bidding behavior in first price sealed bid auctions use of computerized nash competitors abstract results are reported from a series of first price sealed bid auctions where bidders face computerized nash equilibrium competitors the results provide strong support for employing this newly developed methodology as a testing procedure for nash equilibrium bidding models

marshall s scale economies using panel data this paper estimates plant level production functions for machinery and high tech industries that allow for scale externalities from other plants in the same industry locally and from the scale or diversity of local economic activity outside the own industry the paper finds that the count of other own industry plants representing a count of local information spillover sources has strong productivity effects in high tech but not machinery industries single plant firms both benefit more from and generate greater external benefits than corporate plants given their greater reliance on external environments on dynamic externalities high tech single plant firms benefit also from the scale of past own industry activity i find little evidence of economies from the diversity or scale of local economic activity outside the own industry

individual behavior and bidding heterogeneity in sealed bid auctions where the number of bidders is unknown i introduction most of the work in sealed bid auction theory and related experimental work has focused on the case in which the number of bidders is known this is of course not always the case in naturally occurring environments for instance construction firms submitting bids in a sealed bid procurement auction may not know exactly how many other firms have completed the costly process of preparing and submitting a bid until bidding has closed there is a body of theory to address environments with an unknown number of bidders mcafee and mcmillan 1987 matthews 1987 harstad kagel and levin 1990 krishna 2002 1 the purpose of this article is to provide theoretical considerations and analysis of a large data set of individual bids from laboratory sealed bid auction markets in which buyers have some information about the number of rivals but not certainty 2 according to the received theory the availability of information about the number of rivals as expected directly affects bidding and therefore seller revenue in first price fp auctions but should not affect bidding in the second price sp auctions although bidding own valuation is optimal in sp auctions regardless of the number of bidders the majority of previous experimental work on auctions with known number of bidders has shown systematic deviation kagel 1995 while a few studies report coincidence with theory see isaac and james 2000b for an extended discussion earlier work on fp auctions with known number of bidders indicated systematic overbidding compared to risk neutral equilibrium risk aversion has been suggested as one of the possible explanations for observed overbidding cox roberson and smith 1982 dyer kagel and levin 1989 is the only previous experimental study looking at individual bidding in auctions where the number of bidders is unknown and their design is different from this study they look at fp auctions with restricted auction size of either six or three participants and ask subjects to submit three bids two bids for contingent bidding procedure and one bid for noncontingent bidding procedure subjects submit all three bids simultaneously and do not know at the time which procedure will be used they find overbidding in this environment compared to risk neutral nash equilibrium although we test for deviation from risk neutral bidding strategy in a more general setting our study also addresses a broader set of questions previous studies of open bid ascending silent auctions suggested that there may have been revenue loss to the sellers by bidders guarding their higher valued items that is remaining physically proximate to the bidding stations isaac and schnier 2005 the possibility that guarding was at the root of the revenue reductions was investigated by isaac and schnier 2006 who replaced the open bid ascending silent auctions with both fp and sp sealed bid auctions which is the environment studied in this article their paper reported on the aggregate revenue effects of the switch to sealed bid auctions but did not look at individual behavior it is clear that such analysis of individual bidding behavior must be informed by theories of bidding with an unknown number of rivals because such is the reality facing bidders in a multiple sealed bid silent auction context in addition data from a noncomputerized experiment closely approximating field auctions allows the analysis of possible behavioral adjustments in the field for example the attempt to guard the item and count the number of bidders such an analysis is presented in this article 3 our analysis of fp auctions contributes to the discussion about the causes of heterogeneous deviation of individual bidding from risk neutral theory cox roberson and smith 1982 and cox smith and walker 1988 reported heterogeneous bidding above risk neutral equilibrium in fp auctions for mechanisms with fixed number of bidders and palfrey and pevnitskaya 2008 for auctions with endogenous entry where the number of bidders was known at the time of submitting a bid

we the rich inequality identity and cooperation abstract inequality not only generates status differentials between rich and poor individuals it also generates status differentials between groups of different composition and income level we organise the social structure within which groups are embedded to manipulate their composition and relative status thus inducing weaker or stronger group identities in their members via the processes of social categorization identification and comparison we therefore manipulate the fundamental components of group identity rather than resorting to ad hoc identity reinforcement tasks how strongly individuals identify with each group will ultimately determine the degree of cooperativeness within the group and the whole society we find that the impact of inequality on social cooperativeness is not trivial cooperation varies with the strength of the group s identity as predicted by social identity theory in particular high endowment homogeneous groups cooperate most and increasingly over time low endowment homogeneous groups display intermediate levels of cooperation heterogeneous groups cooperate least a result driven by lack of cooperation on behalf of the rich as endowment sizes and groups are exogenously allocated we argue that our findings are a lower bound for the effects generated where endowments and groups are endogenously determined in or outside of the laboratory

measuring the unmeasurable a country s non r d expenditure on product and service innovation knowledge about non r d innovation expenditure such as patenting and licensing design trial production tooling up manpower training market research and investment in fixed assets is extremely sparse and questions about the latter were very poorly answered in the recent community innovation survey cis using information regarding the quality of replies we reach a tentative national estimate of 1992 innovation expenditure for all manufacturing and service industries in the netherlands expenditure on product related r d represents about one quarter of total product and service innovation expenditure roughly half of the latter consists of investment in fixed assets the latter being more important in services than in manufacturing

incentive effects on risk attitude in small probability prospects most studies on the role of incentives on risk attitude report data obtained from within subject experimental investigations this may however raise an issue of sequentiality of effects as later choices may be influenced by earlier ones this paper reports instead between subject results on the effect of monetary stakes on risk attitudes for small probability prospects in a laboratory experiment under low stakes we find the typical risk seeking behavior for small probabilities predicted by the prospect theory but under high stakes we provide some evidence that risk seeking behavior is dramatically reduced this could suggest that utility is not consistently concave over the outcome space but rather contains a convex section for very small amounts

