Lecture Series
Fall 2009
Science of Liberty
Friday, 4:00pm - 5:30pm
reception following
Risk Pooling, Risk Preferences, and Social Networks.
Garance Genicot , Georgetown University
Using data from a eld experiment conducted in seventy Colombian municipalities, we investigate who pools risk with whom when risk pooling arrangements are not formally enforced. We explore the roles played by risk attitudes and network connections both theoretically and empirically. We nd that pairs of participants who share a bond of friendship or kinship are more likely to (1) join the same risk pooling group and to (2) group assortatively with respect to risk attitudes. Also, consistent with our theoretical nding that when there is a problem of trust the process of pooling assortatively with respect to risk preferences is perturbed, we nd (3) only weak evidence of such assorting among unfamiliar individuals.
Toward an understanding of the relative strengths of positive and negative reciprocity
Omar Al-Ubaydli, George Mason University
A stylized fact is that agents respond more acutely to negative than positive stimuli. Such findings have generated insights on mechanism‐design, have been featured prominently in policymaking, and more generally have led to discussions of whether preferences are defined over consumption levels or changes in consumption. This
study reconsiders this stylized fact. In doing so, it provides insights into an important domain wherein positive stimuli induce a greater response than negative stimuli: a principal agent game with reputational considerations and with the agent on the market’s short end. This common setting represents an important feature of labor markets with involuntary unemployment.
Fear of Losing in Dynamic Auctions: An Experimental Study
Erkut Y. Ozbay, University of Maryland
We analyze the implications of different pricing rules in discrete clock auctions. The two most common pricing rules are highest-rejected bid (HRB) and lowest-accepted bid (LAB). Under HRB, the winners pay the lowest price that clears the market; under LAB, the winners pay the highest price that clears the market. This pricing difference creates stronger incentives for bid shading under LAB. When bidders seek to maximize profits, the HRB auction maximizes revenues and is fully efficient. Because of the bid shading under LAB, a bidder may lose at an affordable price. Bidders who fear losing may limit bid shading, causing the LAB auction to achieve higher revenues than the HRB auction. Our experiments confirm that this is the case. The LAB auction achieves higher revenues. This also is the case in a version of the clock auction with provisional winners that is commonly used in spectrum auctions. This revenue result may explain the frequent use of LAB pricing despite the efficiency and simplicity advantages of HRB pricing.
Oct 16th
"ROSCA as a Saving Commitment Device for Sophisticated Hyperbolic Discounters: Field Experiment from Vietnam"
Tomomi Tanaka, Arizona State University
Abstract: This paper investigates whether the participation in rotating savings and credit associations (ROSCAs), an informal financial institution-like arrangement found in many developing countries, is correlated with risk aversion, time discounting and the level of trust and reciprocity measured in experiments. We show people who participate in fixed ROSCAs are less present-biased, have lower discount rates and are often aware of the self-control problem they would face if they had to save alone. In contrast, time preferences are not strongly related to the participation in bidding ROSCAs. The members of fixed ROSCAs are also more trustworthy, and less prone to default. Our experimental results suggest fixed ROSCAs attract sophisticated individuals who are aware of self-control problems, while bidding ROSCAs do not attract these individuals.
Oct 9th
"Social Identity and Inequality: The Impact of China's Hukou System"
Sherry Li, University of Texas-Dallas
We conduct an experimental study t
o investigate the causal impact of migrant or hukou identity on individuals’ response to economic incentives in China. We examine the role that this internalized social identity may play in the widening economic disparity in urban areas. Our results indicate that making individuals’ hukou status salient and public reduces the performance of rural migrant children on assigned tasks by more than 9 percent. Hukou status shifts the income ranking of rural migrants towards the low end of the income distribution – the proportion of rural migrants with earnings below the 25th percentile increases significantly from 11.9 percent to 30.3 percent. This suggests that hukou identity imposed and shaped by the existing institution may distort individuals&rsqu
o; intrinsic response to incentives. This distortion may serve as an avenue through which the hukou system aggravates rising
economic inequality in urban China even in the absence of any discrimination.
uot;font-size: 10px;">Sept 25th
“Sleep deprivation, sleep choice, and time-of-day effects on high-level decision making"
David Dickinson Appalachian State University
text-decoration: underline;">Abstract: Research has made significa
nt recent advances in identifying the effects of adverse sleep states on higher-level decision-making. In most cases, laboratory manipulated sleep choice provides the controlled environment for investigation. Such studies are high on internal experimental control, but low on external validity for the typical real-world decision-maker. An alternative but complementary approach is more observation, examining decisions in more ecologically valid sleep states. This presentation will include some recent and emerging results from both types of environments, which are designed to examine sleep effects on decision tasks with well defined outcome measures that are of interest to economists.
Study #1 (working paper available):
In this study
we explore sleep effects in an ecologically valid environment where we objectively measure naturally-occurring sleep choice (via actigraphy) on 102 subjects prior to administering a high-level reasoning task. Additionally, we examine circadian effects by randomly matching and mismatching subjects to more versus less preferred times of day for the decision experiment session. Our behavioral data show decrements in the controlled-thought portion of the task as a result of relatively mild voluntary sleep loss and circadian mismatch. However, adaptation to the task is unaffected by either adverse sleep state. Within a dual systems framework of cerebral function, these results are consistent with the hypothesis that voluntary sleep restriction and circadian mismatch disproportionally affect controlled thought processes, leaving more automatic response mechanisms intact. Our results apply to environments where depth of reasoning and anticipation are important (e.g., health/safety decisions, threat assessment, stock trading, etc.), with implications for modern societal trends of chronic partial sleep deprivation and performance against one’s circadian rhythm (e.g., shift workers, frequent flyers).
Study #2 (emerging results):
A controlled laboratory protocol is used to manipulate sleep prior to administration of decision tasks: well-rested, 24 hr total sleep deprivation, and chronic partial sleep deprivation are examined. Behavioral and neural data are generated during a Bayesian choice task and during a lottery choice task. Emergent functional MRI results indicate significant decreases in neural activation following total sleep deprivation in regions associated with probability assessment, information
integration, and conflict monitoring (Bayes task). In the lottery choice task, some neural activation differences are found following sleep deprivation even in the absence of significant behavioral outcome differences. These tasks explore two other critical and foundational environments that are the building blocks decision-making in many contexts involving risk or uncertainty.
Sept 11th
The Economics of Charity: Evidence from Natural Field Experiments
M
ichael K.
Price, University of Tennessee
Abstract: Annual giving to charity in the United States exceeds 2 percent of GDP and approximately 90 percent of all people donate to at least one charity each year. Increased individual
wealth, an aging population,and recent devolutionary trends across governments worldwide combine to set the stage for continued growth of this sector. Yet, many economic facts concerning the interrelationship between solicitors and solicitees remain unknown. This talk will summarize insights from a series of field experiments designed to examine why people initially give to charities, why they remain committed to the cause, and what factors attenuate these influences.
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