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Articles 61 - 90 of 106
Full-Text Articles in Economic Theory
Do Market Incentives Crowd Out Charitable Giving?, Cary Deck, Erik O. Kimbrough
Do Market Incentives Crowd Out Charitable Giving?, Cary Deck, Erik O. Kimbrough
Economics Faculty Articles and Research
Donations and volunteerism can be conceived as market transactions with a zero explicit price. However, evidence suggests people may not view zero as just another price when it comes to pro-social behavior. Thus, while markets might be expected to increase the supply of assets available to those in need, some worry such financial incentives will crowd out altruistic giving. This paper reports laboratory experiments directly investigating the degree to which market incentives crowd out large, discrete charitable donations in a setting related to deceased organ donation. The results suggest markets increase the supply of assets available to those in need. …
Comparative Approaches To Studying Strategy: Towards An Evolutionary Account Of Primate Decision Making, Sarah F. Brosnan, Michael J. Beran, Audrey E. Parrish, Sara A. Price, Bart J. Wilson
Comparative Approaches To Studying Strategy: Towards An Evolutionary Account Of Primate Decision Making, Sarah F. Brosnan, Michael J. Beran, Audrey E. Parrish, Sara A. Price, Bart J. Wilson
Economics Faculty Articles and Research
How do primates, humans included, deal with novel problems that arise in interactions with other group members? Despite much research regarding how animals and humans solve social problems, few studies have utilized comparable procedures, outcomes, or measures across different species. Thus, it is difficult to piece together the evolution of decision making, including the roots from which human economic decision making emerged. Recently, a comparative body of decision making research has emerged, relying largely on the methodology of experimental economics in order to address these questions in a cross-species fashion. Experimental economics is an ideal method of inquiry for this …
Endogenous Group Formation Via Unproductive Costs, Jason A. Aimone, Laurence R. Iannaccone, Michael D. Makowsky, Jared Rubin
Endogenous Group Formation Via Unproductive Costs, Jason A. Aimone, Laurence R. Iannaccone, Michael D. Makowsky, Jared Rubin
Economics Faculty Articles and Research
Sacrifice is widely believed to enhance cooperation in churches, communes, gangs, clans, military units, and many other groups. We find that sacrifice can also work in the lab, apart from special ideologies, identities, or interactions. Our subjects play a modified VCM game—one in which they can voluntarily join groups that provide reduced rates of return on private investment. This leads to both endogenous sorting (because free-riders tend to reject the reduced-rate option) and substitution (because reduced private productivity favours increased club involvement). Seemingly unproductive costs thus serve to screen out free-riders, attract conditional cooperators, boost club production, and increase member …
Go West Young Man: Self-Selection And Endogenous Property Rights, Taylor Jaworski, Bart J. Wilson
Go West Young Man: Self-Selection And Endogenous Property Rights, Taylor Jaworski, Bart J. Wilson
Economics Faculty Articles and Research
If, as Hume argues, property is a self-referring custom of a group of people, then property rights depend on how that group forms and orders itself. In this article we investigate how people construct a convention for property in an experiment in which groups of self-selected individuals can migrate between three geographically separate regions. To test a hypothesis of Demsetz's, we vary across two treatments the external benefits of migrating. We find that self-selection has a powerful effect on establishing conventions of property and begetting increases in wealth through exchange and specialization. We also find support for the Demsetz hypothesis.