non monetary incentives and opportunistic behavior evidence from a laboratory public good game this study reports data from a laboratory experiment that investigates the incentive effect of three distinct social communication schemes on free riding behavior we use performance based approval and disapproval ratings and a linear public good game to address the above issues the treatments vary in terms of subjects opportunities to anonymously assign 1 only the approval ratings to other group members 2 only the disapproval ratings to other group members and 3 either the approval or the disapproval ratings to other group members but not both to the same group member after they play a standard linear public good game despite the nash prediction of zero individual contribution in all three treatments the data show that the disapproval points generate significantly higher contribution than the approval points the treatment in which subjects could communicate either the approval or the disapproval points produces the highest level of contribution we discuss the implications that these findings may have for efficient design of organizations jel d03 h41 c72 c92

competitive lobbying over common pool resource regulations abstract common pool resource regulations are developed through a combination of resource assessment economic analysis and politics we investigate a management institution wherein users can influence a proposed common extraction cap through costly effort or lobbying our model incorporates two user types a few harvesters who efficiently handle extraction externalities and a larger number who do not without regulation we observe the efficient harvesters extracting more than the social optimum consistent with nash equilibrium given the opportunity to lobby we observe harvesters contributing to move inefficient proposed caps toward more efficient levels however lobbying is a public good and consistent with nash equilibrium the user type with weaker preference free rides on the type with stronger preferences leading to insufficient lobbying and inefficient regulations especially when the cap must be lowered this highlights an important limitation to participatory governance mechanisms when participation is costly

skills in the city this paper documents the allocation of skills across cities and estimates the impact of agglomeration on the hedonic prices of worker skills we find that large cities are more skilled than are small cities but only to a modest degree we also show that the increase in productivity associated with agglomeration as measured by the urban wage premium is larger for workers with stronger cognitive and people skills in contrast motor skills and physical strength are not rewarded to a greater degree in large cities urbanization thus enhances thinking and social interaction rather than physical abilities these results are robust to a variety of estimation strategies including using nlsy variables that control for worker quality and a worker msa fixed effect specification

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

geography industrial organization and agglomeration this paper makes two contributions to the empirical literature on agglomeration economies first the paper uses a unique and rich database in conjunction with mapping software to measure the geographic extent of agglomerative externalities previous papers have been forced to assume that agglomeration economies are club goods that operate at a metropolitan scale second the paper tests for the existence of organizational agglomeration economies of the kind studied qualitatively by saxenian 1994 this is a potentially important source of increasing returns that previous empirical work has not considered results indicate that localization economies attenuate rapidly and that industrial organization affects the benefits of agglomeration

spatial evolution of the computer industry in the usa abstract this paper examines the spatial evolution of computers across 317 metro areas in the usa since the introduction of the personal computer we start by examining the relative distribution of employment across cities examining how that distribution changes in 1977 1992 and how cities move through the distribution for computers transition matrices are stationary with the industry exhibiting no tendency to settle down nor any tendency of retrenchment during periods of national high tech employment decline there is no tendency of the relative size distribution of computer employment to collapse go bimodal etc overall computers exhibit some turbulence with dramatic big winners and losers among cities as well as persistence for some cities in employment shares in attracting or repelling an industry urban heterogeneity is important large well educated cities near san jose have a much greater chance of attracting high tech employment much lower mean first passage times moving up states and less chance of losing it in assessing the determinants of persistence in local employment patterns we examine sources of productivity growth we find strong evidence of significant dynamic own industry externalities for single plant firms and little evidence of urbanization jacobs knowledge type externalities corporate plants in computers seem to be self reliant and not really influenced by externalities

types and patterns an experimental east west german comparison of cooperation and solidarity abstract in a study of public good and solidarity experiments conducted in eastern and western germany we found in both games that eastern subjects behave in a significantly more selfish manner than do western subjects besides that we found that many qualitative results of both data sets are similar since our experiments were conducted in two parts of one nation we present an unusually well controlled cross cultural study by avoiding difficulties that usually arise in multinational settings we conclude that cooperation and solidarity behavior seem to depend strongly on different culture specific norms resulting from opposing economic and social histories in the two parts of germany

asymmetric enforcement of cooperation in a social dilemma we use a public good experiment to analyze behavior in a decentralized asymmetric punishment institution the institution is asymmetric in the sense that players differ in the effectiveness of their punishment at the aggregate level we observe remarkable similarities between outcomes in asymmetric and symmetric punishment institutions controlling for the average punishment effectiveness of the institutions we find that asymmetric punishment institutions are as effective in fostering cooperation and are as efficient as symmetric institutions at the individual level we find that players with higher punishment effectiveness contribute similar amounts to the public account but have higher earnings and punish more than their weak counterparts

team selection with asymmetric agents abstract in shallow markets where there are mutual gains from cooperation among agents collusive behavior may occur even if it does not constitute a nash equilibrium yet such behavior is rarely sustainable bolle 1994 reports the results of one period team selection experiments in which subjects often did not follow the nash equilibrium behavior but engaged in tacit collusion we test the robustness of bolle s findings by introducing asymmetry into subjects characteristics and repeating the experiment for a number of periods we find that collusion is not sustainable and the outcomes converge to levels close to the nash equilibrium however the agent s actions stayed slightly above the nash equilibrium level in all experiments

do reputation feedback systems really improve trust among anonymous traders an experimental study feedback systems are claimed to be a crucial component of the success of electronic marketplaces like ebay or amazon marketplace this article aims to compare the effects of various feedback systems on trust between anonymous traders through a set of experiments based on the trust game our results indicate that trust is significantly improved by the introduction of a reputation feedback system however such mechanisms are far from being perfect and are vulnerable to strategic ratings and reciprocation our findings indicate that some changes in rating rules may significantly improve the efficiency of feedback systems by avoiding strategic rating or reciprocation and hence stimulate trust and trustworthiness among traders in particular a system in which individuals are not informed of their partner s rating decision before making their own decision provides better results both in terms of trust and earnings

