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Articles 241 - 270 of 281
Full-Text Articles in Social and Behavioral Sciences
Revisiting The Tradeoff Between Risk And Incentives: The Shocking Effect Of Random Shocks, Brice Corgnet, Roberto Hérnan-Gonzalez
Revisiting The Tradeoff Between Risk And Incentives: The Shocking Effect Of Random Shocks, Brice Corgnet, Roberto Hérnan-Gonzalez
ESI Working Papers
Despite its central role in the theory of incentives, empirical evidence of a tradeoff between risk and incentives remains scarce. We reexamine this empirical puzzle in a controlled laboratory environment so as to isolate possible confounding factors encountered in the field. In line with the principal-agent model, we find that principals increase fixed pay while lowering performance pay when the relationship between effort and output is noisier. Unexpectedly, agents produce substantially more in the noisy environment than in the baseline despite lesser pay for performance. We show that this result can be accounted for by introducing agents’ loss aversion in …
Skill Ontogeny Among Tsimane Forager-Horticulturalists, Eric Schniter, Michael Gurven, Hillard Kaplan, Nathaniel Wilcox, Paul Hooper
Skill Ontogeny Among Tsimane Forager-Horticulturalists, Eric Schniter, Michael Gurven, Hillard Kaplan, Nathaniel Wilcox, Paul Hooper
ESI Working Papers
No abstract provided.
Money Is More Than Memory, Maria Bigoni, Gabriele Camera, Marco Casari
Money Is More Than Memory, Maria Bigoni, Gabriele Camera, Marco Casari
ESI Working Papers
Impersonal exchange is the hallmark of an advanced society. One key institution for impersonal exchange is money, which economic theory considers just a primitive arrangement for monitoring past conduct in society. If so, then a public record of past actions—or memory—supersedes the function performed by money. This intriguing theoretical postulate remains untested. In an experiment, we show that the suggested functional equality between money and memory does not translate into an empirical equivalence. Monetary systems perform a richer set of functions than just revealing past behaviors, which proves to be crucial in promoting large-scale cooperation.
Experimenting With Behavior Based Pricing, Zuzana Brokesova, Cary Deck, Jana Peliova
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 …
People Do Not Discount Heavily In Strategic Settings, But They Believe Others Do, Cary Deck, Salar Jahedi
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 …
Single- And Double-Elimination All-Pay Tournaments, Cary Deck, Erik O. Kimbrough
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 …
Accounting Standards And Financial Market Stability: An Experimental Examination, Shengle Lin, Glenn Pfeiffer, David Porter
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 …
Recalibrational Emotions And The Regulation Of Trust-Based Behaviors, Eric Schniter, Timothy W. Shields
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 …
Commitment Problems In Conflict Resolution, Erik O. Kimbrough, Jared Rubin, Roman M. Sheremeta, Timothy W. Shields
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
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
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
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 …
Religious Identity And The Provision Of Public Goods: Evidence From The Indian Princely States, Latika Chaudhary, Jared Rubin
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 …
The Impact Of Competition On Prices With Numerous Firms, Xavier Gabaix, David Laibson, Deyuan Li, Hongyi Li
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
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 …
Too Many Cooks Spoil The Broth: How The Tragedy Of The Anticommons Emerges In Organizations, Matthew W. Mccarter, Shirli Kopelman, Thomas A. Turk, Candace Ybarra
Too Many Cooks Spoil The Broth: How The Tragedy Of The Anticommons Emerges In Organizations, Matthew W. Mccarter, Shirli Kopelman, Thomas A. Turk, Candace Ybarra
ESI Working Papers
In organizations, conflict often revolves around commons resources because they are critical for influence, performance, and organizational survival. Research on property rights, territoriality, and social dilemmas suggests that to reduce such conflict, organizations should facilitate the (psychological) privatization of commons resources. We complement these three literatures by drawing from the legal, organizational, and social psychology literatures to model how psychologically privatizing organizational commons resources – to prevent a tragedy of the commons (an overuse problem) – can lead to the emergence of equivalently problematic tragedy in organizations: the tragedy of the anticommons (an underuse problem). Our model contributes to these …
Building And Rebuilding Trust With Promises And Apologies, Eric Schniter, Roman M. Sheremeta, Daniel Sznycer
Building And Rebuilding Trust With Promises And Apologies, Eric Schniter, Roman M. Sheremeta, Daniel Sznycer
ESI Working Papers
Using trust games, we study how promises and messages are used to build new trust where it did not previously exist and to rebuild damaged trust. In these games, trustees made non-binding promises of investment-contingent returns, then investors decided whether to invest, and finally trustees decided how much to return. After an unexpected second game was announced, but before it commenced, trustees could send a one-way message. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors and focus on naturally occurring remedial strategies used by promise-breakers and distrusted trustees, their effects on investors, and …
Buyer's Equilibrium With Capacity Constraints And Restricted Mobility: A Recursive Approach, Gabriele Camera, Jaehong Kim
Buyer's Equilibrium With Capacity Constraints And Restricted Mobility: A Recursive Approach, Gabriele Camera, Jaehong Kim
ESI Working Papers
We study a decentralized trading model as in Peters (1984), where heterogeneous market participants face a trade-o between price and trade probability. We present a novel proof of existence of a unique demand vector in Nash equilibrium, based on a recursive approach that exploits the monotonicity of matching functions.