An Experimental Investigation Of Colonel Blotto Games, Subhasish M. Chowdhury, Dan Kovenock, Roman M. Sheremeta
An Experimental Investigation Of Colonel Blotto Games, Subhasish M. Chowdhury, Dan Kovenock, Roman M. Sheremeta
Economics Faculty Articles and Research
This article examines behavior in the two-player, constant-sum Colonel Blotto game with asymmetric resources in which players maximize the expected number of battlefields won. The experimental results support the main qualitative predictions of the theory. In the auction treatment, where winning a battlefield is deterministic, disadvantaged players use a 'guerilla warfare' strategy that stochastically allocates zero resources to a subset of battlefields. Advantaged players employ a 'stochastic complete coverage' strategy, allocating random, but positive, resource levels across the battlefields. In the lottery treatment, where winning a battlefield is probabilistic, both players divide their resources equally across all battlefields. However, we …
Managing A Duopolistic Water Market With Confirmed Proposals. An Experiment, Aurora García-Gallego, Nikolaos Georgantzís, Roberto Hérnan-Gonzalez, Praveen Kujal
Managing A Duopolistic Water Market With Confirmed Proposals. An Experiment, Aurora García-Gallego, Nikolaos Georgantzís, Roberto Hérnan-Gonzalez, Praveen Kujal
Economics Faculty Articles and Research
We report results from experimental water markets in which owners of two different sources of water supply water to households and farmers. The final water quality consumed by each type of consumer is determined through mixing of qualities from two different resources. We compare the standard duopolistic market structure with an alternative market clearing mechanism inspired by games with confirmed strategies (which have been shown to yield collusive outcomes). As in the static case, complex dynamic markets operating under a confirmed proposals protocol yield less efficient outcomes because coordination among independent suppliers has the usual effects of restricting output and …
Age Effects And Heuristics In Decision Making, Tibor Besedeš, Cary Deck, Sudipta Sarangi, Mikhael Shor
Age Effects And Heuristics In Decision Making, Tibor Besedeš, Cary Deck, Sudipta Sarangi, Mikhael Shor
Economics Faculty Articles and Research
Using controlled experiments, we examine how individuals make choices when faced with multiple options. Choice tasks are designed to mimic the selection of health insurance, prescription drug, or retirement savings plans. In our experiment, available options can be objectively ranked, allowing us to examine optimal decision making. First, the probability of a person selecting the optimal option declines as the number of options increases, with the decline being more pronounced for older subjects. Second, heuristics differ by age, with older subjects relying more on suboptimal decision rules. In a heuristics validation experiment, older subjects make worse decisions than younger subjects.
The Herodotus Paradox, Michael R. Baye, Dan Kovenock, Casper G. De Vries
The Herodotus Paradox, Michael R. Baye, Dan Kovenock, Casper G. De Vries
Economics Faculty Articles and Research
The Babylonian bridal auction, described by Herodotus, is regarded as one of the earliest uses of an auction in history. Yet, to our knowledge, the literature lacks a formal equilibrium analysis of this auction. We provide such an analysis for the two-player case with complete and incomplete information, and in so doing identify what we call the 'Herodotus paradox.'
The Lifeboat Problem, Kai A. Konrad, Dan Kovenock
The Lifeboat Problem, Kai A. Konrad, Dan Kovenock
Economics Faculty Articles and Research
We study an all-pay contest with multiple identical prizes (“lifeboat seats”). Prizes are partitioned into subsets of prizes (“lifeboats”). Players play a two-stage game. First, each player chooses an element of the partition (“a lifeboat”). Then each player competes for a prize in the subset chosen (“a seat”). We characterize and compare the subgame perfect equilibria in which all players employ pure strategies or all players play identical mixed strategies in the first stage. The partitioning of prizes can lead to coordination failure when players employ nondegenerate mixed strategies. In these equilibria some rents are sheltered and rent dissipation is …
Resource Adequacy: Should Regulators Worry?, Hernan D. Bejarano, Lance Clifner, Carl Johnston, Stephen J. Rassenti, Vernon L. Smith
Resource Adequacy: Should Regulators Worry?, Hernan D. Bejarano, Lance Clifner, Carl Johnston, Stephen J. Rassenti, Vernon L. Smith
Economics Faculty Articles and Research
Regulators have proposed various institutional alternatives to secure network resource adequacy and reasonably priced electric power for consumers. These alternatives prompt many difficult questions: Does the development of Demand Response reduce the need for new capacity? How effectively can a government-mandated Capacity Market foster efficient investment? How does centralized generator commitment (with revenue guarantees) compare to a system in which Generators voluntarily commit themselves with no revenue guarantees? If exclusive distribution contracts were replaced by unregulated retail competition, what would be the effects on investment and market prices? We use laboratory experiments to address these questions.
