Economics Commons^™

The Persistent Power Of Promises, Florian Ederer, Frédéric Schneider

Cowles Foundation Discussion Papers

This paper investigates how the passage of time affects trust, trustworthiness, and cooperation. We use a hybrid lab and online experiment to provide the first evidence for the persistent power of communication. Even when 3 weeks pass between messages and actual choices, communication raises cooperation, trust, and trustworthiness by about 50 percent. Lags between the beginning of the interaction and the time to respond do not substantially alter trust or trustworthiness. Our results further suggest that the findings of the large experimental literature on trust that focuses on laboratory scenarios in which subjects are forced to choose their actions immediately …

Entry Games Under Private Information, José-Antonio Espín-Sánchez, Álvaro Parra

Cowles Foundation Discussion Papers

We study market entry decisions when firms have private information about their profitability. We generalize current models by allowing general forms of market competition and heterogeneous firms that self-select when entering the market. Post-entry profits depend on market structure, and on the identities and the private information of the entering firms. We introduce a notion of the firm's strength and show that an equilibrium where players' strategies are ranked by strength, or herculean equilibrium, always exists. Moreover, when profits are elastic enough with respect to the firm's private information, the herculean equilibrium is the unique equilibrium of the game.

Clackamas County: Tobacco License Impact Analysis, Peter Hulseman, Emma Willingham

Northwest Economic Research Center Publications and Reports

Passage of Senate Bill 754 (Tobacco 21) in August of 2017 raised the tobacco sales age from 18 to 21 in Oregon. However, there is currently no state law requiring retailers to have a license to sell tobacco products within the state. Without a full registry of tobacco vendors, it is difficult to determine whether or not said vendors are complying with the new law. Other counties within Oregon have adopted regional tobacco retail license programs, which help to ensure compliance with Tobacco 21. With this in mind, the Clackamas County Public Health Division requested that the Northwest Economic Research …

Global Melting? The Economics Of Disintegration Of The Greenland Ice Sheet, William D. Nordhaus

Cowles Foundation Discussion Papers

Concerns about the impact on large-scale earth systems have taken center stage in the scientific and economic analysis of climate change. The present study analyzes the economic impact of a potential disintegration of the Greenland Ice Sheet (GIS). The method is to combine a small geophysical model of the GIS with the DICE integrated assessment model. The result shows that the GIS is likely to disappear over the next millennium or so without climate policy, but an active climate policy may prevent the GIS from crossing the threshold of irreversibility. Additionally, the study estimates the impact of the GIS on …

Dispersed Behavior And Perceptions In Assortative Societies, Mira Frick, Ryota Iijima, Yuhta Ishii

Cowles Foundation Discussion Papers

Motivated by the fact that people’s perceptions of their societies are routinely incorrect, we study the possibility and implications of misperception in social interactions. We focus on coordination games with assortative interactions, where agents with higher types (e.g., wealth, political attitudes) are more likely than lower types to interact with other high types. Assortativity creates scope for misperception, because what agents observe in their local interactions need not be representative of society as a whole. To model this, we define a tractable solution concept, “local perception equilibrium” (LPE), that describes possible behavior and perceptions when agents’ beliefs are derived only …

Dispersed Behavior And Perceptions In Assortative Societies, Mira Frick, Ryota Iijima, Yuhta Ishii

Cowles Foundation Discussion Papers

We take an equilibrium-based approach to study the interplay between behavior and misperceptions in coordination games with assortative interactions. Our focus is assortativity neglect, where agents fail to take into account the extent of assortativity in society. We show, first, that assortativity neglect amplifies action dispersion, both in fixed societies and by exacerbating the effect of social changes. Second, unlike other misperceptions, assortativity neglect is a misperception that agents can rationalize in any true environment. Finally, assortativity neglect provides a lens through which to understand how empirically documented misperceptions about distributions of population characteristics (e.g., income inequality) vary across societies.