the impact of fine size and uncertainty on punishment and deterrence theory and evidence from the laboratory abstract increasing punishment is typically considered first choice to boost deterrence of unwarranted behavior such as false financial statements asset misappropriation stealing or corruption however if there is uncertainty on a potential violator s guilt judges and juries willingness to impose punishment may decrease in its magnitude thus increasing the magnitude of punishment may backfire when the reduced punishment probability is anticipated by potential violators based on a theoretical model our paper is the first to analyze the interdependency of violation and punishment behavior in a laboratory experiment and to contrast it to the standard partial equilibrium perspective on deterrence that considers the punishment probability to be independent of the fine size varying both the magnitude of fines and the degree of uncertainty shows that in case of legal uncertainty the deterrent effect of higher fines is far less pronounced than if the punishment probability was exogenous

inequality social sanctions and cooperation within south african fishing communities abstract we explore the effect of income inequality and social attitudes on cooperation and sanctioning in nine south african fishing communities where allocation of fishing rights via quota and permits have been unequal and controversial we use a linear public goods experiment design with heterogeneous endowments and peer sanctioning in the punishment treatment aggregate contributions towards the public good are significantly higher amongst unequal groups with low endowment players contributing the greatest endowment share sanctioning is significantly lower in unequal groups but demand for punishment is similar irrespective of differences in relative costs free riding drives punishment but retaliation is another important motivator specifically in unequal groups in equal groups antisocial punishment of cooperators is more common the effect of real wealth and inequality on contributions and punishment is less salient possibly due to real wealth not being discernible in the experimental context interestingly social attitudes are important in explaining sanctioning behavior indicating that distrust in formal institutions and specifically in the top down quota allocation process may have a significant impact on behavioral outcomes and the effectiveness of community sanctioning mechanisms

reputation in a public goods game taking the design of credit bureaus to the lab abstract we present the results of a new laboratory experiment designed to mimic the ways in which credit bureaus will alter microfinance markets where loans are taken in groups bureaus can build reputations for borrowers at the group or the individual level and the optimal contract is not obvious in a modified public goods game with ejection and re assignment played by guatemalan micro entrepreneurs we find the use of group reputation to be effective in increasing contributions given the costs of transitioning microfinance bureaus to the sharing of individual information our results suggest that this change would not be cost effective

selecting public goods institutions who likes to punish and reward we study the link between individual attitudes toward uncertainty on the one hand and preferences over as well as behavior within various public goods institutions on the other hand we incentive compatibly elicit preferences over voluntary contribution mechanisms with and without reward and punishment options and then randomly assign subjects to play in one of the four institutions we find that payoffs are significantly greater when punishment is allowed but that only a small minority of participants prefers such an environment somewhat surprisingly preferences over institutions are generally independent of individual characteristics conversely individual characteristics including institutional preferences are significantly predictive of behavior in the public goods game for instance risk averse individuals preemptively punish more often this suggests that when studying sanctions and rewards it is important to consider individual attitudes toward risk and uncertainty although they may not affect the original selection into institutions

the logit equilibrium a perspective on intuitive behavioural anomalies costs associated with deviations from the nash equilibrium these payoff asymmetry effects are incorporated in an approach that introduces noisy behavior via a logit probabilistic choice function in the resulting logit equilibrium behavior is characterized by a probability distribution that satisfies a rational expectations consistency condition the beliefs that determine players expected payoffs match the decision distributions that arise from applying the logit rule to those expected payoffs we prove existence of a unique symmetric logit equilibrium and derive comparative statics results the paper provides a unified perspective on many recent laboratory studies of games in which nash equilibrium predictions are inconsistent with both intuition and experimental evidence

bounded rationality and market fluctuations abstract in a model of a competitive market each firm in each period faces a planning problem caused by random changes in circumstances due to bounded rationality a firm is unable to compute costlessly and exactly its optimal output instead the firm approximates optimal output through a decision making process called a deliberation technology this technology involves a rule of thumb a costly deliberation mechanism and a random deliberation error the issue addressed by the model is how bounded rationality affects market fluctuations the first glance intuition is that fluctuations will increase since deliberation error is an added disturbance to the market however the actual effect is much more complicated and might go either way

the propensity to patent abstract this paper analyzes the relationship between 1974 rd among the exceptions the tendency was toward diminishing returns variables measuring overseas sales federal r d support diversification scope of invention use and invention type had only modest explanatory power there was no significant evidence of disproportionate patent accumulation in the more highly concentrated industries

the representative bettor bet size and prospect theory abstract models of representative bettors have ignored the decision on the size of bet that a gambler takes by modelling bet size the favourite longshot bias observed in many pari mutuel betting markets is shown to be consistent with both i a representative bettor taking decisions according to prospect theory based on standard shaped value and weighting functions and ii the bettor simply being risk loving for gains and risk averse for losses

learning to bid an experimental study of bid function adjustments in auctions and fair division games we examine learning behaviour in auction and fair division experiments with independent private values under two different price rules first and second price participants play all four games repeatedly and submit complete bid functions rather than single bids this allows us to study how institutional changes are anticipated and whether learning is influenced by the structural differences between games we find that learning does not drive bidding towards the benchmark solution bid functions are adjusted globally rather than locally directional learning theory offers a partial explanation for bid changes the data support a cognitive approach to learning

do high stakes and competition undermine fair behaviour evidence from russia abstract this paper reports the results of a series of competitive labour market experiments in which subjects have the possibility to reciprocate favours in the high stake condition subjects earned between two and three times their monthly income during the experiment in the normal stake condition the stake level was reduced by a factor of ten we observe that both in the high and the normal stake condition fairness concerns are strong enough to outweigh competitive forces and give rise to non competitive wages there is also no evidence that effort behaviour becomes generally more selfish at higher stake levels therefore our results suggest that fairness concerns may play an important role even at relatively high stake levels