Nonlinear Dynamics And Stability In A Multigroup Asset Flow Model, Mark Desantis, David Swigon, Gunduz Caginalp
Nonlinear Dynamics And Stability In A Multigroup Asset Flow Model, Mark Desantis, David Swigon, Gunduz Caginalp
Economics Faculty Articles and Research
The multigroup asset flow model for asset price dynamics incorporates distinct motivations, e. g., trend and fundamentals (value) and assessments of value by different groups of investors. The stability and bifurcation properties are established for the curve of equilibria. We prove that if all trader groups focus on fundamentals, then all equilibria are stable. For systems in which there is one fundamental and one momentum (trend) group, we establish conditions for stability. In particular, an equilibrium that is stable becomes unstable as the time scale on which momentum investors focus diminishes. The computations examine the excursions, which we define as …
Political Legitimacy And Technology Adoption, Metin M. Coşgel, Thomas J. Miceli, Jared Rubin
Political Legitimacy And Technology Adoption, Metin M. Coşgel, Thomas J. Miceli, Jared Rubin
Economics Faculty Articles and Research
A fundamental question of economic and technological history is why some civilizations adopted new and important technologies and others did not. In this paper, we analyze the effect that new technologies have on agents that legitimize rulers. We construct a simple political economy model which suggests that rulers may not accept a productivity-enhancing technology when it negatively affects an agent’s ability to provide the ruler legitimacy. However, when other sources of legitimacy emerge, the ruler will accept the technology as long as the new legitimizing source is not negatively affected. We use this insight to help explain the initial blocking …
Accommodation Or Deterrence In The Face Of Commercial Piracy: The Impact Of Intellectual Property Rights (Ipr) Protections, Yuanzhu Lu, Sougata Poddar
Accommodation Or Deterrence In The Face Of Commercial Piracy: The Impact Of Intellectual Property Rights (Ipr) Protections, Yuanzhu Lu, Sougata Poddar
Economics Faculty Articles and Research
In this paper, we address the issue of illegal copying or counterfeiting of the original product and Intellectual Property Rights (IPR) protections. The original product developer makes costly investment to deter piracy in a given regime of IPR protection. In the presence of a commercial pirate, we find that it is profitable for the original producer to accommodate the pirate when there is weak IPR protection, and deter when the IPR protection is strong. However, in the comparative statics analysis, we find that there is a non-monotonic relationship between the optimal level of deterrence (chosen by the original producer) and …
Sweet Diversity: Colonial Goods And The Welfare Gains From Trade After 1492, Jonathan Hersh, Hans-Joachim Voth
Sweet Diversity: Colonial Goods And The Welfare Gains From Trade After 1492, Jonathan Hersh, Hans-Joachim Voth
Economics Faculty Articles and Research
When did overseas trade start to matter for living standards? Traditional real-wage indices suggest that living standards in Europe stagnated before 1800. In this paper, we argue that welfare rose substantially, but surreptitiously, because of an influx of new goods as a result of overseas trade. Colonial luxuries such as tea, coffee, and sugar transformed European diets after the discovery of America and the rounding of the Cape of Good Hope. These goods became household items in many countries by the end of the 18th century. We use three different methods to calculate welfare gains based on price data and …
Product Innovation And Stability Of Collusion, Sougata Poddar, Bibhas Saha
Product Innovation And Stability Of Collusion, Sougata Poddar, Bibhas Saha
Economics Faculty Articles and Research
We study the nature of market competition in relation to stability of collusion in the infinitely repeated play of a twostage game of product innovation and market competition, and show that cooperation in giving R&D efforts is more easily sustained when firms compete in quantity than in price.
Team Formation And Self‐Serving Biases, Brice Corgnet
Team Formation And Self‐Serving Biases, Brice Corgnet
Economics Faculty Articles and Research
There is extensive evidence which indicates that people learn positively about themselves. We build on this finding to develop a model of team formation. We show that under complete information learning positively about oneself prevents efficient team formation. Agents becoming overconfident tend to ask for an excessive share of the group outcome. Positive learning generates divergence in workers' beliefs and hampers efficient team formation. Interestingly, in a context of incomplete information regarding the partner's ability, extensive learning biases may reduce the divergence in agents' beliefs and facilitate efficient team formation as a result. We apply our model to coauthorship and …
Did I Do That? Group Positioning And Asymmetry In Attributional Bias, Brian Gunia, Brice Corgnet
Did I Do That? Group Positioning And Asymmetry In Attributional Bias, Brian Gunia, Brice Corgnet
Economics Faculty Articles and Research
A laboratory experiment examined whether one structural feature of groups—members’ physical positioning—may produce asymmetry in their perceived contribution to a task. In particular, we investigated asymmetry in group members’ (often excessive) claims of credit for collective tasks ("the self-serving attributional bias"). Consistent with the availability account of this bias, group members located in the middle of a group, with easy visual access to their partners’ contributions, demonstrated less bias than outside members (who demonstrated bias consistent with prior research)—but no less satisfaction. Further analyses suggested that these results reflected bias reduction among middle members and did stem from visual availability. …
Exchange And Specialisation As A Discovery Process, Sean Crockett, Vernon L. Smith, Bart J. Wilson
Exchange And Specialisation As A Discovery Process, Sean Crockett, Vernon L. Smith, Bart J. Wilson
Economics Faculty Articles and Research
In this article we study the performance of an economy that can support specialisation if the participants develop and follow some system of exchange. We define a closed economy in which the participants must discover the ability to exchange, implement it, and ascertain what they are comparatively advantaged in producing. Many of our participants demonstrate the ability to find comparative advantage, capture gains from trade and effectively choose production that is consistent with the choices of others. We explore various treatments to provide insight into the conditions that foster the growth of specialisation and exchange within this weak institutional framework.
