Fabrizio Adriani

The Inflationary Consequences of a Currency Changeover on the Catering Sector: Evidence from the Michelin Red Guide ∗

This paper examines the inflationary consequences of a currency changeover in the catering market. Empirical evidence from the Michelin Red Guide shows that: i) differently from restaurants in non-euro countries, restaurants in the euro area experienced abnormal price increases just after the changeover, ii) among restaurants in the euro area, tourist restaurants are responsible for most of the abnormal price increases. These results suggest that proposed explanations for the changeover effect such as menu adjustment and rounding up are only part of the story. We present a simple model of the catering market that is consistent with the evidence.

Price Signaling and the Strategic Benefits of Price Rigidities

We analyze trade between a perfectly informed price setting party (seller) and an imperfectly informed price taker (buyer). Differently from most of the literature, we focus on the case in which, under full information, it would be inefficient to trade goods of sufficiently poor quality. We show that the unique equilibrium surviving D1 is characterized by market breakdown, although trade would be mutually beneficial in some state of nature. This occurs independently of the precision of the information available to the buyer. The model thus implies that signaling through prices may exacerbate the effect of adverse selection rather than mitigate it. Under D1, the seller would always benefit from committing to prices that do not reveal her information. We develop this intuition by analyzing the strategic advantages of price rigidities. We show that price rigidities help restore trade and could even enhance effectiveness of prices as signals of quality.

Why Do Parents Socialize Their Children to Behave Pro-Socially? An Information-Based Theory

We present a model of intergenerational transmission of pro-social values in which parents have information about relevant characteristics of society that is not directly available to their children. Differently from existing models of cultural transmission of values (such as Bisin and Verdier, 2001, and Tabellini, 2008) we assume that parents are exclusively concerned with their childrens material welfare. If parents coordinate their educational choices, a child would look at her system of values to predict the values of her contemporaries, with whom she may interact. A parent may thus choose to instil pro-social values into his child in order to signal to her that others can generally be trusted. This implies that parents may optimally decide to endow their children with values that stand in contrast with maximization of material welfare, even if their childrens material welfare is all they care about.

The inflationary consequences of a currency changeover on the catering sector: Evidence from the michelin red guide

This paper examines the inflationary consequences of a currency changeover in the catering market. Empirical evidence from the Michelin Red Guide shows that: i) differently from restaurants in non-euro countries, restaurants in the euro area experienced abnormal price increases just after the changeover, ii) among restaurants in the euro area, tourist restaurants are responsible for most of the abnormal price increases. These results suggest that proposed explanations for the changeover effect such as menu adjustment and rounding up are only part of the story. We present a simple model of the catering market that is consistent with the evidence.

Signaling about norms: Socialization under strategic uncertainty

We consider a society with informed individuals (adults) and naive individuals (children). Adults are altruistic towards their own children and possess information that allows to better predict the behavior of other adults. Children benefit from adopting behaviors that conform to the social norm determined by aggregate adult behavior, but, lacking accurate information, have to rely on the observed behavior of their adult parent to infer the norm. We show that this causes a signaling distortion in adult behavior. Compared to the benchmark case of no signaling, parents have a higher propensity to adopt attitudes that encourage their children to behave in a socially safe way, i.e. the way which would be optimal under maximum uncertainty about the prevailing social norm. This distortion is different in nature from the typical distortion due to a conflict of interest between sender and receiver in standard signaling games. The norm-signaling bias is self-reinforcing and might lead both to (Pareto) superior and inferior outcomes relative to the case of no signaling. We discuss applications to sexual attitudes, collective reputation, and trust.

Over-Signaling or Underpricing? The Role of Financial Intermediaries in Initial Public Offerings

We consider a model of Initial Public Offerings (IPOs) where issuing firms of better quality are more reluctant to go public. IPOs either generate or destroy value depending on the type of the issuing firm, which is only observed by the issuer. We show that, when the issuer directly offers the shares to the investors, market breakdown occurs. This is caused by the issuers attempts to signal his type through the offering price. Things change if we introduce a financial intermediary which: 1) acts as an underwriter, 2) influences the offering price. Underwriting creates a wedge between the interests of the intermediary and those of the issuer. This allows trade with outside investors to be restored. A by-product of the conflict of interest between issuer and intermediary is that trade is characterized by underpricing. In the benchmark case where her profits are zero, the intermediary acts as a screening device: she underwrites the shares only upon receiving positive information about the issuer.