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Full-Text Articles in Economics

Do Prediction Markets Aid Defenders In A Weak-Link Contest?, Cary Deck, Li Hao, David Porter Jan 2015

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

ESI Publications

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 is attempting to predict the move of a strategic rival. This is particularly important in aggressor–defender contests. This paper reports an experiment 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 that is not being exploited by defenders; and …


The Role Of The Decision-Making Regime On Cooperation In A Workgroup Social Dilemma: An Examination Of Cyberloafing, Brice Corgnet, Roberto Hernán-González, Matthew W. Mccarter Jan 2015

The Role Of The Decision-Making Regime On Cooperation In A Workgroup Social Dilemma: An Examination Of Cyberloafing, Brice Corgnet, Roberto Hernán-González, Matthew W. Mccarter

ESI Publications

A burgeoning problem facing organizations is the loss of workgroup productivity due to cyberloafing. The current paper examines how changes in the decision-making rights about what workgroup members can do on the job affect cyberloafing and subsequent work productivity. We compare two different types of decision-making regimes: autocratic decision-making and group voting. Using a laboratory experiment to simulate a data-entry organization, we find that, while autocratic decision-making and group voting regimes both curtail cyberloafing (by over 50%), it is only in group voting that there is a substantive improvement (of 38%) in a cyberloafer’s subsequent work performance. Unlike autocratic decision-making, …


Experimental Evolution And Economics, Terence C. Burnham, Aimee Dunlap, David W. Stephens Jan 2015

Experimental Evolution And Economics, Terence C. Burnham, Aimee Dunlap, David W. Stephens

ESI Publications

This is a theory paper that advocates experimental evolution as a novel approach to study economic preferences. Economics could benefit because preferences are exogenous, axiomatic, and contentious. Experimental evolution allows the empirical study of preferences by placing organisms in designed environments and studying their genotype and phenotype over multiple generations. We describe a number of empirical studies on different aspects of preferences. We argue that experimental evolution has the potential to improve economics.


Peer Pressure And Moral Hazard In Teams: Experimental Evidence, Brice Corgnet, Roberto Hernán-González, Stephen Rassenti Jan 2015

Peer Pressure And Moral Hazard In Teams: Experimental Evidence, Brice Corgnet, Roberto Hernán-González, Stephen Rassenti

ESI Publications

Team incentives have been found to be particularly effective both in the lab and in the field despite the moral hazard in teams problem identified by Holmström (1982). In a newly developed virtual workplace, we show that, in line with Holmström, moral hazard in teams is indeed pervasive. Subsequently, we find strong evidence for the conjecture of Kandel and Lazear (1992) that peer pressure may resolve the moral hazard in teams problem. Organizations equipped with a very weak form of peer monitoring (anonymous and without physical proximity, verbal threats or face-to-face interactions) perform as well as those using individual incentives.


Language And Cooperation In Hominin Scavenging, Bart J. Wilson, Samuel R. Harris Jan 2015

Language And Cooperation In Hominin Scavenging, Bart J. Wilson, Samuel R. Harris

ESI Working Papers

Bickerton (2009, 2014) hypothesizes that language emerged as the solution to a scavenging problem faced by proto‐humans. We design a virtual world to explore how people use words to persuade others to work together for a common end. By gradually reducing the vocabularies that the participants can use, we trace the process of solving the hominin scavenging problem. Our experiment changes the way we think about social dilemmas. Instead of asking how does a group overcome the selfinterest of its constituents, the question becomes, how do constituents persuade one another to work together for a common end that yields a …


Sharing As Risk Pooling In A Social Dilemma Experiment, Todd L. Cherry, E. Lance Howe, James J. Murphy Jan 2015

Sharing As Risk Pooling In A Social Dilemma Experiment, Todd L. Cherry, E. Lance Howe, James J. Murphy

