Behavioral Economics Commons^™

The Bidder's Curse: Comment, Henry S. Schneider

Henry S Schneider

The prices of auctions on eBay often exceed eBay’s fixed-price “Buy-It-Now” prices. I investigate the causes of this overbidding, focusing on the interpretation in Malmendier and Lee (2011) that the observed overbidding cannot be explained “without allowing for nonstandard preferences or beliefs” and that the “strongest direct evidence points to limited attention.” Using data from their study and new data from eBay, I provide evidence that a key condition for identifying nonstandard behavior may not have been met, and that the observed overbidding is not inconsistent with standard behavior once we allow for the likely presence of search costs.

Nonstandard Bidder Behavior In Real-World Auctions, Joseph U. Podwol, Henry S. Schneider

Henry S Schneider

Empirical work on auctions has found that bidders deviate from standard behavior in important ways. We investigate a range of these behaviors, including nonrational herding, auction fever, quasi-endowment effect, and escalation of commitment. Our innovations are to more completely control for unobservables by using new data from a field experiment on eBay, and by accounting for censoring of bids below the starting price. Consistent with standard auction theory and in contrast to the predictions of the nonstandard behaviors, we find that auction starting price has no effect on bidder willingness to pay in a private-values setting. We conclude that there …

Voice Without Say: Why Capital-Managed Firms Aren’T (Genuinely) Participatory, Justin Schwartz

Justin Schwartz

Why are most capitalist enterprises of any size organized as authoritarian bureaucracies rather than incorporating genuine employee participation that would give the workers real authority? Even firms with employee participation programs leave virtually all decision-making power in the hands of management. The standard answer is that hierarchy is more economically efficient than any sort of genuine participation, so that participatory firms would be less productive and lose out to more traditional competitors. This answer is indefensible. After surveying the history, legal status, and varieties of employee participation, I examine and reject as question-begging the argument that the rarity of genuine …

Wat Is Coöperatief Ondernemen?, Lieve Jacobs, Wim Van Opstal

Wim Van Opstal

De discussie van wat een echte coöperatie is en hoort te zijn, is haast zo oud als de coöperatieve beweging zelf en lijkt soms wel op de zoektocht naar de heilige graal. Toch beschikt de internationale coöperatieve beweging, vertegenwoordigd door de Internationale Coöperatieve Alliantie (ICA), over een referentiekader met een gemeenschappelijke definitie, principes en waarden. Dit referentiekader is zelf het compromis tussen vele verschillende visies en stromingen binnen het coöperatieve denken. Net daarom is het verstandig om dit eerder als een kompas in plaats van als een keurslijf te beschouwen. In deze bijdrage illustreren we de praktische grondslagen en gevolgen …

Coöperaties In België. Top 100 Van De Grootste Belgische Coöperatieve Vennootschappen In 2011, Wim Van Opstal

Wim Van Opstal

In deze publicatie presenteren we de top 100 van de grootste Belgische coöperatieve vennootschappen in 2011. We bespreken de grootste coöperaties volgens hun economische activiteit en geven zo een venster op de rijke diversiteit aan coöperatieve initiatieven in ons land.

Coöperaties In België. Profielschets 2005-2010, Wim Van Opstal

Wim Van Opstal

Coöperaties kennen de jongste jaren een groeiende aandacht binnen de academische wereld, het bedrijfsleven, het maatschappelijke middenveld en het beleid. Coöperaties worden tijdens een groeiend aantal studiedagen gewikt en gewogen als mogelijk instrument voor diverse uitdagingen die we vandaag kennen op economisch, sociaal en ecologisch vlak. Cijfers over coöperaties in ons land zijn echter schaars. In deze publicatie presenteren we een profielschets van de coöperatieve vennootschappen in België met daarin enkele kerngegevens die de lezer wegwijs maken in het Belgische coöperatieve landschap. We bestrijken daarmee de periode 2005-2010 en baseren ons hiervoor op administratieve gegevens, afkomstig uit de Balanscentrale van …

Les Co-Opératives En Belgique. Profil 2005-2010, Wim Van Opstal

Wim Van Opstal

Cette publication présente le profil des sociétés coopératives en Belgique, principaux chiffres à la clef, afin de faire découvrir au lecteur le paysage coopératif en Belgique. La période concernée est 2005-2010 et nous nous basons sur les données fournies par la Centrale des bilans de la Banque Nationale de Belgique (BNB), la Banque- Carrefour des entreprises (BCE) et l’Office National de Sécurité Sociale (ONSS). Grâce à la collaboration du Département Emploi et Economie Sociale du gouvernement flamand, ces données ont pu être obtenues auprès de la cellule de coordination Vlaams e-Government (CORVE), qui rassemble les données dans la Verrijkte Kruispuntbank …

