Economic Theory Commons^™

On The Robustness Of Higher Order Risk Preferences, Cary Deck, Harris Schlesinger

ESI Working Papers

Economists have begun to recognize the role that higher order risk preferences play in a variety of settings. As such, several experiments have documented the degree of prudence, temperance, and to a lesser extent, edginess and bentness that laboratory subjects exhibit. More recently, researchers have argued that higher order risk preferences generally conform to mixed risk averse and mixed risk loving patterns that arise from a preference for disaggregating or aggregating harms, respectively. This paper examines the robustness of this pattern in three ways. First, it attempts to directly replicate previous results with compound lotteries over monetary outcomes. Second, it …

Cardiovascular Disease And Type 2 Diabetes In Evolutionary Perspective: A Critical Role For Helminths?, Michael D. Gurven, Benjamin C. Trumble, Jonathan Stieglitz, Aaron D. Blackwell, David E. Michalik, Caleb E. Finch, Hillard Kaplan

ESI Publications

Heart disease and type 2 diabetes are commonly believed to be rare among contemporary subsistencelevel human populations, and by extension prehistoric populations. Although some caveats remain, evidence shows these diseases to be unusual among well-studied hunter-gatherers and other subsistence populations with minimal access to healthcare. Here we expand on a relatively new proposal for why these and other populations may not show major signs of these diseases. Chronic infections, especially helminths, may offer protection against heart disease and diabetes through direct and indirect pathways. As part of a strategy to insure their own survival and reproduction, helminths exert multiple cardio-protective …

Dual Process Utility Theory: A Model Of Decisions Under Risk And Over Time, Mark Schneider

ESI Working Papers

The Discounted Expected Utility model has been a major workhorse for analyzing individual behavior for over half a century. However, it cannot account for evidence that risk interacts with time preference, that time interacts with risk preference, that many people are averse to timing risk and do not discount the future exponentially, that discounting depends on the magnitude of outcomes, that risk preferences are not time preferences, and that risk and time preferences are correlated with cognitive ability. Here we address these issues in a decision model based on the interaction of an affective and a reflective valuation process. The …

Multi-Battle Contests: An Experimental Study, Shakun D. Mago, Roman M. Sheremeta

ESI Working Papers

We examine behavior of subjects in simultaneous and sequential multi-battle contests, where each individual battle is modeled as an all-pay auction with complete information. In simultaneous best-of-three contests, subjects are predicted to make positive bids in all three battles, but we find that subjects often make positive bids in only two battles. In sequential contests, theory predicts sizable bids in the first battle and no bids in the subsequent battles. Contrary to this prediction, subjects significantly underbid in the first battle and overbid in subsequent battles. Consequently, instead of always ending in the second battle, contests often proceeds to the …

An Experimental Investigation Of Simultaneous Multi-Battle Contests With Complementarities, Cary Deck, Sudipta Sarangi, Matt Wiser

ESI Publications

This paper reports the results of laboratory experiments that are designed to test theoretical predictions in a multi-battle contest with value complementarities among the battles. The specific setting is a game of Hex where control of each region is determined by a Tullock contest and the overall winner is determined by the combination of claimed regions. We find that in a game with only a few regions, aggregate behavior across regions is largely consistent with the theoretical predictions. However, examining individual level behavior suggests that bidders are not behaving in accordance with the model, but often pursue specific winning combinations. …

Impulsive Behavior In Competition: Testing Theories Of Overbidding In Rent-Seeking Contests, Roman M. Sheremeta

ESI Working Papers

Researchers have proposed various theories to explain overbidding in rent-seeking contents, including mistakes, systematic biases, the utility of winning, and relative payoff maximization. Through an eight-part experiment, we test and find significant support for the existing theories. Also, we discover some new explanations based on cognitive ability and impulsive behavior. Out of all explanations examined, we find that impulsivity is the most important factor explaining overbidding in contests.

University Rankings: Evidence And A Conceptual Framework, Jonathan G.S. Koppell, Jacob Fowles, H. George Frederickson

Publications from President Jonathan G.S. Koppell

University ranking has high public visibility, the ranking business has flourished, and institutions of higher education have not been able to ignore it. This study of university ranking presents general considerations of ranking and institutional responses to it, particularly considering reactions to ranking, ranking as a self-fulfilling prophecy, and ranking as a means of transforming qualities into quantities. The authors present a conceptual framework of university ranking based on three propositions and carry out a descriptive statistical analysis of U.S. and international ranking data to evaluate those propositions. The first proposition of university ranking is that ranking systems are demarcated …

