Economic Theory Commons^™

Do Market Incentives Crowd Out Charitable Giving?, Cary Deck, Erik O. Kimbrough

Economics Faculty Articles and Research

Donations and volunteerism can be conceived as market transactions with a zero explicit price. However, evidence suggests people may not view zero as just another price when it comes to pro-social behavior. Thus, while markets might be expected to increase the supply of assets available to those in need, some worry such financial incentives will crowd out altruistic giving. This paper reports laboratory experiments directly investigating the degree to which market incentives crowd out large, discrete charitable donations in a setting related to deceased organ donation. The results suggest markets increase the supply of assets available to those in need. …

Dynamical Structure Of A Traditional Amazonian Social Network, Paul L. Hooper, Simon Dedeo, Ann E. Caldwell Hooper, Michael Gurven, Hillard Kaplan

ESI Publications

Reciprocity is a vital feature of social networks, but relatively little is known about its temporal structure or the mechanisms underlying its persistence in real world behavior. In pursuit of these two questions, we study the stationary and dynamical signals of reciprocity in a network of manioc beer (Spanish: chicha; Tsimane’: shocdye’) drinking events in a Tsimane’ village in lowland Bolivia. At the stationary level, our analysis reveals that social exchange within the community is heterogeneously patterned according to kinship and spatial proximity. A positive relationship between the frequencies at which two families host each other, controlling for kinship and …

The "Play-Out" Effect And Preference Reversals: Evidence For Noisy Maximization, Joyce E. Berg, John Dickhaut, Thomas A. Rietz

Accounting Faculty Articles and Research

In this paper, we document a "play-out" effect in preference reversal experiments. We compare data where preferences are elicited using (1) purely hypothetical gambles, (2) played-out, but unpaid gambles and (3) played-out gambles with truth-revealing monetary payments. We ask whether a model of stable preferences with random errors (e.g., expected utility with errors) can explain the data. The model is strongly rejected in data collected using purely hypothetical gambles. However, simply playing-out the gambles, even in the absence of payments, shifts the data pattern so that noisy maximization is no longer rejected. Inducing risk preferences using a lottery procedure, using …

Human Economic Choice As Costly Information Processing, John Dickhaut, Vernon L. Smith, Baohua Xin, Aldo Rustichini

Accounting Faculty Articles and Research

We develop and test a model that provides a unified account of the neural processes underlying behavior in a classical economic choice task. The model describes in a stylized way brain processes engaged in evaluating information provided by the experimental stimuli, and produces a consistent account of several important features of the decision process in different environments: e.g., when the probability is specified or not (ambiguous choices). These features include the choices made, the time to decide, the error rate in choice, and the patterns of neural activation. The model predicts that the further two stimuli are from each other …

Patterns Of Senescence In Human Cardiovascular Fitness: Vo2 Max In Subsistence And Industrialized Populations, Anne C. Pisor, Michael Gurven, Aaron D. Blackwell, Hillard Kaplan, Gandhi Yetish

ESI Publications

Objectives—This study explores whether cardiovascular fitness levels and senescent decline are similar in the Tsimane of Bolivia and Canadians, as well as other subsistence and industrialized populations. Among Tsimane, we examine whether morbidity predicts lower levels and faster decline of cardiovascular fitness, or whether their lifestyle (e.g., high physical activity) promotes high levels and slow decline. Alternatively, high activity levels and morbidity might counterbalance such that Tsimane fitness levels and decline are similar to those in industrialized populations.

Methods—Maximal oxygen uptake (VO2max) was estimated using a step test heart rate method for 701 participants. We compared these estimates …

Age-Independent Increases In Male Salivary Testosterone During Horticultural Activity Among Tsimane Forager-Farmers, Benjamin C. Trumble, Daniel K. Cummings, Kathleen A. O'Connor, Darryl J. Holman, Eric A. Smith, Hillard Kaplan, Michael D. Gurven

ESI Publications

Testosterone plays an important role in mediating male reproductive trade-offs in many vertebrate species, augmenting muscle and influencing behavior necessary for male-male competition and mating-effort. Among humans, testosterone may also play a key role in facilitating male provisioning of offspring as muscular and neuromuscular performance are deeply influenced by acute changes in testosterone. This study examines acute changes in salivary testosterone among 63 Tsimane men ranging in age from 16–80 (mean 38.2) years during one-hour bouts of treechopping while clearing horticultural plots. The Tsimane forager-horticulturalists living in the Bolivian Amazon experience high energy expenditure associated with food production, have high …

Corporate Humanitarian Partnerships, Rebecca C. Keyes

Chancellor’s Honors Program Projects

No abstract provided.

