Economic Theory Commons^™

Breaking Up: Experimental Insights Into Economic (Dis)Integration, Gabriele Camera, Lukas Hohl, Rolf Weder

ESI Working Papers

Standard international economic theory suggests that people should embrace economic integration because it promises large gains. But recent events such as Brexit indicate a desire for economic disintegration. Here we report results of an experiment, based on a strategic analytical framework, of how size and distribution of potential gains from integration influence outcomes and individuals’ inclination to embrace integration. We find that cross-country inequality in potential gains acts as a friction to realize those gains. This suggests that to better understand recent phenomena, international economic theory should account for distributional considerations and behavioral aspects it currently ignores.

Parametric Rationing With Uncertain Needs, Yan Long, Jingyi Xue

Research Collection School Of Economics

We study resource allocation in the face of uncertain needs. We extend Young (1987)’s parametric rules to the uncertain context. We re-establish the axiomatic char-acterization of parametric rules and show the optimality of the rules.

Human Rights And Economic Democracy: Reinvigorating The Human Rights Movement, Curtis T. Kline

Biennial Conference: The Social Practice of Human Rights

A 2018 report from the Intergovernmental Panel on Climate Change (IPCC) concluded that in order to avoid a seemingly inevitable ecological collapse that would bring intense suffering especially on the most marginalized and excluded sectors; the world needs to develop “rapid, far-reaching and unprecedented changes in all aspects of society”. There are many local experiences which demonstrate the possibilities of achieving these needed changes. There are a number of community organizations and associations, social movements, and municipal efforts, among others, with creative visions on this front. In Jackson, Mississippi, for example, Cooperation Jackson strives to be a means …

Non-Separable Models With High-Dimensional Data, Liangjun Su, T Ura, Yc Zhang

Research Collection School Of Economics

This paper studies non-separable models with a continuous treatment when the dimension of the control variables is high and potentially larger than the effective sample size. We propose a three-step estimation procedure to estimate the average, quantile, and marginal treatment effects. In the first stage we estimate the conditional mean, distribution, and density objects by penalized local least squares, penalized local maximum likelihood estimation, and numerical differentiation, respectively, where control variables are selected via a localized method of L-1-penalization at each value of the continuous treatment. In the second stage we estimate the average and marginal distribution of the potential …

Continuous Implementation With Small Transfers, Yi-Chun Chen, Takashi Kunimoto, Yifei Sun

Research Collection School Of Economics

The robust mechanism design literature investigates the global robustness of op-timal mechanisms to large changes in the environment. Acknowledging the global robustness as an overly demanding requirement, we propose continuous implementa-tion as a local robustness of optimal mechanisms to small changes in the environment. We say that a social choice function is continuously implementable “with small trans-fers” if there exists a mechanism which yields the outcome close to the desired one for all types close to the designer’s initial model. We show that when a generic cor-relation condition is imposed on the class of interdependent values environments, any incentive compatible …

Make It Too Difficult And I’Ll Give-Up; Let Me Succeed And I’Ll Excel: The Interaction Between Assigned And Personal Goals, James Fan, Joaquin Gomez-Minambres, Samuel Smithers

ESI Working Papers

We examine the motivational effects of setting both assigned and personal non-binding goals on a real effort laboratory experiment. In order to derive conjectures for our experiment, we develop a model with goal-dependent preferences. In line with previous studies, we find that goal setting leads to a higher performance. We also find that goal-setting is most effective if subjects were able to achieve previous goals. Therefore, in goal setting, “success breeds success”. In particular, we observe that when subjects are initially allowed to attain assigned goals, they are better at self-motivating in the future when performing under personal goals.

