Economic Theory Commons^™

Patterns Of Growth And The Economic Development Of China, Adam C. Watson

Dissertations, Theses, and Capstone Projects

By looking at the historical rise of modern China, starting with the end of the First Opium War (1842) through to the start of the war with Japan (1937), and then from the beginning of Deng Xiaoping’s economic reforms (1979) to the present, this work reveals the striking similarities between the earlier and the later periods of capitalist development. If the country had not been able to draw on the deep-rooted knowledge and skills which originated in Shanghai and the port cities in the mid-nineteenth century, and instead pursued only uninformed free market principles without the training to make these …

Development Of Utility Theory And Utility Paradoxes, Timothy E. Dahlstrom

Lawrence University Honors Projects

Since the pioneering work of von Neumann and Morgenstern in 1944 there have been many developments in Expected Utility theory. In order to explain decision making behavior economists have created increasingly broad and complex models of utility theory. This paper seeks to describe various utility models, how they model choices among ambiguous and lottery type situations, and how they respond to the Ellsberg and Allais paradoxes. This paper also attempts to communicate the historical development of utility models and provide a fresh perspective on the development of utility models.

Daniel Defoe’S Literary Economies: The Shifting Role Of Narrative Uncertainty, Speculation, And Providence In Robinson Crusoe And Roxana., Terese J. Swords

Lawrence University Honors Projects

In my honors project, I analyze how Daniel Defoe’s first novel, Robinson Crusoe (1719), and his last, Roxana (1724), offer shifting economic commentary regarding England’s emerging 18^th century credit economy. This shift does not come as too much of a surprise, as his first and last novel straddle the historic moment of the South Sea Bubble’s burst. Therefore, Defoe’s works, when analyzed sequentially, capture the evolving attitude towards value and credit that was occurring throughout all of England.

In my first chapter, “Crusoe’s Post Facto Journal Editing: ‘How wonderfully we are delivered when we are aware of it,’” I …

A Game Theoretic Analysis Of International Justice Disputes, Mishal Ayaz

Lawrence University Honors Projects

This paper works toward analyzing international justice disputes, through a game theoretic lens. The result of such an analysis is an accurate working model for the international justice dispute resolution process, limiting its scope to those disputes that fall under the International Court of Justice’s jurisdiction post 1986. This time limitation on the explanatory power of the model was deduced from all of the court’s findings since its inception. The game can be formed in four ways: perfect information, incomplete information, no information, and partial information, all of which have their own unique equilibria, which are formed and discussed individually.

Precautionary Saving With Changing Income Ambiguity, Atsushi Kajii, Jingyi Xue

Research Collection School Of Economics

We study a two-period saving model where theagent’s future income might be ambiguous. Our agent has a version of the smoothambiguity decision criterion (Klibano, Marinacci and Mukerji (2005)), where theagent’s perception about ambiguity is described by a second-order belief overfirst-order risks. We model increasing ambiguity as a spreading-out of thesecond-order belief. We show that under a “Risk Comonotonicity” condition, ouragent saves more when ambiguity in future income increases. We argue that thecondition is indispensable for our result.

Effect Of Non-Monetary Incentives On Women's Competitive Inclination: Experimental Evidence From Ancona, Italy, Kalkidan Shebi

Master's Theses

This study investigates how monetary incentives versus non-monetary incentives affect women’s decision to enter a competitive environment. This study was conducted in Ancona Italy, in a controlled laboratory experiment with a total of 60 participants; of which 29 were male and 31 were female. Participants were given mathematical addition problems to solve under alternative incentives. How they received these incentives differed based on their preference to enter or withdraw from the competition. The study also included components that assessed risk preferences and willingness to pay for the non-monetary incentive in the experiment. Results show no significant difference in performance scores …

Geospatial Modeling Of Vietnamese Fdi, Cuong Nguyen Tien

Theses and Dissertations

This thesis sets a goal to analyze and project geographically disaggregated measures of FDI using aggregate data. We regress the country level FDI with aggregate, fine geospatial data on GDP, urban extent, and risk. By disaggregating the model, we will predict the FDI flow in every 1000 square kilometer area.