Experimental Evidence On The Properties Of The California’S Cap And Trade Price Containment Reserve, Rachel Bodsky, Domenic Donato, Kevin James, David Porter
Experimental Evidence On The Properties Of The California’S Cap And Trade Price Containment Reserve, Rachel Bodsky, Domenic Donato, Kevin James, David Porter
ESI Working Papers
We report on a series of experiments to examine the properties of California’s Reserve Sale allocation mechanism to be implemented as part of the forthcoming cap and trade program and compare it with an alternative reserve sale mechanism. The proposed reserve sale mechanism allows covered entities to purchase allowances after the primary auction sale at fixed prices. If demand for units is greater the amount supplied in the reserve sale, a Proportional Rationing rule is used to distribute allowances based on submitted request for units. This rule is contrasted with to an alternative rule, Equal Rationing in which allowances are …
Information Effects In Multi-Unit Dutch Auctions, Joy A. Buchanan, Steven Gjerstad, David Porter
Information Effects In Multi-Unit Dutch Auctions, Joy A. Buchanan, Steven Gjerstad, David Porter
ESI Working Papers
We design a multi-unit descending-price (Dutch) auction mechanism that has applications for resource allocation and pricing problems. We address specific auction design choices by theoretically and experimentally determining optimal information disclosure along two dimensions. Bidders are either informed of the number of bidders in the auction, or know that it is one of two possible sizes; they also either know the number of units remaining for sale or are unaware of how many units have been taken by other bidders. We find that revealing group size decreases bids, and therefore revenue, if units remaining are not shown. When group size …
Do Liars Believe? Beliefs And Other-Regarding Preferences In Sender-Receiver Games, Roman M. Sheremeta, Timothy W. Shields
Do Liars Believe? Beliefs And Other-Regarding Preferences In Sender-Receiver Games, Roman M. Sheremeta, Timothy W. Shields
ESI Working Papers
We examine subjects‟ behavior in sender-receiver games where there are gains from trade and alignment of interests in one of the two states. We elicit subjects‟ beliefs, risk and other-regarding preferences. Our design also allows us to examine the behavior of subjects in both roles, to determine whether the behavior in one role is the best response to the subject‟s own behavior in the other role. The results of the experiment indicate that 60 percent of senders adopt deceptive strategies by sending favorable message when the true state of the nature is unfavorable. Nevertheless, 67 percent of receivers invest conditional …
Are You A Good Employee Or Simply A Good Guy? Influence Costs And Contract Design, Brice Corgnet, Ismael Rodriguez-Lara
Are You A Good Employee Or Simply A Good Guy? Influence Costs And Contract Design, Brice Corgnet, Ismael Rodriguez-Lara
ESI Working Papers
We develop a principal–agent model with a moral hazard problem in which the principal has access to a hard signal (the level of output) and a soft behavioral signal (the supervision signal) about the agent's level of effort. In our model, the agent can initiate influence activities and manipulate the behavioral signal. These activities are costly for the principal as they detract the agent from the productive task. We show that the agent's ability to manipulate the behavioral signal leads to low-powered incentives and increases the cost of implementing the efficient equilibrium as a result. Interestingly, the fact that manipulation …
Transparency, Efficiency And The Distribution Of Economic Welfare In Pass-Through Investment Trust Games, Thomas A. Rietz, Roman M. Sheremeta, Timothy W. Shields, Vernon Smith
Transparency, Efficiency And The Distribution Of Economic Welfare In Pass-Through Investment Trust Games, Thomas A. Rietz, Roman M. Sheremeta, Timothy W. Shields, Vernon Smith
ESI Working Papers
We design an experiment to examine welfare and behavior in a multi-level trust game representing a pass through investment in an intermediated market. In a repeated game, an Investor invests via an Intermediary who lends to a Borrower. A pre-experiment one-shot version of the game serves as a baseline and to type each subject. We alter the transparency of exchanges between non-adjacent parties. We find transparency of the exchanges between the investor and intermediary does not significantly affect welfare. However, transparency regarding exchanges between the intermediary and borrower promotes trust on the part of the investor, increasing welfare. Further, this …
Double Bubbles In Assets Markets With Multiple Generations, Cary Deck, David Porter, Vernon Smith
Double Bubbles In Assets Markets With Multiple Generations, Cary Deck, David Porter, Vernon Smith
ESI Working Papers