Investment Choice Architecture In Trust Games: When “All-In” Is Not Enough, Joaquin Gómez-Miñambres, Eric Schniter, Timothy W. Shields

ESI Working Papers

While many economic interactions feature “All-or-Nothing” options nudging investors towards going “all-in”, such designs may unintentionally affect reciprocity. We manipulate the investor’s action space in two versions of the “trust game”. In one version investors can invest either “all” their endowment or “nothing”. In the other version, they can invest any amount of the endowment. Consistent with our intentions-based model, we show that "all-or-nothing” designs coax more investment but limit investors’ demonstrability of intended trust. As a result, “all-in” investors are less generously reciprocated than when they can invest any amount, where full investments are a clearer signal of trustworthiness.

Labor Contracts, Gift-Exchange And Reference Wages: Your Gift Need Not Be Mine!, Hernán Bejarano, Brice Corgnet, Joaquín Gómez-Miñambres

ESI Working Papers

We extend Akerlof’s (1982) gift-exchange model to the case in which reference wages respond to changes in the work environment such as those related to unemployment benefits or workers’ productivity levels. Our model shows that these changes spur disagreements between workers and employers regarding the value of the reference wage. These disagreements tend to weaken the gift-exchange relationship thus reducing production levels and wages. We find support for these predictions in a controlled, yet realistic, workplace environment. Our work also sheds light on several stylized facts regarding employment relationships such as the increased intensity of labor conflicts when economic conditions …

Nonbinding Goals In Teams: A Real Effort Coordination Experiment, James Fan, Joaquin Gómez-Miñambres

ESI Publications

Problem definition: We investigate the impact of nonbinding (wage-irrelevant) goals, set by a manager, on a team of workers with “weak-link” production technology. Can nonbinding goals improve team production when team members face production complementarity? Academic/practical relevance: Nonbinding goals are easy to implement and ubiquitous in practice. These goals have been shown to improve individual performance, but it remains to be seen if such goals are effective in team production when there is production complementarity among workers. Methodology: We first develop a theoretical model where goals act as reference points for workers’ intrinsic motivation to complete the …

Give Me A Challenge Or Give Me A Raise, Aleksandr Alekseev

ESI Working Papers

I study the effect of task difficulty on workers' effort and compare it to the effect of monetary rewards in an incentivized lab experiment. I find that task difficulty has an inverse-U effect on effort, and that this effect is quantitatively large when compared to the effect of conditional monetary rewards. Difficulty acts as a mediator of monetary rewards: conditional rewards are most effective at the intermediate or high levels of difficulty. I show that the inverse-U pattern of effort response to difficulty is not consistent with the Expected Utility model but is consistent with the Rank-Dependent Utility model that …

Self-Selecting Into Being A Dictator: Distributional Consequences, Lara Ezquerra, Praveen Kujal

ESI Working Papers

We allow for principals to self-select into delegating, or not, the allocation decision to an agent in a modified dictator game. The standard dictator game arises when principal´s choose to make the allocation decision themselves. Dictators thus obtained transfer lower amounts to receivers, relative to when the decision making is passed to an agent under delegation (or in the standard dictator game). Principals choose to be a dictator nearly half of the time. The average amount transferred by individuals who delegate in more than half of the rounds is significantly higher than the quantity transferred by those who choose to …

The Plight Of Retail Investors In The Pakistani Stock Market, Ahmed Jamil

MSJ Capstone Projects

PSX has a reputation for being biased towards big investors; Experts blame lack of information, brokers’ disinterest in smaller returns, and govt.’s indifference towards spreading investment awareness.

Lying And Shirking Under Oath, Nicolas Jacquemet, Alexander James, Stéphane Luchini, James J. Murphy, Jason F. Shogren

ESI Working Papers

This study explores whether an oath to honesty can reduce both shirking and lying among crowd-sourced internet workers. Using a classic coin-flip experiment, we first show that a substantial majority of Mechanical Turk workers both shirk and lie when reporting the number of heads flipped. We then demonstrate lying can be reduced by first asking each worker to swear voluntarily on his or her honor to tell the truth in subsequent economic decisions. The oath, however, did not reduce shirking as measured by time- at-coin-flip-task, although it did increase the time they spent answering a demographic survey. Conditional on response, …

