Published and Accepted Papers
Published and Accepted Papers
Price Setting and Price Stickiness: A Behavioral Foundation of Inaction Bands [Paper][Slides][Replication]
Journal of the European Economic Association, Volume 23, Issue 3, June 2025
Abstract: This paper puts forward a behavioral theory of price setting where managers maximize perceived profits following a process of mental accounting. The theory predicts a pricing rule that is similar to—but crucially different from—that of a standard menu cost theory: there is an inaction band, but there are two rather than just one target prices, depending on whether the firm updates its price upwards or downwards. The calibrated model replicates two patterns of price microdata that standard menu cost models have difficulty accounting for: i) The distribution of price changes has both small and large price changes, and ii) the hazard function of price changes is downward sloping initially, that is, firms that have just recently changed their price have a higher probability of changing it again, while this probability becomes constant thereafter.
The Matching Function: A Unified Look into the Black Box, with Yann Bramoullé [Paper][Slides]
Abstract: In this paper, we use tools from network theory to trace the properties of the matching function to the structure of granular connections between applicants and vacancies. We unify seemingly disparate parts of the literature by recovering multiple functional forms as special cases including the CES. We derive a testable condition under which matching in any network from the broad class we analyze can be thought "as if" it comes from a CES matching function, up to a first-order approximation. We provide a theory of match efficacy in which inequality in search intensities is the key determinant of how well the matching process works. A robust finding of our analysis is that dispersion of search intensities on either side of the market is bad for the matching process. We also show that a rise in the market's mean search intensity can reduce match efficacy when it is associated with a higher Gini coefficient of search intensities.
Waiting for Windfalls, with Neil Thakral [Paper][Appendix][Slides]
R&R at Journal of Public Economics
Abstract: We study how the timing of information about windfalls shapes spending decisions when consumers derive utility from anticipating future consumption through gain-loss experiences relative to anticipated outcomes. We show that longer waiting between news and access to funds lowers short-term spending and raises saving, even absent tight liquidity constraints. The framework also reproduces stylized facts about how consumption responds to the arrival of gains but not to news about gains, asymmetric smoothing of losses, and smaller MPCs for larger windfalls.
An Anticipatory Utility Model of Consumption and Savings, with Neil Thakral [Paper][Slides]
Abstract: This paper builds a consumption-saving model of anticipatory utility. In addition to consumption-derived utility, an agent experiences gains-loss utility from two sources: from anticipating future consumption, and from comparing their current level of consumption with past-formed anticipation levels. The agent chooses optimally both their consumption and anticipation levels. We highlight the model’s relevance for macroeconomics analyzing the behavior of two types of agents in three contexts: when income is certain, when income is risky, and when there are credit market imperfections. Agents with a limited planning horizon emerge as “impatient” – predisposed to borrow, while agents with an unlimited planning horizon emerge as “patient” – predisposed to save. Agents have an endogenous time-discount factor in all contexts. Our main results relate to agents’ precautionary savings.
Monetary Policy and Bank Intermediation: A Search and Matching Approach [Paper][Slides]
Abstract: The Great Recession rekindled interest in studying the financial intermediation process as part of monetary policy. This paper proposes a theory of bank lending using the tractable device of an aggregate matching function. Banks search for potential borrowers and firms search for funds, but not all searches are successful, thus loan applications and loan approvals are placed at the heart of the model. The paper illustrates how in such a framework a natural “analogy” between the loans and the labor markets emerges, which yields new insights into our understanding of the financial intermediation process and the effects of monetary policy. The main result is the presence of a “reversal interest rate” (Brunnermeier and Koby, 2018).