Loss Aversion And The Quantity-Quality Tradeoff,
2017
Chapman University
Loss Aversion And The Quantity-Quality Tradeoff, Jared Rubin, Anya Samek, Roman M. Sheremeta
ESI Working Papers
Firms face an optimization problem that requires a maximal quantity output given a quality constraint. But how do firms incentivize quantity and quality to meet these dual goals, and what role do behavioral factors, such as loss aversion, play in the tradeoffs workers face? We address these questions with a theoretical model and an experiment in which participants are paid for both quantity and quality of a real effort task. Consistent with basic economic theory, higher quality incentives encourage participants to shift their attention from quantity to quality. However, we also find that loss averse participants shift their attention from …
A Reexamination Of “The Hidden Return To Incentives”,
2017
Chapman University
A Reexamination Of “The Hidden Return To Incentives”, Jing Davis, Steven Schwartz, Richard Young
Economics Faculty Articles and Research
Prior literature has observed a “hidden return to incentives” where principals receive more cooperation from agents when formal incentives are available but not used than when not available. Previous experiments are replicated using a gift-exchange rather than a trust game. Hidden returns to incentives are not observed, and in fact the results show the opposite. Suggestions for future research are provided.
The Effect Of Paid Sick Leave On Physician Office-Based Visits,
2017
CUNY Hunter College
The Effect Of Paid Sick Leave On Physician Office-Based Visits, Korvin Vicente
Theses and Dissertations
This paper uses a balanced sample of workers from cross-sections of the National Health Interview Survey to estimate the causal effects of paid sick leave on the medical care seeking behavior of individuals, as measured by physician office-based visits.
Human And Monkey Responses In A Symmetric Game Of Conflict With Asymmetric Equilibria,
2017
Georgia State University
Human And Monkey Responses In A Symmetric Game Of Conflict With Asymmetric Equilibria, Sarah F. Brosnan, Sara A. Price, Kelly Leverett, Laurent Prétôt, Michael Beran, Bart J. Wilson
ESI Publications
To better understand the evolutionary history of human decision-making, we compare human behavior to that of two monkey species in a symmetric game of conflict with two asymmetric equilibria. While all of these species routinely make decisions in the context of social cooperation and competition, they have different socio-ecologies, which leads to different predictions about how they will respond. Our prediction was that anti-matching would be more difficult than matching in a symmetric coordination with simultaneous moves. To our surprise, not only do rhesus macaques frequently play one asymmetric Nash equilibrium, but so do capuchin monkeys, whose play in the …
Historical Cost And Conservatism Are Joint Adaptations That Help Identify Opportunity Cost,
2017
Temple University
Historical Cost And Conservatism Are Joint Adaptations That Help Identify Opportunity Cost, Sudipta Basu, Gregory B. Waymire
ESI Publications
Braun (The ecological rationality of historical costs and conservatism. Accounting, Economics and Law: A Convivium, this issue) argues that the traditional accounting principles underlying the revenue-expense approach such as Historical Cost and Conservatism are ecologically rational in that they help organizations survive better in uncertain economic environments. More importantly, Braun argues that the revenue-expense approach generates new private information, which informs markets and makes them more effective (Hayek, 1945, The use of knowledge in society. The American Economic Review, 35(4), 519–530), as opposed to merely reflecting back market data under the asset-liability approach (e.g. Sunder, 2011, IFRS monopoly: …
Exchange In The Absence Of Legal Enforcement: Reputation And Multilateral Punishment Under Uncertainty,
2017
Chapman University
Exchange In The Absence Of Legal Enforcement: Reputation And Multilateral Punishment Under Uncertainty, Aidin Hajikhameneh, Jared Rubin
ESI Working Papers
Prinicpal-agent problems can reduce gains from exchange available in long distance trade. One solution to mitigate this problem is multilateral punishment, whereby groups of principals jointly punish cheating agents by giving them bad reputations. But how does such punishment work when there is uncertainty regarding whether an agent actually cheated or was just the victim of bad luck? And how might such uncertainty be mitigated—or exacerbated—by nonobservable, pro-social behavioral characteristics? We address these questions by designing a simple modified trust game with uncertainty and the capacity for principals to employ multilateral punishment. We find that a modest amount of uncertainty …
Experimenting With Contests For Experimentation,
2017
Chapman University
Experimenting With Contests For Experimentation, Cary Deck, Erik O. Kimbrough
ESI Publications
We report an experimental test of alternative rules in innovation contests when success may not be feasible and contestants may learn from each other. Following Halac, Kartik, and Liu (in press), the contest designer can vary the prize allocation rule from Winner‐Take‐All (WTA) in which the first successful innovator receives the entire prize to Shared in which all successful innovators during the contest duration share in the prize. The designer can also vary the information disclosure policy from Public in which at each period, all information about contestants' past successes and failures is publicly available, to Private, in which contestants …
How Product Innovation Can Affect Price Collusion,
2017
Chapman University
How Product Innovation Can Affect Price Collusion, Andrew Smyth
ESI Working Papers
Price conspiracies appear endemic in many markets. This paper conjectures that low expected returns from product innovation can affect price collusion in certain markets. This conjecture is tested—and supported—by both archival and experimental data. In particular, average market prices in low innovation experiments are significantly greater than those in high innovation, but otherwise identical experiments, because price collusion is more successful in the low innovation experiments.
