Johannes Binswanger
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Binswanger
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Johannes
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johannes.binswanger@unisg.ch
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+41 71 224 2514

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Now showing 1 - 10 of 27
  • Publication
    Investor beliefs about transformative innovations under uncertainty
    ( 2023-07-12)
    Johannes Binswanger
    ;
    Anja Garbely
    ;
    Manuel Oechslin
    Modern economies sometimes produce potentially transformative innovations whose development and implementation involves large amounts of capital. Often, the required initial investments are fraught with uncertainty, and there is a scarcity of objective information that would help interested investors to predict success. How, in this situation, do investors form subjective beliefs about prospective returns? This paper explores the role of competing, specialized financial intermediaries that are incentivized to steer capital either towards or away from a potentially transformative innovation. We develop a model in which investors' subjective beliefs arise from a competitive campaign game, or belief contest, between two financial intermediaries. We discuss how a financial regulator—who does not possess superior information—may influence the contest outcome in favour of impartial beliefs, away from exuberant or overly pessimistic ones.
    Type: journal article
    Journal: Economica
    Volume: 90
    Issue: 360
    URL: https://onlinelibrary.wiley.com/doi/full/10.1111/ecca.12488
    DOI: https://doi.org/10.1111/ecca.12488
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/119933
  • Publication
    Better Statistics, Better Economic Policies?
    (Elsevier, 2020)
    Binswanger, Johannes
    ;
    Oechslin, Manuel
    More and more economic transactions leave a "digital footprint". This trend opens unprecedented opportunities for improving economic statistics and underpins demands to give statistical agencies far-reaching access to private-sector data. We analyze the consequences of better economic statistics in a political-agency framework that includes fundamental uncertainty about the impact of potentially welfare-enhancing reforms. We demonstrate that improvements in economic statistics can inhibit - rather than stimulate - reform attempts. With better statistics, the government is less likely to receive the "benefit of the doubt" if the numbers suggest its past reforms are failing. Reforms therefore come with a higher risk of electoral losses, implying that the government has stronger incentives to preserve the status quo. We identify political environments that are particularly vulnerable to this mechanism and contribute to the debate on private-sector data access.
    Type: journal article
    Journal: European Economic Review
    Issue: 130
    DOI: https://doi.org/10.1016/j.euroecorev.2020.103588
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/112576
  • Publication
    The Economics of Beliefs under Fundamental Uncertainty
    ( 2020-12)
    Binswanger, Johannes
    ;
    Oechslin, Manuel
    Introducing the concept of “belief entrepreneur”, this paper offers a novel theory on endogenous belief formation under fundamental uncertainty in the sense of \textcite{Knight1921}. We consider a generic setup in which individuals must choose between a tested approach (supplied by a “defender”) and a competing innovative approach (supplied by an “innovator”). While the innovation is promising, its true merits are uncertain (e.g., financial engineering in the 1990s). Facing an ambiguous choice, individuals are susceptible to narratives. The innovator and defender thus act as competing belief entrepreneurs who engage in a narrative contest whose outcome shapes individual prior beliefs. We clarify the conditions under which the contest outcome predominantly reflects information on the merits of the innovation---and when other factors, such as the entrepreneurs’ payoffs, dominate. Our analysis may be helpful to regulators that have to grapple with innovations whose fundamentals they do not know any better than the public.
    Type: journal article
    Journal: Working Paper
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/111498
  • Publication
    Type: journal article
    Journal: Zeitschrift für Unternehmensentwicklung und Change Management (ZOE)
    Issue: 02
    URL: https://zoe-online.owlit.de/document.aspx?docid=ZOE1267411&authentication=none
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/100575
  • Publication
    Does everyone use probabilities? The role of cognitive skills
    ( 2017)
    Binswanger, Johannes
    ;
    Salm, Martin
    What is the role of cognitive skills in decision making under uncertainty? We address this question by examining the relationship between responses to survey questions about sub-jective probabilities of stock market returns and stock holding decisions. Based on data from the Health and Retirement Study (HRS), we find that for individuals with lower cognitive skills the association between measured probabilities and decisions is weaker than for individuals with higher cognitive skills. Additional evidence suggests that individuals with lower cognitive skills are more likely to give heuristic answers to questions about stock return probabilities. A likely explanation is that individuals with lower cognitive skills have a fuzzier mental representation of stock returns that cannot be captured by a unique well-defined probability distribution. In contrast, individuals with higher cognitive skills are more likely to act as if subjective probabilities are meaningful measures of uncertainty. We discuss wheth-er or not the behavior of the latter can be seen as more “rational”.
