not all rivals look alike estimating an equilibrium model of the release date timing game a very serious game of strategy is at work a cross between chess and chicken which studio distribution chiefs play year round but with increasing intensity during the summer and holiday release period new york times december 6 1999 hubris hubris if you only think about your own business you think i ve got a good story department i ve got a good marketing department we re going to go out and do this and you don t think that everybody else is thinking the same way in a given weekend in a year you ll have five movies open and there s certainly not enough people to go around joe roth chairman of walt disney studios answering a question about the large number of major movies opening within days of each other los angeles times december 31 1996 i introduction the number of americans who go to the movies varies dramatically over the course of the year and sometimes more than doubles within a period of two weeks at the same time the first week accounts for almost 40 of the box office revenues of the average movie the combination of these two facts makes the timing of launching a new movie a major focus of attention for distributors of movies with virtually no subsequent price competition the movie s release date is one of the main short run vehicles by which studios compete with each other in this paper i develop and estimate a model of discrete games which allows me to analyze this release date timing game most empirical industry studies focus on price and quantity competition taking other product characteristics as given in many industries however prices play a very small role and competition is channeled through other product attributes the entertainment industry is a prime example competition among movies television programs or broadway shows is on nonmonetary product attributes such as content advertising and time therefore understanding competition in such industries requires a model that endogenizes some of these product attributes especially those that can be changed in the short run this paper provides a framework in which release decisions can be endogenized and nonprice competition can be analyzed the absence of price competition is useful because it allows the focus of the analysis to be on the timing dimension without relying on assumptions about the nature of the postrelease price competition 1 together with the frequent timing decisions associated with different movies this makes the motion picture industry quite attractive for empirical analysis of the timing game this industry however is not the only example in which timing decisions play a central role similar timing considerations are also important in the release decisions of books compact disks and other new products as well as in the scheduling decisions of major events television programs flight schedules and promotional sales 2 when taking on a new project distributors of movies typically plan for a friday release which falls within a relatively short window of time carefully chosen to match the type of the movie this makes the choice of the release date a very discrete one the exact friday within the season is generally determined by a strategic timing game played among distributors before each release season distributors scramble to release their movies on big holiday weekends when demand is high when doing so each distributor tries to release on the attractive holiday weekend and at the same time to deter competitors from doing the same the extent to which distributors are successful in doing so largely depends on the quality of the movies at their disposal and on the way they can compete with movies released by other studios thus modeling this timing game must account for the asymmetries among movies and for the variation in these asymmetries across release seasons specifically i develop and estimate a sequential move game with private information i assume that the observed release date decisions are the equilibrium outcome of such a game

the optimal allocation of prizes in tournaments of heterogeneous agents tournaments are widely used in organizations explicitly or implicitly to reward the best performing employees for example by promotion or bonuses and or to penalize the worst performing employees for example by demotion withholding bonuses or unfavorable job assignments these incentive schemes can be interpreted as various prize allocations based on the employees relative performance while the optimal prize allocation in tournaments of symmetric agents is relatively well understood little is known about the impact of the allocation of prizes on the effectiveness of tournament incentive schemes for heterogeneous agents we show that while multiple prize allocation rules are equivalent when agents are symmetric in their ability the equivalence is broken in the presence of heterogeneity under a wide range of conditions loser prize tournaments that is tournaments that award a low prize to relatively few bottom performers are optimal for the firm the reason is that low ability agents are discouraged less in such tournaments as compared to winner prize tournaments awarding a high prize to few top performers and hence can be compensated less to meet their participation constraints jel m52 j33 j24

measuring skill and chance in games abstract online and offline gaming has become a multi billion dollar industry yet games of chance in contrast to games of skill are prohibited or tightly regulated in many jurisdictions thus the question whether a game predominantly depends on skill or chance has important legal and regulatory implications in this paper we suggest a new empirical criterion for distinguishing games of skill from games of chance all players are ranked according to a best fit elo algorithm the wider the distribution of player ratings are in a game the more important is the role of skill most importantly we provide a new benchmark 50 chess that allows to decide whether games predominantly depend on chance as this criterion is often used by courts we apply the method to large datasets of various games e g chess poker backgammon our findings indicate that most popular online games including poker are below the threshold of 50 skill and thus depend predominantly on chance in fact poker contains about as much skill as chess when 75 of the chess results are replaced by a coin flip

garp for kids on the development of rational choice behavior in this paper we examine the extent to which consumption choices by 7 and 11 year old children and college undergraduates satisfy the axioms of revealed preference we find that choices by even the 7 year olds are considerably more likely to obey revealed preference axioms than would be true if they were choosing randomly 11 year olds do better still while college students do no better than 11 year old children we also find that mathematical ability is not correlated with choosing rationally we argue that this evidence suggests that the ability to choose rationally is not innate but that it does develop quickly

focusing and framing of risky alternatives abstract this paper develops a theory of focusing and framing in an intertemporal context with risky choices we provide a selection criterion between existing theories of focusing by allowing a decision maker to choose her frame such that her attention is either drawn to salient events associated with an option or to the expected utilities an option yields in different time periods our key assumption is that a decision maker can choose her frame in a self serving manner we predict that the selected frame induces overoptimistic actions in the sense that subjects underrate downside risk but overrate upside risk and accordingly reveal overoptimistic choices hence our theory can explain phenomena such as excessive harmful consumption smoking unhealthy diet and risky investments entrepreneurship lotteries gambling in one coherent framework notably overoptimistic actions are not universal but have plausible limits we characterize under which situations overoptimistic actions are most likely to occur and under which circumstances choices should be rational or even pessimistic

affirmative action or just discrimination a study on the endogenous emergence of quotas affirmative action rules are often implemented to promote women on labor markets little is known however about how and whether such rules emerge endogenously in groups of potentially affected subjects we experimentally investigate whether subjects vote for affirmative action rules against or abstain if approved by the vote a quota rule is implemented that favors women in one treatment but members of an artificially created group based on random color assignment in another treatment we find that quota rules based on gender are implemented frequently and do not affect the performance of men and women in a contest quota rules based on an arbitrary criterion however are less often approved and lead to strong individual reactions of advantaged and disadvantaged group members and to efficiency losses these results show that the effects of affirmative action policies largely depend on whether these policies are viewed favorably within the affected groups

entrepreneurial success and failure confidence and fallible judgment excess entry or the high failure rate of market entry decisions is often attributed to overconfidence exhibited by entrepreneurs assuming that these decisions depend on assessments of business opportunities we model boundedly rational entrepreneurs and show analytically that whereas excess entry is an inevitable consequence of imperfect judgment it does not necessarily imply overconfidence indeed judgmental fallibility can lead to excess entry even when all potential entrepreneurs are underconfident we further demonstrate that as a group individuals who decide to start a new business exhibit more confidence than those who do not and that successful entrants are less confident than failures our results therefore question general claims that overconfidence leads to excess entry we conclude by emphasizing the need to understand the role of judgmental fallibility in producing economic outcomes and implications for both venture capitalists and the training of entrepreneurs

