By April 2013, the FCC's recent bill-shock agreement with cellular carriers requires consumers be notified when exceeding usage allowances. Will the agreement help or hurt consumers? To answer this question, we estimate a model of consumer plan choice, usage, and learning using a panel of cellular bills. Our model predicts that the agreement will lower average consumer welfare by $2 per year because firms will respond by raising monthly fees. Our approach is based on novel evidence that consumers are inattentive to past usage (meaning that bill-shock alerts are informative) and advances structural modeling of demand in situations where multipart tariffs induce marginal-price uncertainty. Additionally, our model estimates show that an average consumer underestimates both the mean and variance of future calling. These biases cost consumers $42 per year at existing prices. Moreover, absent bias, the bill-shock agreement would have little to no effect.

For many goods and services, such as cellular-phone service and debit-card transactions, the price of the next unit of service depends on past usage. As a result, consumers who are inattentive to their past usage but are aware of contract terms may remain uncertain about the price of the next unit. I develop a model of inattentive consumption, derive equilibrium pricing when consumers are inattentive, and evaluate bill-shock regulation requiring firms to disclose information that substitutes for attention. When inattentive consumers are heterogeneous and unbiased, bill-shock regulation reduces social welfare in fairly-competitive markets, which may be the effect of the FCC's recent bill-shock agreement. If inattentive consumers underestimate their demand, however, then bill-shock regulation can lower market prices and protect consumers from exploitation. Hence the Federal Reserve's new opt-in rule for debit-card overdraft protection may substantially benefit consumers.

This paper studies the role of information asymmetries in second price, common value auctions. Motivated by information structures that arise commonly in applications such as online advertising, we seek to understand what types of information asymmetries lead to substantial reductions in revenue for the auctioneer. One application of our results concerns online advertising auctions in the presence of ``cookies,'' which allow individual advertisers to recognize advertising opportunities for users who, for example, are customers of their websites. Cookies create substantial information asymmetries both ex ante and at the interim stage, when advertisers form their beliefs. The paper proceeds by first introducing a new refinement, which we call ``tremble robust equilibrium'' (TRE), which overcomes the problem of multiplicity of equilibria in many domains of interest. Second, we consider a special information structure, where only one bidder has access to superior information, and show that the seller's revenue in the unique TRE is equal to the expected value of the object conditional on the lowest possible signal, no matter how unlikely it is that this signal is realized. Thus, if cookies identify especially good users, revenue may not be affected much, but if cookies can (even occasionally) be used to identify very poor users, the revenue consequences are severe. In the third part of the paper, we study the case where multiple bidders may be informed, providing additional characterizations of the impact of information structure on revenue. Finally, we consider richer market designs that ensure greater revenue for the auctioneer, for example by auctioning the right to participate in the mechanism.

Consumers may overestimate the precision of their demand forecasts. This overconfidence creates an incentive for both monopolists and competitive firms to offer tariffs with included quantities at zero marginal cost, followed by steep marginal charges. This matches observed cell-phone service pricing plans in the US and elsewhere. An alternative explanation with common priors can be ruled out in favor of overconfidence based on observed customer usage patterns for a major US wireless phone service provider. The model can be reinterpreted to explain the use of flat rates and late fees in rental markets, and teaser rates on loans. Nevertheless, firms may benefit from consumers losing their overconfidence.

(The 2008 working paper version is available from SSRN here as well as from my website here. Download 2008 web appendix here.)

A sender who has disclosable information with probability less than one may partially conceal bad news by choosing to withhold information and pooling with uninformed types. The success of this strategy depends on receivers' beliefs about the probability that the sender has disclosable news. In a dynamic context, informed senders try to cultivate a reputation for reticence either by concealing good news along with the bad, or by concealing some good news and disclosing some bad news. A reputation for reticence is valuable because it makes receivers less skeptical of past or future non-disclosures. The model provides insight into the choice by firms such as Google not to disclose quarterly earnings guidance to analysts, as well as Tony Blair's reticence over his son's vaccine record during the MMR scare in the UK.

Recent research highlights the importance of biased expectations and inattention for nonlinear pricing in dynamic environments. Findings are: (1) Three-part tariffs, such as cellular service contracts, exploit consumer overconfidence. (2) Surprise penalty fees may be used to further exploit biased beliefs or alternatively to price discriminate more efficiently whenever consumers are inattentive. (3) Implementing the recent bill-shock agreement between cellular carriers and the FCC is predicted to harm rather than help consumers when endogenous price changes are taken into account.

We use university parking permits to study how firms and employees split the value of employee benefit tax subsidies. Starting in 1998, the IRS allowed employees to pay for parking passes with pre-tax income. This subsidized the parking pass purchases of faculty and staff, but did not affect students. We show that the typical university raised its parking rates by 8-10% extra when it implemented a pre-tax payment system, but that this increase was the same for those affected by the tax change and those that were not affected. We conclude that university employees captured much of the new tax benefit, that faculty and staff that purchase permits benefited relative to those that do not purchase permits, and that students that purchase permits were made worse off relative to those that do not buy permits.