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2014

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The Financial Power Of The Powerless: Socio-Economic Status And Interest Rates Under Partial Rule Of Law, Timur Karan, Jared Rubin Jan 2014

The Financial Power Of The Powerless: Socio-Economic Status And Interest Rates Under Partial Rule Of Law, Timur Karan, Jared Rubin

ESI Working Papers

In advanced economies interest rates generally vary inversely with the borrower’s socio-economic status, because status tends to depend inversely on default risk. Both of these relationships depend critically on the impartiality of the law. Specifically, they require a lender to be able to sue a recalcitrant borrower in a sufficiently impartial court. Where the law is markedly biased in favor of elites, privileged socio-economic classes will pay a premium for capital. This is because they pose a greater risk to lenders who have limited means of punishing them. Developing the underlying theory, this paper also tests it through a data …

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Skill Ontogeny Among Tsimane Forager-Horticulturalists, Eric Schniter, Michael Gurven, Hillard Kaplan, Nathaniel Wilcox, Paul Hooper Jan 2014

Skill Ontogeny Among Tsimane Forager-Horticulturalists, Eric Schniter, Michael Gurven, Hillard Kaplan, Nathaniel Wilcox, Paul Hooper

ESI Working Papers

No abstract provided.

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Behavioral Dimensions Of Contests, Roman M. Sheremeta Jan 2014

Behavioral Dimensions Of Contests, Roman M. Sheremeta

ESI Working Papers

The standard theoretical description of rent-seeking contests is that of rational individuals or groups engaging in socially inefficient behavior by exerting costly effort. Experimental studies find that the actual efforts of participants are significantly higher than predicted in the models based on rational behavior and that over-dissipation of rents (or overbidding or over-expenditure of resources) can occur. Although over-dissipation cannot be explained by the standard rational-behavior theory, it can be explained by incorporating behavioral dimensions into the standard model, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are …

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Self Discrimination: A Field Experiment On Obesity, Antonios Proestakis, Pablo Brañas-Garza, Praveen Kujal Jan 2014

Self Discrimination: A Field Experiment On Obesity, Antonios Proestakis, Pablo Brañas-Garza, Praveen Kujal

ESI Working Papers

Empirical evidence suggests that physical characteristics such as obesity can result in a salary gap in the work place. It is, however, not clear how much of this (gap) is due to factors emanating from the demand or supply side of the market. In this paper we use a eld experiment to study whether a part of this wage gap can be attributed to personality traits of individuals on the supply side. Monitors randomly select individuals to respond to a questionnaire. Individuals can make money requests for completing the questionnaire. In the questionnaire they also self-report several personality chracteristics. We …

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Experimenting With Behavior Based Pricing, Zuzana Brokesova, Cary Deck, Jana Peliova Jan 2014

Experimenting With Behavior Based Pricing, Zuzana Brokesova, Cary Deck, Jana Peliova

ESI Working Papers

Many purchases of differentiated goods are repeated, giving sellers the opportunity to engage in price discrimination based upon the shopper’s previous behavior by either offering loyalty discounts to repeat buyers or introductory rates to new customers. Recent theoretical work suggests that loyalty discounts are likely to be implemented when customer preferences are not stationary and sellers can pre-commit to prices for repeat buyers, but otherwise repeat buyers can be expected to pay the same or more than new buyers. This paper reports the results of a series of controlled laboratory experiments designed to empirically test the impact of these factors …

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Overbidding And Overspreading In Rent-Seeking Experiments: Cost Structure And Prize Allocation Rules, Subhashish M. Chowdhury, Roman M. Sheremeta, Theodore L. Turocy Jan 2014

Overbidding And Overspreading In Rent-Seeking Experiments: Cost Structure And Prize Allocation Rules, Subhashish M. Chowdhury, Roman M. Sheremeta, Theodore L. Turocy