Favorite-Longshot Bias In Pari-Mutuel Betting: An Evolutionary Explanation,
2017
Singapore Management University
Favorite-Longshot Bias In Pari-Mutuel Betting: An Evolutionary Explanation, Atsushi Kajii, Takahiro Watanabe
Research Collection School Of Economics
Favorite-longshot bias (FLB) refers to an observed tendency whereby “longshots” are overvalued and favorites are undervalued. We offer an evolutionary explanation for FLB in pari-mutuel betting using a simple market model. A bettor is forced to quit with some probability if his total net gain in one day is negative. Because of a positive track take, the expected returns of any strategy are negative, and so every agent must eventually lose and disappear in the long run. Those who favor longshots have a better chance of getting ahead with rare but large gains, enabling them to survive for longer than …
The Optimal Defense Of Networks Of Targets,
2017
Chapman University
The Optimal Defense Of Networks Of Targets, Dan Kovenock, Brian Roberson
ESI Working Papers
This paper examines a game-theoretic model of attack and defense of multiple networks of targets in which there exist intra-network strategic complementarities among targets. The defender’s objective is to successfully defend all of the networks and the attacker’s objective is to successfully attack at least one network of targets. Although there are multiple equilibria, we characterize correlation structures in the allocations of forces across targets that arise in all equilibria. For example, in all equilibria the attacker utilizes a stochastic ‘guerrilla warfare’ strategy in which a single random network is attacked.
War And Conflict In Economics: Theories, Applications, And Recent Trends,
2017
Simon Fraser University
War And Conflict In Economics: Theories, Applications, And Recent Trends, Erik O. Kimbrough, Kevin Laughren, Roman M. Sheremeta
ESI Working Papers
We review the main economic models of war and conflict. These models vary in details, but their implications are qualitatively consistent, highlighting key commonalities across a variety of conflict settings. Recent empirical literature, employing both laboratory and field data, in many cases confirms the basic implications of conflict theory. However, this literature also presents important challenges to the way economists traditionally model conflict. We finish our review by suggesting ways to address these challenges.
Equilibrium Play In Voluntary Ultimatum Games: Beneficence Cannot Be Extorted,
2017
Chapman University
Equilibrium Play In Voluntary Ultimatum Games: Beneficence Cannot Be Extorted, Vernon L. Smith, Bart J. Wilson
ESI Working Papers
One robust result in experimental economics is the failure to observe equilibrium play in the ultimatum game. A heretofore unnoticed feature of the game is that neither player voluntarily chooses to play the game. Motivated by Adam Smith’s proposition that beneficence—like that of non‐ equilibrium play in the ultimatum game—cannot be extorted by force, we offer the responder the opportunity to opt out of the game for a mere $1 payoff for both players. We observe high rates of equilibrium play with highly unequal splits when responders choose to play such ultimatum games with both fixed and variable sums.
Informed Entry In Auctions,
2017
Universidad del Rosario
Informed Entry In Auctions, Diego Aycinena, Hernán Bejarano, Lucas Rentschler
ESI Publications
We examine entry decisions in first-price and English clock auctions with participation costs. Potential bidders observe their value and report maximum willingness to pay (WTP) to participate. Entry occurs if revealed WTP (weakly) exceeds the randomly drawn participation cost. We find no difference in WTP between auction formats, although males have a higher WTP for first-price auctions. WTP is decreasing in the number of potential bidders, but this reduction is less than predicted and small in magnitude.
Every Random Choice Rule Is Backwards-Induction Rationalizable,
2017
Singapore Management University
Every Random Choice Rule Is Backwards-Induction Rationalizable, Jiangtao Li, Rui Tang
Research Collection School Of Economics
Motivated by the literature on random choice and in particular the random utility models, we extend the analysis in Bossert and Sprumont (2013) to include the possibility that players exhibit stochastic preferences over alternatives. We prove that every random choice rule is backwards-induction rationalizable.
