revenue management with strategic customers last minute selling and opaque selling companies in a variety of industries e g airlines hotels theaters often use last minute sales to dispose of unsold capacity although this may generate incremental revenues in the short term

limited commitment and crowding out of private transfers evidence from a randomised experiment this paper studies some empirical implications of models with limited risk sharing due to the imperfect enforceability of contracts we test whether the amount by which public transfers reduce private transfers is affected by features of the economy such as the variance of income and its persistence these implications are unique to models with imperfect enforceability we use data from mexico collected to evaluate a public transfer programme it included a randomised component that we exploit as a source of exogenous variation our results support the theoretical model in that the crowding out of private transfers is larger in villages where the variance of income is smaller

share contracts and their rationale lessons from marine fishing most of the existing literature on share contracts is based explicitly or implicitly on agriculture a sector in which share contracts are seldom dominant and apparently on the decline moreover since agricultural activities have some rather special characteristics the purpose of the present article is to analyse contractual choice and especially the choice of share contracts in a sector in which share contracts are dominant namely fishing in the process of explaining the dominance of share contracts in fishing the article also explains a some heretofore neglected features of these share contracts such as the way in which shares are calculated and the treatment of repair and maintenance expenditures b the nature and extent of interlinked transactions c the exceptional cases where share contracts are not used and d the relevance of varying environmental conditions and especially those of poor developing countries to the nature of contracts in fishing and to the differences therein between

an experimental investigation of asymmetric contests abstract contest theory has been used in industrial organization to describe phenomena like r d races or efforts to defend a monopoly position when pricing behavior is constrained by regulators competition can also take the form of a contest this paper reports on an experimental test of the effects of asymmetry in the tullock contest success function both the simultaneous move and sequential move frameworks are considered despite high levels of overbidding across the different conditions the introduction of asymmetries in the contest function generates experimental behavior on aggregate qualitatively consistent with the theoretical predictions at the individual level behavior seems divided into those subjects who bid very high amounts and those who bid very low amounts

gift giving and the evolution of cooperation gift giving is a practice common to many societies in an evolutionary model the social custom of giving gifts at the beginning of a relationship can lead to trust and cooperation the evolutionary approach makes predictions about the character of the goods that can be used as gifts for example gift goods may have little use value even at low levels of consumption although the gifts themselves are useless the institution is not

risk preferences and pesticide use by cotton farmers in china abstract despite that insect resistant bt cotton has been lauded for its ability to reduce the use of pesticides studies have shown that chinese bt cotton farmers continue to use excessive amounts of pesticides using results from a survey and an artefactual field experiment we find that farmers who are more risk averse use greater quantities of pesticides we also find that farmers who are more loss averse use lesser quantities of pesticides this result is consistent with our conceptual framework and suggestive evidence where farmers behave in a loss averse manner in the health domain and place more weight on the importance of health over money in the loss domain

noisy leadership an experimental approach abstract we examine the strategic behavior of leaders and followers in sequential duopoly experiments with errors in communication followers either perfectly observe the leaders actions or else they observe nothing consistent with the theory the leaders in our experiments enjoy a greater first mover advantage when followers observe their actions with higher probability albeit their advantage is weaker than the theory predicts and is only weakly increasing with the probability that their actions will be observed our results also show that i when informed followers hardly ever underreact to the leaders quantities but tend to overreact slightly and ii when uninformed followers try to predict leaders quantities and react optimally this suggests that followers view the symmetric cournot outcome as fair and when informed punish leaders who try to exploit their first mover advantage in turn such punishments by overreactions induce leaders to behave more softly than the theory predicts

gordon tullock and experimental economics gordon tullock s research has substantially influenced the development of economic science in general and experimental economics in particular we present the first comprehensive survey of this significant achievement we show how tullock s research in bioeconomics influenced later developments in neuroeconomics and how his pioneering work on rent seeking generated a literature of laboratory tests of his hypothesis we also describe tullock s own experiments and draw attention to his early insights on trust games

informal insurance arrangements with limited commitment theory and evidence from village economies recent work on consumption allocations in village economies finds that idiosyncratic variation in consumption is systematically related to idiosyncratic variation in income thus rejecting the hypothesis of full risk pooling we attempt to explain these observations by adding limited commitment as an impediment to risk pooling we provide a general dynamic model and completely characterise efficient informal insurance arrangements constrained by limited commitment and test the model using data from three indian villages we find that the model can fully explain the dynamic response of consumption to income but that it fails to explain the distribution of consumption across households

who gets the job referral evidence from a social networks experiment we use recruitment into a laboratory experiment in kolkata india to analyze how job networks select individuals for employment opportunities we present evidence that individuals face a tradeoff between choosing the most qualified individual for the job and the individual who is ideal from the perspective of their social network the experiment allows randomly selected subjects to refer members of their social networks to subsequent rounds of the experiment and varies the incentive schemes offered to these participants we find that when faced with performance pay individuals are more likely to refer co workers and less likely to refer family members high ability participants who are offered performance pay recruit referrals who perform significantly better on a cognitive ability task and also prove to be more reliable as evidenced by their choices in the trust game and performance on an effort task

