1,721,092 research outputs found
Common value auctions with voluntary and qualified entry
Get PDFWe study auctions under different entry rules. In the field, individuals self-select into auctions and regulations often require them to meet specific qualifications. In this experiment we assess the role of voluntary entry and financial requirements on the incidence of severe overbidding and bankruptcies, which are widespread in common value auctions. We show that voluntary entry amplifies overbidding and increases bankruptcy rates. Qualified entry has only modest impacts on overbidding. This study adds new insights to existing experiments where all subjects are usually placed exogenously into auctions
Product adoption and pricing with network externalities
No full textThis thesis includes three essays that examine the impact on network externalities (demand side economies of scale) on agent behaviour in markets. Essays 2 and 3 use experimental methodology to test predictions from theory. The fourth essay analyses field data collected from a specific market that is affected by these externalities. Chapter 2 studies product adoption as modeled by Katz and Shapiro (1986) in an experimental setting. Two sellers offer competing, incompatible technologies and two groups of four buyers make purchase decisions sequentially in a two-stage game of complete information. One of these technologies enjoys well-defined property rights whereas the other one is unsponsored and supplied at cost. The sellers post prices and a different group of buyers make simultaneous purchase decisions in each stage. There is mixed evidence that the results are qualitatively consistent with the Katz and Shapiro (1986) equilibrium predictions. Chapter 3 extends the design from chapter 2 to the case in which both technologies are sponsored (also in Katz and Shapiro, 1986). In certain sessions over three-quarters of first stage buyers purchase the more expensive technology anticipating that later arriving buyers will also buy this technology. In periods where a strong network has been established for a technology in the first stage, over 80 percent of second stage buyers buy that technology, even though in most cases it is priced higher. The data collected from the experiments used in both chapters 2 and 3, however, are not consistent with the point predictions of the model. In chapter 4, we investigate the effects of various quality attributes and network specific features on the price of DOS word processing software from 1987 through 1991. We use a hedonic price framework in order to assess the effect of the network variable on the quality-adjusted price. Our results to date suggest that there is a positive effect of network externalities upon price. However product quality attributes do not significantly impact price in this market
Three essays in economics
Get PDFHow 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\u27s Dilemmas at the same time, with the payoffs from both games added to their earnings. In a lottery task, subjects were generally revealed to be risk-averse narrow bracketers. Aggregate play in the Roommate\u27s Dilemma is not consistent with predictions made by assuming all subjects either narrowly or broadly bracket. On the individual level, structural modeling suggests that most subjects bracket narrowly in the game. Mixture Models of Behavior and Nuisance Parameters: A Semi-Parametric Bayesian Approach When there is more than one model of decision-making that could explain behavior in experiments, the mixture model is a useful tool in taking theory to data. The estimation results can inform the researcher about the prevalence of each model in the sample, and whether observable characteristics of subjects are predictors of which model they use. Each model typically specifies a function describing behavior, but also requires individual-level nuisance parameters\u27\u27 that must also be estimated. We demonstrate that restrictive econometric assumptions made on these individual parameters can result in the researcher overstating the importance of type heterogeneity (subjects using different decision rules), when in fact the cause of heterogeneous choices is subject parameter heterogeneity (subjects having different nuisance parameters). We propose a less restrictive assumption, and demonstrate its implementation on some existing experimental data. Hospital-Insurer Bargaining Power and Negotiated Rates. In addition to risk-sharing, U.S. health insurance companies negotiate rates for services with hosptials. The price of service can vary depending on which entity, if any, is insuring the patient. Insurers (and possibly their customers) benefit from negotiating through lower prices, while hospitals benefit through higher patient volume. Using Massachusetts\u27 Center for Health Information and Analysis (CHIA) data, we use hospital and insurer characteristics to estimate negotiated prices specific to hospital-insurer pairs. We investigate the relationship between two important quantities: (i) the charged amount that hospitals bill for their services, and (ii) the amount that hospitals are paid for insured patients. These numbers differ because the former is a function only of the services provided and the hospital\u27s chargemaster\u27\u27 prices, while the latter is the result of negotiation. We find that payments for privately insured patients are on average 38% of charges when payments are made on a fee-for-service basis. However this ratio varies greatly by hospital and insurer. Compared to community hospitals without an emergency room, academic medical centers are compensated 15% more for their services, and hospitals with an emergency room are compensated 7% more than those without