ESI Working Papers

We study experimentally the effects of cost structure and prize allocation rules on the performance of rent-seeking contests. Most previous studies use a lottery prize rule and linear cost, and find both overbidding relative to the Nash equilibrium prediction and significant variation of efforts, which we term ‘overspreading.’ We investigate the effects of allocating the prize by a lottery versus sharing it proportionally, and of convex versus linear costs of effort, while holding fixed the Nash equilibrium prediction for effort. We find the share rule results in average effort closer to the Nash prediction, and lower variation of effort. Combining …

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People Do Not Discount Heavily In Strategic Settings, But They Believe Others Do, Cary Deck, Salar Jahedi Jan 2014

People Do Not Discount Heavily In Strategic Settings, But They Believe Others Do, Cary Deck, Salar Jahedi

ESI Working Papers

Several studies have shown that people greatly discount future bene ts and costs. However, most of the direct laboratory evidence of this phenomenon has focused on individual choice experiments. This paper investigates the degree to which the timing of payments a ects behavior in four commonly studies strategic settings: a Prisoner's Dilemma game, a Stag-Hunt game, a First Price Auction and a Second Price Auction. In all four settings, a two week delay in payo s has a comparable e ect to a 20% reduc- tion in current payo s. A follow-up study suggests that it is an individual's strategic …

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The Meaning Of Deceive In Experimental Economic Science, Bart J. Wilson Jan 2014

The Meaning Of Deceive In Experimental Economic Science, Bart J. Wilson

ESI Working Papers

Two principles distinguish experimental economic science from other experimental social sciences. First, we experimental economists pay our participants based upon the decisions they make… Secondly, we do not use deception, not out of any deontic aversion to dishonesty, but rather because we are “concerned about developing and maintaining a reputation among the student population for honesty in order to ensure that subject actions are motivated by the induced monetary rewards rather than by psychological reactions to suspected manipulation” (Davis and Holt, 1993, pp. 23‐24).1 Again, our concern is for the integrity of the inferences from our observations.

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Single- And Double-Elimination All-Pay Tournaments, Cary Deck, Erik O. Kimbrough Jan 2014

Single- And Double-Elimination All-Pay Tournaments, Cary Deck, Erik O. Kimbrough

ESI Working Papers

Tournaments consisting of iterative matches are a common mechanism for determining how to allocate a prize. While participants are focused on their own outcomes, tournament organizers often have objectives such as maximizing the total investment or effort by the participants over the course of the tournament. For this reason it is important for organizers to understand the behavioral as well as the theoretical properties of different tournament structures. Given that laboratory experiments have consistently found high levels of overbidding in contests, one might suspect that double-elimination tournaments would generate substantially more total investment than single-elimination tournaments despite the two types …

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When Identifying Contributors Is Costly: An Experiment On Public Goods, Anya Savikhin Samek, Roman M. Sheremeta Jan 2014

When Identifying Contributors Is Costly: An Experiment On Public Goods, Anya Savikhin Samek, Roman M. Sheremeta

ESI Working Papers

Studies show that identifying contributors significantly increases contributions to public goods. In practice, however, viewing identifiable information is costly, which may discourage people from accessing such information. To address this question, we design a public goods experiment in which participants can pay a fee to view information about identities and corresponding contributions of their group members. We then compare this to a treatment in which there is no identifiable information, and a treatment in which all contributors are freely identified. Our main findings are that: (1) contributions in the treatment with costly information are as high as those in the …

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Accounting Standards And Financial Market Stability: An Experimental Examination, Shengle Lin, Glenn Pfeiffer, David Porter Jan 2014

Accounting Standards And Financial Market Stability: An Experimental Examination, Shengle Lin, Glenn Pfeiffer, David Porter

ESI Working Papers

We examine the effect on asset mispricing of different accounting methods in an experimental asset market characterized by bubbles and crashes. In particular, we study three alternative asset value reporting treatments: (1) Fair Value (also known as Mark-to-Market – M2M), (2) Historical Cost (HC) and (3) Marked to Fundamental Value (M2F). In addition, each of these treatments is replicated in two different financial leverage conditions. In the first condition (No Loan) traders must purchase assets from their available cash balances without the option of borrowing. In the second condition, (Loan), traders are given the option of taking out loans based …