Dynamic Behavior And Player Types In Majoritarian Multi-Battle Contests, Alan Gelder, Dan Kovenock

ESI Working Papers

In a dynamic contest where it is costly to compete, a player who is behind must decide whether to surrender or to keep fighting in the face of bleak odds. We experimentally examine the game theoretic prediction of last stand behavior in a multi-battle contest with a winning prize and losing penalty, as well as the contrasting prediction of surrendering in the corresponding contest with no penalty. We find varied evidence in support of these hypotheses in the aggregated data, but more conclusive evidence when scrutinizing individual player behavior. Players’ realized strategies tend to conform to one of several “types”. …

Immune Function In Amazonian Horticulturalists, Aaron D. Blackwell, Benjamin C. Trumble, Ivan Maldonado Suarez, Jonathan Stieglitz, Bret Beheim, J. Josh Snodgrass, Hillard Kaplan, Michael Gurven

ESI Publications

Background—Amazonian populations are exposed to diverse parasites and pathogens, including protozoal, bacterial, fungal, and helminthic infections. Yet much of our understanding of the immune system is based on industrialised populations where these infections are relatively rare.

Aim—We examine distributions and age-related differences in 22 measures of immune function for Bolivian forager-horticulturalists and US and European populations.

Subjects and Methods—Subjects were 6,338 Tsimane aged 0–90 years. Blood samples collected between 2004–2014 were analysed for 5-part blood differentials, C-reactive protein, erythrocyte sedimentation rate (ESR), and total immunoglobulins E, G, A, and M. Flow cytometry was used to quantify naive …

Mean-Dispersion Preferences With A Specific Dispersion Function, Mark Schneider, Manuel Nunez

ESI Working Papers

A popular approach to modeling ambiguity aversion is to decompose preferences into the subjective expected utility of an act and an ambiguity index, or an adjustment factor, or a dispersion function. However, in these approaches the dispersion function (or ambiguity index, or adjustment factor) has very little structure imposed on it, leaving the selection of a specific dispersion function in applications to be rather arbitrary. In this note, working in the Anscombe- Aumann (1963) framework, we provide a simpler axiomatic characterization of mean-dispersion preferences which uniquely identifies the dispersion function from the infinite class of possible alternatives. Given the representation, …

Designing Contests Between Heterogeneous Contestants: An Experimental Study Of Tie-Breaks And Bid-Caps In All-Pay Auctions, Aniol Llorente-Saguer, Roman M. Sheremeta, Nora Szech

ESI Working Papers

A well-known theoretical result in the contest literature is that greater heterogeneity decreases performance of contestants because of the “discouragement effect.” Leveling the playing field by favoring weaker contestants through bid-caps and favorable tie-breaking rules can reduce the discouragement effect and increase the designer’s revenue. We test these predictions in an experiment. Our data show that indeed, strengthening weaker contestants through tie-breaks and bid-caps significantly diminishes the discouragement effect. Bid-caps can also improve revenue. Most deviations from Nash equilibrium can be explained by the level-k model of reasoning.

Information Effects In Uniform Price Multi-Unit Dutch Auctions, Joy A. Buchanan, Steven Gjerstad, David Porter

Economics Faculty Articles and Research

We design a multi-unit descending-price (Dutch) auction mechanism that has applications for resource allocation and pricing problems. We address specific auction design choices by theoretically and experimentally determining optimal information disclosure along two dimensions. Bidders are either informed of the number of bidders in the auction, or know that it is one of two possible sizes; they also either know the number of units remaining for sale or are unaware of how many units have been taken by other bidders. We find that revealing group size decreases bids, and therefore revenue, if units remaining are not shown. When group size …

The Fair And Impartial Spectator, Vernon L. Smith

Economics Faculty Articles and Research

Adam Smith’s metaphor of the impartial spectator is an essential element in understanding his model of the maturation process whereby people learn to follow general rules that honor the human sentiments of gratitude and resentment in others. Through the impartial spectator human action, subject to error, is governed by self-command. Smith’s model is presented in the form of a series of propositions.