Kinship, Fractionalization And Corruption, Mahsa Akbari, Duman Bahrami-Rad, Erik O. Kimbrough

Economics Faculty Articles and Research

We examine the roots of variation in corruption across societies, and we argue that marriage practices and family structure are an important, overlooked determinant of corruption. By shaping patterns of relatedness and interaction, marriage practices influence the relative returns to norms of nepotism/favoritism versus norms of impartial cooperation. In-marriage (e.g. consanguineous marriage) generates fractionalization because it yields relatively closed groups of related individuals and thereby encourages favoritism and corruption. Out-marriage creates a relatively open society with increased interaction between non-relatives and strangers, thereby encouraging impartiality. We report a robust association between in-marriage practices and corruption both across countries and within …

Computed Tomography Shows High Fracture Prevalence Among Physically Active Forager-Horticulturalists With High Fertility, Jonathan Stieglitz, Benjamin C. Trumble, Horus Study Team, Caleb E. Finch, Dong Li, Matthew J. Budoff, Hillard Kaplan, Michael D. Gurven

ESI Publications

Modern humans have more fragile skeletons than other hominins, which may result from physical inactivity. Here, we test whether reproductive effort also compromises bone strength, by measuring using computed tomography thoracic vertebral bone mineral density (BMD) and fracture prevalence among physically active Tsimane forager-horticulturalists. Earlier onset of reproduction and shorter interbirth intervals are associated with reduced BMD for women. Tsimane BMD is lower versus Americans, but only for women, contrary to simple predictions relying on inactivity to explain skeletal fragility. Minimal BMD differences exist between Tsimane and American men, suggesting that systemic factors other than fertility (e.g. diet) do not …

Adding Tournament To Tournament: Combining Between-Team And Within-Team Incentives, Michael Majerczyk, Roman Sheremeta, Yu Tian

ESI Working Papers

We examine theoretically and experimentally how combining between-team and within-team incentives affects behavior in team tournaments. Theory predicts that free-riding will occur when there are only between-team incentives, and offering within-team incentives may solve this problem. However, if individuals collude, then within-team incentives may not be as effective at reducing free-riding. Consistent with the theoretical predictions, the results of our experiment indicate that although between-team incentives are effective at increasing individual effort, there is substantial free-riding and declining effort over time. Importantly, a combination of between-team and within-team incentives is effective not only at generating effort but also at sustaining …

A Dynamical Systems Approach To Cryptocurrency Stability, Carey Caginalp

ESI Publications

Recently, the notion of cryptocurrencies has come to the fore of public interest. These assets that exist only in electronic form, with no underlying value, offer the owners some protection from tracking or seizure by government or creditors. We model these assets from the perspective of asset flow equations developed by Caginalp and Balenovich, and investigate their stability under various parameters, as classical finance methodology is inapplicable. By utilizing the concept of liquidity price and analyzing stability of the resulting system of ordinary differential equations, we obtain conditions under which the system is linearly stable. We find that trend-based motivations …

The Dynamics Of Men's Cooperation And Social Status In A Small-Scale Society, Christopher Von Rueden, Daniel Redhead, Rick O'Gorman, Hillard Kaplan, Michael Gurven

ESI Publications

We propose that networks of cooperation and allocation of social status co-emerge in human groups. We substantiate this hypothesis with one of the first longitudinal studies of cooperation in a preindustrial society, spanning 8 years. Using longitudinal social network analysis of cooperation among men, we find large effects of kinship, reciprocity and transitivity in the nomination of cooperation partners over time. Independent of these effects, we show that (i) higher-status individuals gain more cooperation partners, and (ii) individuals gain status by cooperating with individuals of higher status than themselves. We posit that human hierarchies are more egalitarian relative to other …

Essays On Human Capital Formation In Developing Countries, Alexander Sergeevich Ugarov

Graduate Theses and Dissertations

Differences in human capital explain approximately one-half of the productivity variation across countries. Therefore, we need to understand drivers of human capital accumulation in order to design successful development policies. My dissertation studies formation and use of human capital with emphasis on its less tangible forms, including skills, abilities and know-how.