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

a model of positive self image in subjective assessments this paper suggests a mechanism that describes individuals positive self image in subjective assessments of their relative abilities the mechanism assumes individuals have heterogeneous production functions that determine ability as a function of multiple skills make skill enhancing investments with the goal of maximizing their ability and make ability comparisons using their own production function within this framework the paper provides conditions under which there is positive self image positive self image is increasing in the ease of the task the number of different skills needed for the task and the variability of production technologies in the population

optimal coverage for incompletely reliable insurance abstract optimal actuarially fair coverage of insurance subject to default risk can be less or more than full depending upon the relation between the recovery rate under default and a positive trigger level that is independent of the insured s risk preference

migrations risks and uncertainty a field experiment in china abstract we report data from the first incentivized artefactual field experiment conducted in china to understand whether chinese migrants differ from non migrants in terms of preferences regarding risk and uncertainty in various contexts we find that compared to non migrants migrants are significantly more likely to enter competitions when they expect competitive entries from others however migrants are not different from non migrants in risk and ambiguity preferences where strategic uncertainty is absent our results suggest that migration may be driven more by a stronger belief in one s chance of succeeding in an uncertain competitive environment than by differences risk attitudes related to state uncertainty

is there a hold up problem most literature on the hold up problem starts from the assumption that ex post bargaining outcomes are insensitive to prior investment costs we argue that this approach is unsatisfactory if the bargaining procedure is relatively symmetric it typically admits multiple perfect equilibria some of which give the investor a high enough payofi to sustain e cient investment even if the bargaining procedure is asymmetric and rigged against the investor there may be investment if agents are driven by moral concerns or if communication creates commitment laboratory experiments indicate that communication is necessary and su cient for agents to coordinate on e cient outcomes when the bargaining game is symmetric when the bargaining game is rigged against the investor the hold up problem is mitigated but not eliminated by moral behavior communication is quite credible and we flnd that promises are more believable than threats

contract nonperformance risk and uncertainty in insurance markets insurance contracts may fail to perform leading to a default on valid claims we relax the standard assumption of known probabilities for such defaults by allowing for uncertainty within a large behavioral experiment we show that introducing risk and uncertainty each leads to significant reductions in insurance demand and that the effects are comparable in magnitude 17 1 and 14 5 percentage points furthermore risk and ambiguity averse participants are affected most these findings are in line with models incorporating ambiguity attitudes or alternatively pessimistic beliefs an analysis of the belief and decision dynamics suggests persistent pessimistic priors and disregard of peer experiences leading to a stable uncertainty effect

gender and competition at a young age gender gaps may be observed in a variety of economic and social environments one of the possible determining factors is that men are more competitive than women and so when the competitiveness of the environment increases the performance of men increases relative to that of women we test this hypothesis in a field study conducted with 9 year old children running on a track they first run alone and then in pairs over a short distance with different gender composition of the pairs the results support the hypothesis that performance in competition varies according to gender when children ran alone there was no difference in performance in competition boys but not girls improved their performance this finding relates to the discussion regarding single sex schools the outcomes of examinations in a mixed sex school can show a gender gap in favor of boys even when this gap does not reflect actual abilities girls who are as talented as boys will end up performing worse just because they are not as competitive and will not achieve as high scores in examinations as boys

the effect of link costs on simple buyer seller networks we examine experimentally how link costs affect the formation of links between a single seller and two potential buyers as well as the ensuing bargaining theory predicts that link costs lead to less competitive networks with one link rather than two links and that link costs do not affect the bargaining outcomes conditional on the network we find support for the first but not the second prediction 2 link networks form less frequently when there are link costs given that a 2 link network forms however a seller on average offers a smaller share of the pie to the buyers in the presence than in the absence of link costs this impact of link costs can be explained by a disutility for advantageous inequality on the part of the seller

does temporary affirmative action produce persistent effects a study of black and female employment in law enforcement abstract this paper exploits variation in the timing and outcomes of employment discrimination lawsuits against u s law enforcement agencies to estimate the cumulative and persistent employment effects of temporary externally imposed affirmative action aa we find that aa increased black employment at all ranks by 4 5 to 6 2 percentage points relative to national trends we also find no erosion of these employment gains in the fifteen years following aa termination although black employment growth was significantly lower in departments after aa ended than in departments whose plans continued for women in contrast we find only marginal employment gains at lower ranks

real options logic revisited the performance effects of alternative resource allocation regimes we delineate three dimensions of resource allocation behavior that allow us to distinguish between real options logic and alternative resource allocation regimes sequencing low initial commitment and reallocation we then measure these in a product innovation context to test for the performance effect of real options logic vis a vis its alternatives sequencing which distinguishes dynamic allocation regimes more generally is associated with higher new product sales low initial commitment and reallocation do not show individual direct effects on new product sales however when assessed as a match we find that the fit between low initial commitment and reallocation yes yes no no increases performance significantly after controlling for such fit as well as sequencing we find no significant performance difference between real options logic and other regimes our findings imply that insufficient identification of real options logic picks up confounding effects which may provide an explanation for the inconclusive results in prior studies of real options and performance in addition to bounding the concept more precisely we contribute to theory by situating real options logic within the broader set of allocation regimes conducive to innovation performance in uncertain competitive markets

competitor orientation and the evolution of business markets competitor orientation i e the focus on beating the competition rather than maximizing profits seems to thrive in business situations despite being by definition suboptimal for profit maximizing firms our research explains how a competitor orientation can persist and even thrive in equilibrium in markets that reward only profits we apply evolutionary game theory to business markets where reputation matters we use three games that represent classic interactions in business marketing chicken to illustrate competition for product adoption the battle of the sexes channel negotiations and the prisoners dilemma pricing battles initial populations are assumed to have both profit maximizing managers and competitor oriented managers i e those who gain additional utility from beating others we demonstrate that a competitor orientation can survive in equilibrium despite selection that is based solely on profits using chicken we show that a competitor orientation thrives and can even overrun the population we use the battle of the sexes to show that a competitor orientation will overrun one population in a two sided negotiation e g all retailers in a retailer manufacturer dyad last using the prisoners dilemma we show that competitor orientation is not selected against we conclude that evolutionary profit driven selection pressures cannot be assumed to eliminate nonprofit maximizing behavior even when selection is based purely on profitability

