Michele Fioretti

Assistant Professor
​Department of Economics
Sciences Po

email michele.fioretti@sciencespo.fr
cv pdf

Working Papers

Caring or Pretending to Care? Social Impact, Firms' Objectives and Welfare
R&R at Journal of Political Economy
Best Paper Award at EEA-ESEM 2018
[pdf] [show abstract]

Abstract: Many firms claim that "social impact" influences their strategies. I develop a structural model that quantifies social impact as the sum of the surpluses to a firm and its stakeholders. Using data from a for-profit firm whose prosocial expenditures are measurable and salient to consumers, I find that the firm spends prosocially beyond profit-maximization, which substantially increases welfare. Incentivizing a standard profit-maximizing firm to behave similarly would require subsidies for 55% of the prosocial expenditures because consumers' willingness-to-pay is relatively inelastic to prosocial expenses. Therefore, social impact resembles a self-imposed welfare-enhancing tax with limited pass-through.

Dynamic Regret Avoidance
with Sasha Vostroknutov and Giorgio Coricelli
Conditionally Accepted 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.

Performance Pay in Insurance Markets: Evidence from Medicare
with Hongming Wang
R&R at Review of Economics and Statistics
Policy Research Award at INFER 2020
[VoxEU] [pdf] [show abstract]

Abstract: Public procurement bodies increasingly resort to pay-for-performance contracts to promote efficient spending. We show that firm responses to pay-for-performance can widen the inequality in accessing social services. Focusing on the U.S. Medicare Advantage market, we find that insurers with higher quality ratings responded to bonus payments by selecting healthier enrollees with premium differences across counties. Selection is profitable because the quality rating fails to adjust for differences in the health of enrollees. Selection inflated the bonus payments and shifted the supply of high-rated insurance to the healthiest counties, hurting the healthcare access of sicker patients in the riskiest counties.

Saving for a Dry Day: Coal, Dams and Energy Prices
with Jorge Tamayo
[pdf - new version out soon] [show abstract]

Abstract: Hydropower generation creates a trade-off between current and future energy production as a firm must choose when to release previously-stored resources. In the Colombian wholesale energy market, suppliers strategically shift production from hydropower to fossil fuels in expectation of severe droughts. We explain these responses showing that the intertemporal opportunity cost of water oppositely affects pricing at a firm's conventional and hydro generators. As a result, diversifying a supplier's production-technology mix reduces market prices ahead of a drought due to the increased supply of conventional energy. These results highlight a new role for conventional resources in the clean-energy transition.

Selfish Shareholders: Corporate Donations During COVID-19
with Victor Saint-Jean and Simon Smith
[arXiv] [show abstract]

Abstract: During the onset of the COVID-19 pandemic, conflicting incentives caused most shareholders to adverse corporate social responsibility (CSR) -measured by firms' charitable donations- since it would further burden firms' already strained finances. Those shareholders that favored donations, large individual investors, did so to bolster their own images as they are typically synonymous with the donating firms. Image gains do not pass through to institutional shareholders, who instead preferred to donate themselves rather than having the firms they invested in donate. Taken together, our results cast doubts on large corporations' willingness to demand costly CSR measures across firms in their portfolios.

Two-Sided Market Power in Firm-to-Firm Trade
with Vanessa Alviarez, Ken Kikkawa and Monica Morlacco
[pdf] [show abstract]

Abstract: We provide a framework for analyzing buyer-supplier bargaining over the price of an imported good with two-sided market power and heterogeneity. Our main theoretical result is a price formula that tractably nests a wide range of configurations of market power and heterogeneity among importers and exporters in a unified way. We demonstrate that a shock to the exporter's costs can have a very different pass-through on import prices depending on the allocation of bargaining power and bilateral market shares. To estimate the model, we build a novel dataset merging transaction-level international trade data for the U.S. with balance sheet information on both the U.S. importers and foreign exporters. Our results shed light on two open questions on firms' participation in global value chains: the relationship between import and export concentration and markups; the role of firms in determining the tariff pass-through on import prices.

Published Work

Suboptimal Dishonesty: Rationality in the Absence of Strategic Behavior in Honesty Experiments
with Sean Marden
The Journal of Neuroscience, 2015 [pdf]