Experiment-As-Market: Incorporating Welfare Into Randomized Controlled Trials, Yusuke Narita

Cowles Foundation Discussion Papers

Randomized Controlled Trials (RCTs) enroll hundreds of millions of subjects and involve many human lives. To improve subjects’ welfare, I propose a design of RCTs that I call Experiment-as-Market (EXAM). EXAM produces a Pareto efficient allocation of treatment assignment probabilities, is asymptotically incentive compatible for preference elicitation, and unbiasedly estimates any causal effect estimable with standard RCTs. I quantify these properties by applying EXAM to a water cleaning experiment in Kenya (Kremer et al., 2011). In this empirical setting, compared to standard RCTs, EXAM substantially improves subjects’ predicted well-being while reaching similar treatment effect estimates with similar precision.

Toward An Ethical Experiment, Yusuke Narita

Cowles Foundation Discussion Papers

Randomized Controlled Trials (RCTs) enroll hundreds of millions of subjects and involve many human lives. To improve subjects’ welfare, I propose an alternative design of RCTs that I call Experiment-as-Market (EXAM). EXAM Pareto optimally randomly assigns each treatment to subjects predicted to experience better treatment effects or to subjects with stronger preferences for the treatment. EXAM is also asymptotically incentive compatible for preference elicitation. Finally, EXAM unbiasedly estimates any causal effect estimable with standard RCTs. I quantify the welfare, incentive, and information properties by applying EXAM to a water cleaning experiment in Kenya (Kremer et al., 2011). Compared to standard …

The Persistent Power Of Promises, Florian Ederer, Frédéric Schneider

Cowles Foundation Discussion Papers

Using a large-scale hybrid laboratory and online trust experiment with pre-play communication this paper investigates how the passage of time affects trust, trustworthiness, and cooperation. We provide evidence for the persistent power of communication. Even when three weeks pass between messages and actual choices and even when these choices are made outside of the lab, communication (predominantly through the use of promises) raises cooperation, trust, and trustworthiness by about 50 percent. Delays between the beginning of the interaction and the time to reciprocate neither substantially alter trust or trustworthiness nor affect how subjects choose to communicate.

Equilibrium Uniqueness In Entry Games With Private Information, José-Antonio Espín-Sánchez, Álvaro Parra, Yuzhou Wang

Cowles Foundation Discussion Papers

We study equilibrium uniqueness in entry games with private information. Our framework embeds models commonly used in applied work, allowing rich forms of firm heterogeneity and selective entry. We introduce the notion of strength, which summarizes a firm’s ability to endure competition. In environments of applied interest, an equilibrium in which entry strategies are ranked according to strength, called herculean equilibrium, always exists. Thus, when the entry game has a unique equilibrium, it must be herculean. We derive simple sufficient conditions guaranteeing equilibrium uniqueness and, consequently, robust counterfactual analyses.

Dispersed Behavior And Perceptions In Assortative Societies, Mira Frick, Ryota Iijima, Yuhta Ishii

Cowles Foundation Discussion Papers

We formulate a model of social interactions and misinferences by agents who neglect assortativity in their society, mistakenly believing that they interact with a representative sample of the population. A key component of our approach is the interplay between this bias and agents’ strategic incentives. We highlight a mechanism through which assortativity neglect, combined with strategic complementarities in agents’ behavior, drives up action dispersion in society (e.g., socioeconomic disparities in education investment). We also show how the combination of assortativity neglect and strategic incentives may help to explain empirically documented misperceptions of income inequality and political attitude polarization.

The Colombian Peace Deal With Farc: Effects On Tourism And Deforestation, Diana Solano-Florez

Honors Capstones

No abstract provided.

Airbnb's Effect On The Hospitality Industry, Eric A. Douglas

Student Publications

I examined the effect that Airbnb’s entrance into and disruption of the hospitality market in 2011 had on hotel room rates across the world by 2017. Hotel room rates were taken from published data tables rather than my own analysis because of an unavailability of raw hotel pricing data. Price comparisons between current Airbnb and hotel room rates were researched to see if one method of accommodation would be better than the other. Twenty-seven cities’ hotel rate averages and Airbnb entire-home prices were averaged and compared. There was a significant difference in hotel room rates between 2011 and 2017, during …

Parallel Worlds: Comparing Rural Development To Development In Global Communities, Jena Martin, Karon Powell

West Virginia Law Review

No abstract provided.