Theoretical And Experimental Analysis Of Auctions With Negative Externalities, Youxin Hu, John Kagel, Xiaoshu Xu, Lixin Ye

Youxin Hu

We investigate a private value auction in which a single “entrant” on winning imposes a negative externality on two “regular” bidders. In an English auction, when all bidders are active “regulars” free ride, exiting before price reaches their value. In a first-price sealed-bid auction incentives for free riding and aggressive bidding coexist, limiting free riding. We find substantial, though incomplete, free riding in the clock auction. In first-price auctions, regular bidders bid more aggressively than the “entrant” and both bid higher than in auctions with no externality. Predictions regarding revenue, efficiency, and successful entry between the two auctions are satisfied.

Harnessing Complementarities In The Education Production Function, John A. List, Jeffrey A. Livingston, Susanne Neckermann

Jeffrey A Livingston

Studies which seek to estimate components of the education production function, especially those that employ the “value-added” approach, almost universally assume that the production function is linear and additively separable in its inputs. This strict functional form assumes that there are no complementarities between inputs, though there are compelling intuitive reasons to think they might exist. This study conducts a randomized field experiment to evaluate whether complementarities between students, their parents, and tutors who aid the students in specific subjects can be harnessed using financial incentives. No evidence emerges in support of this hypothesis. The results suggests that a given …

Coöperaties In Zorg. Een Verkenning Van Vraagstukken En Goede Praktijken In Binnen- En Buitenland, Wim Van Opstal

Wim Van Opstal

Reeds meer dan twee eeuwen worden coöperaties opgericht om de levensstandaard van arbeiders en boeren te verbeteren. Hoewel de coöperatie in Vlaanderen al enkele decennia aan zichtbaarheid moest inboeten, begint men de laatste jaren ook bij ons de coöperatie opnieuw te ontdekken als instrument voor het combineren van een economische activiteit met sociale doelstellingen. Ook, en misschien zelfs vooral, binnen de social profitsector doen zich tal van interessante ontwikkelingen op dat vlak voor. De social profitsector, en de zorgsector in het bijzonder, wordt anno 2011 immers geconfronteerd met de dubbele uitdaging van toenemende maatschappelijke noden in een context van een …

Persuading Consumers With Social Attitudes, Stefan Buehler, Daniel Halbheer

Stefan Buehler

This paper analyzes persuasive advertising and pricing in oligopoly if firms sell differentiated products and consumers have heterogenous social attitudes towards the consumption by others. Deriving product demand from primitives, we show that the demand-enhancing effect of persuasive advertising varies across consumers and increases in the average degree of conformity. In equilibrium, both quality and cost leaders choose higher advertising intensities and charge higher prices than their competitors. In addition, we show that an increase in the average degree of conformity among consumers reinforces asymmetries between firms.

Collective Choice, Justin Schwartz

Justin Schwartz

This short nontechnical article reviews the Arrow Impossibility Theorem and its implications for rational democratic decisionmaking. In the 1950s, economist Kenneth J. Arrow proved that no method for producing a unique social choice involving at least three choices and three actors could satisfy four seemingly obvious constraints that are practically constitutive of democratic decisionmaking. Any such method must violate such a constraint and risks leading to disturbingly irrational results such and Condorcet cycling. I explain the theorem in plain, nonmathematical language, and discuss the history, range, and prospects of avoiding what seems like a fundamental theoretical challenge to the possibility …

Trust And Trustworthiness Among Economics Majors, Utteeyo Dasgupta, Arjun Menon

Utteeyo Dasgupta

We use a simple trust-game to elicit trusting and trustworthy behavior among students majoring in economics and other disciplines. We also administer a Social Values Orientation (SVO) survey to evaluate any possible correlation between an individual's levels of trust indicated in the survey and his/her action in the game. Our results suggest that although students pursuing a major in economics appear to be no different than other students in choosing trusting actions, when it comes to being trustworthy, the former group always chooses the self payoff maximizing action rather than the trustworthy action. Scores from the SVO survey do not …

Using Spectrum Auctions To Enhance Competition In Wireless Services, Peter Cramton, Evan Kwerel, Gregory Rosston, Andrzej Skrzypacz1

Peter Cramton

Spectrum auctions are used by governments to assign and price licenses for wireless communications. Effective auction design recognizes the importance of competition, not only in the auction, but in the downstream market for wireless communications. This paper examines several instruments regulators can use to enhance competition and thereby improve market outcomes.