Public Spending On Education And The Incentives For Student Achievement, William Blankenau, Gabriele Camera
Public Spending On Education And The Incentives For Student Achievement, William Blankenau, Gabriele Camera
Economics Faculty Articles and Research
We build a model where homogeneous workers can accumulate human capital by investing in education. Schools combine public resources and individual effort to generate productive skills. If skills are imperfectly compensated, then in equilibrium students may under-invest in effort. We examine the effect on human capital accumulation of three basic education finance policies. Increased tuition subsidies may not be beneficial because they increase enrollment but they may lower the incentives for student achievement, hence the skill level. Policies directed at enhancing the productivity of education or making degrees more informative are more successful at improving educational outcomes.
A Correspondence-Theoretic Approach To Dynamic Optimization, C. D. Aliprantis, Gabriele Camera
A Correspondence-Theoretic Approach To Dynamic Optimization, C. D. Aliprantis, Gabriele Camera
Economics Faculty Articles and Research
This paper introduces a method of optimization in infinite-horizon economies based on the theory of correspondences. The proposed approach allow us to study time-separable and non-time-separable dynamic economic models without resorting to fixed point theorems or transversality conditions. When our technique is applied to the standard time-separable model it provides an alternative and straightforward way to derive the common recursive formulation of these models by means of Bellman equations.
The Alliance Formation Puzzle And Capacity Constraints, Kai A. Konrad, Dan Kovenock
The Alliance Formation Puzzle And Capacity Constraints, Kai A. Konrad, Dan Kovenock
Economics Faculty Articles and Research
The formation of an alliance in conflict situations is known to suffer from a collective action problem and from the potential of internal conflict. We show that budget constraints of an intermediate size can overcome this strong disadvantage and explain the formation of alliances.
Competition For Fdi With Vintage Investment And Agglomeration Advantages, Kai A. Konrad, Dan Kovenock
Competition For Fdi With Vintage Investment And Agglomeration Advantages, Kai A. Konrad, Dan Kovenock
Economics Faculty Articles and Research
Countries compete for new FDI investment, whereas stocks of FDI generate agglomeration benefits and are potentially subject to extortionary taxation. We study the interaction between these aspects in a simple vintage capital framework with discrete time and an infinite horizon, focussing on Markov perfect equilibrium. We show that the equilibrium taxation destabilizes agglomeration advantages. The agglomeration advantage is valuable, but is exploited in the short run. The tax revenue in the equilibrium is substantial, and higher on “old” FDI than on “new” FDI, even though countries are not allowed to use discriminatory taxation. If countries can provide fiscal incentives for …
Economics Works! Experiments In High School Classrooms, Stephen L. Jackstadt, Paul Johnson, Bart J. Wilson
Economics Works! Experiments In High School Classrooms, Stephen L. Jackstadt, Paul Johnson, Bart J. Wilson
Economics Faculty Articles and Research
Economic experiments are a unique form of active learning. Students apply the scientific method by testing hypotheses and discovering for themselves how markets work. The authors conducted teacher training courses in experimental economics over a three-year period and conducted surveys to track teachers' adoption of classroom experiments. This paper discusses the survey results and describes how the training was revised accordingly. The primary conclusion of this article is that classroom experiments must be compatible with the school environment; that is, they should emphasize non-monetary incentives and hand-run experiments as well as be explicitly tied to school curricula.
Another Example Of A Credit System That Coexists With Money, Gabriele Camera, Yiting Li
Another Example Of A Credit System That Coexists With Money, Gabriele Camera, Yiting Li
Economics Faculty Articles and Research
We study an economy in which exchange occurs pairwise, there is no commitment, and anonymous agents choose between random monetary trade or deterministic credit trade. To accomplish the latter, agents can exploit a costly technology that allows limited recordkeeping and enforcement. An equilibrium with money and credit is shown to exist if the cost of using the technology is sufficiently small. Anonymity, record-keeping and enforcement limitations also permit some incidence of default, in equilibrium.