decision making over time and under uncertainty a common approach this paper considers a number of parallels between risky and intertemporal choice we begin by demonstrating a one to one correspondence between the behavioral violations of the respective normative theories for the two domains i e expected utility and discounted utility models we argue that such violations or preference reversals are broadly consistent with three propositions about the weight that an attribute receives in both types of multiattribute choice specifically it appears that 1 if we add a constant to all values of an attribute then that attribute becomes less important 2 if we proportionately increase all values of an attribute or if we change the sign of an attribute from positive to negative then that attribute becomes more important the generality of these propositions as well as the constraints they would impose on separable representations of multiattribute preferences is discussed

arbitration and bargaining across the pacific this paper reports laboratory experiments comparing arbitration behavior between and across two countries with extensive trade relations the united states and japan besides comparing disputes in both locations we evaluate disputes between them while we find nominal differences between the countries we observe significant changes in both groups behavior when facing someone from the other country specifically americans seek larger profits when facing a japanese counterpart and japanese subjects settle more frequently with an american counterpart our results suggest that the literature on bargaining behavior across cultures paints an incomplete picture of international comparisons by failing to consider bargaining interactions

asymmetric network monitoring and punishment in public goods experiments abstract we extend the recent experimental literature on incomplete punishment networks in linear public goods games in these games we use an exogenous network to restrict both monitoring and the set of feasible punishment flows in addition to two baseline structures the complete network and the circle network we examine a novel asymmetric network in which both punishment responsibility and exposure differ across players average contributions are significantly lower in the asymmetric network driven entirely by the under monitored player who faces only one potential punisher we formulate and examine the hypothesis that asymmetry among a player s potential punishment targets may lead to discriminatory patterns of punishment in particular players might wish to punish targets for whom they are solely responsible discriminately more than targets for whom they share responsibility the experimental data do not support this hypothesis although they do suggest a compelling explanation as to why specifically we find that the under monitored player in the network retaliates against previous punishment significantly more often than others in the group which deters their only potential punisher from issuing stronger sanctions thus an additional complication of asymmetry in the network is that it may lead to more instances of anti social retaliation inhibiting the effectiveness of the decentralized punishment institution

counterterrorism strategies in the lab we conduct experiments to test the collective action dilemmas associated with defensive and proactive counterterror strategies defensive policies are associated with creating public bads e g a commons whereas proactive policies are akin to the voluntary provision of public goods when combined the inefficiency of collective action is exacerbated resulting in a situation known as a prisoner s dilemma squared pd2 deterministic versus probabilistic equivalent versions of the associated externalities are compared within a laboratory setting experimental results reveal that the collective action problem associated with counterterror strategies is deepened in uncertain environments and is indeed a robust regularity that is not easily overcome as individuals gain more experience they become even more self interested

market roll out and retailer adoption for new brands this paper proposes a descriptive model of the spatial and temporal evolution of retail distribution for new packaged goods the distribution model postulates separate processes for local market entry by manufacturers and adoption by retailers given entry of special interest is whether retail adoption occurs along a competitive network with retailers as nodes and overlapping trade areas of these retailers as links the model is calibrated on data covering the introduction of two very successful new brands in the frozen pizza category for these brands manufacturers sequentially enter markets based on spatial proximity to markets already entered spatial evolution and on whether chains in these markets adopted previously elsewhere market selection a retail chain adopts new brands based on the adoption timing of competing chains within its trade territory competitive contagion and on the fraction of its trade area in which the new brand is available trade area coverage the effects of market selection and of trade area coverage create dependencies between market entry and retail adoption because of these dependencies the attraction of a particular market as a lead market depends on its location in the geographic structure of the u s retail trade

price formation in single call markets this paper reports a laboratory experiment designed to examine the price formation process in a simple market institution the single call market the experiment features random values and costs each period so each period generates a new price formation observation other design features are intended to enhance the predictive power of the bayesian nash equilibrium bne theory developed recently for this trading institution we find that the data support several qualitative implications of the bne but that subjects bid and ask behavior is not as responsive to changes in the pricing rule as the bne predictions bids and asks tend to reveal more of the underlying values and costs than predicted particularly when subjects are experienced nevertheless observed trading efficiency falls below the bne prediction the results offer more support for the bne when subjects compete against nash robot opponents a simple learning model accounts for several of the deviations from bne

payoff effects in information cascade experiments lisa r anderson i introduction this article examines payoff effects in information cascade experiments 1 cascade experiments provide a unique environment to study errors because decisions are made publicly and in sequence allowing people to learn from the decisions of others however there are no payoff interdependencies so subjects are only concerned with maximizing their own expected payoffs which cannot be directly affected by the actions of others this feature simplifies the analysis of the decision making process and makes it possible to focus more clearly on how subjects draw inferences from public decisions furthermore errors are recursive in the sense that mistakes made by initial decision makers influence the decisions of those that come later in the sequence this study focuses on learning and errors by analyzing data econometrically in a logistic error model econometric methods have gained popularity as a way to examine errors in experimental data harless and camerer 1994 present a maximum likelihood estimation method to test the predictive power of various utility theories using data from 23 different experiments mckelvey and palfrey 1995 and 1998 use the logistic structure to estimate error rates with data from a variety of games palfrey and prisbrey 1997 use a similar structure with a probit model to estimate error rates in a public goods experiment the analysis presented here differs from these previous econometric studies of experimental data in the following way in this model errors are analyzed in a sequential structure so the errors of others must be taken into account but there is no strategic element in the decision making process this study expands on the error analysis presented in anderson and holt 1997 by examining error rates under different payoff conditions smith and walker 1993a present a model of decision making in which the effort of contemplating a decision is balanced against potential gains in payoffs in addition they survey the experimental literature in economics and psychology addressing the issue of payoff effects and they find mixed results some studies report a decrease in error rates as payoffs increase others show little difference in results under payoff and no payoff treatments however there is a consensus that higher payoffs reduce the variance of decisions from the predicted outcome testing their own theory in the context of a first price auction experiment smith and walker 1993b report that the amount and severity of error decreases as payoffs increase interestingly behavior is not random even when there is no monetary reward for a correct decision using data from lottery choice experiments wilcox 1993 finds that higher monetary payoffs affect behavior in complex situations but not in relatively simple decision making environments harless and camerer 1994 use econometric methods to compare error rates in experiments with real losses to those with hypothetical losses they find that error rates are lower and variances are reduced in data with real losses this article adds to the literature on the saliency of rewards by analyzing behavior in a different experimental framework and by using the logistic model to generate econometric estimates of error rates under no payoff payoff and double payoff conditions the underlying behavioral model is an extension of the cascade model presented in bikhchandani hirshleifer and welch 1992 experimental procedures are discussed in section ii section iii discusses econometric details section iv reports results and section v concludes ii procedures 2 for each session of this experiment seven subjects were recruited from undergraduate economics courses at the university of virginia one subject was randomly chosen to be a monitor and the remaining six subjects were decision markers at the beginning of each period the monitor threw a six sided die to determine which of two urns was to be used for that period

