Papers - All

Rama Katkar, David Lucking-Reiley

Cited by*: 7 Downloads*: 13

Sellers in eBay auctions have the opportunity to choose both a public minimum bid amount and a secret reserve price. We ask, empirically, whether the seller is made better or worse off by setting a secret reserve above a low minimum bid, versus the option of making the reserve public by using it as the minimum bid level. In a field experiment, we auction 50 matched pairs of Pokemon cards on eBay, half with secret reserves and half with equivalently high public minimum bids. We find that secret reserve prices make us worse off as sellers, by reducing the probability of the auction resulting in a sale, deterring serious bidders from entering the auction, and lowering the expected transaction price of the auction. We also present evidence that some sellers choose to use secret reserve prices for reasons other than increasing their expected auction prices.

John A List

Cited by*: 0 Downloads*: 13

No abstract available

David J Cooper

Cited by*: 6 Downloads*: 13

This paper studies experiments set in a corporate environment where a manager attempts to overcome a history of coordination failure by employees using either financial incentives or communication. I compare the choices of subject managers drawn from a standard undergraduate population with subject managers drawn from the executive MBA (EMBA) program at Case?s Weatherhead School of Management. The EMBA subjects are a group of experienced, successful managers; all of the EMBA subjects have at least ten years of work experience, including at least five years in a supervisory role, and have average annual earnings in excess of $120,000. The EMBA subject managers are able to overcome a history of coordination failure significantly faster than the undergraduate subject managers. This superior performance is driven neither by differences in the financial incentives offered to the employees nor by use of an inherently different communications strategy. Instead, EMBA subject managers are significantly more likely to use the same "good" communication strategy as is identified for undergraduate subject managers through systematic coding of managers messages to employees.

Alessandra Cassar, Lucas Crowley, Bruce Wydick

Cited by*: 1 Downloads*: 13

An important question to microfinance is the relevance of existing social capital in target communities to the performance of group lending. This research presents evidence from field experiments in South Africa and Armenia, in which subjects participate in trust games and a microfinance game. We present moderately strong evidence that personal trust between group members and peer homogeneity are more important to group loan repayment than general societal trust or mere acquaintanceship between members. We also find some evidence of reciprocity in groups: those who have been helped by other members are more likely to contribute themselves.

Michael Kremer, Edward Miguel

Cited by*: 7 Downloads*: 13

The history of foreign development assistance is one of movement away from addressing immediate needs and toward focusing on the underlying causes of poverty. A recent manifestation is the move towards sustainability,' which stresses community mobilization, education, and cost-recovery. This stands in contrast to the traditional economic analysis of development projects, with its focus on providing public goods and correcting externalities. We examine evidence from randomized evaluations on strategies for combating intestinal worms, which affect one in four people worldwide. Providing medicine to treat worms was extremely cost effective, although medicine must be provided twice per year indefinitely to keep children worm-free. An effort to promote sustainability by educating Kenyan schoolchildren on worm prevention was ineffective, and a mobilization' intervention from psychology failed to boost deworming drug take-up. Take-up was highly sensitive to drug cost: a small increase in cost led to an 80 percent reduction in take-up (relative to free treatment). The results suggest that, in the context we examine, the pursuit of sustainability may be an illusion, and that in the short-run, at least, external subsidies will remain necessary.

John Gibson, David McKenzie, Steven Stillman

Cited by*: 3 Downloads*: 13

People migrate to improve their well-being, whether through an expansion of economic and social opportunities or a reduction in persecution. Yet a large literature suggests that migration can be a very stressful process, with potentially negative impacts on mental health reducing the net benefits of migration. However, to truly understand the effect of migration on mental health one must compare the mental health of migrants to what their mental health would have been had they stayed in their home country. The existing literature is not able to do this and typically settles for comparing the mental health of migrants to that of natives in the destination country, which takes no account of any pre-existing differences between these groups. This paper overcomes the selection problems affecting previous studies of the effect of migration on mental health by examining a migrant lottery program. New Zealand allows a quota of Tongans to immigrate each year with a lottery used to choose amongst the excess number of applicants. A unique survey conducted by the authors in these two countries allows experimental estimates of the mental health effects of migration to be obtained by comparing the mental health of migrants who were successful applicants in the lottery to the mental health of those who applied to migrate under the quota, but whose names were not drawn in the lottery. Migration is found to lead to improvements in mental health, particularly for women and those with poor mental health in their home country.

William T Harbaugh, Kate Krause, Lise Vesterlund

Cited by*: 77 Downloads*: 13

In this paper we examine how risk attitudes change with age. We present participants from age 5 to 65 with choices between simple gambles and the expected value of the gambles. The gambles are over both gains and losses, and vary in the probability of the non-zero payoff. Surprisingly, we find that many participants are risk seeking when faced with high-probability prospects over gains and risk averse when faced with small-probability prospects. Over losses we find the exact opposite. Children's choices are consistent with the underweighting of low-probability events and the overweighting of high-probability ones. This tendency diminishes with age, and on average adults appear to use the objective probability when evaluating risky prospects.

Juan-Camilo Cardenas

Cited by*: 0 Downloads*: 13

The internalization of external costs arising from a group dilemma between the individual and social interests require the design of institutions through the market, the state or self-governance that are able to induce in the agents a change in their pecuniary and non-material incentives so that their choices are socially desirable. The conventional approach in the economic analysis of the enforcement of the law based mostly on the work of Becker is based on the postulate that those not complying with the law are rationally perceiving a greater benefit from doing so if compared to the expected cost of the sanction by the state, that is the value of the sanction for the law violator multiplied by the probability of detection. Through a series of economic experiments we explore this hypothesis for the case of a typical public good or resource extraction where there is a group externality, and an external regulation that is partially enforced. The results suggest that the strategic response by the agents to the different expected costs of the sanction confirm only partially the hypothesis in the sense that the differences are less than proportional to the differences to the expected costs for the regulated agents. Further, when the results here are compared to exact replications of the experiments with people in the field that face these kinds of dilemmas, the differences in individual behavior across levels of expected costs virtually vanish. It is suggested here that along with the material costs for violators, the individuals may incorporate additional elements in their cognitive process which are consistent with findings from experimental and behavioral economics studies.

