233 research outputs found
Common value auctions with voluntary and qualified entry
No full textWe 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
What Can Laboratory Experiments Teach Us About Emissions Permit Market Design?
No full textThe laboratory provides a test bed to inform many design choices for emissions permit markets. Experiments are sometimes strongly motivated and structured by specific theoretical models and predictions, but in other cases the experiment itself can be the model of the market and regulatory environment. We review specific experimental applications that address design issues for permit auction rules, permit expiration dates and banking, liability rules, and regulatory enforcement.cap-and-trade, auctions, liability, regulation, compliance, banking, Environmental Economics and Policy, Institutional and Behavioral Economics,
A Market with Frictions in the Matching Process: An Experimental Study
No full textWe construct a laboratory market with the structure of the theoretical model of Burdett, Shi, and Wright (2001). The model is a simple and natural way to represent a market in which there is a friction in the matching process between buyers and sellers. Sellers first simultaneously post prices at which they are willing to sell their single unit of a good. Buyers then simultaneously choose a seller from whom to attempt to purchase a unit. If more than one buyer chooses the same seller, the good is randomly sold to one of the buyers. If a seller is not chosen by any buyer, his unit is not sold. Our experimental results show a broad consistency with the model of Burdett et al. and less support for an alternative model, which is analogous to the model of Montgomery (1991), and which has different assumptions on the strategic interaction between sellers. The main departures that we observe from the Burdett et al. model are that (a) price dispersion exists and is slow to decay, (b) prices exceed the equilibrium level when there are only two sellers, and (c) buyers’ purchase probabilities are insufficiently responsive to price differences when there are two sellers.
Do Community Characteristics Determine Environmental Outcomes? Evidence from the Toxics Release Inventory
No full textThis research uses neighborhood characteristics (at the zipcode level) to explain changes in toxic releases between 1990 and 1993. It combines the Toxics Release Inventory data with demographic data from the 1990 US Census. We first analyze the location of manufacturing facilities in a particular neighborhood using a sample selection model, and then attribute changes in the level of emissions between 1990 and 1993 to the demographic and socio-economic characteristics of the neighborhood in 1990. The results indicate that variables likely to affect the propensity for communities to engage in political action significantly influence environmental performance. Economic characteristics of neighborhoods (such as income levels and unemployment) also affect changes in releases. Release changes in the Southeastern US exhibit a pattern consistent with racial injustice.
The strategy method lowers measured trustworthy behavior
No full textIn a trust game experiment, we elicited choices using either the so-called game or strategy method. While yielding similar rates of trust, the strategy method reveals a significantly lower rate of trustworthiness
Communication and Coordination in the Laboratory Collective Resistance Game
No full textThis paper presents a laboratory collective resistance (CR) game to study how different forms of non-binding communication among responders can help coordinate their collective resistance against a leader who transgresses against them. Contrary to the predictions of analysis based on purely self-regarding preferences, we find that non-binding communication about intended resistance increases the incidence of no transgression even in the one-shot laboratory CR game. In particular, we find that the incidence of no transgression increases from 7 percent with no communication up to 25-37 percent depending on whether communication occurs before or after the leader’s transgression decision. Responders’ messages are different when the leaders can observe them, and the leaders use the observed messages to target specific responders for transgression.Communication ; Cheap Talk ; Collective Resistance ; Laboratory Experiment ; Social Preferences
Uncertainty and Resistance to Reform in Laboratory Participation Games
No full textThis paper presents a participation game experiment to study the impact of uncertainty and costly political participation on the incidence of reform. Fernandez and Rodrik (1991) show that uncertainty about who will ultimately gain or lose as a result of a reform can prevent its adoption. We introduce intra-group conflict into this framework by incorporating costly political participation, which creates a natural incentive for free-riding on fellow group members’ efforts to influence policy outcomes. An agent, however, may still be willing to participate if her participation is likely to affect the policy outcome given the probabilities of participation by others. Our experimental findings show that uncertainty reduces the incidence of reform even with costly political participation, and that an increase in the cost of participation reduces the participation of all agents, regardless of whether they belong to the majority and minority. This second result cannot be reconciled with the standard mixed strategy Nash equilibrium, but is consistent with the quantal response equilibrium.Reform, Uncertainty, Experiment, Participation Game, Bounded Rationality, Quantal Response Equilibrium
COMMUNICATION AND COORDINATION IN THE LABORATORY COLLECTIVE RESISTANCE GAME
No full textThis paper presents a laboratory collective resistance (CR) game to study how different forms of non-binding communication among responders can help coordinate their collective resistance against a leader who transgresses against them. Contrary to the predictions of analysis based on purely self-regarding preferences, we find that non-binding communication about intended resistance increases the incidence of no transgression even in the one-shot laboratory CR game. In particular, we find that the incidence of no transgression increases from 7 percent with no communication up to 25-37 percent depending on whether communication occurs before or after the leader’s transgression decision. Responders’ messages are different when the leaders can observe them, and the leaders use the observed messages to target specific responders for transgression.Communication, Cheap Talk, Collective Resistance, Laboratory Experiment, Social Preferences
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
No full textHow 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
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