The first chapter of my dissertation explores the effects of occupational and educational barriers on human capital stock and aggregate productivity. I find that students' academic skills have very small impact on occupational choice in most developing countries. This finding suggests a higher incidence of occupational barriers in developing …

Fields And Consumer Groups: The Layered And Overlapping Roles Of Culture, Brandon James Mcalexander

Graduate Theses and Dissertations

The first essay investigates Bourdieu’s conceptualization of fields and its use in the marketing literature. It suggests that fields do not exist in isolation, but rather work together in a number of different possible configurations. Fields are reconceptualized as dominated, overlapped, unrelated, contrasted, and co-constituted, rather than completely distinct and opens a new theoretical space for interpretive researchers in marketing. The second essay is a descriptive ethnography of a local fab lab. The essay describes in rich detail the ways in which new skills are developed in a shared work environment, and contextualizes the findings using practice theory as a …

Co-Enforcement Of Common Pool Resources: Experimental Evidence From Turfs In Chile, Carlos A. Chávez, James J. Murphy, John K. Stranlund

ESI Working Papers

This work presents the results of framed field experiments designed to study the co-enforcement of access to common pool resources. The experiments were conducted in the field with participants in the territorial use rights in fisheries (TURFs) management scheme that regulates access to nearshore fisheries along the coast of Chile. In the experiments, TURF members not only decided on harvest but also invested in monitoring to deter poaching by outsiders. Treatments varied whether the monitoring investment was an individual decision or determined by a group vote. Per-unit sanctions for poaching were exogenous as if provided by a government authority, and …

Kinship Ties Across The Lifespan In Human Communities, Jeremy Koster, Dieter Lukas, David Nolin, Eleanor Power, Alexandra Alvergne, Ruth Mace, Cody T. Ross, Karen Kramer, Russell Graves, Mark Caudell, Shane Macfarlan, Eric Schniter, Robert Quinlan, Siobhan Mattison, Adam Reynolds, Chun Yi-Sim, Eric Massengill

ESI Publications

A hypothesis for the evolution of long post-reproductive lifespans in the human lineage involves asymmetries in relatedness between young immigrant females and the older females in their new groups. In these circumstances, inter-generational reproductive conflicts between younger and older females are predicted to resolve in favor of the younger females, who realize fewer inclusive fitness benefits from ceding reproduction to others. This conceptual model anticipates that immigrants to a community initially have few kin ties to others in the group, gradually showing greater relatedness to group members as they have descendants who remain with them in the group. We examine …

Nonlinear Price Dynamics Of S&P 100 Stocks, Gunduz Caginalp, Mark Desantis

ESI Publications

The methodology presented provides a quantitative way to characterize investor behavior and price dynamics within a particular asset class and time period. The methodology is applied to a data set consisting of over 250,000 data points of the S&P 100 stocks during 2004-2018. Using a two-way fixed-effects model, we uncover trader motivations including evidence of both under- and overreaction within a unified setting. A nonlinear relationship is found between return and trend suggesting a small, positive trend increases the return, while a larger one tends to decrease it. The shape parameters of the nonlinearity quantify trader motivation to buy into …

Random Mechanism Design On Multidimensional Domains, Shurojit Chatterji, Huaxia Zeng

Research Collection School Of Economics

We study random mechanism design in an environment where the set of alternatives has a Cartesian product structure. We first show that all generalized random dictatorships are strategy-proof on a minimally rich domain if and only if the domain is a top-separable domain. We next generalize the notion of connectedness (Monjardet, 2009) to establish a particular class of top-separable domains: connected domains, and show that in the class of minimally rich and connected domains, the multidimensional single-peakedness restriction is necessary and sufficient for the design of a flexible random social choice function that is unanimous and strategy-proof. Such a flexible …