darwin s invisible hand market competition evolution and the firm competition among firms has been suggested to reflect the ruthless logic of darwinian selection a free market is a struggle for survival in which successful firms survive and unsuccessful ones die this view appears to bolster three pillars of neoclassical economics 1 that economic actors are self interested 2 that self interest leads to public goods adam smith s invisible hand and 3 that together these lead to market optimization however this chain of reasoning leads to a paradox we show that the application of darwinian selection to competition among firms as opposed to among individuals invokes group selection which leads to exactly the opposite predictions notably altruism and the suppression of individual self interest we apply an alternative evolutionary model of economic competition multi level selection mls theory which integrates the effects of selection at both individual and group levels this approach reveals that while individuals may generally pursue their own self interest as in the standard evolutionary account humans also have evolved traits that as if led by an invisible hand steer our self interest to align with the good of the firm or wider society as well but it is the hand of darwin not smith

economic cosmology and the evolutionary challenge abstract the intellectual histories of economics and evolutionary biology are closely intertwined because both subjects deal with living complex evolving systems because the subject matter is similar contemporary evolutionary thought has much to offer to economics in recent decades theoretical biology has progressed faster than economics in understanding phenomena like hierarchical processes cooperative behavior and selection processes in evolutionary change this paper discusses three very old cosmologies in western thought how these play out in economic theory and how evolutionary biology can help evaluate their validity and policy relevance these cosmologies are 1 natural man as a rational self sufficient egotistical individual 2 competition among individuals can lead to a well functioning society and 3 there exists an ideal optimal state of nature these correspond to colander et al 2004 holy trinity of orthodox economics rationality greed and equilibrium it is argued below that current breakthroughs in evolutionary biology and neuroscience can help economics go beyond these simple cosmologies

optimistic behavior when a decision bias is costly an experimental test the existence of optimism when biased decisions are costly is investigated experimentally subjects make an informed guess about an exogenously determined event the outside temperature a couple of days later payments in the control group depend only on how close the guess was to the realized temperature while payments in the treatment group also depend positively on realized temperature the data show the treatment group subjects to guess higher temperatures that is higher payments compared with the control group results thus indicate that there is optimism also when a decision bias is costly jel c91 d81 d84

optimal favoritism in all pay auctions and lottery contests abstract we analyze the revenue enhancing potential of favoring specific contestants in complete information all pay auctions and lottery contests with several heterogeneous contestants two instruments of favoritism are considered head starts that are added to the bids of specific contestants and multiplicative biases that give idiosyncratic weights to the bids in the all pay auction head starts are more effective than biases while optimally combining both instruments even yields first best revenue in the lottery contest head starts are less effective than biases and combining both instruments cannot further increase revenue as all pay auctions revenue dominate lottery contests under optimal biases we thus obtain an unambiguous revenue ranking of all six combinations of contest formats and instruments

do you trust your insurer ambiguity about contract nonperformance and optimal insurance demand abstract we study optimal insurance demand for a risk and ambiguity averse consumer under ambiguity about contract nonperformance ambiguity aversion lowers optimal insurance demand and the consumer s degree of ambiguity aversion is negatively associated with the optimal level of coverage a more pessimistic belief and greater ambiguity may increase or decrease the optimal demand for insurance and we determine sufficient conditions for a negative effect we also discuss wealth effects and evaluate the robustness of our results by considering several alternative models of ambiguity aversion our findings show how ambiguity about contract nonperformance can undermine the functioning of insurance markets making it a concern for regulators caution is required though because demand reactions are only imperfectly informative about the welfare effects of ambiguity about contract nonperformance

do women shy away from competition do men compete too much we examine whether men and women of the same ability differ in their selection into a competitive environment participants in a laboratory experiment solve a real task first under a noncompetitive piece rate and then a competitive tournament incentive scheme although there are no gender differences in performance men select the tournament twice as much as women when choosing their compensation scheme for the next performance while 73 percent of the men select the tournament only 35 percent of the women make this choice this gender gap in tournament entry is not explained by performance and factors such as risk and feedback aversion only playa negligible role instead the tournament entry gap is driven by men being more overconfident and by gender differences in preferences for performing in a competition the result is that women shy away from competition and men embrace it

how uncertainty and ambiguity in tournaments affect gender differences in competitive behavior abstract tournament incentives prevail in labor markets yet the number of tournament winners is often unclear to competitors while it is hard to measure how this uncertainty affects work performance and willingness to compete in the field it can be studied in a controlled lab experiment we present a novel experiment where subjects can compete against each other but the number of winners is either uncertain but with known probabilities or ambiguous with unknown probabilities for different numbers of winners we compare these two conditions to a control treatment with a known number of winners we find that ambiguity induces a significant increase in the performance of men who choose to compete while we observe no change for women men also increase their willingness to enter competition in the presence of ambiguity overall both effects contribute to men winning the tournament significantly more often than women under uncertainty and ambiguity these findings suggest that management should make tournament conditions transparent and information available in order to prevent gender disparities from increasing under uncertainty and ambiguity

asymmetric tournaments equal opportunity laws and affirmative action some experimental results this paper assesses whether affirmative action programs and equal opportunity laws affect the output of economic agents more precisely we find that equal opportunity laws and affirmative action programs always benefit disadvantaged groups equal opportunity laws also increase the effort levels of all subjects and hence the profits of the tournament administrator usually the firm the effects of affirmative action programs depend on the severity of a group s cost disadvantage when the cost disadvantage is severe these programs significantly increase effort levels and hence profits the opposite is true when the disadvantage is slight

job matching and occupational choice this paper presents a model of job matching the generalizes the existing literature by allowing for different jobs types or occupations such differences affect the value of job specific experience inducing a career profile where certain types are sampled before others more specifically the analysis shows that it is optimal for the young and inexperienced to gravitate toward jobs exhibiting a certain kind of risk then after deriving the equilibrium job turnover rate for an economy in which people do not switch occupations panel data are used to estimate its underlying parameters the hypothesis that people do not switch occupations is rejected against the alternative that they do thus providing empirical support for the theoretical extension undertaken here