social capital and contributions in a public goods experiment recent empirical studies from across the social and behavioral sciences find that social capital is associated with various measures of well being including economic growth stephen knack and phillip keefer 1997 and mortality ichiro kawachi bruce p kennedy and kimberly lochner 1997 these findings have inspired subsequent studies by economists examining the determinants of individual level measures of social capital e g alberto alesina and elianna la ferrara 2002 however experimental evidence from trust games conducted by edward l glaeser david i laibson jose a scheinkman and christine l soutter 2001 calls into question the efficacy of the most prevalent measures of social capital employed in the literature in contrast we show that these same measures are significantly associated with contributions in a public goods experiment and perform as well as the alternative measures of social trust suggested by glaeser et al because social capital is thought to influence wellbeing through its effect on public good provision our results bolster previous empirical work on the causes and consequences of social capital this abstract was borrowed from another version of this item

do non strategic sanctions obey the law of demand the demand for punishment in the voluntary contribution mechanism abstract the prospect of receiving a monetary sanction for free riding has been shown to increase contributions to public goods we ask whether the impulse to punish is unresponsive to the cost to the punisher or whether like other preferences it interacts with prices to generate a conventional demand curve in a series of experiments we randomly vary the cost of reducing the earnings of other group members following voluntary contribution decisions in our design new groups are formed after each interaction and no subject faces any other more than once so there is no strategic reason to punish we nonetheless find significant levels of punishment and we learn that both price and the extent to which the recipient s contribution is below the group mean are significant determinants of the quantity of punishment demanded moreover punishment is mainly directed at free riders even when it costs nothing to the punisher

technological specialization and variety in urban invention o huallachain b and lee d s technological specialization and variety in urban invention regional studies urban economic theory distinguishes between knowledge spillovers that occur within specializations and those that cross technologies empirical analysis has sought to gauge their relative strength but the results are inconclusive metropolitan specialization and variety at different aggregation levels of a us patent classification system are assessed using theil s relative entropy index the results show that specialization and variety are not competing features of urban technological structure cities can have both the invention rate positively associates with specialization in diverse technologies the cross fertilization of ideas among skilled professionals with different expertise and the interaction between specialists of narrow fields of knowledge are both important in technological advance the most inventive cities have deep specializations in different technologies the results also sho

decision making in patchy resource environments spatial misperception of bioeconomic models abstract we investigate the performance of subjects in a patchy resource environment in the experimental laboratory to expand the concept of stock misperception into spatial and non spatial components results indicate that substantial heterogeneity exists in the decision heuristics employed that can be used to identify subject types steady state and pulse fishing strategists while steady state strategists are only subject to spatial misperceptions pulse strategists are subject to both forms of misperception both subject groups overallocate effort to regions within the fishery that possess the highest rates of emigration inducing a spatial externality these spatial misperceptions are exacerbated by the spatial structure present

does stake size matter for cooperation and punishment the effects of stake size on cooperation and punishment are investigated using a public goods experiment we find that an increase in stake size does neither significantly affect cooperation nor the level of punishment

spatial wage disparities sorting matters spatial wage disparities can result from spatial differences in the skill composition of the workforce in non human endowments and in local interactions to distinguish between these explanations we estimate a model of wage determination across local labour markets using a very large panel of french workers we control for worker characteristics worker fixed effects industry fixed effects and the characteristics of the local labour market our findings suggest that individual skills account for a large fraction of existing spatial wage disparities with strong evidence of spatial sorting by skills interaction effects are mostly driven by the local density of employment not controlling for worker heterogeneity leads to very biased estimates of interaction effects endowments only appear to play a small role

rewards experience and decision costs in first price auctions consistent with a model of asymmetric risk aversion subjects in first price auctions consistently bid above the risk neutral nash prediction it has been argued that this is due to low opportunity cost of deviating from the risk neutral bid we increase opportunity cost and payoff levels by factors of 0 1 5 10 and 20 from the normal levels generating payoffs up to 250 for risk neutral subjects and observe an insignificant increase in the slope of individual bid functions the rmse of bids declines significantly this is consistent with a reward decision cost model of bidding behavior

monetary rewards and decision cost in experimental economics a survey of thirty one experimental studies which report data on the comparative effects of monetary rewards and opportunity cost shows 1 several studies in which increased rewards shift the central tendency of the data toward the predictions of rational models 2 in virtually all cases rewards reduce the variance of the data around the predicted outcome this is consistent with a model in which rewards are balanced against decision cost in agent behavior and explicates the argument that when rational models fail it can be attributed to low opportunity cost of deviations from the rational prediction