We construct an asset market in a finite horizon overlapping-generations environment. Subjects are tested for comprehension of their fundamental value exchange environment, and then reminded during each of 25 periods of its declining new value. We observe price bubbles forming when new generations enter the market with additional liquidity and bursting as old generations exit the market and withdrawing cash. The entry and exit of traders in the market creates an M shaped double bubble price path over the life of the traded asset. This finding is significant in documenting that bubbles can reoccur within one extended trading horizon and, …
Strategic Behavior In Schelling Dynamics: A New Result And Experimental Evidence, Juan Miguel Benito, Pablo Brañas-Garza, Penélope Hern´Andez, Juan A. Sanchis
Strategic Behavior In Schelling Dynamics: A New Result And Experimental Evidence, Juan Miguel Benito, Pablo Brañas-Garza, Penélope Hern´Andez, Juan A. Sanchis
ESI Working Papers
In this paper we experimentally test Schelling’s (1971) segregation model and confirm the striking result of segregation. In addition, we extend Schelling’s model theoretically by adding strategic behavior and moving costs. We obtain a unique subgame perfect equilibrium in which rational agents facing moving costs may find it optimal not to move (anticipating other participants’ movements). This equilibrium is far for full segregation. We run experiments for this extended Schelling model. We find that the percentage of strategic players dramatically increases with the cost of moving and that the degree of segregation depends on the distribution of rational subjects.
Cognitive Effort In The Beauty Contest Game, Pablo Brañas-Garza, Teresa García-Muñoz
Cognitive Effort In The Beauty Contest Game, Pablo Brañas-Garza, Teresa García-Muñoz
ESI Working Papers
This paper analyzes cognitive effort in 6 different one-shot p-beauty games. We use both Raven and Cognitive Reáection tests to identify subjects' abilities. We find that the Raven test does not provide any insight on beauty contest game playing but CRT does: subjects with higher scores on this test are more prone to play dominant strategies.
Don’T Ask Me If You Will Not Listen: The Dilemma Of Participative Decision Making, Brice Corgnet, Roberto Hérnan-Gonzalez
Don’T Ask Me If You Will Not Listen: The Dilemma Of Participative Decision Making, Brice Corgnet, Roberto Hérnan-Gonzalez
ESI Working Papers
We study the effect of participative decision making in an experimental principalagent game, where the principal can consult the agent’s preferred option regarding the task to be undertaken in the final stage of the game. We show that consulting the agent was beneficial to principals as long as they followed the agent’s choice. Ignoring the agent’s choice was detrimental to the principal as it engendered negative emotions and low levels of transfers. Nevertheless, the majority of principals were reluctant to change their mind and adopt the agent’s proposal. Our results suggest that the ability to change one’s own mind is …
Durability, Re-Trading And Market Performance, John Dickhaut, Shengle Lin, David Porter, Vernon Smith
Durability, Re-Trading And Market Performance, John Dickhaut, Shengle Lin, David Porter, Vernon Smith
ESI Working Papers
Key differential structural characteristics of environments studied in previous market experiments have documented large divergences in their observed performance, particularly discrepancies in their convergence to expected equilibrium outcomes. We investigate why this should be so.
Can Markets Save Lives? An Experimental Investigation Of A Market For Organ Donations, Cary Deck, Erik O. Kimbrough
Can Markets Save Lives? An Experimental Investigation Of A Market For Organ Donations, Cary Deck, Erik O. Kimbrough
ESI Working Papers
Many people die while waiting for organ transplants even though the number of usable organs is far larger than the number needed for transplant. Governments have devised many policies aimed at increasing available transplant organs with variable success. However, with few exceptions, policy makers are reluctant to establish markets for organs despite the potential for mutually beneficial exchanges. We ask whether organ markets could save lives. Controlled laboratory methods are ideal for this inquiry because human lives would be involved when implementing field trials. Our results suggest that markets can increase the supply of organs available for transplant, but that …
Affecting Policy By Manipulating Prediction Markets: Experimental Evidence, Cary Deck, Shengle Lin, David Porter
Affecting Policy By Manipulating Prediction Markets: Experimental Evidence, Cary Deck, Shengle Lin, David Porter
ESI Working Papers
Documented results indicate prediction markets effectively aggregate information and form accurate predictions. This has led to a proliferation of markets predicting everything from the results of elections to a company’s sales to movie box office receipts. Recent research suggests prediction markets are robust to manipulation attacks and resulting market outcomes improve forecast accuracy. However, we present evidence from the lab indicating that single‐minded, well‐funded manipulators can in fact destroy a prediction market’s ability to aggregate informative prices and mislead those who are making forecasts based upon market predictions. However, we find that manipulators primarily influence market trades meaning outstanding bids …