    Type: journal article
    Journal: European Economic Review
    Volume: 98
    URL: http://dx.doi.org/10.1016/j.euroecorev.2017.06.009
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/102869
  • Publication
    Disagreement and Learning about Reforms
    ( 2015)
    Binswanger, Johannes
    ;
    Oechslin, Manuel
    When it comes to economic reforms in developing countries, many economists agree on broad objectives. Broad objectives, however, can be pursued in different ways, and policy experimentation is often indispensable for learning which alternative works locally. We propose a theoretical model to study this societal learning process. The model explores the role of disagreeing beliefs about ‘what works’. It suggests that such disagreement can stall the societal learning process and cause economic stagnation although everyone knows that growth‐promoting reforms do exist. Our analysis is motivated by the observation of a negative relationship between disagreement and economic growth among poorer countries.
    Type: journal article
    Journal: The Economic Journal
    Volume: 125
    Issue: 584
    URL: http://dx.doi.org/10.1111/ecoj.12252
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/106973
  • Publication
    Panel Conditioning in Difficult Attitudinal Questions
    ( 2013)
    Binswanger, Johannes
    ;
    Schunk, Daniel
    ;
    Toepoel, Vera
    We investigate whether survey answers of trained respondents differ systematically from answers of novice respondents. Focusing on difficult attitudinal or preference questions, we find that novice respondents answer “don’t know” significantly more often. Importantly, however, there is no systematic evidence for a conditioning effect on measured prefer-ences (substantial answers). Overall, our results suggest that panel conditioning does not pose a serious problem, even in the case of rather difficult questions.
    Type: journal article
    Journal: Public Opinion Quarterly
    Volume: 77
    Issue: 3
    URL: http://dx.doi.org/10.1093/poq/nft030
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/89899
  • Publication
    Type: journal article
    Journal: European Economic Review
    Volume: 56
    Issue: 3
    URL: http://dx.doi.org/10.1016/j.euroecorev.2012.01.003
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/92301
  • Publication
    How real people make long-term decisions: The case of retirement preparation
    ( 2012)
    Binswanger, Johannes
    ;
    Carman, Katherine Grace
    Large variations in retirement wealth are common, with some households accumulating hundreds of thousands of dollars and others accumulating next to nothing. We examine to what extent formal planning or simple rules of thumb contribute to these differences in wealth accumulation. In particular, we investigate whether those who follow simple rules of thumb or those who come up with more complete plans accumulate more wealth than those who take an unsystematic approach. We test this empirically using a specifically de-signed survey about retirement preparation. We find that people who rely on a rule of thumb behave like literal planners. However, people without any systematic approach save substantially less. Our results, taken together with evidence from psychology, suggest that financial planning advice based on simple rules of thumb may be helpful for those who cur-rently take no systematic approach.
    Type: journal article
    Journal: Journal of Economic Behavior & Organization
    Volume: 81
    Issue: 1
    URL: http://dx.doi.org/10.1016/j.jebo.2011.08.010
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/92302
  • Publication
    Democracy, populism, and (un)bounded rationality
    ( 2012)
    Binswanger, Johannes
    ;
    Prüfer, Jens
    In this paper we aim to understand how bounded rationality affects performance of demo-cratic institutions. We consider policy choice in a representative democracy when voters do not fully anticipate a politician's strategic behavior to manipulate his reelection chances. We find that this limited strategic sophistication affects policy choice in a fundamental way. Un-der perfect sophistication, a politician does not make any use of his private information but completely panders to voters' opinions. In contrast, under limited sophistication, a politician makes some use of private information and panders only partially. Limited sophistication crucially determines how welfare under representative democracy compares to welfare un-der alternative political institutions such as direct democracy or governance by experts. We find that, under limited strategic sophistication, representative democracy is preferable to the other institutions from an ex ante perspective.
    Type: journal article
    Journal: European Journal of Political Economy
    Volume: 28
    Issue: 3
    URL: http://dx.doi.org/10.1016/j.ejpoleco.2012.02.002
    URI: https://www.alexandria.unisg.ch/handle/20.500.14171/92304