Daron Acemoglu, David Laibson , John A List

Cited by*: 4 Downloads*: 13

Internet-based educational resources are proliferating rapidly. One concern associated with these (potentially transformative) technological changes is that they will be disequalizing - as many technologies of the last several decades have been - creating superstar teachers and a winner-take-all education system. These important concerns notwithstanding, we contend that a major impact of web-based educational technologies will be the democratization of education: educational resources will be more equally distributed, and lower-skilled teachers will benefit. At the root of our results is the observation that skilled lecturers can only exploit their comparative advantage if other teachers complement those lectures with face-to-face instruction. This complementarity will increase the quantity and quality of face-to-face teaching services, potentially increasing the marginal product and wages of lower-skill teachers.

Alan S Gerber, Donald P Green

Cited by*: 12 Downloads*: 13

No abstract available

Bradley J Ruffle, Richard Sosis

Cited by*: 24 Downloads*: 13

No abstract available

John A Fox, Jayson L Lusk

Cited by*: 6 Downloads*: 13

An increasing number of studies have begun conducting economic experiments in field, rather than laboratory settings. We directly compare results from laboratory and field valuation experiments. After controlling for unengaged bidders, results indicate field valuations were greater than laboratory valuations. Results are discussed in the context of recent literature on commitment costs.

Catherine Co , John A List

Cited by*: 47 Downloads*: 13

This paper employs a conditional logit model to estimate the effects of state environmental regulations on foreign multinational corporations' new plant location decisions from 1986 to 1993. The relationship between site choice and state environmental regulations is explored, using four measures of regulatory stringency. We find evidence that heterogeneous environmental policies across states do matter.

Jan Hansen, Carsten Schmidt, Martin Strobel

Cited by*: 6 Downloads*: 13

Political stock markets (PSM) are sometimes seen as substitutes for opinion polls. On the bases of a behavioural model, specific preconditions were drawn out under which manipulation in PSM can weaken this argument. Evidence for manipulation is reported from the data of two separate PSM during the Berlin 1999 state elections.

Juan-Camilo Cardenas, Jeff P Carpenter

Cited by*: 1 Downloads*: 13

No abstract available

Stefan Luckner, Christof Weinhardt

Cited by*: 9 Downloads*: 12

The results of recent studies on prediction markets are encouraging. Prior experience demonstrates that markets with different incentive schemes predicted uncertain future events remarkably accurately. In this paper, we study the impact of different monetary incentives on prediction accuracy in a field experiment. In order to do so, we compare three groups of traders, corresponding to three treatments with different payment schemes, in a prediction market for the FIFA World Cup 2006. Somewhat surprisingly, our results show that performance-related payment schemes do not necessarily increase the prediction accuracy. Due to the risk aversion of traders the competitive environment in a rank-order tournament leads to the best results in terms of prediction accuracy.

Carlos A Alpizar, Steven Buck

Cited by*: 0 Downloads*: 12

In this paper, we distinguish between horizontal and vertical trust. We investigate how these measures of trust, as well as measures of trustworthiness and risk aversion are related to the probability of rural farmers of having had a loan from a bank. Using experimental and survey data from 191 farmers of the Amazon region of Ecuador, we find that: (1) controlling for risk aversion, women do not trust differently than men in each trust game, however, women compared to men do trust outside professionals more than community members, and (2) isolated rural farmers with stronger preferences for trusting outside professionals experience higher levels of bank loan uptake.

Antoni Bosch-Domenech, Jose Garcia-Montalvo, Rosemarie Nagel, Albert Satorra

Cited by*: 0 Downloads*: 12

This paper develops a finite mixture distribution analysis of Beauty-Contest data obtained from diverse groups of experiments. ML estimation using the EM approach provides estimates for the means and variances of the component distributions, which are common to all the groups, and estimates of the mixing proportions, which are specific to each group. This estimation is performed without imposing constraints on the parameters of the composing distributions. The statistical analysis indicates that many individuals follow a common pattern of reasoning described as iterated best reply (degenerate), and shows that the proportions of people thinking at different levels of depth vary across groups.

Jonathan E Alevy, Oscar Cristi, Oscar Melo

Cited by*: 1 Downloads*: 12

Field experiments were conducted with farmers in the Limari Valley of Chile to test extant theory on right-to-choose auctions. Water volumes that differed by reservoir source and time of availability were offered for sale by the research team. The auctions were supplemented by protocols to elicit risk and time preferences of bidders. We find that the right-to-choose auctions raise significantly more revenue than the benchmark sequential auction. Risk attitudes explain a substantial amount of the difference in bidding between auction institutions, consonant with received theory. The auction bidding revealed distinct preferences for water types, which has implications for market re-design.

Michael S Haigh, John A List

Cited by*: 6 Downloads*: 12

An important class of investment decisions is characterized by unrecoverable sunk costs, resolution of uncertainty through time, and the ability to invest in the future as an alternative to investing today. The options model provides guidance in such settings, including an investment decision rule called the "bad news principle": the downside investment state influences the investment decision whereas the upside investment state is ignored. This study takes a new approach to examining predictions of the options model by using the tools of experimental economics. Our evidence, which is drawn from student and professional trader subject pools, is broadly consonant with the options model.