Equivalence Of Stochastic And Deterministic Mechanisms, Yi-Chun Chen, Jiangtao Li, Jiangtao Li, Yeneng Sun

Research Collection School Of Economics

We consider a general social choice environment that has multiple agents, a finite set of alternatives, independent types, and atomless type distribution. We show that for any Bayesian incentive compatible mechanism, there exists an equivalent deterministic mechanism that (1) is Bayesian incentive compatible; (2) delivers the same interim expected allocation probabilities and the same interim expected utilities for all agents; and (3) delivers the same ex ante expected social surplus. This result holds in settings with a rich class of utility functions, multidimensional types, interdependent valuations, and in settings without monetary transfers. To prove our result, we develop a novel …

Limit Theory For Moderate Deviation From Integrated Garch Processes, Yubo Tao

Research Collection School Of Economics

This paper develops the limit theory of the GARCH(1,1) process that moderately deviates from IGARCH process towards both stationary and explosive regimes. The asymptotic theory extends Berkes et al. (2005) by allowing the parameters to have a slower rate of convergence. The results can be applied to unit root test for processes with mildly-integrated GARCH innovations (e.g. Boswijk (2001), Cavaliere and Taylor (2007, 2009)) and deriving limit theory of estimators for models involving mildly-integrated GARCH processes (e.g. Jensen and Rahbek (2004), Francq and Zakoïan (2012, 2013).

The Effect Of Social Information In The Dictator Game With A Taking Option, Tanya O'Garra, Valerio Capraro, Praveen Kujal

ESI Working Papers

We experimentally study how redistribution choices are affected by positive and negative information regarding the behaviour of a previous participant in a dictator game with a taking option. We use the strategy method to identify behavioural ‘types’, and thus distinguish ‘conformists’ from ‘counter-conformists’, and unconditional choosers. Unconditional choosers make up the greatest proportion of types (about 80%) while only about 20% of subjects condition their responses to social information. We find that both conformity and counter-conformity are driven by a desire to be seen as moral (the ‘symbolization’ dimension of moral identity). The main difference is that, conformity is also …

Cournot Marked The Turn From Classical To Neoclassical Thinking, Vernon L. Smith, Sabiou M. Inoua

ESI Working Papers

For classical economists, markets served the highest value buyers without anyone in the market needing to know that it was possible to write aggregate buyer reservation prices in the form, D = F (p). Cournot, thereby launched neoclassical economics as modelling and thinking of economic action in terms of their outcome effects, rather than their roots in human experience.

Classical Economics: Lost And Found, Sabiou M. Inoua, Vernon Smith

ESI Working Papers

"We argue that neoclassical value theory suffers from a more basic and serious logical indeterminacy, which is inherent in the axiom of price-taking behavior, and which renders price dynamics indeterminate before inquiring as to its stability. If everyone in the economy takes price as given, whence come these prices? Who is giving these prices? Jevons avoided the indeterminacy by assuming that people must have complete information on supply and demand, and the consequent equilibrium prices—‘perfect competition.’ Walras in effect imported an external agent who found the prices by trial-and-error-correction (the Walrasian Auctioneer). Paradoxically, both approaches had the potential better to …

Analisa Produk Asuransi Minyak Dan Gas Bumi Dalam Kegiatan Oprasional Usaha Hulu Offshore Pertamina, Kuncoro Haryo Pribadi, Annisa Pratiwi

Jurnal Administrasi Bisnis Terapan

Indonesia as a country that has a lot of natural wealth and natural beauty is famous to reach all corners of the world. Many mining goods owned by the Indonesian nation include: petroleum, gold, silver, nickel, manganese, wood and so on as well as the largest natural gas owned by Indonesia in the world. Thus, we must also be able to make use of the riches wisely and be used as well as possible to be used for the prosperity of the people. The government made various regulations to open mining, process mining products and obtain mining products and channel …