An Empirical Analysis On Excessive Reserves In U.S Banking System And Its Application, Lianjiang Lu

Senior Theses and Projects

This paper examines factors that account for excessive reserves held by U.S banks and potential consequences of this phenomenon. This paper shall firstly establish economic rationales to address the current abnormity and then use empirical data to reinforce its argument.

As an empirical analysis, this paper firstly seeks evidence in macroeconomics and adopts time series models using U.S data. This mainly involves regressions to identify determinants of excessive reserves. Furthermore, this paper examines microeconomic factors in order to model for individual banks and unveil their motivations of holding reserves. This mainly involves panel analysis on different U.S commercial banks.

Based …

Standard Oil: Cost Reductions And Predatory Pricing, Francisco Bedoya

Senior Theses and Projects

Standard Oil was founded by John D. Rockefeller and later dismantled by the US Supreme Court in 1911 for attempting to monopolize the market of the refined-oil kerosene. The objective of this thesis is to determine if the Supreme Court’s accusations relating to predatory pricing were based on facts; or did the government make groundless denunciations due to pressure from society at the time.

My objective revolves a historical case study that can be understood with economic theory. I intend to use empirical information from historical data about the growth of the company to determine whether the accusation of employing …

Household Task Delegation Among High-Fertility Forager-Horticulturalists Of Lowland Bolivia, Jonathan Stieglitz, Michael Gurven, Hillard Kaplan, Paul L. Hooper

ESI Publications

Human kin cooperation is universal, leading researchers to label humans as “cooperative breeders.” Despite widespread interest in human cooperation, there has been no systematic study of how household economic decision making occurs. We document age and sex profiles of task delegation by parents to children ages 4–18 among Bolivian forager-horticulturalists. We test for sex differences in the probability of delegation and examine whether tasks are more likely delegated as household labor demand increases. We also test whether food acquisition tasks are more likely delegated to higher producers.We find mixed support for the prediction that girls are more likely delegated domestic …

Physical Activity And Modernization Among Bolivian Amerindians, Michael Gurven, Adrian V. Jaeggi, Hillard Kaplan, Daniel Cummings

ESI Publications

Background: Physical inactivity is a growing public health problem, and the fourth leading risk factor for global mortality. Conversely, indigenous populations living traditional lifestyles reportedly engage in vigorous daily activity that is protective against non-communicable diseases. Here we analyze physical activity patterns among the Tsimane, forager-horticulturalists of Amazonian Bolivia with minimal heart disease and diabetes. We assess age patterns of adult activity among men and women, test whether modernization affects activity levels, and examine whether nascent obesity is associated with reduced activity.

Methods and Findings: A factorial method based on a large sample of behavioral observations was employed …

Faith, Science And Religion, Vernon L. Smith

ESI Publications

No abstract provided.

Religious Identity And The Provision Of Public Goods: Evidence From The Indian Princely States, Latika Chaudhary, Jared Rubin

ESI Working Papers

Religious identity affects preferences and can consequently affect policy. We propose two mechanisms through which a ruler's religious identity can affect public good provision: i) greater provision of goods in regions where more subjects are the ruler's co-religionists, and ii) lower provision of goods where private markets provide a substitute to the ruler's co-religionists. Empirically, identifying the causal effect of religious identity on policy is often impossible, since the religious identity of rulers rarely changes over time and place. We address this problem by exploiting the variation in the religion of rulers in the Indian Princely States in the early …

Recalibrational Emotions And The Regulation Of Trust-Based Behaviors, Eric Schniter, Timothy W. Shields

ESI Working Papers

Though individuals differ in the degree to which they are predisposed to trust or act trustworthy, we theorize that trust-based behaviors are universally determined by the calibration of conflicting short- and long-sighted behavior regulation programs, and that these programs are calibrated by emotions experienced personally and interpersonally. In this chapter we review both the main-stream and evolutionary theories of emotions that philosophers, psychologists, and behavioral economists have based their work on and which can inform our understanding of trust-based behavior regulation. The standard paradigm for understanding emotions is based on mapping their positive and negative affect valence. While Valence Models …

The Impact Of Competition On Prices With Numerous Firms, Xavier Gabaix, David Laibson, Deyuan Li, Hongyi Li

ESI Working Papers

We use extreme value theory (EVT) to develop insights about price theory. Our analysis reveals detail-independent equilibrium properties that characterize a large family of models. We derive a formula relating equilibrium prices to the level of competition. When the number of rms is large, markups are proportional to 1= (nF' [F^-1 (1- 1/n)], where F is the random utility noise distribution and n is the number of rms. This implies prices are pinned down by the tail properties of the noise distribution and that prices are independent of many other institutional details. The elasticity of the markup with respect to …