Essays on the public goods game
No full textThis dissertation consists of three essays on the public goods game. Each essay is an experimental examination of the game and investigates whether behavior in the lab environment is affected by changes to the basic structure of the game. The first essay investigates if differences in information within a group impacts behavior. In each group there are two subject types, a manager who observes the individual contribution choices of each group member and donors who can only view the total amount contributed. The difference in information does not lead to a significant difference in average contributions for the two types. It is suggested that no effect is found because both information sets allow subjects to compute the average contributions of others. The second essay investigates how agency problems at public goods producers, such as non-profit organizations, impact the voluntary provision of public goods. One subject is assigned as the manager, as in the first essay, but in certain treatments the manager is given the ability to exploit the contributions of others. These managers often take advantage of the opportunity to exploit the contributions of others but do so strategically. This strategic behavior reduces the impact of a change in the marginal per capita return and results in contribution behavior that is no longer conditional on the behavior of others. Interestingly, there is little effect on donors, who behave in a manner consistent with the existing literature on voluntary contribution games. There are two notable exceptions. First, donors contribute significantly lower amounts when they can be exploited and the exploitation is unobservable. Second, when exploitation is observable managers are successful at maintaining contributions at intermediate levels until end periods when contributions fall to zero. This results in average contribution levels that are not different from treatments where exploitation is not possible. These results suggests one potential impact agency has on the provision of public goods is through the transparency offered by the organizations producing the public good. The final essay asks the basic question of whether behavior commonly observed in linear public goods games differs when the game is played in a two-game ensemble. This is an important question because individuals face multiple giving opportunities or multiple options for giving within a single organization. The results suggest that even when the two games are identical there is a spillover of information between the two games. Certain treatments fail to be effective at raising average contributions when the games are played in a two-game ensemble; this includes non-monetary sanctioning and the display of digital photos. In contrast, lowering the cost of contribution in one game of the ensemble is effective at raising average contributions for that game. Together the results support the position that games should be considered in ensembles instead of in isolation
Essays on Experimental Economics
No full textThis dissertation consists of two independent essays on experimental economics. The first essay examines how different ways of providing common pool resources affect users\u27 extraction behavior. Common pool resource (CPR) users often face two types of problems to solve: provision problems and appropriation problems. The first essay presents a laboratory experiment to study the choices of CPR users under different provision schemes, in a heterogeneous environment. In the first two treatment conditions, the level of contribution to the provision process is determined exogenously: in the regressive treatment, poor and rich individuals pay equal amounts to the provision of the resource, and in the progressive treatment, the entire provision cost is paid by rich members. Finally, in the endogenous condition, subjects voluntarily choose how much to contribute through the Provision Point Mechanism. The experimental results provide strong evidence for inequality aversion motivating subjects\u27 decisions. Interestingly, inequality aversion motivates subjects\u27 choices differently in the exogenous and in the endogenous provision conditions: under the regressive and the progressive treatments, inequality aversion motivates subjects\u27 extraction choices while in the endogenous treatment, inequality aversion motivates subjects\u27 contribution choices but not their extraction choices. The second essay studies the effect of interim performance information on individual effort choices. Costly effort choices are often made sequentially and over multiple steps. In many situations, individuals who make effort choices do not fully observe how well they are performing during the process. A more informed party may choose to reveal their private information about the agent\u27s performance to the agent. The second essay presents an experiment to study the impact of interim performance information on individuals\u27 effort choices under different incentive schemes. Subjects make costly effort choices in two subsequent stages under convex and concave payment conditions. In No-Feedback treatments, subjects make their second effort choice without knowing the outcome of the first stage, and in Feedback treatment, subjects learn the outcome of the first stage before making their second effort choice. Experimental results show that interim feedback can be used as an effective tool to increase individual effort. However, the extent to which feedback impacts effort depends on the incentive scheme, as well as individual attitudes towards losses and risks
