR 190. The inspiring environment of Schloss Lautrach provided the perfect backdrop for productive days filled with exciting presentations, deep scientific discussions and great food.

How labour-market inequality arises without employer bias: Our new experiment shows that social anxiety leads qualified candidates to skip job interviews due to pessimism, even though they perform just as well as anyone else.

How government wealth transfers can backfire on the politicians who enact them: Our new study of the 1934 Taylor Grazing Act shows that giving ranchers secure property rights on public land made them richer- prompting them to turn against the Democrats who enriched them.

Is China a "Paper Tiger" regarding scientific quality? Our investigation into citation home bias revealed China exhibits the largest bias globally, demonstrating that its seeming rise in citation rankings is overstated. Now published in "Journal of International Economics".

We are very much looking forward to hosting the 3rd International Seminar on Trade together with the ifo Institute and @lmu.de in Munich!

How do elite families maintain their status over multiple generations? Using data from prewar Japan, we showed that adoption expands the choice to a broader talent pool, increasing the probability of maintaining elite status. Now published in "Economic History Review".

Unclear product details or mixed user reviews aren't always bad. Our study showed that ambiguous product information can prompt sellers to drop prices for cautious shoppers or boost revenue when buyers feel optimistic. Now published in "Theoretical Economics".

Why information campaigns fail: We showed that correcting consumers beliefs about which products cause high emissions does not have an effect on their consumption decisions. Now published in the Journal of the Association of Environmental and Resource Economists.

Last week marked 50 weeks of the CRC TRR 190 Coffee Break Blog! To celebrate, throughout next week, we will highlight some of our discussion papers, which have been published since we featured them on our blog. Thanks for reading everyone and to the next 50 weeks!

Why one analysis isn’t the full story: A re-check of 100 studies reveals that only 34% of original results held up across different expert choices. So, even with identical data, different "justifiable" analytical paths often lead to different scientific conclusions.

How certification can fall short in spite of perfect honesty: Our research shows that expert gatekeepers reveal every secret a seller is hiding while deliberately avoiding new data investigations just to keep a bigger slice of the profit for themselves.

Why central bank actions don’t always work as predicted: A new study shows that rising interest rates cause people to cut their spending and borrowing much more than an equal drop in inflation, even though both should technically affect our wallets the same way.

Why talking to political rivals is better for social cohesion than for information sharing: Our experiment shows that while face-to-face conversations durably reduce polarization, deep-seated distrust prevents us from learning, even when the other side has more to teach.

How eco-friendly markets can accidentally increase pollution: Our research shows that without enough environmentally-conscious buyers, creating separate "green" markets can backfire by pushing regular consumers toward more harmful products.

Why are new homes being built in danger zones? Cheap insurance and strict building rules in safe neighbourhoods are forcing development toward the wildfire fringe, but allowing more housing in safe areas can help lower the financial burden on workers.

How transport subsidies fall short as climate policy: Germany’s 9-Euro Ticket boosted rail travel by 35% but cost €6,140/tCO2 due to minimal car-to-rail substitution. Though an efficient cost-of-living transfer, the passenger surge triggered a 30% surge in train delays.

How private interest drives the public good: Our study shows that the 1866 cholera epidemic induced a 35% increase in waterworks investments by industrial elites fearing labor scarcity, proving that economic incentives can catalyze transformative public health reforms.

This is not just another summer workshop in Berlin, but actually TWO conferences! The 2nd Berlin PhD Conference consists of an Applied Micro part and a part on micro theory and behavioral economics: sites.google.com/vie... Keynotes by Esmée Zwiers, Simon Jäger, Jeanne Hagenbach, and Botond Köszegi.

How a country can survive its currency value doubling overnight: Our study of the 1985 Plaza Accord shows that Japan avoided a jobs crisis by leaning on its "jobs-for-life" culture and moving production to Asia, even as it began a shift from manufacturing to services.

Great stuff happening in Berlin! Look at our market design workshop at @wzb.bsky.social ! @rationalitycrc.bsky.social

Why newly enfranchised women voted against the parties that secured their rights: We reveal that religious "identity payoffs" outweighed material self-interest, proving that cultural identities can decouple political choice from economic incentives even when stakes are high.

Why searching for a "better deal" yields diminishing returns: David Ronayne and David P. Myatt prove that sampling without replacement exhibits decreasing returns, where the expected benefit of each additional search systematically declines regardless of the population.

Why specialists give proprietary data to big-tech rivals for free: David Ronayne and colleague's model shows that sharing data strategically induces "coopetition," softening competition but potentially harming consumers through lower innovation.

Why identical products maintain persistent price differences: David Ronayne and David P. Myatt demonstrate how the threat of rapid "special deals" stabilizes price dispersion, with the most captive firms setting the highest prices.

How the "law of one price" fails in asymmetric competition: David Ronayne and David P. Myatt show that vanishing customer loyalty induces a "law of monopoly pricing" where most firms charge the maximum price while one leader anchors the market at the second-lowest cost.

When price competition is more than a simple "tango": David Ronayne and David P. Myatt show how cost differences create a "thrango" of multiple firms using randomized sales. Innovation drives even similar companies toward unique, unpredictable pricing strategies.

How ancient history shapes economic decision-making: Our 116-country study reveals that ancestral distance systematically drives preference heterogeneity, showing that modern risk and time preferences are rooted in cultural patterns transmitted over thousands of years.

Why cash makes us more selfish: Our new experiment shows that knowing the real-world dollar value of earnings triggers more self-serving judgements than abstract points or tokens, even when the actual split remains exactly the same.

How students leverage self-delusion to beat procrastination: Our new field study shows that university students strategically inflate their believed returns to effort by 20% as exams approach, proving that biased beliefs function as an instrumental tool for self-control.

Yesterday, we concluded our 18th CRC Retreat in Schwanenwerder. Three wonderful days of reseach collaboration and scientific exchange.

Why labor markets underprovide benefits despite high worker demand: Our model shows that treating benefits as hidden "experience goods" systematically induces inefficiently low coverage and compressed wage gaps, masking the true extent of compensation inequality.

How "Amazon’s Choice" badges steer choice: We show that they drive engagement despite competing signals, yet disproportionately favors platform-sold products. Crucially, this boost persists after the badge is removed, potentially reinforcing long-term market advantages.

Why incentive-compatibility isn't enough for data quality: Our new online experiment shows that popular belief elicitation methods like BSR and BDM fail to outperform simple, unincentivized introspection.

How does ambiguity affect trade between a price-setting seller and an ambiguity-sensitive buyer? We find that the right kind of ambiguous information makes both the buyer and seller better off than any possible unambiguous information.

How structured management falls short in a crisis: Our study of Spanish firms shows that formal practices, while driving long-run productivity, paradoxically lead to lower performance during downturns because of higher short-run adjustment costs.

Why we’ve been underestimating the economic engine of big cities: Our new analysis of office rents reveals that productivity gains are hidden in high property prices, meaning the true economic advantage of large cities is actually 33% to 50% higher than previously measured.