Experimental Gasoline Markets, Cary A. Deck, Bart J. Wilson
Experimental Gasoline Markets, Cary A. Deck, Bart J. Wilson
Economics Faculty Articles and Research
Zone pricing in wholesale gasoline markets is a contentious topic in the public policy debate. With a controlled laboratory experiment, we investigate the competitive effects of zone pricing on consumers, retail stations, and refiners vis-à-vis the proposed policy prescription of uniform wholesale pricing to retailers. We also examine the issue of divorcement and the “rockets and feathers” phenomenon. The former is the legal restriction that refiners and retailers cannot be vertically integrated, and the latter is the perception that retail gasoline prices rise faster than they fall in response to random walk movements in the world price for oil.
Matching And Anonymity, C. D. Aliprantis, Gabriele Camera, D. Puzzello
Matching And Anonymity, C. D. Aliprantis, Gabriele Camera, D. Puzzello
Economics Faculty Articles and Research
This work introduces a rigorous set-theoretic foundation of deterministic bilateral matching processes and studies systematically their properties. In particular, it formalizes a link between matching and informational constraints by developing a notion of anonymity that is based on the agents' matching histories. It also explains why and how various matching processes generate different degrees of "informational isolation" in the economy. We illustrate the usefulness of our approach to modeling matching frameworks by discussing the classical turnpike model of Townsend.
Comparative Analysis Of Litigation Systems: An Auction‐Theoretic Approach, Michael R. Baye, Dan Kovenock, Casper G. De Vries
Comparative Analysis Of Litigation Systems: An Auction‐Theoretic Approach, Michael R. Baye, Dan Kovenock, Casper G. De Vries
Economics Faculty Articles and Research
A simple auction-theoretic framework is used to examine symmetric litigation environments where the legal ownership of a disputed asset is unknown to the court. The court observes only the quality of the case presented by each party, and awards the asset to the party presenting the best case. Rational litigants influence the quality of their cases by hiring skilful attorneys. This framework permits us to compare the equilibrium legal expenditures that arise under a continuum of legal systems. The British rule, Continental rule, American rule, and some recently proposed legal reforms are special cases of our model.
Free Riding In Noncooperative Entry Deterrence With Differentiated Products, Dan Kovenock, Suddhasatwa Roy
Free Riding In Noncooperative Entry Deterrence With Differentiated Products, Dan Kovenock, Suddhasatwa Roy
Economics Faculty Articles and Research
We examine free riding and underinvestment in noncooperative entry deterrence in the Gilbert and Vives (1986) model with differentiated products. Our analysis proves that for products that are differentiated enough, when both entry allowing and entry deterring equilibria coexist, the symmetric entry deterring equilibrium may Pareto dominate the entry equilibrium. Hence, "coordination failure" underinvestment in entry prevention can occur. However, as claimed, the overinvestment result of Gilbert and Vives remains robust to moderate amounts of product differentiation. We also show that coordination failure underinvestment arises in a wide variety of entry deterrence models and does not rely on assumptions regarding …
Auction Markets For Evaluations, Cary Deck, Bart J. Wilson
Auction Markets For Evaluations, Cary Deck, Bart J. Wilson
Economics Faculty Articles and Research
When the value of a product or service is uncertain, outcomes can be inefficient. A market for evaluations can theoretically increase efficiency by voluntarily eliciting an evaluation that would otherwise not be provided. This paper uses a controlled laboratory experiment to test the performance of four market mechanisms to provide product evaluations. The mechanisms considered are derived from the oft studied uniform price sealed bid, discriminatory price sealed bid, English clock auction, and Dutch clock auction. Our results indicate for this nonrivalrous product that (i) each of these institutions improves social welfare and (ii) the performances of the four mechanisms …
On Patent Licensing In Spatial Competition, Sougata Poddar, Uday Bhanu Sinha
On Patent Licensing In Spatial Competition, Sougata Poddar, Uday Bhanu Sinha
Economics Faculty Articles and Research
We consider the issue of patent licensing in a linear city framework where firms are located at the end points of the city and compete in price. We consider three types of licensing arrangements, namely, auction, fixed fee, royalty; and focus on the optimal licensing strategy of an outsider patentee as well as an insider patentee. Contrary to the findings in the existing literature, first we show offering royalty is the best for the patentee when the patentee is an outsider for both drastic and non-drastic innovation. For insider patentee, offering no-license is the best when the innovation is drastic, …