Essays on unemployment insurance
No full textThis thesis is comprised of three independent chapters. The first two chapters investigate the effect of unemployment insurance on job search behavior using laboratory experiments. The third chapter uses survey data to study the impact of unemployment insurance on alcohol use and abuse following job loss. In the first chapter, I study the effect of changes in unemployment insurance benefit generosity on search for vertically differentiated jobs. I use a laboratory experiment to observe search effort and outcomes under four treatments that differ in benefit level and benefit exhaustion rate. Two job opportunities differ in the probability of finding a job conditional on effort, and the wage. Consistent with theoretical predictions, the results show a positive relationship between benefit generosity and the propensity of subjects to search for a job which pays a higher wage but is more difficult to find. However, subjects are less responsive to changes in benefits than predicted; and the propensity to search for the good job declines over time even in a stationary environment. Last, I provide insight into why search is suboptimal and evaluate the implications of suboptimal search for the design of UI programs and subsequent matching of workers and employers. In the second chapter, I use a laboratory experiment to investigate the effect of labor market policies on job search and the resulting productivity of the employer-employee match. Job offers consist of one of two possible real effort tasks, intermediate level math or verbal questions, and a piece rate wage. Unemployed subjects receive job offers and must accept or reject the offer. The subject\u27s ability in each task is used as a measure of idiosyncratic productivity. I find evidence that unemployment insurance benefits increase the productivity of a worker-firm match by increasing worker selectivity which allows subjects to more often accept a job that matches their skills. In the third chapter, joint work with Robert Lantis, we investigate potential unintended consequences of unemployment insurance (UI) policy on alcohol use and abuse. Using NLSY data supplemented with Geocode data, we estimate the effect of benefit replacement rates on changes in individual alcohol consumption following job loss. Identification relies on variation in replacement rates across states and over time. Benefits provide income to the unemployed which enables individuals to smooth consumption and also may reduce the stress and anxiety of job loss. Results indicate higher levels of benefits increase the amount of alcohol unemployed individuals consume. Moreover, a higher level of benefits increases the likelihood an individual abuses alcohol following job loss. Individuals\u27 responsiveness to changes in replacement rates varies based on drinking history with moderate drinkers the most responsive to changes
Essays on experimental and behavioral economics
No full textThis dissertation consists of three essays on experimental and behavioral economics that examine how decision-making in the laboratory environment is affected by changes in context.1 The first three essays focus on how behavior changes when individuals are presented with two simultaneous decision making tasks. The first two essays are experimental investigations of simultaneous decision-making in two contrasting environments: an environment that encourages competition (a lottery contest) and an environment that encourages cooperation (a voluntary contribution mechanism). In the first essay, individuals participate in different environments with the same group members, while in the second essay individuals participate in same and different environments with different group members. We find evidence both for behavioral spillovers and for social interaction effects, suggesting that context matters in laboratory settings. The third essay explores the existence of conditional cooperators as an alternative explanation for behavioral spillover. The fourth essay uses experimental methods to study a market with differently-valued goods under a reputation system. We find that the addition of a reputation system increases efficiency, and the reputation system is especially effective for increasing trade in high value goods. The caveat is that allowing for differently-valued goods reduces the information carried by the reputation system. To resolve this issue, we investigate a new reputation system, which displays reputation separately for each type of good. Efficiency is not increased as compared to the original reputation system, suggesting that the reputation system typically implemented with homogeneous goods performs adequately in the heterogeneous good setting. 1The first two essays are co-authored with Roman Sheremeta. The third essay is single authored
Essays in Nonlinear Pricing Under Regulation: Analysis of Interventions on Food Retailing