is increasing inequality harmful experimental evidence abstract increasing inequality is commonly associated with social unrest and conflict between social classes this paper reports the results of a laboratory experiment to study the implications of greater inequality on the tendency to burn others income the experiment considers an environment where higher earnings in a real effort task are typically associated with higher effort and varies how fair and transparent this relationship is the findings indicate that greater inequality does not lead to more money burning itself rather it depends on whether the increase in inequality can be unequivocally attributed to exerted effort i e the fairness of the income generating process only if greater inequality can be the result of morally questionable activities subjects engage in substantially more money burning while most income burning aims at reducing inequality the fairness of inequality only plays a role in the extent of money burning but not so much for the qualitative burning patterns

an individualistic approach to institution formation in public good games in a repeated public goods setting we explore whether individuals acting unilaterally will provide an effective sanctioning institution subjects first choose independently whether they will participate in a sanctioning stage that follows a contribution stage only those who gave themselves the right to sanction can do so we find that the effectiveness of the institution may not require provision of the institution at the level of the group individuals acting unilaterally are able to provide sanctioning institutions that effectively raise cooperation the effectiveness of the institution however depends on whether the right to sanction entails a monetary cost or not

infrastructure provision gender and poverty in indian slums we examine the relationship between infrastructure provision and poverty alleviation by analyzing 500 interviews conducted in serviced and non serviced slums in india using a mixed method approach of qualitative analysis and regression modeling we find that infrastructure was associated with a 66 increase in education among females service provision increased literacy by 62 enhanced income by 36 and reduced health costs by 26 evidence suggests that a gender sensitive consideration of infrastructure is necessary and that a one size fits all approach will not suffice we provide evidence that infrastructure investment is critical for well being of slum dwellers and women in particular

emotion venting and punishment in public good experiments experimental studies have shown that sanctions effectively deter free riding within groups however the over use of costly punishment may actually harm overall welfare a main reason for over punishment is that free riders generate negative emotions that likely favor excessive punishments in this paper we ask whether the venting of one s emotions in different ways can reduce the level of excessive punishment in a standard vcm with punishment environment while preserving the norm enforcement properties of punishment we find that venting emotions reduces excessive punishment and under certain conditions the net effect is an increase in final payoffs i e welfare to the group

confidence and the real value of money in an overlapping generations economy we demonstrate that stochastic bubbles which have a constant exogenous probability of collapsing may exist in general equilibrium on an intrinsically useless and unbacked asset money this may happen provided that the probability q that the bubble will persist next period is large enough and exceeds a threshold level q which we call the minimum rate of confidence this condition is always violated when the economy without bubble is dynamically efficient it is more likely to be satisfied in dynamically inefficient economies the larger the size of the inefficiency as measured by the excess of the growth rate over the no bubble interest rate we study both exchange and production economies

the moral costs of nastiness we introduce two variants of the one shot joy of destruction minigame mini jod two players are endowed with the same amount of money they simultaneously decide whether or not to reduce the payoff of the other player at an own cost in one treatment there was a probability that nature would destroy the opponent s money anyway we test whether this feature reduces the moral costs of being nasty and find that destruction rates rise significantly despite the absence of strategic reasons

gaming against managers in incentive systems experimental results with chinese students and chinese managers we examine strategic interactions between firms and planners in china comparing behavior between i students and managers with field experience with this situation ii standard versus increased monetary incentives and iii sessions conducted in context making explicit reference to interactions between planners and managers and those without any such references the dynamics of play are similar across treatments with play only gradually and incompletely converging on a pooling equilibrium a fivefold increase in incentives significantly increases initial levels of strategic play games played in context generated greater levels of strategic play for managers with minimal impact on students

theory and misbehavior in first price auctions comment in his recent paper in this review glenn harrison 1989 argues that the conclusions of james cox et al 1982 1983 1985 1988 in their studies of first price private value auctions are not well supported because of shortcomings in the way their experimental investigations were designed analyzed and reported harrison argues that the expected cost of deviations from risk neutral nash equilibrium rnne bidding in these auctions was quite small less than 0 05 at the median so that in terms of expected monetary payoffs payoff space many subjects had little to lose from deviating from the rnne strategy harrison suggests that the significance of the differences cox vernon smith and james walker hereafter csw report between subjects bids and the rnne bids deviations in the message space may therefore need to be reexamined in discussing harrison versus csw we have three primary points to make first in arguing that it is more natural to evaluate subject behavior in expected payoff space harrison 1989 p 749 we think harrison has overstated his case however we agree with his more important point that looking at the cost of deviations is a useful diagnostic tool for determining when experimenters are likely to have lost control over subjects incentives further as we will show in section i this part of harrison s critique applies with special force to csw s studies of bidding second a broader examination of the results of private value auction experiments indicates that risk aversion cannot be the only factor and may well not be the most important factor behind bidding above the rnne found so often in first price privatevalue auctions the most telling evidence here is bidding above the dominant bid price found in second price auctions kagel et al 1987 kagel and levin 1990 and the risk loving found under several treatment conditions in csw s 1984 own multipleunit discriminative auctions auctions in which the high bidders pay their bid price these and other data inconsistent with risk averse bidding are largely ignored in csw 1988 but are nevertheless relevant to the substantive issue of risk aversion in private value auctions they are discussed in section ii third there are data gathered in other investigations which provide strong support for the view that the deviations from rnne bidding reported in first price auctions are not the results of the low expected cost of such deviations however these data unlike the higher stakes payoff data that csw offer in response to harrison are not consistent with csw s subsidiary conclusions that the data can be well accounted for by a narrow class of risk aversion parameters for the bidders together with the assumption that all agents are playing a nash equilibrium of the resulting game of incomplete information a key difference between these experiments and csw s is that if subjects do not respond to csw s treatment condition increasing the payoffs from experimental to u s dollars their behavior will be consistent with csw s theory in contrast department of economics university of pittsburgh pittsburgh pa 15260 we thank jack ochs and emilie roth for thoughtful discussions on earlier drafts of the paper jim cox and glenn harrison for helpful comments on the initial draft of the paper susan garvin for research assistance and ray battalio carl kogut and don meyer for providing us with access to their data research support was provided by the information science and technology and economics divisions of the national science foundation the alfred p sloan foundation and the russell sage foundation the usual caveat applies with special force iwe do not respond to specific comments that csw 1992 make in response to our comment as in order to avoid indefinite regress the ground rules for this debate required us to comment on csw s criticism of harrison after which they would be given the opportunity to respond to our comment