Prediction Markets In The Laboratory, Cary Deck, David Porter

ESI Working Papers

"The idea that there is wisdom from the collective has been forcefully described in “The Wisdom of the Crowds” by James Surowiecki, who argues that the aggregation of information in groups results in better decisions than those that are afforded by any single member of the group. Markets, like opinion polls, are one mechanism for aggregating disparate pieces of information. The aggregation properties of prices were first noted by Hayek (1945) and were formally examined by Muth (1961). In particular, Hayek argues that market prices serve the purpose of sharing and coordinating local and personal knowledge, while Muth shows that …

Cognitive Systems For Revenge And Forgiveness, Michael E. Mccullough, Robert Kurzban, Benjamin A. Tabak

ESI Publications

Minimizing the costs that others impose upon oneself and upon those in whom one has a fitness stake, such as kin and allies, is a key adaptive problem for many organisms. Our ancestors regularly faced such adaptive problems (including homicide, bodily harm, theft, mate poaching, cuckoldry, reputational damage, sexual aggression, and the infliction of these costs on one's offspring, mates, coalition partners, or friends). One solution to this problem is to impose retaliatory costs on an aggressor so that the aggressor and other observers will lower their estimates of the net benefits to be gained from exploiting the retaliator in …

How Universal Is The Big Five? Testing The Five-Factor Model Of Personality Variation Among Forager-Farmers In The Bolivian Amazon, Michael Gurven, Christopher Von Rueden, Maxim Massenkoff, Hillard Kaplan, Marino Lero Vie

ESI Publications

The five-factor model (FFM) of personality variation has been replicated across a range of human societies, suggesting the FFM is a human universal. However, most studies of the FFM have been restricted to literate, urban populations, which are uncharacteristic of the majority of human evolutionary history. We present the first test of the FFM in a largely illiterate, indigenous society. Tsimane forager–horticulturalist men and women of Bolivia (n = 632) completed a translation of the 44-item Big Five Inventory (Benet-Martínez & John, 1998), a widely used metric of the FFM. We failed to find robust support for the FFM, based …

Commitment Problems In Conflict Resolution, Erik O. Kimbrough, Jared Rubin, Roman M. Sheremeta, Timothy W. Shields

ESI Working Papers

Commitment problems are inherent to non-binding conflict resolution mechanisms, since an unsatisfied party can ignore the resolution and initiate conflict. We provide experimental evidence suggesting that even in the absence of binding contractual agreements individuals often avoid conflict by committing to the outcome of a conflict resolution mechanism. Commitment problems are mitigated to a greater extent for groups who opt-in to the conflict resolution mechanism, but only when opting-in is costly. Although conflict rates are higher when opting-in is costly than when it is free or exogenously imposed, commitment problems are greatly reduced amongst those groups who choose to opt-in.

When Parity Promotes Peace: Resolving Conflict Between Asymmetric Agents, Erik O. Kimbrough, Roman M. Sheremeta, Timothy W. Shields

ESI Working Papers

Due to the high costs of conflict both in theory and practice, we examine and experimentally test the conditions under which conflict between asymmetric agents can be resolved. We model conflict as a two-agent rent-seeking contest for an indivisible prize. Before conflict arises, both agents may agree to allocate the prize by fair coin flip to avoid the costs of conflict. The model predicts that “parity promotes peace”: in the pure-strategy equilibrium, agents with relatively symmetric conflict capabilities agree to resolve the conflict by using a random device; however, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent …

Cheap Talk With Two Audiences: An Experiment, Mikhail Drugov, Roberto Hérnan-Gonzalez, Praveen Kujal, Marta Troya Martinez

ESI Working Papers

In this paper we experimentally test strategic information transmission between one informed and two uninformed agents in a cheap-talk game. We find evidence of the "disciplining" effect of public communication as compared to private; however, it is much weaker than predicted by the theory. Adding a second receiver naturally increases the complexity of strategic thinking when communication is public. Using the level-k model, we exploit the within subject design to show how individuals decrease their level-k in public communication. Surprisingly, we find that individuals become more sophisticated when they communicate privately with two receivers rather than one.

Do Prediction Markets Aid Defenders In A Weak‐Link Contest?, Cary Deck, Li Hao, David Porter

ESI Working Papers

Laboratory experiments have demonstrated that prediction market prices weakly aggregate the disparate information of the traders about states (moves) of nature. However, in many practical applications one might want to predict the move of a strategic participant. This is particularly important in aggressor‐defender contests. This paper reports a set of such experiments where the defender may have the advantage of observing a prediction market on the aggressor’s action. The results of the experiments indicate that: the use of prediction markets does not increase the defender’s win rate; prediction markets contain reliable information regarding aggressors’ decisions, namely excess bid information, that …