The Corporate Occupation Of The Final Frontier; Emerging Market Analysis Of Spacex And The Privatized Race To Space., Nicholas Herbert

Honors Projects

This project is important to allow a full understanding of the current environment of the emerging market of space transport and travel. As we continue to move into a more technologically advanced society, we will no doubt have more contact with companies looking to profit from the race to deliver the promise of satellite space to companies all over the world in a more cost effective and powerful manner. To this end, Google and Facebook have already begun cooperation with private companies to propagate the space around our planet, and in addition, the investment and return basis of this work …

Spatial Effects Of Foreign Direct Investment (Fdi) On Poverty Reduction In Colombia: A Mixed Methods Approach, Mayra Alejandra Yat Aguilar

Masters Theses

Foreign direct investment (FDI) has been identified as an important factor in stimulating economic growth and decreasing poverty. In particular, the relationship between FDI and economic growth has been extensively debated in the academic literature but with mixed results. Meanwhile, considerably less work has been done towards investigating the effects of FDI on poverty reduction. Evidence from the limited research linking on FDI and poverty levels is also mixed. Through a more comprehensive survey-based multi-scale method of assessing poverty, this empirical study investigates the contribution of FDI with respect to concurrent quantitative and qualitative assessment of changes in living standards …

Does The Stock Market Value Inclusion On A Sustainability Index? An Event Study Using The Dow Jones Sustainability North America Index, Lauren Hayward

Economics Department Student Scholarship

The concept of socially responsible investing (SRI) has evolved into a mainstream strategy for investments. Investors who place value on sustainability use SRI strategies to make investment decisions. Companies send a signal to stakeholders, including investors, that they are sustainability leaders by being recognized as a member of a sustainability index. The purpose of this paper is to analyze the impact of the announcement that a company is added to, removed from, or remaining on the Dow Jones North America Sustainability Index (DJSI NA) on its stock price. An event study is used to measure the impact of the announcement …

Financing Climate Resilience: Mobilizing Resources And Incentives To Protect Boston From Climate Risks, David L. Levy, Rebecca Herst

Sustainable Solutions Lab

This report explores the challenges of financing climate-resilience investments in the Boston region. As risks from storm surge, sea level rise, and extreme weather increase, there is growing urgency for pre-disaster investments to reduce physical risk, reduce social vulnerability, and increase capacity for emergency response and disaster recovery. However, these investments face significant barriers, including market failures, capital budget constraints, and misaligned incentives. The report identifies a range of funding mechanisms appropriate at different scales, including general obligation bonds, resilience fees, property tax surcharges, stormwater fees, tax increment financing, business improvement districts, and insurance-based funding. It evaluates these mechanisms using …

Determinants Of Household Water Use In The City Of Kalamazoo, Michigan: The Role Of Climate And Socioeconomic Factors, Danielle Molenaar

Masters Theses

Located in the Great Lakes Watershed, the City of Kalamazoo can be considered “water rich”. Therefore, the area has been absent from water use studies. Water use studies are beneficial in all locations; as they can aid city planners, water resource managers, and utility companies. This study examines how household monthly water use in the City of Kalamazoo is impacted by both climate and socioeconomic variables over the period 2006-2016. Household level data were aggregated into census tracts to obtain monthly tract averages for the eleven-year period. Ordinary least squares regression (OLS) was used to determine which variables impact the …

Engaging America: Unearthing The Middle Way In The Conflict Between Liberals And Conservatives, Noah Cadet

Capstone Collection

Liberals and conservatives have waged conflict over development strategies since the founding of the United States of America. Observers of the 2016 Presidential Election may have noticed an escalation of a preexisting trend of destructive engagement between Democrats and Republicans. The researcher pursued primary and secondary research in an attempt to understand how conflict within and between development paradigms in the United States can be transcended. The central research question was regarding how this conflict affects efforts towards peacebuilding at the grassroots from the perspective of a liberal. The literature review provides a brief histories of US American Political Economy …

Income Distribution, Fertility Behavior And Demographic Transition In Egypt, Sarah El-Khishin