ESI Working Papers

In rural economies with missing or incomplete markets, idiosyncratic risk is frequently pooled through informal networks. Idiosyncratic shocks, however, are not limited to private goods but can also restrict an individual from partaking in or benefiting from a collective activity. In these situations, a group must decide whether to provide insurance to the affected member. In this paper, we describe results of a laboratory experiment designed to test whether a simple sharing institution can sustain risk pooling in a social dilemma with idiosyncratic risk. We test whether risk can be pooled without a commitment device and, separately, whether effective risk …


Revisiting The Tradeoff Between Risk And Incentives: The Shocking Effect Of Random Shocks, Brice Corgnet, Roberto Hérnan-Gonzalez Jan 2015

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 …


Dynamic Directed Search, Gabriele Camera, Jaehong Kim Jan 2015

Dynamic Directed Search, Gabriele Camera, Jaehong Kim

ESI Working Papers

The directed search model (Peters, 1984) is static; its dynamic extensions typically restrict strategies, often assuming price or match commitments. We lift such restrictions to study equilibrium when search can be directed over time, without constraints and at no cost. In equilibrium trade frictions arise endogenously, and price commitments, if they do exist, are self-enforcing. In contrast to the typical model, there exists a continuum of equilibria that exhibit trade frictions. These equilibria support any price above the static price, including monopoly pricing in arbitrarily large markets. Dispersion in posted prices can naturally arise as temporary or permanent phenomenon despite …


Generalizations Of The General Lotto And Colonel Blotto Games, Dan Kovenock, Brian Roberson Jan 2015

Generalizations Of The General Lotto And Colonel Blotto Games, Dan Kovenock, Brian Roberson

ESI Working Papers

In this paper, we generalize the General Lotto game (budget constraints satisfied in expectation) and the Colonel Blotto game (budget constraints hold with probability one) to allow for battlefield valuations that are heterogeneous across battlefields and asymmetric across players, and for the players to have asymmetric resource constraints. We completely characterize Nash equilibrium in the generalized version of the General Lotto game and then show how this characterization can be applied to identify equilibria in the Colonel Blotto version of the game. In both games, we find that there exist sets of non-pathological parameter configurations of positive Lebesgue measure with …


The Impact Of Social Information On The Voluntary Provision Of Public Goods: A Replication Study, James J. Murphy, Nomin Batmunkh, Ben Nilson, Samantha Ray Jan 2015

The Impact Of Social Information On The Voluntary Provision Of Public Goods: A Replication Study, James J. Murphy, Nomin Batmunkh, Ben Nilson, Samantha Ray

ESI Working Papers

Shang and Croson (2009) found that providing information about the donation decisions of others can have a positive impact on individual donations to public radio. In this study, we attempted to replicate their results, however, we found no evidence of that social comparisons affected donation decisions. Most of our donors were renewing members, a group which Shang and Croson also found were not influenced by social information.


On The Merit Of Equal Pay: When Influence Activities Interact With Incentive Setting, Brice Corgnet, Ludivine Martin, Peguy Ndodjang, Angela Sutan Jan 2015

On The Merit Of Equal Pay: When Influence Activities Interact With Incentive Setting, Brice Corgnet, Ludivine Martin, Peguy Ndodjang, Angela Sutan

ESI Working Papers

Influence costs models predict that organizations should limit managerial discretion to deter organizational members from engaging in wasteful politicking activities. We test this conjecture in a controlled, yet realistic, work environment in which we allow employees to influence managers’ decisions about rewards. We find that influence activities are pervasive and significantly lower organizational performance. Organizational performance suffers because principals offer weaker incentives when influence activities are allowed than when they are not. Importantly, we show that equal pay incentive schemes perform better when influence activities are available than when they are not. Our results thus support the idea that prevalent …


When Income Depends On Performance And Luck: The Effects Of Culture And Information On Giving, Pedro Rey-Biel, Roman M. Sheremeta, Neslihan Uler Jan 2015