On The Behavior Of Entrepreneurial Factor Supply To The Firm, Nicos Zafiris

The Journal of Entrepreneurial Finance

This paper draws on an existing, but little used, approach to the choices governing the supply of ‘entrepreneurial’, in the sense of ‘residually remunerated’, resources to an enterprise, especially post start up. It focuses in particular on the hybrid ‘own factor demand/supply curve’ to the firm of Bronfenbrenner (1960), but attempts to treat such supply in conjunction with ‘contractual’ employment of resources, thus making use of gearing and portfolio concepts. To achieve this, it is found necessary for the hybrid schedule to be reinterpreted and recast as the locus of the relevant utility maximising choices. A model is presented which …

The Taper Tantrum Of 2013: Momentum-Driven Or A Return To Fundamentals?, Colette L. Terhune

Finance Undergraduate Honors Theses

This study explores the driving force behind the Taper Tantrum of 2013. Following the Fed’s announcements of potential QE tapering, investors poured of the bond market, causing yields to rise sharply. This analysis seeks to determine whether this was a momentum-driven reaction or a return to fundamental values. Throughout this paper, fundamental determinants of bond prices and investor returns are combined with trading volume and bid-ask spread data to determine the motivating market force. The findings suggest that the Taper Tantrum was a return to fundamental bond prices following an asset bubble burst, likely due to momentum trading.

Identifying Irrationality And Fear-Driven Reactions To Financial Market Shocks & Terrorism, Kimberly M. Roland

Honors Scholar Theses

Economic research on post 9-11 terrorism lacks a distinction between fear-based reactions and rational financial market behavior in its analysis surrounding terror strikes. The purpose of this paper is to expose and interpret the fear triggered by terrorism in financial markets, and to separate rational market responses from irrational, fear-driven investor reactions. A rational market response follows the efficient market theory (Wang 1993) in which investors alter their behavior based on changes in fundamental values. Becker and Rubinstein (2011) define terror-triggered fear as the magnitude with which subjective beliefs about danger hinder objective risk assessment. I apply this definition to …

From The Classical School To Today: The Evolution Of Stagnation Theories, Francis J. Lukacovic Ii

Applied Economics Theses

The purpose of this thesis is to study the theory of secular stagnation, which was made famous by the American Keynesian economist Alvin Hansen in his book Full Recovery or Stagnation. The theory of secular stagnation has reappeared in economic circles today due to recent economic conditions since the financial crisis of 2007-2008. The thesis will analyze the history of the stagnation theory dating back to Classical economists in the 19^th century. The concept of a stagnating economy has been talked about for centuries with many economists adding important thoughts. Furthermore, the thesis will address the current questions and …

Efficient Dynamic Mechanisms With Interdependent Valuations, Wei He, Jiangtao Li

Research Collection School Of Economics

This paper considers a dynamic environment with interdependent valuations and evolving private information. Under the assumption of “independent types”, we construct an efficient, incentive-compatible mechanism that is also budget-balanced in every period of the game. Our mechanism works in environments where in each period, each agent observes her own realized outcome-decision payoff from the previous period. This extends the insight of Mezzetti (2004) to the dynamic setting.

East Asian Economies And Financial Globalization In The Post-Crisis World, Joshua Aizenman, Hiro Ito

Economics Faculty Publications and Presentations

This paper assesses the East Asian Economies’ openness to cross-border capital flows and exchange rate arrangements in the past decades, with the main focus on emerging market economies. Using Mundell’s trilemma indexes, we note that the convergence of the three policy goals in East Asia toward a “middle ground” pre-dates the convergence of these indices in other regions. Another more recent development involves the high level of international reserve (IR) holdings–a feature that is known as the most distinct characteristic of Asian EMEs. Financial globalization seems to have made asset prices and interest rates in Asian EMEs more vulnerable to …

An Experimental Investigation Of Procurement Auctions With Asymmetric Sellers, John Aloysius, Cary A. Deck, Li Hao, Ryan French

ESI Publications

Electronic reverse auctions are a commonly used procurement mechanism. Research to date has focused on suppliers who are ex ante symmetric in that their costs are drawn from a common distribution. However, in many cases a seller's range of potential costs depends on their own operations, location, or economies of scale and scope. Thus, understanding how different bidder types impact auction outcomes is key when designing an auction. This paper reports the results of the first controlled laboratory experiment designed to compare prices between first-price and second-price procurement auctions for homogeneous goods when seller cost types are asymmetric and the …