Essays in Applied Economics

During my studies and research I have always been fascinated by the variety of problems economists can study using empirical and theoretical methods. Understanding how incentives, the (non)-availability of information, or strategic interaction shape outcomes in many areas of life is the key goal of my academic work. Naturally, many of these ideas emerged from studying the functioning of markets or situations in which market failures lead to inefficiencies. However, applying economic insights to various aspects of society has opened up a rich set of research questions. The very fact that many of these aspects have an impact on important areas of society has motivated me to research in different areas, applying economic thinking and methodology. This view is reflected in the choice of research questions for this thesis. It comprises a study of how the support of crowds, in theory mostly irrelevant to a fully rational agent, affects the performance of professional football players. I argue that choking under pressure is a relevant dimension in such environments. I consequently study the role of betting markets in pricing novel insights on the performance of such athletes in the absence of crowds due to the coronavirus pandemic. I also study a crucial field of modern societies that is, due to the presence of externalities, largely organized outside of markets: academic research. I contribute to the quantitative understanding of the role of information acquisition across different scientific fields. Lastly, motivated by the ubiquitous problem of controlling the spread of the novel Coronavirus SARS-CoV-2, I build on an epidemic model and discuss some of the trade-offs policy-makers face when deciding on quarantine policies. With this thesis I want to contribute to a better understanding of how markets and organizations do and should approach the complexity of incomplete information and human behavior. In the first chapter, I show that crowd presence may be a two-edged sword not benefiting all teams equally -- some instead seem display what is known as choking under pressure. In chapter 2, I document that this effect is not adequately incorporated into market prices by bookmakers, contradicting market efficiency. In the third chapter, I discuss the important policy problem of allocating scarce resources to different research projects of ex-ante unobservable quality. Commonly, expert knowledge is used to identify projects considered fund-worthy. I document empirically that experts across scientific fields differ with respect to their ability in reliably evaluating the merit of their peers' work (noise). In particular, scholars in natural sciences display higher agreement than their colleagues from other fields. Lastly, the fourth chapter introduces the role of incomplete information in a workhorse epidemiological model. In the case of covid-19, symptoms together with tests as means of retrieving information on health status, can reduce the economic and social burden of the pandemic. I argue that targeted quarantine measures are superior to general lockdowns if the the policy-maker is endowed with rich information.