No full textIn this dissertation I present three essays. The overarching theme of these projects is how price-discriminating sellers endogenously modify their pricing schemes in the face of regulatory interventions. The application I have in mind when writing the papers is that of a food retailer deciding menu characteristics, such as price and quantity, in the context of a given food policy environment. The particular policies I consider are portion cap rules and taxes, both designed by the policy-maker to reduce the consumption of certain foods and ingredients. My approach diverges from studies focusing on buyers' reactions to paternalistic food policies by placing the seller at the center of the analysis. I use models of nonlinear pricing to derive hypotheses, which I test in controlled laboratory experiments. In the first two essays I explore the economic impacts of taxes and portion cap rules when single-product sellers serve privately informed buyers. In the third, I examine the economic effects of portion cap rules when two-product sellers serve buyers with private preferences. In the first essay, collective work with Dr. Joseph Balagtas and Dr. Steven Wu, I compare the impacts of taxes and portion control rules on profit and consumer surplus. I model the pricing problem of a single-product seller serving two types of privately-informed customers. I aim to answer the following questions: i) what effects do taxes have on portion sizes, buyer surplus, and seller's expected profit; ii) how does the tax affect the seller's ability to screen the market, and iii) how the effects of taxes and portion cap rules compare. I find that under a tax regime, all package sizes are smaller; high willingness to pay buyers see a reduction in their surplus, and the retailer's expected profit is unambiguously diminished. Both policy instruments curb consumption. In contrast with tax regimes, however, cap rules leave buyer surplus unaffected. These outcomes suggest that portion control rules might be a preferred over tax regimes as methods to regulate consumption of calorie-dense and low-nutrient foods traded in settings where retailers engage in second-degree price discrimination.In the second paper, also joint work with Dr. Joseph Balagtas and Dr. Steven Wu, I report a controlled laboratory experiment designed to test the results of my first essay. In this project, human subjects take on the role of sellers and are free to decide their pricing strategies, including number of ``packages'', their price and their quantity. We vary the policy environment across treatments,and these include: unregulated baseline, cap rule, and specific tax. My principal goal is to test the theoretical outcomes of the first essay and find which regulation is associated with a smaller negative impact on consumers' economic surplus in the laboratory. My main finding is that the cap does not impact buyers' information rents regardless of the seller's segmentation scheme; while the effect of the tax is contingent on the seller's strategy and is neutral at best.In the last essay, I study the economic impacts resulting from enforcing a maximum-quantity limit on one of the two products offered by a seller facing demand from privately-informed heterogeneous buyers. Specifically, I look at impacts on: i) consumption of the regulated component, ii) purchases of the unregulated item, and iii) consumer surplus. Hypotheses derived from a bi-dimensional nonlinear pricing predict reductions in consumption of the target component, changes in consumption of the unregulated product by some buyers, and mixed impacts on consumer surplus. Data from a laboratory experiment corroborates the predictions regarding consumption of the regulated good; however, no significant changes in consumption of the unregulated product are found, surprisingly a subset of buyers are better-off after the cap rule while no buyer type is worse-off. The results have implications for food policy discussions around portion cap rules, where the assumption that these regulations negatively impact consumers' well-being largely drives public debate. </div
Three essays on experimental economics: Social recognition via charity, gender difference in risk preference and property rights through effort investment
No full textIn this dissertation we add two new experimental studies to the growing catalog of non-economic factors that influence one\u27s economic decisions. Specifically, we examine the effect of social recognition on charitable donation and the effect of context on gender difference in risk preference. In addition to these studies, this thesis examines how the origin of wealth affects decisions to give in laboratory experiments involving charitable donation. The theories of public good and warm glow have shaped much of our understanding about why people charitable contributions. Despite the tremendous empirical success of these theories, some commonly observed aspects of charitable giving remain unexplained. One such aspect is social recognition. It has been shown repeatedly that one\u27s decision to donate and how much to donate may depend on whether others get to know about this act of charity. In Chapter 2, we explore how this effect can be partially explained by the theory of conspicuous consumption due to Glazer and Konrad (1996). According to this theory, when social rank is determined by factors that are unobservable to others, people may use charitable donation as an instrument to signal their social status, by ensuring that their observed donation rank exactly matches their unobserved social rank. We present an experimental study demonstrating this phenomenon where subjects suitably change their initial allocation to charitable donation to reduce the mismatch between their donation rank and the rank determined by their unobserved endowment. With the help of varying treatment conditions and a careful hierarchical Bayesian data analysis we establish that the effect of rank