Bondholder Reorganization Of Systemically Important Financial Institutions,
2017
Chapman University
Bondholder Reorganization Of Systemically Important Financial Institutions, Steven Gjerstad
ESI Working Papers
This paper describes a resolution process for faltering financial firms that quickly allocates losses to bondholders and transfers ownership of the firm to them. This process overcomes the most serious flaws in resolution plans submitted by banks under Dodd-Frank Title I and in the FDIC receivership procedure in Dodd-Frank Title II by restoring the balance sheet of a failing financial institution and immediately replacing the management and board of directors who allowed its demise. In almost all bank failures, this process would eliminate the need for government involvement beyond court certification of the reorganization. The procedure overcomes the serious incentive …
Nebraska Monthly Economic Indicators: June 21, 2017,
2017
University of Nebraska-Lincoln
Nebraska Monthly Economic Indicators: June 21, 2017, Eric Thompson
Leading Economic Indicator Reports
The Leading Economic Indicator – Nebraska (LEI-N) 1 fell by 0.51% during May of 2017. This is the second consecutive monthly decline in the LEI-N. The declines followed three months of rapid increase from January through March of 2017. Taken together, the LEI-N values imply a moderation in economic growth in Nebraska in late 2017 after strong growth midyear. Among the components of the indicator, business expectations were strong during May while the value of the U.S. dollar fell, which is a positive sign for Nebraska’s export-oriented businesses. However, manufacturing hours, building permits and airline passen
Sentiments, Conduct, And Trust In The Laboratory,
2017
Chapman University
Sentiments, Conduct, And Trust In The Laboratory, Vernon Smith, Bart J. Wilson
ESI Publications
In this essay we provide a brief account and interpretation of The Theory of Moral Sentiments showing that it departs fundamentally from contemporary patterns of thought in economics that are believed to govern individual behavior in small groups, and contains strong testable propositions governing the expression of that behavior. We also state a formal representation of the model for individual choice of action, apply the propositions to the prediction of actions in trust games, report two experiments testing these predictions, and interpret the results in terms directly related to the model. In short, we argue that the system of sociability …
More Balanced Economic Growth,
2017
University of Nebraska-Lincoln
More Balanced Economic Growth, Eric Thompson
Business in Nebraska
There has been a re-balancing of both global and domestic economic growth during 2017. Globally, growth is improving in Europe and China, yielding more balanced international growth. Within the United States, growth also has become more balanced across industries. As in past years, the service sector, supported by growth in employment and real wages, has grown steadily with increases in retail trade, business services, personal services and construction activity. However, in recent months, there also has been improved growth in the industrial sector, with a rebound in the energy sector, and more business investment in capital equipment. The result is …
Analyzing The Relationship Between Exposure To Extreme Weather And Economic Inequality In The Philippines,
2017
Ateneo de Manila University
Analyzing The Relationship Between Exposure To Extreme Weather And Economic Inequality In The Philippines, Rosalina Palanca-Tan, Jaimie Kim Bayani-Arias
Economics Department Faculty Publications
This paper looks into the relationship between typhoon exposure and inequality in per capita income and per capita expenditure of households in the Philippines by comparing the change in the Theil L and Theil T inequality indexes between 2009 and 2012 across different exposure groups. A decomposition analysis of the Theil index was also undertaken to establish the relative contributions of within-exposure group inequality and between-exposure groups inequality to total inequality. Conforming to the paper‘s hypothesis, the group that has the highest exposure to typhoons was found to experience a worsening of both income and expenditure inequality while the group …
Sleep Restriction And Circadian Effects On Social Decisions,
2017
Chapman University
Sleep Restriction And Circadian Effects On Social Decisions, David L. Dickinson, Todd Mcelroy
ESI Publications
Our study examines how chronic sleep restriction and suboptimal times-of-day affect decisions in a classic set of social tasks. We experimentally manipulate and objectively measured sleep in 184 young-adult subjects, who were also randomly assigned an early morning or late evening experiment session during which decision tasks were administered. Sleep restriction and suboptimal time-of-day are both estimated to either directly or indirectly (via an impact on sleepiness) reduce altruism, trust, and trustworthiness. We conclude that commonly experienced adverse sleep states, most notably chronic sleep restriction, significantly reduce prosocial behaviors, and can therefore limit benefits from short-term social interactions.