discrimination social identity and durable inequalities what are the mechanisms by which societal discrimination affects individual achievement and why do the effects of past discrimination endure once legal barriers are removed we report the findings of two experiments in village india that suggest that the mechanisms of discrimination operate in part within the individuals who are members of the groups who have been discriminated against we demonstrate that publicly revealing an individual s membership in such a group alters his behavior in ways that make the effects of past discrimination persist over time a growing literature in social psychology on stereotype threat finds that stereotyped based expectations affect individual performance in the domain of the stereotype a study by jeff stone et al 1999 is illustrative when college students were asked to perform a task described as diagnostic of natural athletic ability blacks stereotyped as better athletes but worse students than whites performed better than whites when the same test was presented as diagnostic of sports intelligence the performance of blacks declined that of whites improved and the racial gap was reversed evidence suggests that a mediating factor in stereotype threat is a change in self confidence mara cadinu et al 2005 in our studies we investigated whether the public revelation of social identity caste affects cognitive task performance and responses to economic opportunities by young boys in village india subjects were sixth and seventh graders drawn from the two ends of the caste hierarchy we asked subjects to learn and then perform a task under incentives and we manipulated whether their peers in the experimental session knew their caste caste is well suited to this manipulation because unlike race gender and ethnicity there are no unambiguous outward markers of caste among young boys six subjects generally from six different villages participated in each experimental session in the control condition the subjects were anonymous within the six person group in the experimental conditions the experimenter publicly revealed subjects names and caste in the task solving mazes in which performance was studied here the low caste subjects in the anonymous condition did not perform significantly differently from high caste subjects but when caste identity was publicly revealed in a mixed caste group a significant caste gap emerged the caste gap was due to a 20 percent decline in the average number of mazes solved by the low caste the study shows that publicly revealing the social identity of an individual can change his behavior even when that information is irrelevant to payoffs our results are a generalization of the literature on stereotype threat like that literature we find that individuals performance is more in accordance with the stereotype of the group when group membership is made salient in some way unlike that literature salience in our experiments depends on the public revelation of social identity and more importantly we do not argue that the domain of the tasks undertaken by discussants rachel croson university of pennsylvania iris bohnet harvard university stefano dellavigna university of california berkeley

affirmative action in education evidence from engineering college admissions in india abstract this paper examines an affirmative action program for lower caste groups in engineering colleges in india we study both the targeting properties of the program and its implications for labor market outcomes we find that affirmative action successfully targets the financially disadvantaged the upper caste applicants that are displaced by affirmative action come from a richer economic background than the lower caste applicants that are displacing them targeting by caste however may lead to the exclusion of other disadvantaged groups for example caste based targeting reduces the overall number of females entering engineering colleges we find that despite poor entrance exam scores lower caste entrants obtain a positive return to admission our estimates however also suggest that these gains may come at an absolute cost because the income losses experienced by displaced upper caste applicants are larger than the income gains experienced by displacing lower caste students limited sample sizes in our preferred econometric specifications however prevent us from drawing strong conclusions from these labor market findings

do your online friends make you pay a randomized field experiment on peer influence in online social networks demonstrating compelling causal evidence of the existence and strength of peer to peer influence has become the holy grail of modern research in online social networks in these networks it has been consistently demonstrated that user characteristics and behavior tend to cluster both in space and in time there are multiple well known rival mechanisms that compete to be the explanation for this observed clustering these range from peer influence to homophily to other unobservable external stimuli these multiple mechanisms lead to similar observational data yet have vastly different policy implications in this paper we present a novel randomized experiment that tests the existence of causal peer influence in the general population one that did not involve subject recruitment for experimentation of a particular large scale online social network we utilize a unique social feature to exogenously induce adoption of a paid service among a group of randomly selected users and in the process develop a clean exogenous randomization of treatment and control groups a variety of nonparametric semiparametric and parametric approaches ranging from resampling based inference to ego level random effects to logistic regression to survival models yield close to identical statistically and economically significant estimates of peer influence in the general population of a freemium social network our estimates show that peer influence causes more than a 60 increase in odds of buying the service due to the influence coming from an adopting friend in addition we find that users with a smaller number of friends experience stronger relative increase in the adoption likelihood due to influence from their peers as compared to the users with a larger number of friends our nonparametric resampling procedure based estimates are helpful in situations of networked data that violate independence assumptions we establish that peer influence is a powerful force in getting users from free to premium levels a known challenge in freemium communities this paper was accepted by sandra slaughter information systems

subjective probabilities in games an application to the overbidding puzzle this article illustrates how the joint elicitation of subjective probabilities and preferences may help us understand behavior in games we conduct an experiment to test whether biased probabilistic beliefs may explain overbidding in first price auctions the experimental outcomes indicate that subjects underestimate their probability of winning the auction and indeed overbid when provided with feedback on the precision of their predictions subjects learn to make better predictions and to curb significantly overbidding the structural estimation of different behavioral models suggests that biased probabilistic beliefs are a driving force behind overbidding and that risk aversion plays a lesser role than previously believed

will affirmative action policies eliminate negative stereotypes a key question concerning affirmative action is whether the labor market gains it brings to minorities can continue without it becoming a permanent fixture in the labor market the authors argue that this depends on how the policy affects employers beliefs about the productivity of minority workers they study the joint determination of employer beliefs and worker productivity in a model of statistical discrimination in job assignments the authors prove that even when identifiable groups are equally endowed ex ante affirmative action can bring about a situation in which employers correctly perceive the groups to be unequally productive ex post copyright 1993 by american economic association

a note on insurance coverage in incomplete markets in this paper full insurance coverage on average is defined as the coinsurance rate that eliminates all insurable risk when the uninsurable risk is evaluated at its mean the regressibility assumption is used to derive the conditions on the correlation between background and insurable risks and the actuarial unfairness of insurance under which full over or underinsurance on average is optimal these conditions are compared to those for the case of default risk together they explain intuitively the different results under the cases of background risk and default risk obtained in the literature

optimal capital structure and investment decisions under time inconsistent preferences based on a continuous time model of quasi hyperbolic discounting this paper provides an analytically tractable framework of entrepreneurial firms capital structure and investment decisions under time inconsistent preferences inefficiency in both investment and default is caused due to time inconsistency if we view the time consistent benchmark as efficient compared to the standard trade off theory in corporate finance we clarify that debt financing under time inconsistent preferences brings a new trade off between the alleviation effect on investment inefficiency and the aggravation effect on default inefficiency the impact of time inconsistent preferences depends on the entrepreneurs belief regarding their future time inconsistent behavior i e sophisticated or naive concretely we find that naive entrepreneurs always choose higher leverages while sophisticated ones are more likely to choose lower leverages compared to the time consistent benchmark therefore time inconsistency can explain the observed leverage puzzle i e why firms choose different leverages even with similar fundamentals moreover we demonstrate that time inconsistent preferences delay investment and hasten default due to the interaction among the three effects option value effect payoff value effect and leverage effect in particular naive entrepreneurs invest later and default earlier than sophisticated ones leading to a shorter operating period these results support the empirical findings in entrepreneurial finance