When Income Depends On Performance And Luck: The Effects Of Culture And Information On Giving, Pedro Rey-Biel, Roman M. Sheremeta, Neslihan Uler

ESI Working Papers

We study how giving depends on income and luck, and how culture and information about the determinants of others’ income affect this relationship. Our data come from an experiment conducted in two countries, the US and Spain, which have different beliefs about how income inequality arises. We find no cross-cultural differences in giving when individuals are informed about the determinants of income, but when uninformed, Americans give less than Spanish. Culture and information not only affect individual giving, but also the determinants of giving and the beliefs about how income inequality arises. Beliefs partially moderate cross-cultural differences in giving.


Competition Between And Within Universities: Theoretical And Experimental Investigation Of Group Identity And The Desire To Win, Zhuoqiong Charlie Chen, David Ong, Roman M. Sheremeta Jan 2015

Competition Between And Within Universities: Theoretical And Experimental Investigation Of Group Identity And The Desire To Win, Zhuoqiong Charlie Chen, David Ong, Roman M. Sheremeta

ESI Working Papers

We study how salient group identity, created through competition between students from different universities, as well as differences in the value of winning impact competitive behavior. Our experiment employs a simple all-pay auction within and between two university subject pools. We find that when competing against their peers, students within the lower tier university bid more aggressively than students within the top-tier university. Also, students from the lower tier university, in particular women, bid more aggressively when competing against students from the top-tier university. These findings, interpreted through a theoretical model incorporating both group identity and differential value of winning, …


Revisiting Information Aggregation In Asset Markets: Reflective Learning & Market Efficiency, Brice Corgnet, Mark Desantis, David Porter Jan 2015

Revisiting Information Aggregation In Asset Markets: Reflective Learning & Market Efficiency, Brice Corgnet, Mark Desantis, David Porter

ESI Working Papers

The ability of markets to aggregate disperse information leading to prices that reflect the fundamental value of an asset is key to assessing the often-debated efficiency of markets. We study information aggregation in the experimental environment originally created by Plott and Sunder (1988). Contrary to the current belief, we find that markets do not aggregate information. The model that best describes our data, as well as data on information aggregation subsequent to Plott and Sunder (1988), is prior information (Lintner, 1969). That is, traders use their private information but fail to use market prices to infer other traders’ information. We …


An Experiment On Retail Payments Systems, Gabriele Camera, Marco Casari, Stefania Bortolotti Jan 2015

An Experiment On Retail Payments Systems, Gabriele Camera, Marco Casari, Stefania Bortolotti

ESI Working Papers

We develop a novel theoretical and experimental framework to study adoption and use of cash versus electronic payments in retail transactions. The design allows us to assess the behavioral impact of sellers’ service fees and buyers’ rewards from using electronic payments. In the experiment, buyers and sellers faced a coordination problem, independently choosing a payment method before trading. Sellers readily adopted electronic payments but buyers did not. Eliminating service fees or introducing rewards significantly increased adoption and use of electronic payments. Buyers’ economic incentives played a pivotal role in the diffusion of electronic payments but cannot fully explain their adoption …


The Effects Of Make And Take Fees In Experimental Markets, Vince Bourke, David Porter Jan 2015

The Effects Of Make And Take Fees In Experimental Markets, Vince Bourke, David Porter

ESI Working Papers

We conduct a series of experiments to examine the effects of the make and take fee structure currently used by equity exchanges in the U.S. We examine the effects of these fees on measures of market quality (allocative efficiency, trading volume, book depth, and the bid-ask spread). With the exception of increased book depth, we document no significant effects of make and take fees relative to a baseline case in which trading fees are assessed on both sides of a transaction.