Letter To Deputy Administrator Blum (Cms) On Medicare Auction, Peter Cramton

Peter Cramton

No abstract provided.

Reducing Healthcare Costs Requires Good Market Design, Peter Cramton, Brett Katzman

Peter Cramton

No abstract provided.

Letter From 167 Concerned Auction Experts On Medicare Competitive Bidding Program, Peter Cramton

Peter Cramton

No abstract provided.

Wind Energy In Colombia: A Framework For Market Entry, Peter Cramton, Walter Vergara, Alejandro Deeb, Natsuko Toba, Irene Leino

Peter Cramton

The purpose of this report is to provide decision makers in Colombia (and by extension other countries or regions), who are considering the deployment or consolidation of wind power, with a set of options to promote its use. The options presented are the result of an analysis of the Colombian market; this analysis included simulations and modeling of the country’s power sector, and extensive consultations with operators, managers, and agents. More information on the analysis and simulations is presented in the appendixes. Wind was chosen to exemplify the range of renewable energy alternatives available to complement traditional power sector technologies …

De Coöperatie, Organisatievorm Uit Het Verleden Voor Onze Samenleving Van Morgen?, Wim Van Opstal

Wim Van Opstal

De financieel-economische crisis heeft het debat over de wijze waarop we onze economie moeten organiseren opnieuw aangewakkerd. Brede lagen van de bevolking, het maatschappelijk middenveld en zelfs de politieke klasse gingen op zoek naar alternatieven voor ons economisch bestel. Eén van deze alternatieven is de coöperatie. Het loont daarom eens de moeite om te kijken in welke domeinen men deze organisatievorm (her)ontdekt heeft en of de coöperatie daadwerkelijk een alternatief kan vormen voor bepaalde sociale en economische problemen.

Naar Een Monitor Voor De Sociale Economie In Vlaanderen, Wim Van Opstal, Eva Deraedt

Wim Van Opstal

In de loop van 2009 werd aan het HIVA – Onderzoeksinstituut voor Arbeid en Samenleving (KULeuven) in de schoot van het Steunpunt Werk en Sociale Economie een monitor voor de sociale inschakelingseconomie opgesteld (Deraedt & Van Opstal, 2009a, b). Het ontwerp van deze monitor volgt daarbij de conceptualisering van de sociale economie, zoals eerder uitgewerkt in een technisch voorrapport door Gijselinckx & Van den Broeck (2008). Bij de uitdraai van de monitor werden verschillende administratieve databanken aan elkaar gekoppeld, wat ons toelaat een profielschets van de sector op te stellen op ondernemingsniveau en op het niveau van haar doelgroepmedewerkers. Daarnaast …

Armoede Te Huur. Ervaringsdeskundigheid Op Een Schoteltje., Birgit Goris, Wim Van Opstal

Wim Van Opstal

Het Europese jaar van de bestrijding van armoede en sociale uitsluiting, loopt op haar laatste benen. Het Belgische motto luidde: ‘De strijd tegen armoede is een zaak van iedereen’. Een uitspraak die wijst op de noodzaak van een brede maatschappelijke inzet en betrokkenheid van het beleid, de hulp- en dienstverlening, armen en niet-armen. Cijfers en onderzoek tonen aan dat één persoon op zeven in België onder de armoedegrens leeft, ondanks het vangnet van onze sociale bijstand en sociale zekerheid. Al verbergt het zich nog zo goed, armoede is ook in ons land een reëel probleem. De aanpak van dit probleem …

Werken Met En Voor Mensen In Kansarmoede. Een Evaluatie Van Het Project Tao Limburg, Birgit Goris, Ann Moreels, Wim Van Opstal

Wim Van Opstal

Dit onderzoeksrapport is het resultaat van een evaluatie van het project ‘TAO – Team voor Advies en Ondersteuning’ in Limburg, dat in een eerste projectjaar liep van september 2009 tot mei 2010. De evaluatie vond plaats in de periode december 2009 tot juni 2010. Het doel van de evaluatie is het grondig onderzoeken van de specificiteit van het huidige project (een pool van opgeleide ervaringsdeskundigen); de meerwaarde voor het werkveld (i.c. toegankelijkheid en kwaliteit van voornamelijk de sociale hulp- en dienstverlening) en de doelgroep van mensen in kansarmoede; de efficiëntie en de effectiviteit van de organisatie (op vlak van personeelsbezetting, …

Theoretical And Experimental Analysis Of Auctions With Negative Externalities, Youxin Hu, John Kagel, Lixin Ye