turbulence in growing and declining industries turbulence over the industry life cycle is examined for the case of portugal using the lowest possible level of industry aggregation thus allowing for the use of panel data to study the evolution of product markets replacement of exiting firms by subsequent entrants plays a primary role in generating turbulence in high growth markets while displacement of incumbents by recent entrants is the main selection force in declining markets as the industry life cycle progresses trial and error entry and entry mistakes decrease and turbulence subsides

the evolution of private property experimental studies have shown that subjects exhibit a systematic endowment effect no acceptable explanation for the existence of this behavior has been offered this paper shows that the endowment effect can be modeled as respect for private property in the absence of legal institutions ensuring third party contract enforcement in this sense natural private property has been observed in many species in the form of recognition of territorial incumbency we develop a model loosely based on the hawk dove bourgeois game maynard smith j parker g a 1976 the logic of asymmetric contests animal behaviour 24 159 175 and the war of attrition maynard smith j price g r 1973 the logic of animal conflict nature 246 15 18 to explain the natural evolution of private property

the provision of incentives in firms i ncentives are the essence of economics despite many wide ranging claims about their supposed importance there has been little empirical assessment of incentive provision for workers the purpose of this paper is to critically overview existing work on the provision of incentives since the interests of workers and their employers are not always aligned a large theoretical literature has emphasized how firms design compensation contracts to induce employees to operate in the firm s interest this literature has reached into many areas of compensation and has pointed to a multitude of different mechanisms that can be used to induce workers to act in the interests of their employers these include piece rates options discretionary bonuses promotions profit sharing efficiency wages deferred compensation and so on my objective here is to evaluate this literature in the light of a growing empirical literature on compensation where possible i will address the literature from two perspectives first an underlying assumption of this literature is that individuals respond to contracts that reward performance accordingly i consider whether agents behave in this way and whether these responses are always in the firm s interest second i address whether firms write contracts with these responses in mind in other words do contracts look like the predictions of the theory incentives are provided to workers

evolving theories of sustainability and firms history future directions and implications for renewable energy research abstract sustainability has become a critical perspective in managing firms via a holistic approach by considering economic environmental and social dimensions of firms with the rising significance of sustainable development the theories of sustainability in firms have evolved during the past six decades this article offers a critical review of the evolving theories linking sustainability to firms and discusses their implications for future renewable energy research the relationships among different theories are critically analysed and the directions for future research are discussed the paper shows that the main theories linking sustainability to firms in a chronological order are 1 corporate social responsibility 2 stakeholder theory 3 corporate sustainability and 4 green economics currently various innovative approaches and new theories emerged such as co evolution theory and multi level perspective reflecting three directions of theory development namely 1 shifting from what to how 2 growing use of interdisciplinary approach and 3 towards broader systems renewable energy studies associated with firms and future research opportunities in this area are also critically analysed the comprehensive review offered in this paper provides a useful reference for policy makers corporate managers and researchers interested in corporate sustainability and renewable energy related studies

learning information and sorting in market entry games theory and evidence previous data from experiments on market entry games n player games where each player faces a choice between entering a market and staying out appear inconsistent with either mixed or pure nash equilibria here we show that in this class of game learning theory predicts sorting that is in the long run agents play a pure strategy equilibrium with some agents permanently in the market and some permanently out we conduct experiments with a larger number of repetitions than in previous work in order to test this prediction we find that when subjects are given minimal information only after close to 100 periods do subjects begin to approach equilibrium in contrast with full information subjects learn to play a pure strategy equilibrium relatively quickly however the information which permits rapid convergence revelation of the individual play of all opponents

modern theories of entrepreneurial behavior a comparison and appraisal this paper compares and appraises three principal contemporary theories of entrepreneurial decision making neoclassical austrian and behavioral we employ theory appraisal criteria made available in fritz machlup s 1967 celebrated article on alternative theories of the firm the paper considers theories that treat sequences of behavior by which individual entrepreneurs reach decisions on two levels the discovery of profit opportunities and their exploitation we also consider how each theory characterizes the entrepreneur s decision making process by contrast with the posited behavior of other economic agents austrian theory is suited to explaining novel adventurous behavior at the discovery stage the algorithm for opportunity exploitation in both the neoclassical and austrian approaches is a single repertoire optimization rule neoclassical theory is situated in frictionless atomistic walrasian markets and emphasizes mathematical tractability austrian and behavioral theories conceive entrepreneurial acts taking place in market processes understood as complex institutional phenomena there are strong theoretical complementarities between austrian and behavioral approaches both approaches value descriptive accuracy though the behavioralists place more weight on operational tractability austrians and behavioralists share an interest in heuristics they emphasize the role of prior micro level knowledge at the discovery stage therefore more collaborative research in future between austrians and behavioralists should prove fruitful

a theory of affirmative action in college admissions i introduction race conscious preferential admissions have been widely practiced by selective colleges and universities to enhance minority representation in higher education for example the college of arts and sciences at the university of michigan automatically added 20 points out of a possible 150 points to a minority applicant s score in its rating system harvard university has an unofficial lift scheme which also targets minority applicants however controversy has surrounded affirmative action ever since its inception for instance california texas and florida have already terminated the use of race conscious admissions at state funded institutions this debate culminated in the recent supreme court ruling regarding admissions procedures at the university of michigan which endorsed admissions rules that took into account race as a qualifying characteristic unfortunately positive studies on this issue have been scarce relative to the high profile of the debate according to holzer and neumark 1999 theoretical studies of the efficiency of affirmative action on education are virtually nonexistent some have argued that affirmative action is merely a patronage program and necessarily results in mediocracy rather than meritocracy in the debate on affirmative action practices in college admissions a major criticism is that affirmative action designed to create diversity comes at the cost of academic quality a competing view offered by those opposed to affirmative action is that it weakens school applicants incentives to achieve academic excellence for instance justice thomas wrote in his opinion in grutter v bollinger that there is no incentive for the black applicant to continue to prepare for the lsat once he is reasonably assured of achieving the requisite score supporters of this practice tend to emphasize the importance of diversity and the positive influence of diversity on the pedagogical environment steele 1990 these views however do not fully recognize the incentive structure behind affirmative action admissions rules it is unclear how a college admissions rule affects high school students incentives to achieve academic excellence which adds to their human capital stock and future productivity the process of college admissions by and large resembles a contest in which contestants exert costly effort in order to win a limited number of prizes in the context of college admissions to compete for a limited number of seats in the incoming class college candidates have to present their academic credentials such as gpa and sat score to the admissions officer to win the seat high school students have to invest in their human capital which improves the academic performance whereas the academic investments are costly and nonrefundable regardless of the outcome for example the tuition the money spent on books the salary paid to tutors the time and energy and so on all of these features may be approximated by an all pay auction mechanism we propose a simple theoretical framework that models the process of college admissions as an all pay auction to investigate two major questions is there any theoretical rationale for an affirmative action admissions rule how do such rules affect college candidates incentives to invest in academic effort two candidates one a minority and the other a nonminority simultaneously choose their academic efforts human capital investments to compete for a seat in a college we show that an academic quality oriented college prefers to adopt an admissions rule that scales up the test score of the minority relative to the nonminority although this rule is designed purely to maximize the expected academic quality of the incoming class it turns out to favor the minority and create ethnic diversity we show that the unique equilibrium affirmative action admissions rule creates a positive cross group interaction between college candidates incentives to make educational effort