Associationistic Luce Rule, Jiangtao Li, Rui Tang

Research Collection School Of Economics

We develop an extension of Luce’s random choice model that incorporates a role forthe association of alternatives. Each alternative is characterized by a salience value, aLuce value, and its associated alternatives. The salience value captures the alternative’sability to attract the decision maker’s attention, and the Luce value measures thealternative’s desirability. The decision maker is first attracted by some alternativeaccording to a salience-based Luce-type formula, and then chooses among its associatedalternatives according to another desirability-based Luce-type formula. While retainingthe simplicity of the Luce rule, the theory accommodates some well-known behavioralphenomena in individual choice, such as the attraction effect (violations of regularity),and …

Endogenous Market Formation And Monetary Trade: An Experiment, Gabriele Camera, Dror Goldberg, Avi Weiss

ESI Working Papers

The theory of money assumes decentralized bilateral exchange and excludes centralized multilateral exchange. However, endogenizing the exchange process is critical for understanding the conditions that support the use of money. We develop a “travelling game” to study the spontaneous emergence of decentralized and centralized exchange, theoretically and experimentally. Players located on separate “islands” can either trade locally, or pay a cost to trade elsewhere, so decentralized and centralized markets can both emerge in equilibrium. The latter maximize trade meetings and are socially efficient; the former minimize trade costs through the use of money. In the laboratory, centralized exchange more frequently …

Do Economic Inequalities Affect Long-Run Cooperation?, Gabriele Camera, Cary Deck, David Porter

ESI Working Papers

Does inequality affect a group’s cohesion and ability to prosper? Participants in laboratory economies played an indefinite sequence of helping games in random, anonymous pairs. A coin flip determined donor and recipient roles in each pair. This random shock ensured equality of opportunity but not of results, because earnings depended on realized shocks. We manipulated the ability to condition choices on this uncontrollable inequality source. In all treatments, uncertain ending supports multiple Pareto-ranked equilibria, including full cooperation. Theoretically, inequalities do not alter the incentives’ structure. Empirically, inequality disclosures altered conduct, weakened norms of mutual support and reduced efficiency.

Focality And Asymmetry In Multi-Battle Contests, Subhashish M. Chowdhury, Dan Kovenock, David Rojo Arjona, Nathaniel Wilcox

ESI Working Papers

This article examines behavior in two-person constant-sum Colonel Blotto games in which each player maximizes the expected total value of the battlefields won. A lottery contest success function is employed in each battlefield. Recent experimental research on such games provides only partial support for Nash equilibrium behavior. We hypothesize that the salience of battlefields affects strategic behavior (the salient target hypothesis). We present a controlled test of this hypothesis – against Nash predictions – when the sources of salience come from certain asymmetries in either battlefield values or labels (as in Schelling (1960)). In both cases, subjects over-allocate the resource …

Industrial Ecology Analysis Of The Potential For An Eastern Nebraska Industrial Symbiosis Network (Enisn): A Comparative Study, Bradley A. Behne

School of Natural Resources: Dissertations, Theses, and Student Research

The area of Eastern Nebraska north of Omaha, including the municipality of Blair is host to a collection of unique companies and industries. These industries, driven by the agricultural and urban economy of the area, as well as the geographic proximity to each other, make it an advantageous area to study the potential for a network where individual entities utilize the concept of industrial symbiosis. This potential network is referred to as the Eastern Nebraska Industrial Symbiosis Network (ENISN). Industrial symbiosis, a sub-set of industrial ecology, engages separate industries in a collaborative and collective approach, concerning itself with the flow …

An Epigenetic Clock Analysis Of Race/Ethnicity, Sex, And Coronary Heart Disease, Steve Horvath, Michael Gurven, Morgan E. Levine, Benjamin C. Trumble, Hillard Kaplan, Hooman Allayee, Beate R. Ritz, Brian Chen, Ake T. Lu, Tammy M. Rickabaugh, Beth D. Jamieson, Dianjianyi Sun, Shengxu Li, Wei Chen, Lluis Quintana-Murci, Maud Fagny, Michael S. Kobor, Philip S. Tsao, Alexander P. Reiner, Kerstin L. Edlefsen, Devin Absher, Themistocles L. Assimes

ESI Publications

Background: Epigenetic biomarkers of aging (the “epigenetic clock”) have the potential to address puzzling findings surrounding mortality rates and incidence of cardio-metabolic disease such as: (1) women consistently exhibiting lower mortality than men despite having higher levels of morbidity; (2) racial/ethnic groups having different mortality rates even after adjusting for socioeconomic differences; (3) the black/white mortality cross-over effect in late adulthood; and (4) Hispanics in the United States having a longer life expectancy than Caucasians despite having a higher burden of traditional cardio-metabolic risk factors.

