Michele Fioretti

Sciences Po
​Department of Economics

email michele.fioretti@sciencespo.fr
cv pdf

Working Papers

Giving for profit or giving to give: the profitability of corporate social responsibility [JMP]
Best Paper Award at EEA-ESEM 2018
[pdf] [show abstract]

Abstract: Is corporate social responsibility (CSR) profitable or do firms engage in CSR to contribute to the greater good? This paper investigates the profit-optimal level of CSR for a firm whose CSR expenditure can be easily quantified: a monopolist offering charity auctions of celebrities' belongings. Donations influence both revenues and costs. A structural auction model is used to estimate the elasticity of demand to donations. Procurement costs for each item are estimated exploiting the way the firm sets the reserve price. Counterfactuals show that despite prices increase as the firm donates more, such increase does not compensate for the donations. The comparison of the estimated costs and revenues indicate that the firm can significantly increase its profits by donating the profit-optimal amount. This suggests that firms' objectives may extend beyond profitability as, in this case, the firm also cares about its social impact.

How does risk selection respond to quality payments? Evidence from Medicare Advantage
with Hongming Wang
[pdf] [show abstract]

Abstract: As payments to health insurers increasingly reward quality, evidence on the insurer response to quality-based payments is still scarce. In the Medicare Advantage market, we find that the introduction of quality bonus payments led high-quality contracts to select healthier enrollees using premium variation across counties. The effect is concentrated in contracts serving low-risk counties, and resulted in a decline of high-quality market shares in riskier counties. The selection incentive arises from the failure to adequately adjust the quality rating for differences in pre-existing health conditions. Our results cast doubts on the effectiveness of pay-for-performance contracts in health insurance markets.

Dynamic regret avoidance
with Sasha Vostroknutov and Giorgio Coricelli
Revision requested at AEJ: Microeconomics
[ssrn] [show abstract]

Abstract: In a stock market experiment we examine how regret avoidance influences the decision to sell an asset while its price changes over time. Participants know beforehand whether they will observe the future prices after they sell the asset or not. Without future prices participants are affected only by regret about previously observed high prices (past regret), but, when future prices are available, they also avoid regret about expected after-sale high prices (future regret). Moreover, as the relative sizes of past and future regret change, participants dynamically switch between them. This demonstrates how multiple reference points dynamically influence sales.
Presentations: Barcelona Summer Forum (2019)

Work in Progress

Two-sided market power in firm-to-firm trade
with Vanessa Alviarez, Ken Kikkawa and Monica Morlacco

Complementarities between teacher, school, and student inputs
with Elena Manresa, Olga Namen and Petra Thiemann

Altruism and firm profits
with Kenneth Chuk
[soon] [show abstract]

Abstract: Firms' donations are pervasive, but do they increase profits? Theoretical studies attribute higher profits if consumers display warm-glow preferences and exhibition value. The two models differ in the way consumers perceive direct donations to charities. Under warm-glow, indirect donations by purchasing charity-linked products act as discounts, resulting in no extra profits. Under exhibition value, indirect donations can increase profits because consumers' own purchases and direct donations are not perfect substitutes. Indirect contributions can also generate a larger public good, but this necessarily implies lower profits. Thus, markets cannot adequately incentivize firms to promote greater individual contributions.

Competition across banks for credit: Evidence from Colombia
with Jorge Tamayo

Published Work

Suboptimal dishonesty: rationality in the absence of strategic behavior in honesty experiments
with Sean Marden
The Journal of Neuroscience, 2015 [pdf]