risk aversion and the propensities for self insurance and self protection for a risk averse individual the methods for reducing the expected financial impact of a loss include reducing the severity of any loss that occurs self insurance and reducing the probability of the occurrence of a loss self protection the literature on this topic has pointed to several anomalies whereby the use of self protection and self insurance yield quite unsimilar results for example ehrlich and becker 5 show that self insurance is always a substitute for market insurance an insurance company s indemnifying a loss whereas self protection and market insurance might be complements dionne and eeckhoudt 4 show that a more risk averse consumer would always invest more in self insurance activities but not necessarily more in self protection activities they argue 4 42 that this result is counterintuitive and provides an exception to the widely accepted result that increased risk aversion reduces risky activities ehrlich and becker 5 639 argue that the incentive to self protect is not so dependent on attitude towards risk both of the above papers seem to take for granted that self protection activities reduce the riskiness of the final wealth distribution however as we argue below this is not the case if riskiness is defined as in rothschild and stiglitz 14 even if we use the variance as our risk measure we do not always reduce risk via self protection dionne and eeckhoudt suggest that these results might not be robust enough to extend to models that incorporate random initial wealth risk and state dependent preferences we show that the model seems to be very robust we also explain why self protection is not at all an exception to the long standing result of arrow 1 whereby more risk averse individuals undertake a lower

bid preference programs and participation in highway procurement auctions we use data from highway procurement auctions subject to california s small business preference program to study the effect of bid preferences on auction outcomes our analysis is based on an estimated model of firms bidding and participation decisions which allows us to evaluate the effects of current and alternative policy designs we show that incorporating participation responses significantly alters the assessment of preferential treatment policies

my first employee an empirical investigation the challenge for solo entrepreneurs to add their first employee is arguably the single biggest growth event facing any growing firm to understand how this event affects performance and the antecedents of hiring we analyse danish matched employer employee data those who hire enjoy superior sales outcomes in subsequent years while the dispersion in profits increases furthermore those that hire enjoy faster sales growth in the previous year suggesting that sales growth precedes the first hire finally we show that founders with a stronger profile in terms of education and previous income are more likely to increase profits while the characteristics of the employee are less important the latter finding is important from a job creation perspective in light of the suggested sorting of more marginalized employees into new and established firms

controlling preferences for lotteries on units of experimental exchange in an experimental setting when outcomes are stochastically related to actions predictions of equilibrium behavior depend not only on the participants preference orderings of outcomes but also on their orderings of lotteries on outcomes as well we introduce and test a reward structure that can be utilized in any experimental setting to allow the experimenter to decree beforehand the subjects preferences for lotteries on experimental outcomes we show analytically that the proposed reward structure can induce subjects to behave as if they have the decreed preference function defined on experimental outcomes empirical tests using two different choice settings provide evidence to support this ability to control preferences

discrimination in the labor market the curse of competition between workers in an experiment we identify a crucial factor that determines whether employers engage in statistical discrimination of ex ante equal groups in the standard no competition setup of coate and loury 1993 we do not nd systematic evidence for statistical discrimination when we introduce competition between workers of dierent groups for the same job the non discrimination equilibrium ceases to be stable in line with this theoretical observation we nd systematic discrimination in the experimental treatment with competition nevertheless a substantial minority of the employers refuses to discriminate even when it is in their best interest to do so

modeling the psychology of consumer and firm behavior with behavioral economics abstract marketing is an applied science that tries to explain and influence how firms and consumers behave in markets marketing models are usually applications of standard economic theories which rely on strong assumptions of rationality of consumers and firms behavioral economics explores the implications of the limits of rationality with the goal of making economic theories more plausible by explaining and predicting behavior more accurately while maintaining formal power this article reviews six behavioral economics models that are useful to marketing three models generalize standard preference structures to allow for sensitivity to reference points and loss aversion social preferences toward outcomes of others and preference for instant gratification the other three models generalize the concept of game theoretic equilibrium allowing decision makers to make mistakes encounter limits on the depth of strategic thinking and equilibrate by learning from feedback the authors also discuss a sp

an explanation of anomalous behavior in models of political participation this paper characterizes behavior with noisy decision making for models of political interaction characterized by simultaneous binary decisions applications include voting participation games candidate entry the volunteer s dilemma and collective action problems with a contribution threshold a simple graphical device is used to derive comparative statics and other theoretical properties of a quantal response equilibrium and the resulting predictions are compared with nash equilibria that arise in the limiting case of no noise many anomalous data patterns in laboratory experiments based on these games can be explained in this manner

looking at the bright side the motivational value of confidence abstract the motivational value of confidence postulates that individual effort provision is increasing in beliefs on one s own ability this relation is supposed to also hold for overconfident individuals who have exaggerated ability beliefs we present the first empirical evidence on the existence of a motivational value of absolute confidence that many microeconomic models with overconfident agents build on moreover we document that negative debiasing information on individual ability diminishes effort provision a result that is of obvious relevance for many contexts such as labor relations or learning at school we also offer a strategy for identifying significant absolute overconfidence at the individual level

does banning affirmative action lower college student quality banning affirmative action from college admissions cannot prevent an admissions office that cares about diversity from achieving it in ways other than explicitly considering race we model college admissions where candidates from two groups with different average quali cations compete for a xed number of seats under affirmative action an admissions office that cares both about quality and diversity admits the best quali ed candidates from each group under a ban it may promote diversity by partially ignoring candidates quali cations and therefore not admitting the best quali ed candidates from either group a ban always reduces diversity and may also lower quality jel j71 j 15 i28