Asymmetric And Endogenous Within-Group Communication In Competitive Coordination Games, Timothy N. Cason, Roman Sheremeta, Jingjing Zhang Jan 2015

Asymmetric And Endogenous Within-Group Communication In Competitive Coordination Games, Timothy N. Cason, Roman Sheremeta, Jingjing Zhang

ESI Working Papers

Within-group communication in competitive coordination games has been shown to increase competition between groups and lower efficiency. This study further explores potentially harmful effects of communication, by addressing the questions of (i) asymmetric communication and (ii) the endogenous emergence of communication. Our theoretical analysis provides testable hypotheses regarding the effect of communication on competitive behavior and efficiency. We test these predictions using a laboratory experiment. The experiment shows that although asymmetric communication is not as harmful as symmetric communication, it leads to more aggressive competition and lower efficiency relative to the case when neither group can communicate. Moreover, groups vote …


Selective Recognition: How To Recognize Donors To Increase Charitable Giving, Anya Samek, Roman Sheremeta Jan 2015

Selective Recognition: How To Recognize Donors To Increase Charitable Giving, Anya Samek, Roman Sheremeta

ESI Working Papers

Recognizing donors by revealing their identities is important for increasing charitable giving. We conducted a field experiment to examine how different recognition methods impact giving, and found that all forms of recognition that we examined had a positive impact on increasing donations, whereby recognizing only highest donors (positive recognition) and recognizing only lowest donors (negative recognition) had the most pronounced effect. We argue that selective recognition (both positive and negative) creates tournament-like incentives. Recognizing the highest donors activates the desire to seek a positive prize of prestige, thus increasing the proportion of donors who contribute large amounts. Recognizing the lowest …


Status And The Demand For Visible Goods: Experimental Evidence On Conspicuous Consumption, David Clingingsmith, Roman M. Sheremeta Jan 2015

Status And The Demand For Visible Goods: Experimental Evidence On Conspicuous Consumption, David Clingingsmith, Roman M. Sheremeta

ESI Working Papers

Some economists argue that consumption of publicly visible goods is driven by social status. Making a causal inference about this claim is difficult with observational data. We conduct an experiment in which we vary both whether a purchase of a physical product is publicly visible or kept private and whether the income used for purchase is linked to social status or randomly assigned. Making consumption choices visible leads to a large increase in demand when income is linked to status, but not otherwise. We investigate the characteristics that mediate this effect and estimate its impact on welfare.


The Cognitive Basis Of Social Behavior: Cognitive Reflection Overrides Antisocial But Not Always Prosocial Motives, Brice Corgnet, Antonio M. Espín, Roberto Hérnan-Gonzalez Jan 2015

The Cognitive Basis Of Social Behavior: Cognitive Reflection Overrides Antisocial But Not Always Prosocial Motives, Brice Corgnet, Antonio M. Espín, Roberto Hérnan-Gonzalez

ESI Working Papers

Even though human social behavior has received considerable scientific attention in the last decades, its cognitive underpinnings are still poorly understood. Applying a dual-process framework to the study of social preferences, we show in two studies that individuals with a more reflective/deliberative cognitive style, as measured by scores on the Cognitive Reflection Test (CRT), are more likely to make choices consistent with “mild” altruism in simple non-strategic decisions. Such choices increase social welfare by increasing the other person’s payoff at very low or no cost for the individual. The choices of less reflective individuals (i.e. those who rely more heavily …


Macroeconomic Fluctuations As Sources Of Luck In Ceo Compensation, Hsin-Hui Chiu, Lars Oxelheim, Clas Wihlborg, Jianhua Zhang Dec 2014

Macroeconomic Fluctuations As Sources Of Luck In Ceo Compensation, Hsin-Hui Chiu, Lars Oxelheim, Clas Wihlborg, Jianhua Zhang