mismatch on the change in donation is more than what can be explained by the intrinsic utility subjects derive by donating to charity. It is commonly held that women are more risk averse than men. Some empirical and experimental studies provide evidence toward this stereotype while others report no significant difference. Experimental studies usually employ an abstract setting to elicit risk propensity. It is often argued that abstract settings, with the lack of any familiar cues, do not well represent the natural world. Thus it would be important to build a catalog of gender difference studies that make use of a diverse set of familiar contexts. In Chapter 3 we present one such study where gender difference in risk aversion is examined in the context of emission trading and its mathematically equivalent abstract gamble counterpart. Our experimental study indicates a greater risk propensity by women in the context of emission trading, though the stereotype of their greater risk aversion than men prevails in our abstract game treatment. Our detection of a greater risk propensity by women is a first of its kind, as the best documented evidence against the stereotype has so far been in the form of “no significant differences between the sexes”. Emission trading is fast becoming an important social issue, involving intricate sub-contexts of self-restraint and law abidance under imperfect enforcement. Why women tend to be more risk seeking in such a context poses an interesting question for future research. It is a common practice in economics experiments to gift subjects with an initial endowment. It is debatable whether subjects gifted with an endowment have the same kind of attachment to it as people do in the natural world where endowment is hard earned. To answer this, we study in Chapter 4 whether greater effort investment leads to bigger property rights in a modified dictator game where recipients are well known charities. Our choice of charities as recipients eliminates a peer-to-peer comparison and the associated relative property rights that are commonly observed in dictator, ultimatum and trust games. We find that whether endowment is earned or received as a gift has no effect on what subjects to donate to charities. We also observe that whether endowment is earned by defeating a competitor or cooperating with a partner has a minimal effect on the donation amount. The effect can be explained by relative property rights that two cooperating subjects may develop toward the common sum they earn as a team. Therefore, we conclude that effort investment alone does not lead to stronger property rights – property rights develop only in a context where two peers compare their relative worths
Experimental studies of arbitration mechanism and two-sided markets
Get PDFThis dissertation consists of three essays. The first essay is an experimental study that examines a relative new type of arbitration called &agr;-Final Offer Arbitration. The second is a theoretical study that introduces inequality aversion as a new explanatory factor for low agreements rates during disputes under arbitration mechanism. The final essay analyzes the effects of different polices on the price stricter in a two-sided market monopoly. Promising results to improve arbitration used in the field are obtained from Amended Final Offer Arbitration (AFOA), which outperforms Final-Offer Arbitration (FOA) and weakly outperforms Conventional Arbitration (CA). The first essay presents an experiment to evaluate a more general case of AFOA, &agr;-Final Offer Arbitration (&agr;-FOA). This mechanism is similar to a second-price auction, which punishes the loser with a value proportional (&agr;) to the difference between her final offer and the arbitrator\u27s fair settlement. The experiment furthermore divides the pool of subjects within a session into two groups according to their estimated risk preferences in order to assess how the contract zone depends on the relative risk preferences of the subjects involved in negotiation. Although agreement rates overall are low, the results show that &agr;-FOA has a significantly higher agreement rate than both CA and FOA. Contrary to theoretical prediction the more risk-averse group of subjects does not have a higher agreement rate than the less risk-averse group of subjects. The second essay proposes an as yet unstudied factor to explain disagreements between disputants under &agr;-Final Offer Arbitration and Conventional Arbitration. Using a utility function proposed by Fehr & Schmidt (1999) that includes inequality aversion, the model predicts that two risk-neutral disputants will not reach an agreement if one of them has positively biased beliefs about the size of the pie. The third essay investigates the effects of different policies on price structure and consumer surplus in a two-sided market monopoly. In a laboratory environment, most of the monopolists charge a price below cost even if there is no threat of new competitors. A policy that imposes that the monopolist must charge the same price for both sides of the market decreases the total consumer surplus, while a policy that imposes that prices must be above costs decreases the total consumer surplus even more. A tax that increases the cost on one side of the market leads to a decrease in the price that monopolist charges on the other side of the market. These results suggest that the policymakers should distinguish between a one-sided and a two-sided market before they impose different policies
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