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Predictable And Predictive Emotions: Explaining Cheap Signals And Trust Re-Extension, Eric Schniter, Roman M. Sheremeta Jan 2014

Predictable And Predictive Emotions: Explaining Cheap Signals And Trust Re-Extension, Eric Schniter, Roman M. Sheremeta

ESI Working Papers

Despite normative predictions from economics and biology, unrelated strangers can often develop the trust necessary to reap gains from one-shot economic exchange opportunities. This appears to be especially true when declared intentions and emotions can be cheaply communicated. Perhaps even more puzzling to economists and biologists is the observation that anonymous and unrelated individuals, known to have breached trust, often make effective use of cheap signals, such as promises and apologies, to encourage trust re-extension. We used a pair of trust games with one-way communication and emotion surveys to investigate the role of emotions in regulating the propensity to message, …

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The Paradox Of Misaligned Profiling: Theory And Experimental Evidence, Charles A. Holt, Andrew Kydd, Laura Razzolini, Roman M. Sheremeta Jan 2014

The Paradox Of Misaligned Profiling: Theory And Experimental Evidence, Charles A. Holt, Andrew Kydd, Laura Razzolini, Roman M. Sheremeta

ESI Working Papers

This paper implements an experimental test of a game-theoretic model of equilibrium profiling. Attackers choose a demographic “type” from which to recruit, and defenders choose which demographic types to search. Some types are more reliable than others in the sense of having a higher probability of carrying out a successful attack if they get past the security checkpoint. In a Nash equilibrium, defenders tend to profile by searching the more reliable attacker types more frequently, whereas the attackers tend to send less reliable types. Data from laboratory experiments with financially motivated human subjects are consistent with the qualitative patterns predicted …

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Characterising Competitive Equilibrium In Terms Of Opportunity, Robert Sugden Jan 2014

Characterising Competitive Equilibrium In Terms Of Opportunity, Robert Sugden

ESI Working Papers

This paper is the first draft of a technical appendix to a chapter of a book I am writing, with the provisional title The Community of Advantage. The central argument of the book will be that many elements of the (classically) liberal tradition of normative economics do not depend on assumptions about individual rationality, and so it is possible for a behavioural economist to work in that tradition. I will propose an approach to normative economics that differs both from neoclassical welfare economics and from the various variants of soft paternalism that are currently being proposed by behavioural economists. My …

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Strategically Equivalent Contests, Subhashish M. Chowdhury, Roman M. Sheremeta Jan 2014

Strategically Equivalent Contests, Subhashish M. Chowdhury, Roman M. Sheremeta

ESI Working Papers

Using a two-player Tullock-type contest we show that intuitively and structurally different contests can be strategically equivalent. Strategically equivalent contests generate the same best response functions and, as a result, the same equilibrium efforts. However, strategically equivalent contests may yield different equilibrium payoffs. We propose a simple two-step procedure to identify strategically equivalent contests. Using this procedure, we identify contests that are strategically equivalent to the original Tullock contest, and provide new examples of strategically equivalent contests. Finally, we discuss possible contest design applications and avenues for future theoretical and empirical research.

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Why Can’T We Be Friends? Entitlements And The Costs Of Conflict, Erik O. Kimbrough, Roman M. Sheremeta Jan 2014

Why Can’T We Be Friends? Entitlements And The Costs Of Conflict, Erik O. Kimbrough, Roman M. Sheremeta

ESI Working Papers

We design an experiment to explore the impact of earned entitlements on the frequency and intensity of conflicts in a two-stage conflict game where players may attempt to use non-binding side-payments to avoid conflict. In this game, Proposers make offers and Responders decide simultaneously whether to accept the offers and whether to engage in a conflict. A simple theoretical analysis suggests that Proposers should never offer side-payments because Responders should always accept them and then still choose to enter conflict; however, our experiment reveals that some individuals use this non-binding mechanism to avoid conflict. Moreover, when subjects earn their roles …

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