does fdi bring environmental knowledge spillovers to developing countries the role of the local industrial structure this paper examines the environmental knowledge externalities of fdi within and across cities in an emerging economy context it argues that the extent of these environmental externalities is contingent upon local industrial agglomeration using a panel dataset of 280 chinese prefectural cities from 2003 to 2012 we employ a spatial economic approach although limited to evidence from soot and hbox so 2 pollutants our results suggest that fdi brings overall positive environmental knowledge externalities to a region and also spillovers to nearby regions specialised cities may lock into a particular technological path attenuating the absorption and diffusion of a variety of fdi environmental knowledge conversely diversified cities promote cross fertilisation of environmental knowledge and mitigate local pollution intensity at the aggregated city level this study adds to the literature by highlighting the importance of considering both the spatiality of fdi and industrial structure in understanding fdi environmental knowledge spillovers

are hypothetical referenda incentive compatible a comment in a recent article in this journal cummings al 1997 offer experimental evidence rejecting the hypothesis that a hypothetical referendum is an incentive compatible mechanism for obtaining the social value of or willingness to pay for changes in the allocation of environmental goods and services while cautions in offering a blanket rejection of hypothetical referenda as a means of measuring economic values on the basis of their findings the authors do suggest that at least in experimental settings respondents appear to behave differently when real money is changing hands wheather hypothetical situations adequately mimic real market situations has been debated in the contigent valuation literature since its inception see cummings brookshire and schulze 1986 cummings et al s finding of incentive incompatibility appears to offer strong evidence for the critics of hypothetical referenda

viewpoint on the generalizability of lab behaviour to the field abstract we can think of no question more fundamental to experimental economics than understanding whether and under what circumstances laboratory results generalize to naturally occurring environments in this paper we extend levitt and list 2006 to the class of games in which financial payoffs and doing the right thing are not necessarily in conflict we argue that behaviour is crucially linked to not only the preferences of people but also the properties of the situation by doing so we are able to provide a road map of the psychological and economic properties of people and situations that might interfere with generalizability of laboratory result from a broad class of games

individual behavior of first price auctions the importance of information feedback in computerized experimental markets abstract this article reports the results of an individual choice experiment designed to test the nash equilibrium predictions of the first price sealed bid auction a subject faced in 100 auctions always the same resale value and competed with computer simulated bids the design used between subjects variation and involved information feedback as the treatment variable earlier experimental work on first price auctions has frequently reported an overbidding relative to the risk neutral nash equilibrium our data provide evidence that overbidding can be fostered by the standard information feedback in auction experiments which after each auction reveals the winning bid only by means of learning direction theory we explain the individual bidding dynamics in our experiment finally we apply impulse balance theory and make long run predictions of individual bidding behavior

cryptocurrency adoption with speculative price bubbles this paper marries models of stochastic bubbles and the standard model of product diffusion to study the role of price bubbles in cryptocurrency adoption

the economic performance of cities a markov switching approach abstract this paper examines the determinants of employment growth in metro areas to obtain growth rates we use a markov switching model that separates a city s growth path into two distinct phases high and low each with its own growth rate the simple average growth rate over some period is therefore the weighted average of the high phase and low phase growth rates with the weight being the frequency of the two phases we estimate the effects of a variety of factors separately for the high phase and low phase growth rates growth in the high phase is related to both human capital and industry mix while growth in the low phase is related to industry mix only specifically the relative importance of manufacturing overall our results strongly reject the notion that city level characteristics influence employment growth equally across the phases of the business cycle

risk aversion experimental evidence from south african fishing communities we estimate the risk attitudes of a large sample of individuals from various fishing communities along the west coast of south africa female fishers and rights holders are found to be more risk averse than their male counterparts while rights holders are found to be less risk averse relative to subjects without fishing rights risk attitudes are found to be correlated with compliance with fisheries regulations in particular a greater degree of risk aversion translates into a reduction in compliance furthermore in the case of gender female fishers and rights holders are more likely to comply with fisheries regulations

social background cooperative behavior and norm enforcement studies have shown that there are differences in cooperative behavior across countries furthermore differences in the use and the reaction on the introduction of a norm enforcement mechanism have been documented in cross cultural studies recently we present data which prove that stark differences in both dimensions can exist even within the same town for this end a unique data set was created based on public goods experiments conducted in cape town south africa most of the differences in behavior can however be explained by variables accounting for social capital and social environment such as trust or household violence

examining risk preferences under high monetary incentives experimental evidence from the people s republic of china several experimental sessions were conducted to elicit certainty equivalents for a sequence of lotteries involving real monetary outcomes the opportunity to conduct sessions in the people s republic of china afforded the ability to offer very large monetary incentives relative to subjects living costs in the highest payoff condition subjects earned three times their normal monthly revenue in the course of a two hour experiment results indicate a statistically significant impact of the level of monetary incentives on revealed risk preferences however even under extreme monetary incentives subjects demanded amounts well in excess of expected value for low probability gain prospects copyright 1992 by american economic association