rational insurance purchasing consideration of contract nonperformance much of the analysis of rational insurance purchasing and hedging strategies has been undertaken on the basis of the expected utility hypothesis this decision framework has been used to reformulate the bernoulli principle that a risk averter rationally would fully insure at a fair premium other applications include the analysis of insurance at unfair premiums mossin 1968 and smith 1968 the effects of state dependent utility on the rational insurance purchase cook and graham 1977 the effects of risky background wealth doherty and schlesinger 1983 and mayers and smith 1983 and the design of the optimal insurance policy raviv 1979 such analyses have been conducted on the assumption that insurance policies are free of insolvency default risk this assumption stands in sharp contrast to the actuarial literature in which the insolvency risk or probability of ruin is a central focus of attention

how costly is diversity affirmative action in light of gender differences in competitiveness affirmative action is often criticized for causing reverse discrimination and lowering the qualifications of those hired under the policy however the magnitude of such adverse effects depends on whether the best suited candidate is hired absent the policy indeed affirmative action may compensate for the distortion discrimination imposes on the selection of candidates this paper asks whether affirmative action can have a similar corrective impact when qualified individuals fail to apply for a job we evaluate the effect of introducing a gender quota in an environment where high performing women fail to enter competitions they can win we show that guaranteeing women equal representation among winners increases their entry the response exceeds that predicted by the change in probability of winning and is in part driven by women being more willing to compete against other women the consequences are substantial as the boost in supply essentially eliminates the anticipated costs of the policy this paper was accepted by uri gneezy behavioral economics

overconfidence and excess entry an experimental approach psychological studies show that most people are overconfident about their own relative abilities and unreasonably optimistic about their futures e g shelly e taylor and j d brown 1988 neil d weinstein 1980 when assessing their position in a distribution of peers on almost any positive trait like driving ability ola svenson 1981 income prospects or longevity a vast majority of people say they are above the average although of course only half can be if the trait is symmetrically distributed this paper explores whether optimistic biases could plausibly and predictably influence economic behavior in one particular setting entry into competitive games or markets many empirical studies show that most new businesses fail within a few years for example using plant level data from the u s census of manufacturers spanning 1963 1982 timothy dunne et al 1988 estimated that 61 5 percent of all entrants exited within five years and 79 6 percent exited within 10 years most of these exits are failures see also dunne et al 1989a 1989b d shapiro and r s khemani 1987

equilibrium play in large group market entry games coordination behavior is studied experimentally in a class of noncooperative market entry games featuring symmetric players complete information zero entry costs and several randomly presented values of the market capacity once the market capacity becomes publicly known each player must decide privately whether to enter the market and receive a payoff which increases linearly in the difference between the market capacity and the number of entrants or stay out payoffs for staying out are either positive giving rise to the domain of gains or negative giving rise to the domain of losses the major findings are substantial individual differences that do not diminish with practice aggregate behavior that is organized extremely well in both the domains of gains and losses by the nash equilibrium solution and variations in the population action strategies with repeated play of the stage game that are accounted for by a variant of an adaptive learning model due to roth and erev 1995

distinguishing the effect of overconfidence from rational best response on information aggregation this article studies the causal effect of individuals overconfidence and bounded rationality on information aggregation by using a new multiperiod game in which agents are rewarded for submitting accurate estimates of an unknown asset s value based on i their private information and ii others past estimates by carrying out laboratory sessions of this game in which subjects overconfidence is a treatment variable i find that overconfidence affects the information aggregation process by increasing the dispersion of estimates and decreasing the rate of estimates convergence however even when subjects are not overconfident qualitatively similar deviations from the fully rational model predictions are observed i show that this can be explained by subjects strategic response to errors the author 2008 published by oxford university press on behalf of the society for financial studies all rights reserved for permissions please email journals permissions oxfordjournals org oxford university press

implications of incomplete performance for optimal insurance we investigate the demand for insurance when contracts are subject with positive probability to two distinct types of incomplete performance when partial performance means payment of some fraction of the indemnity under full performance the latter exhibits a disappearing deductible when partial performance is due to insufficient financial capacity optimal insurance contracts for any given level of financial capacity offer full marginal coverage above a deductible for either type of non performance the optimal deductible under full performance is positive when insurance is offered at an actuarially fair price

managerial overconfidence and accounting conservatism managerial overconfidence overconfident managers overestimate ixwxuhuhwxuqviurpwkhluilupv lqyhvwphqwv 7kxv zh predict that overconfident managers will tend to accelerate good news recognition delay loss recognition and generally use less conservative accounting furthermore we test whether external monitoring helps to mitigate this effect using measures of both conditional and unconditional conservatism we find robust evidence of a negative relation between ceo overconfidence and accounting conservatism we further find that external monitoring does not appear to mitigate this effect our findings add to the growing literature on overconfidence and complements findings in schrand and zechman 2011 that overconfidence affects financial reporting behavior

decision biases and entrepreneurial finance we study the effects of three cognitive biases by the entrepreneur on obtaining funding we find planning fallacy to increase funding amounts whereas optimism and overconfidence by the entrepreneur have no effects on funding amounts from others further planning fallacy positively impacts the probability of strong tie inside investments but negatively impacts the probability of weak tie outside investments mediation analyses further show that planning fallacy positively impacts venture performance through both self and other investor funding amounts our findings are not consistent with the pecking order theory of informal finance and suggest positive effects of at least one cognitive bias on entrepreneurial business success through increased funding

monetary incentives and mood abstract researchers have long debated the methodological necessity of monetary incentives in experimental research the current work shows that financial incentives not only can fail to improve task performance but also can worsen it three studies verify that incentives can elevate mood and that this mood enhancement contributes to worsened task performance the authors discuss implications for the use of incentives in experimental research

heckle and chide results of a randomized road safety intervention in kenya in economies with weak enforcement of traffic regulations drivers who adopt excessively risky behavior impose externalities on other vehicles and on their own passengers in light of the difficulties of correcting inter vehicle externalities associated with weak third party enforcement this paper evaluates an intervention that aims instead to correct the intra vehicle externality between a driver and his passengers who face a collective action problem when deciding whether to exert social pressure on the driver if their safety is compromised we report the results of a field experiment aimed at solving this collective action problem which empowers passengers to take action evocative messages encouraging passengers to speak up were placed inside a random sample of over 1 000 long distance kenyan minibuses or matatus serving both as a focal point for and to reduce the cost of passenger action independent insurance claims data were collected for the treatment group and a control group before and after the intervention our results indicate that insurance claims fell by a half to two thirds from an annual rate of about 10 percent without the intervention and that claims involving injury or death fell by at least 50 results of a driver survey eight months into the intervention suggest passenger heckling was a contributing factor to the improvement in safety available http www cgdev org files 1421541 file habyarimana jack heckle final pdf