Economics

Abstract - Demographic-economic interrelationships have been broadly examined in the literature from a macro perspective using mostly cross-country panel regressions. A limited strand of literature has emphasized the need to examine the demographic-economic dynamics in a reversed way; inspect dual-causality relation between demographic and economic factors. In this paper, I examine the effect of changes in income distribution and fertility behavior on the speed of demographic transition. I moreover examine the reverse relation by testing effect of changed household structure on income distribution and income disparities in Egypt. Empirical results show that wealth redistribution in Egypt and moving up to …

Dispersed Behavior And Perceptions In Assortative Societies, Mira Frick, Ryota Iijima, Yuhta Ishii

Cowles Foundation Discussion Papers

We formulate a model of social interactions and misinferences by agents who neglect assortativity in their society, mistakenly believing that they interact with a representative sample of the population. A key component of our approach is the interplay between this bias and agents’ strategic incentives. We highlight a mechanism through which assortativity neglect, combined with strategic complementarities in agents’ behavior, drives up action dispersion in society (e.g., socioeconomic disparities in education investment). We also suggest that the combination of assortativity neglect and strategic incentives may be relevant in understanding empirically documented misperceptions of income inequality and political attitude polarization.

The Core Of Macroeconomic Theory Ii, Alexander Nunez-Torres

Open Educational Resources

No abstract provided.

The Macroeconomic Perspective Ii: The Gdp Concept, Alexander Nunez-Torres

Open Educational Resources

This lecture presents concepts related to the Gross Domestic Product (GDP) and its calculation. It examines nominal versus real GDP.

The Macroeconomic Perspective I: Introduction To Macroeconomics, Alexander Nunez-Torres

Open Educational Resources

This lecture evaluates concepts of macroeconomics and distinguishes it from microeconomics. It examines the role of government as well as providing a brief history of macroeconomics.

Demand, Supply, And Market Equilibrium, Alexander Nunez-Torres

Open Educational Resources

This lecture discusses the role of firms and households in the market as well as the circular flow. Market equilibrium, supply, demand and the concept of efficiency are also covered.

Welcome To Economics! The Scope And Method Of Economics, Alexander Nunez-Torres

Open Educational Resources

This lecture covers concepts, definitions and methods of Economics and discusses how theories and models are used.

Lending Club’S Note Trading Platform Facade: An Examination Of Peer-To-Peer (P2p) Lending Secondary Market Inefficiency, Stephen Harvey

Honors Theses

The original objective of the study was to monitor and analyze the inefficiencies in Lending Club’s Peer-toPeer (P2P) secondary market, in order to exploit these inefficiencies for a risk-free return. Upon a threemonth examination and analysis of the secondary market, the findings indicate that arbitrage conditions do not exist as a result of the observed volume of the marketplace being vastly lower than initially believed. Only 0.44% of note listing instances on Lending Club’s secondary market over the three-month period resulted in successful trades. As a consequence, investors assume a purported level of liquidity that is never met, thus they …

Contagious Exporting And Foreign Ownership: Evidence From Firms In Shanghai Using A Bayesian Spatial Bivariat Probit Model, Badi H. Baltagi, Peter H. Egger, Michaela Kesina

Center for Policy Research

Whether a firm is able to attract foreign capital and whether it may participate at the export market depends on whether the fixed costs associated with doing so are at least covered by the incremental operating profits. This paper provides evidence that success for some firms in attracting foreign investors and in exporting appears to reduce the associated fixed costs with exporting or foreign ownership in other firms. Using data on 8,959 firms located in Shanghai, we find that contagion and spillovers in exporting and in foreign ownership decisions within an area of 10 miles in the city of Shanghai …

Healthcare Coverage In The United States And New York Metropolitan Area, 2009 - 2015, Andrew S. Alger

Center for Latin American, Caribbean, and Latino Studies

Introduction: This study examines trends regarding health insurance coverage in the United States along lines of sex, race/ethnicity, place of birth, and poverty status between 2009 and 2015.

Methods: This study uses the American Community Survey PUMS (Public User Microdata Series) for the years 2009, 2011, 2013, and 2015. These datasets were downloaded from the IPUMS USA website hosted by the University of Minnesota. The variables used in the study describe these populations in terms of sex, the four major race/ethnic groups (non-Hispanic white, non-Hispanic black, Latino, and Asian), being born either within the United States or abroad, and being …