Business Faculty Articles and Research

Macroeconomic fluctuations in interest rates, exchange rates, and inflation can be considered sources of good or bad “luck” for corporate performance if management is unable to adjust operations to these fluctuations. Based on a sample of 2,091 US firms, we decompose the impacts of macroeconomic fluctuations on three measures of CEO compensation. Our study provides empirical support for the importance of considering macroeconomic fluctuations in designing CEO incentive schemes. It adds to the managerial power literature on moral hazard and CEO compensation by pinpointing the obvious risk that the CEO in an asymmetric and non-linear reward system will be inclined …


Extremism Drives Out Moderation, Bettina Klose, Dan Kovenock Dec 2014

Extremism Drives Out Moderation, Bettina Klose, Dan Kovenock

Economics Faculty Articles and Research

This article examines the impact of the distribution of preferences on equilibrium behavior in conflicts modeled as all-pay auctions with identity-dependent externalities. Centrists and radicals are defined using a willingness-to-pay criterion that admits preferences more general than a simple ordering on the line. Extremism, characterized by a higher per capita expenditure by radicals than centrists, may persist and generate higher aggregate expenditure by radicals, even when they are relatively small in number. Our results demonstrate the importance of the institutions of conflict in determining the role of extremism and moderation in economic, political, and social environments.


Low Mineral Density Of A Weight-Bearing Bone Among Adult Women In A High Fertility Population, Jonathan Stieglitz, Bret Beheim, Benjamin C. Trumble, Felicia C. Madimenos, Hillard Kaplan, Michael Gurven Dec 2014

Low Mineral Density Of A Weight-Bearing Bone Among Adult Women In A High Fertility Population, Jonathan Stieglitz, Bret Beheim, Benjamin C. Trumble, Felicia C. Madimenos, Hillard Kaplan, Michael Gurven

ESI Publications

Evolutionary theories of aging posit that greater reproductive effort causes somatic decline given a fundamental trade-off between investing energy in reproduction and repair. Few studies in high fertility human populations support this hypothesis, and problems of phenotypic correlation can obscure the expected trade-off between reproduction and somatic condition. This cross-sectional study investigates whether greater reproductive effort is associated with reduced calcaneal bone mineral density (BMD) among female Tsimane forager-farmers of lowland Bolivia. We also investigate whether female Tsimane BMD values are lower than sex- and age-matched US reference values, despite the fact that Tsimane engage in higher physical activity levels …


China-Based Industrial Espionage, Joel Savary Dec 2014

China-Based Industrial Espionage, Joel Savary

Student Scholar Symposium Abstracts and Posters

On Oct 8, 2014 China has surpassed the United States as the world’s largest economy in terms of Purchasing Power Parity (PPP)” (IMF). My paper explores one of the instances of unlawful business practices that have contributed to China’s new world position. China based espionage undercuts American businesses and U.S. foreign policy directly, causing catastrophic economic implications for America, its businesses, and its allies. The U.S. government is grappling with the means and methods China uses to disseminate information stolen from U.S. businesses to support China based industries. Due to the lack of transparency in China, it has been difficult …


The Marriage Market: The Mail-Order Bride Industry In The United States!, Penelope Burner Dec 2014

The Marriage Market: The Mail-Order Bride Industry In The United States!, Penelope Burner

Student Scholar Symposium Abstracts and Posters

The international bride market has generated more than 2 billion dollars in 2010 in the United States alone. The concept of a “mail-order bride” is one that dates back to the founding of the United States. Many people believe this practice to be antiquated, but with the addition of technology, this industry has become very prevalent in modern society. I will examine the effects the mail order bride industry has had on views regarding women in the United States, Asia and Europe and show how this industry still has relevance today. I will track the way this industry has shaped …


The Nonlinear Price Fynamics Of Us Equity Etfs, Gunduz Caginalp, Mark Desantis, Akin Sayrak Dec 2014

The Nonlinear Price Fynamics Of Us Equity Etfs, Gunduz Caginalp, Mark Desantis, Akin Sayrak

Economics Faculty Articles and Research

We investigate the price dynamics of large market-capitalization U.S. equity exchange-traded funds (ETFs) in order to uncover trader motivations and strategy. We show that prices of highly liquid ETFs can deviate significantly from their daily net asset values. By adjusting for changes in valuations, we report the impact of non-classical variables including price trend and volatility using data from 2008 to 2011. We find a cubic nonlinearity in the trend suggesting that traders are not only aware of the underreaction of others, but also self-optimize by anticipating others' reactions, and sell when the uptrend is stronger than usual.