new product diffusion with influentials and imitators we model the diffusion of innovations in markets with two segments influentials who are more in touch with new developments and who affect another segment of imitators whose own adoptions do not affect the influentials this two segment structure with asymmetric influence is consistent with several theories in sociology and diffusion research as well as many viral or network marketing strategies we have four main results 1 diffusion in a mixture of influentials and imitators can exhibit a dip or chasm between the early and later parts of the diffusion curve 2 the proportion of adoptions stemming from influentials need not decrease monotonically but may first decrease and then increase 3 erroneously specifying a mixed influence model to a mixture process where influentials act independently from each other can generate systematic changes in the parameter values reported in earlier research 4 empirical analysis of 33 different data series indicates that the two segment model fits better than the standard mixed influence the gamma shifted gompertz and the weibull gamma models especially in cases where a two segment structure is likely to exist also the two segment model fits about as well as the karmeshu goswami mixed influence model in which the coefficients of innovation and imitation vary across potential adopters in a continuous fashion

estimating risk preferences from deductible choice we develop a structural econometric model to estimate risk preferences from data on deductible choices in auto insurance contracts we account for adverse selection by modeling unobserved heterogeneity in both risk claim rate and risk aversion we find large and skewed heterogeneity in risk attitudes in addition women are more risk averse than men risk aversion exhibits a u shape with respect to age and proxies for income and wealth are positively associated with absolute risk aversion finally unobserved heterogeneity in risk aversion is greater than that of risk and as we illustrate has important implications for insurance pricing

spite and development in a wide variety of settings spiteful preferences would constitute an obstacle to cooperation trade and thus economic development this paper shows that spiteful preferences the desire to reduce another s material payoff for the mere purpose of increasing one s relative payoff are surprisingly widespread in experiments conducted in one of the least developed regions in india uttar pradesh in a one shot trust game the authors find that a large majority of subjects punish cooperative behavior although such punishment clearly increases inequality and decreases the payoffs of both subjects in experiments to study coordination and to measure social preferences the findings reveal empirical patterns suggesting that the willingness to reduce another s material payoff either for the sake of achieving more equality or for the sake of being ahead is stronger among individuals belonging to high castes than among those belonging to low castes because extreme social hierarchies are typically accompanied by a culture that stresses status seeking it is plausible that the observed social preference patterns are at least partly shaped by this culture thus an exciting question for future research is the extent to which different institutions and cultures produce preferences that are conducive or detrimental to economic development

a failure to communicate an experimental investigation of the effects of advice on strategic play abstract we investigate why two person teams beat the truth wins benchmark in signaling games cooper and kagel 2005 cooper and kagel 2009 by studying an advice treatment where advisees have the benefit of two individuals insight but not bilateral communication the tw benchmark states that the performance of a team for problems with a demonstrable correct solution should be no worse than the performance of its most able individual if one individual solves the problem the team solves it as well advisees whose advisors play strategically have significantly higher levels of strategic play but fall well short of the truth wins benchmark as i many advisors who play strategically do not provide advice to this effect and ii many advisees fail to follow sound advice effect i is largely attributable to female advisors who are far less likely to provide advice than men whether or not advice contains a clear explanation for its effectiveness has no effect on the likelihood of advisees strategic play a result at odds with the idea that economic agents regularly consider all the available alternatives

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

how economic rewards affect cooperation reconsidered abstract recent studies suggest that payoffs in cents compared to dollars produce less defection in a repeated prisoner s dilemma game we are unable to replicate these findings with conventional economic procedures or in a direct replication

urban diversity and economic growth at the risk of some simplification it is possible to identify four periods of intense study of cities by economists each of these has led to an increased understanding of the economics of urban areas and the unique role played by cities in the modem economy the first of these periods occurred in the decade after world war i only about ten years after the truck revolutionized the transport of goods within urban areas this period included the first systematic empirical analysis of the forces affecting the location of firms and households within cities robert murray haig 1926 and a number of other microeconomists at columbia analyzed the spatial pattems of manufacturing activity in lower manhattan and in the rest of new york city haig jmd his colleagues devoted considerable attention to where things belong in an urban area p 402 providing the first systematic economic analysis of urban spatial structure for example they analyzed the garment industry concluding that it was destined by nature to disperse north of 14th street and predicting that it would follow the estabhshed spatial pattem of the cooperage barrelmaking industry standardization in size and quality of barrels had meant that identical barrels could be made throughout the new york metropolitan area even in new jersey and the introduction of the truck meant that they could be transported cheaply throughout the region and exported the second of these periods though not in chronological order began in the mid 1960s it formalized many of the insights about location incentives within urban areas which had been uncovered a half century before mixed them with the logic of heinrich von thunen s 1826 ancient theories about agricultural crops and land values and applied them to the hotisehold sector the works of william alonso 1964

overpricing and stake size on the robustness of results from experimental asset markets we assess the effects of a stake size variation on experimental asset markets our results show that a fivefold increase in stake size leads to higher trading frequencies mispricing and overpricing however are not fundamentally different for different stake sizes

the use of information system technology to develop tests on insider trading and asymmetric information issues related to insider trading remain popular research topics empirical studies using historical data are limited by two key factors 1 the inability to identify exactly who possesses inside information and 2 the inability to identify the accuracy of information possessed advances in information system technology enable us to overcome these problems in the laboratory using this technology we create a research shell to conduct experiments where we can identify the exact type and quality of information accessible by each trader our system includes the capability to monitor individual activities in accessing inside information the system can automatically impose a monetary penalty if random monitoring identifies a trader accessing inside information our experiments involve traders who receive access to inside information without initial knowledge of the quality of that information the results indicate that traders were able to outperform the market if penalties for being caught accessing such information were not included once penalties were included however no significant performance differences were observed finally in a second set of experiments involving a simplified market with infrequent electronic monitoring and low penalty amounts inside information seemed to be rapidly and effectively disseminated to traders possessing no inside information

theory and misbehavior of first price auctions recent experimental evidence appears to reject simple nash equilibrium models of bidding behavior in first price auctions the author presents a methodological critique of this evidence existing tests have concentrated on deviations of subjects from predictions in the message space of the action bid deviations the author suggests that it is more natural to evaluate subject behavior in expected payoff space he concludes that the evidence against the simple models is not significant enough to warrant their rejection copyright 1989 by american economic association