the effect of court ordered hiring quotas on the composition and quality of police arguably the most aggressive armative action program ever implemented in the united states was a series of court ordered racial hiring quotas imposed on municipal police departments my best estimate of the eect of court ordered armative action on workforce composition is a 14

risk preferences and the economics of contracts t he literature of risk aversion and risk preference is one of the richest sources of ad hoc assumptions concerning tastes n o significant behavior has been illuminated by assumptions of differences in tastes such theories have been a convenient crutch to lean on when the analysis has bogged down they give the appearance of considered judgement yet really have only been ad hoc arguments that disguise analytical failures george j stigler and gary s becker 1977 p 89

price setting and attainment of equilibrium posted offers versus an administered price abstract the operation of the posted offer market with advance production environment mestelman and welland 1988 appropriately parameterized differs from that of the market entry game selten and guth 1982 appropriately presented only in terms of price setting we establish the effect of this difference in price setting on attainment of the competitive equilibrium allocation while controlling for effects relating to the presentation of the market entry game and to the stationarity or non stationarity of environment free posting of prices promotes convergence to the competitive equilibrium allocation while the typical market entry game data can be characterized as displaying cycling prices

affirmative action and the quality fit trade off this paper reviews the literature on affirmative action in undergraduate education and law schools focusing especially on the trade off between institutional quality and the fit between a school and a student we discuss the conditions under which affirmative action for underrepresented minorities urm could help or harm their educational outcomes we provide descriptive evidence on the extent of affirmative action in law schools as well as a critical review of the contentious literature on how affirmative action affects urm law school student performance our review then discusses affirmative action in undergraduate admissions focusing on the effects such admissions preferences have on college quality graduation rates college major and earnings we conclude by examining the evidence on percent plans as a replacement for affirmative action

are bid preferences benign the effect of small business subsidies in highway procurement auctions abstract bid preferences in procurement auctions allow firms from an identifiable group an advantage in bidding against unfavored firms while economic efficiency is expected to fall as a result of bid preferences government procurement costs may either increase or decrease depending on the competitive response of favored and unfavored firms this paper uses data from california auctions for road construction contracts where small businesses receive a 5 percent bid preference in auctions for projects using only state funds and no preferential treatment on projects using federal aid i show that while firms bidding behavior matches theoretical predictions procurement costs are 3 8 percent higher on auctions using preferences the higher procurement cost in preference auctions is attributed to reduced participation by lower cost large firms structural estimates of latent firm costs are then used to evaluate how efficiency and the division of surplus between firms and the government are impacted by bid preferences firm profits are 3 1 percent lower under bid preferences however this is overwhelmed by the efficiency loss due to reduced large firm participation the efficiency loss conditional on firm participation is estimated to represent around 0 1 percent of overall procurement costs including the adverse effect of preferences on the participation of large firms increases the estimated efficiency loss to 3 6 percent which represents 27 cents for each additional dollar awarded to small businesses through the program counterfactual simulations indicate that if participation were instead inelastic to bid preferences the 5 percent bid preference would be close to the optimal level

performance in competitive environments gender differences even though the provision of equal opportunities for men and women has been a priority in many countries large gender differences prevail in competitive high ranking positions suggested explanations include discrimination and differences in preferences and human capital in this paper we present experimental evidence in support of an additional factor women may be less effective than men in competitive environments even if they are able to perform similarly in non competitive environments in a laboratory experiment we observe as we increase the competitiveness of the environment a significant increase in performance for men but not for women this results in a significant gender gap in performance in tournaments while there is no gap when participants are paid according to piece rate this effect is stronger when women have to compete against men than in single sex competitive environments this suggests that women may be able to perform in competitive environments per se

do men and women respond differently to competition evidence from a major education reform this paper provides new evidence of gender differences in response to increased competition focusing on important life tasks performed in a regular social environment the analysis takes advantage of a major education reform in ontario that exogenously increased competition for university grades comparing students prereform and postreform using rich administrative data i find that male average grades and the proportion of male students graduating on time increased relative to females further the evidence indicates that these changes were due to increased relative effort rather than self selection the findings have implications for the delivery of education and incentive provision more generally

optimal consumption portfolio rules with biased beliefs abstract we extend the model of optimal consumption and asset allocation by incorporating the biased agent beliefs overconfidence and overextrapolation it predicts that overconfidence entails overconsumption lower overconfidence induced hedging demand and overinvestment in the risky assets while overextrapolation induces underconsumption higher overextrapolation induced hedging demand and underinvestment our model provides an alternative explanation for an agent s mis consumption hedging and portfolio misallocation from the perspective of biased beliefs

the incentive effects of affirmative action in a real effort tournament abstract affirmative action policies bias tournament rules in order to provide equal opportunities to a group of competitors who have a disadvantage they cannot be held responsible for its implementation affects the underlying incentive structure which might induce lower performance by participants and additionally result in a selected pool of tournament winners that is less efficient in this paper we study the empirical validity of such concerns in a case where the disadvantage affects capacities to compete we conducted real effort tournaments between pairs of children from two similar schools who systematically differed in how much training they received ex ante on the task at hand contrary to the expressed concerns our results show that the implementation of affirmative action did not result in a significant performance loss for either advantaged or disadvantaged subjects instead it rather enhanced the performance for a large group of participants moreover affirmative action resulted in a more equitable tournament winner pool where half of the selected tournament winners came from the originally disadvantaged group hence the negative selection effects due to the biased tournament rules were at least partially offset by performance enhancing incentive effects

the effects of perceived and actual financial literacy on financial behaviors a combined measure of financial literacy that includes both a test score of actual financial literacy and a self rating of overall financial literacy is used in this study we find that the combined measure appears to provide greater understanding about how financial literacy affects financial behaviors a large national survey of u s adults and households n 28 146 was used to investigate how this overall financial literacy is likely to change financial behaviors across five financial topics credit cards investments loans insurance and financial advice for each topic we include 4 5 financial behaviors 22 in total to demonstrate the consistency of the findings within and across topics although we are unable to identify a causal relationship the results from the probit analysis show that both actual and perceived financial literacy appear to influence financial behaviors and that perceived financial literacy may be as important as actual financial literacy jel d14 g00