Rick Harbaugh

Areas of Expertise

Information Economics, Strategic Communication, Industrial Organization

Academic Degrees

• PhD, University of Pittsburgh, 1997
• MA, National Taiwan University, 1992
• BA, University of Pennsylvania, 1986

Selected Publications

• R. Harbaugh and Rasmusen, E. (2018), "Coarse Grades," American Economic Journal: Microeconomics, 10(1): 210-235.
• Harbaugh, Rick, and Ted To (2014), "Opportunistic Discrimination," European Economic Review, 66: 192-204.

Abstract Are minorities more vulnerable to opportunism? We find that individuals from a minority group face greater danger of being cheated because trade with them is less frequent and the value of a reputation for fairness toward them is correspondingly smaller. When the majority is sufficiently large it has no reason to fear opportunism, so a firm can continue business as usual with the majority even after cheating the minority. If there is a small chance that a firm might have an implicit or preference bias against either group, then the interaction with reputational incentives gives unbiased firms an incentive to cheat the minority but not the majority. The prediction that smaller groups are more susceptible to discrimination distinguishes the model from most other discrimination models.

• Chakraborty, Archishman and Rick Harbaugh (2014), “Persuasive Puffery,” Marketing Science, 33(3): 382-400.

Abstract Abstract: Sellers often make claims about product strengths without providing evidence. Even though such claims are mere puffery, we show that they can be credible because talking up any one strength comes at the implicit tradeoff of not talking up another potential strength. Puffery pulls in buyers who value product attributes that are talked up or emphasized, while pushing away other buyers who infer that the attributes they value are not the product''s strengths. When the initial probability of a sale is low there are more potential buyers to pull in than to push away so puffery is persuasive. This persuasiveness requires some buyer privacy about their preferences so that the seller does not completely pander to them. More generally the results show how cheap talk by an expert to a decision maker can be credible and persuasive in standard discrete choice models used throughout marketing and economics.

• Harbaugh, Rick, John W. Maxwell, and Beatrice Roussillon (2011), "Label Confusion: The Groucho Effect of Uncertain Standards," Management Science, Vol. 57, No. 9, September, pp. 1512-1527.

Abstract Labels certify that a product meets some standard for quality, but often consumers are unsure of the exact standard that the label represents. Focusing on the case of eco-labels for environmental quality, we show how even small amounts of uncertainty can create consumer confusion that reduces or eliminates the value to firms of adopting voluntary labels. First, consumers are most suspicious of a label when a product with a bad reputation has it, so labels are often unpersuasive at showing that a seemingly bad product is actually good. Second, label proliferation aggravates the effect of uncertainty, causing the informativeness of labels to decrease rather than increase. Third, uncertainty makes labeling and non-labeling equilibria more likely to coexist as the number of labels increases, so consumers face greater strategic uncertainty over how to interpret the presence or absence of a label. Finally, a label can be legitimitized or spoiled for other products when a product with a good or bad reputation displays it, so firms may adopt labels strategically to manipulate such information spillovers, which further exacerbates label confusion. Managers can reduce label confusion by supporting mandatory labeling or by undertaking investments to make certain labels “focal”.

• Harbaugh, Rick and Rahul Khemka (2010), "Does Copyright Enforcement Encourage Piracy?," Journal of Industrial Economics, Vol. 58, pp. 306-323.

Abstract More intensive copyright enforcement reduces piracy, raises prices, and lowers consumer surplus. We show that these results do not hold regarding the extent rather than intensity of enforcement. When enforcement is targeted at high-value buyers such as corporate and government users, the copyright holder charges super-monopoly prices, thereby encouraging low-value buyers to switch to inferior pirated copies. Extending enforcement down the demand curve broadens the copyright holder’s captive market, reduces prices toward the monopoly level, and increases sales of legitimate copies. Since more extensive enforcement increases both profits and consumer surplus over some range, the standard tradeoff between the incentive to generate intellectual property and the welfare cost of monopoly power is avoided. Technologies such as digital rights management which allow for more extensive copyright enforcement can sometimes benefit consumers even apart from their effects on the incentive to generate intellectual property.

• Chakraborty, Archishman and Rick Harbaugh (2010), "Persuasion by Cheap Talk," American Economic Review, Vol. 100, No. 5, pp. 2361-2382.

Abstract We consider the credibility, persuasiveness, and informativeness of multidimensional cheap talk by an expert to a decision maker. We find that an expert with state-independent preferences can always make credible comparative statements that trade off the expert''s incentive to exaggerate on each dimension. Such communication benefits the expert -- cheap talk is "persuasive" -- if her preferences are quasiconvex. Communication benefits a decision maker by allowing for a more informed decision, but strategic interactions between multiple decision makers can reverse this gain. We apply these results to topics including media bias, advertising, product recommendations, voting, and auction disclosure.

• Chakraborty, Archishman and Rick Harbaugh (2007), "Comparative Cheap Talk," Journal of Economic Theory, Vol. 132, pp. 70-94.

Abstract When are comparative statements credible? We show that simple complementarity conditions ensure that an expert with private information about multiple issues can credibly rank the issues for a decision maker. By restricting the expert''s ability to exaggerate, multidimensional cheap talk of this form permits communication when it would not be credible in a single dimension. The communication gains can be substantial with even a couple of dimensions, and the complete ranking is asymptotically equivalent to full revelation as the number of issues becomes large. Nevertheless, partial rankings are sometimes more credible and/or more profitable for the expert than the complete ranking. Comparative cheap talk is robust to asymmetries that are not too large. Consequently, for sufficiently many independent issues, there are always some issues sufficiently symmetric to permit comparative cheap talk.

• Gupta, Nandini, Archishman Chakraborty, and Rick Harbaugh (2006), "Best Foot Forward or Best for Last in a Sequential Auction?," RAND Journal of Economics, Vol. 37, No. 1, Spring, pp. 176-194.

Abstract Should a seller with private information sell the best or worst goods first? Considering the sequential auction of two stochastically equivalent goods, we find that the seller has an incentive to impress buyers by selling the better good first because the seller''s sequencing strategy endogenously generates correlation in the values of the goods across periods. When this impression effect is strong enough, selling the better good first is the unique pure-strategy equilibrium. By credibly revealing to all buyers the seller''s ranking of the goods, an equilibrium strategy of sequencing the goods reduces buyer information rents and increases expected revenues in accordance with the linkage principle.

• Feltovich, Nick, Richmond Harbaugh, and Ted To (2002), "Too Cool for School? Signalling and Countersignalling," RAND Journal of Economics, Vol. 33, pp. 630-649.

Abstract In signaling environments ranging from consumption to education, high quality senders often shun the standard signals that should separate them from lower quality senders. We find that allowing for additional, noisy information on sender quality permits equilibria where medium types signal to separate themselves from low types, but high types then choose to not signal or "countersignal". High types not only save costs by relying on the additional information to stochastically separate them from low types, but countersignaling itself is a signal of confidence which separates high types from medium types. Experimental results confirm that subjects can learn to countersignal.

• Harbaugh, Rick (1998), Chinese Characters: A Genealogy and Dictionary, Zhongwen.com.  Publication assumed by Yale University Press in 2009.