Results: We analyzed blood, saliva, and brain samples from seven different racial/ethnic groups. …

The Influence Of The Electric Supply Industry On Economic Growth In Less Developed Countries, Edward Richard Bee

Dissertations

This study measures the impact that electrical outages have on manufacturing production in 135 less developed countries using stochastic frontier analysis and data from World Bank’s Investment Climate surveys. Outages of electricity, for firms with and without backup power sources, are the most frequently cited constraint on manufacturing growth in these surveys.

Outages are shown to reduce output below the production frontier by almost five percent in Africa and by a lower percentage in South Asia, Southeast Asia and the Middle East and North Africa. Production response to outages is quadratic in form. Outages also increase labor cost, reduce exports …

Three Essays In Economics, James R. Bland

Open Access Dissertations

How Many Games Are We Playing: An Experimental Analysis of Choice Bracketing in Games

A subject brackets two decisions if she "choose[s] an option in each case without full regard to the other" Rabin (2009). Although in most situations such behavior is unlikely to be optimal, it is well documented in experiments where subjects make decisions in the absence of strategic considerations. This paper uses an economic experiment to investigate whether subjects also bracket their decisions in games. Subjects played two Volunteer's Dilemmas at the same time, with the payoffs from both games added to their earnings. In a lottery …

Essays On Health Insurance, Amanda C. Cook

Open Access Dissertations

Uninsured individuals receive fewer health care services for at least three reasons: higher prices, responsibility for the entire bill, and potential provider reductions for concern of non-payment. This study isolates differences in service levels between insured and uninsured individuals that are attributed to different effective prices; the uninsured pay the bill without a contribution from an insurance company. I capitalize on Maryland's highly regulated health care system, where prices are set by the state, are uniform across all patients, and hospitals are compensated for free care and bad debt, to isolate the difference in quantity demanded by the uninsured. While …

Essays In Labor Economics And Panel Data Analysis, Evan S. Totty

Open Access Dissertations

This dissertation is composed of three independent chapters. The first chapter studies the impact of minimum wage hikes on employment of low-skill workers in the United States. The second chapter studies the lasting impact of attending a higher value-added high school on college performance. The third chapter studies the impact of stuttering on labor market outcomes.

The first chapter resolves issues in the minimum wage-employment debate by using factor model econometric methods to address concerns related to unobserved heterogeneity. Recent work has shown that the negative effects of minimum wages on employment found using traditional methods are sensitive to the …

Associations Between Male Testosterone And Immune Function In A Pathogenically Stressed Forager-Horticultural Population, Benjamin C. Trumble, Aaron D. Blackwell, Jonathan Stieglitz, Melissa Emery Thompson, Ivan Maldonado Suarez, Hillard Kaplan, Michael Gurven

ESI Publications

Objectives—Despite well-known fitness advantages to males who produce and maintain high endogenous testosterone levels, such phenotypes may be costly if testosterone-mediated investment in reproductive effort trade-off against investment in somatic maintenance. Previous studies of androgen-mediated trade-offs in human immune function find mixed results, in part because most studies either focus on a few indicators of immunity, are confounded by phenotypic correlation, or are observational. Here the association between male endogenous testosterone and 13 circulating cytokines are examined before and after ex vivo antigen stimulation with phytohaemagglutinin (PHA) and lipopolysaccharides (LPS) in a high pathogen population of Bolivian forager-horticulturalists.

Materials …

Multiple Openings And Competitiveness Of Forward Markets: Experimental Evidence, José Luis Ferreira, Praveen Kujal, Stephen Rassenti

Economics Faculty Articles and Research

We test the competition enhancing effect of selling forward in experimental Cournot duopoly and quadropoly with multiple forward markets. We find that two forward periods yields competitive outcomes and that the results are very close to the predicted theoretical results for quantity setting duopolies and quadropolies. Our experiments lend strong support to the hypothesis that forward markets are competition enhancing. We then test a new market that allows for endogenously determined indefinitely many forward periods that only close when sellers coordinate on selling a zero amount in a forward market. We find that the outcomes under an endogenous close rule …

Indirect Reciprocity, Resource Sharing, And Environmental Risk: Evidence From Field Experiments In Siberia, E. Lance Howe, James J. Murphy, Drew Gerkey, Colin Thor West

ESI Publications

Integrating information from existing research, qualitative ethnographic interviews, and participant observation, we designed a field experiment that introduces idiosyncratic environmental risk and a voluntary sharing decision into a standard public goods game. Conducted with subsistence resource users in rural villages on the Kamchatka Peninsula in Northeast Siberia, we find evidence consistent with a model of indirect reciprocity and local social norms of helping the needy. When participants are allowed to develop reputations in the experiments, as is the case in most small-scale societies, we find that sharing is increasingly directed toward individuals experiencing hardship, good reputations increase aid, and the …