Youxin Hu

We investigate a model in which a single bidder (the “entrant”), on winning the auction, imposes a negative externality on two “regular” bidders. In an ascending price clock auction, in equilibrium when all bidders are active a regular bidder free rides, dropping out before reaching his private value. Despite this free riding problem, in almost all cases, the item is ex post efficiently assigned. In contrast, in a first-price sealed bid auction incentives for free riding and aggressive bidding coexist, leading to a lower ex post efficiency. The experiment shows minimal free riding in the clock auction, but as predicted, …

Using Forward Markets To Improve Electricity Market Design, Peter Cramton, Lawrence Ausubel

Peter Cramton

Forward markets, both medium term and long term, complement the spot market for wholesale electricity. The forward markets reduce risk, mitigate market power, and coordinate new investment. In the medium term, a forward energy market lets suppliers and demanders lock in energy prices and quantities for one to three years. In the long term, a forward reliability market assures adequate resources are available when they are needed most. The forward markets reduce risk for both sides of the market, since they reduce the quantity of energy that trades at the more volatile spot price. Spot market power is mitigated by …

Virtual Power Plant Auctions, Peter Cramton, Lawrence Ausubel

Peter Cramton

Since their advent in 2001, virtual power plant (VPP) auctions have been implemented widely. In this paper, we describe the simultaneous ascending-clock auction format that has been used for virtually all VPP auctions to date, elaborating on other design choices that most VPP auctions have had in common as well as discussing a few aspects that have varied significantly among VPP auctions. We then evaluate the various objectives of regulators in requiring VPP auctions, concluding that the auctions have been effective devices for facilitating new entry into electricity markets and for developing wholesale power markets.

Competition-Based Environmental Policy: An Analysis Of Farmland Preservation In Maryland, John K. Horowitz, Lori Lynch, Andrew J. Stocking

Andrew J Stocking

Policy makers have turned to competition-based voluntary-enrollment programs as a cost-effective way to achieve preferred land uses. This paper studies bidder behavior in an innovative auction-based program in which farmers compete to sell and retire the right to develop their land. We derive a reduced-form bidding model that includes private and common values. This model allows us to estimate the role of bidder competition, winner’s curse correction, and the underlying distribution of private values. We estimate that the auction enrolled as many as 3,000 acres (12%) more than a take-it-or-leave-it offer would have enrolled for the same budgetary cost.

Charitable Memberships, Volunteering, And Discounts: Evidence From A Large-Scale Online Field Experiment, Andreas Lange, Andrew J. Stocking

Andrew J Stocking

Despite the increasing use by charities, significant uncertainty exists about optimal online fundraising mechanisms, especially when large donor pools show substantial heterogeneities. We use an online natural field experiment with over 700,000 subjects to test theory on price discounts and show large differences in donation behavior between donors who have previously given money and/or volunteered. For example, framing the charity’s membership price as a discount increases response rates and decreases conditional contributions from former volunteers, but not from past money donors. Our study thereby demonstrates the importance of conditioning fundraising strategies on the specifics of past donation dimensions.

A Two-Sided Auction For Legacy Loans, Peter Cramton

Peter Cramton

On Monday, 23 March 2009, Treasury Secretary Geithner presented the Public-Private Investment Program as a key instrument to resolve the financial crisis (www.financialstability.gov). The Treasury’s description still leaves many issues unanswered. We flesh out the auction design for legacy loans. A two-sided auction is required. Both banks and private investors must compete in a transparent and competitive process.

Bringing Growth Theory Down To Earth, Andrew J. Stocking, Ramon Lopez

Andrew J Stocking

Explicitly accounting for certain basic physical laws governing the “earth” sector dramatically enriches our ability to explain a high degree of diversity in observed patterns of economic growth. We provide a theoretical explanation of why some countries have been able to sustain a more or less constant and positive rate of economic growth for many decades while so many others have failed to do so. The analysis predicts that countries that have an over abundance of physical capital (a concept that is precisely defined in the text) may be unable to sustain a positive rate of economic growth over the …

Enabling Environments For Social Enterprise Development. Analytical Framework And International Exploratory Study Of Good Practices, Raf Peels, Caroline Gijselinckx, Wim Van Opstal, Li Zhao

Wim Van Opstal

The ILO Social Enterprise Development Targeting Unemployed Youth in South Africa (SETYSA) project seeks to promote social enterprise development in South Africa by supporting progress towards a conducive enabling environment and the development of appropriate business development service (BDS) products for potential social entrepreneurs, with a particular focus on young entrepreneurs. The ultimate objective of the project is to encourage the creation of employment opportunities within social enterprises, as well as the social value delivered by the goods and services they produce.

This report presents a selection of policy measures that governments worldwide are taking to create a supportive environment …