A Survey Of Experimental Research On Contests, All-Pay Auctions And Tournaments, Emmanuel Dechenaux, Dan Kovenock, Roman M. Sheremeta Nov 2014

A Survey Of Experimental Research On Contests, All-Pay Auctions And Tournaments, Emmanuel Dechenaux, Dan Kovenock, Roman M. Sheremeta

Economics Faculty Articles and Research

Many economic, political and social environments can be described as contests in which agents exert costly effort while competing over the distribution of a scarce resource. These environments have been studied using Tullock contests, all-pay auctions and rank-order tournaments. This survey provides a comprehensive review of experimental research on these three canonical contests. First, we review studies investigating the basic structure of contests, including the number of players and prizes, spillovers and externalities, heterogeneity, risk and incomplete information. Second, we discuss dynamic contests and multi-battle contests. Then we review studies examining sabotage, feedback, bias, collusion, alliances, group contests and gender, …


The All-Pay Auction With Complete Information And Identity-Dependent Externalities, Bettina Klose, Dan Kovenock Oct 2014

The All-Pay Auction With Complete Information And Identity-Dependent Externalities, Bettina Klose, Dan Kovenock

Economics Faculty Articles and Research

We derive a necessary and sufficient condition for the existence of equilibria with only two active players in the all-pay auction with complete information and identity-dependent externalities. This condition shows that the generic equilibrium of the standard all-pay auction is robust to the introduction of "small" identity-dependent externalities. In general, however, the presence of identity-dependent externalities invalidates well-established qualitative results concerning the set of equilibria of the first-price all-pay auction with complete information. With identity-dependent externalities equilibria are generally not payoff equivalent, and identical players may earn different payoffs in equilibrium. These observations show that Siegel’s (2009) results characterizing the …


Leadership In An Egalitarian Society, Christopher Von Rueden, Michael Gurven, Hillard Kaplan, Jonathan Stieglitz Sep 2014

Leadership In An Egalitarian Society, Christopher Von Rueden, Michael Gurven, Hillard Kaplan, Jonathan Stieglitz

ESI Publications

Leadership is instrumental to resolution of collective action dilemmas, particularly in large, heterogeneous groups. Less is known about the characteristics or effectiveness of leadership in small-scale, homogeneous, and relatively egalitarian societies, in which humans have spent most of our existence. Among Tsimane’ forager-horticulturalists of Bolivia, we (1) assess traits of elected leaders under experimental and naturalistic conditions and (2) test whether leaders impact collective action outcomes. We find that elected leaders are physically strong and have more kin and other exchange partners. Their ranks on physical dominance, kin support, and trustworthiness predict how well their groups perform, but only where …


Cosmopolitanism And Global Justice: A Review Essay Of Cosmopolitan Regard By Richard Vernon, Tiana-Renée C. Silva Sep 2014

Cosmopolitanism And Global Justice: A Review Essay Of Cosmopolitan Regard By Richard Vernon, Tiana-Renée C. Silva

e-Research: A Journal of Undergraduate Work

While geologists may not be able to find physical proof to suggest that the world is shrinking, social scientists are convinced that this is the case. The amount of information that is shared amongst the world's citizens has grown exponentially over the years, and evidence of an increasingly interconnected world can be seen in every facet of our everyday lives from the food we eat to what we watch on television. Thousands of miles that once divided us from one another are now eliminated by telephones, the Internet, and even the ability to make telephone calls over the Internet. In …