probabilistic selling in quality differentiated markets probabilistic selling the sale of synthetic products consisting of a lottery between two distinct goods has been extensively analyzed in horizontal markets in this research we investigate probabilistic selling in quality differentiated markets this is an important new dimension of inquiry because of the widespread prevalence of quality differentiated markets as well as significant differences in the preference structure across these markets in fact this latter consideration casts doubt as to whether probabilistic selling will even emerge in quality differentiated markets we find that probabilistic selling emerges in quality differentiated markets as a way to profitably dispose excess capacity moreover probabilistic selling remains viable even under endogenous quality choice in addition in markets where sellers employ strong quality differentiation the introduction of an intermediate probabilistic good actually causes closer quality levels in a product line and enhances consumer welfare in contrast in markets where sellers employ weak quality differentiation the introduction of an intermediate probabilistic good increases quality separation and degrades consumer welfare overall we view our contribution as one of characterizing the optimality implementation and policy implications of probabilistic selling in quality differentiated markets this paper was accepted by pradeep chintagunta marketing

risk and insurance in a rural credit market an empirical investigation in northern nigeria credit contracts play a direct role in pooling risk between households in northern nigeria repayments owed by borrowers depend on realizations of random shocks by both borrowers and lenders the paper develops two models of state contingent loans the first is a competitive equilibrium in perfectly enforceable contracts the second permits imperfect information and equilibrium default estimates of both models indicate that quantitatively important state contingent payments are embedded in these loan transactions but that a fully efficient risk pooling equilibrium is not achieved the research is based on a year long survey in zaria nigeria conducted by the author

an inferred valuation method although estimates of people s values for public goods are often needed to conduct cost benefit analysis existing value elicitation methods are prone to a number of well documented biases we argue that some of these biases result because people derive utility from the act of saying they are willing to pay for a good to counteract this phenomenon we consider an approach that asks people to predict or infer others values for a good instead of asking people to state their own value both a conceptual model and results from a laboratory experiment lend support for the new approach

competing for market shares does the order of moves matter even when it shouldn t abstract this paper investigates whether the order of moves affects behavior and outcomes even in the absence of material incentives for pre commitment evidence from laboratory experiments with shared rents symmetric players and either a simultaneous or a sequential move order suggests that it is an inherent advantage to move second rather than first the reason is that first movers face strategic uncertainty while second movers have the power to ultimately determine the outcome through their investment choices many first movers acknowledge this power and decrease investments below the standard prediction which is interpreted as an attempt to collude this strategy leads to higher absolute payoffs for the first movers compared to a situation where they do not try to establish collusion however relative payoffs are low since collusive outcomes are typically asymmetric to the advantage of the second mover

crime and social interactions the high variance of crime rates across time and space is one of the oldest puzzles in the social sciences this variance appears too high to be explained by changes in the exogenous costs and benefits of crime we present a model where social interactions create enough covariance across individuals to explain the high cross city variance of crime rates this model provides an index of social interactions which suggests that the amount of social interactions is highest in petty crimes moderate in more serious crimes and almost negligible in murder and rape

gifts as economic signals and social symbols gift giving has often puzzled economists especially because efficient gifts like cash or giving exactly what a person asks for seem crass or inappropriate it is shown in a formal game theoretic model that gifts serve as signals of a person s intentions about future investment in a relationship and inefficient gifts can be better signals other explanations for the inefficiency of gift giving are advanced and some stylized facts about gift giving practices are described many of which are consistent with the signaling view of gifts

dynamic rent seeking games the present paper analyses rent seeking games in which competitors for a rent can act and react finitely or infinitely often it argues for an infinite move model as the most appropriate specification of a model of rent seeking dynamic equilibrium analysis of this game suggests that wasteful expenditures in rent seeking competitions are lower than previously studied static simultaneous move games predict journal of economic literature classification numbers d72 c73

an analysis of rent seeking games with relative payoff maximizers in this paper we introduce relative payoff maximizing firms into the tullock model of rent seeking these firms try to realize higher expected payoff than other firms as a consequence of this the outcome of the model changes firms on average will invest more in the rent seeking process the rate of dissipation of the rent becomes independent of the number of rent seekers dissipation becomes complete in cases where underdissipation prevails in the original model

market segmentation self selection and product line design the purpose of this paper is to develop a theory of market segmentation based on consumer self selection the extant theory is based on the third degree price discrimination model of pigou central assumptions of which are that the firm can directly address individual segments and isolate them by using consumer self selection i am relaxing these assumptions in the context of a monopolist designing a product line i show that this relaxation has significant implications for how the products and prices are chosen and what they look like in particular segments may be aggregated even though there are no economies of scale furthermore consumer self selection enables us to model cannibalization and competition among firms

an experiment on sequential rent seeking in an experiment on sequential rent seeking we find that the theoretically predicted first mover advantage does not exist empirically rather a second mover advantage can be observed though the subgame perfect equilibrium can not prevail in experiment individual behavior is highly reasonable nevertheless such that subjects appear to play a reduced form of the original game we also observe that the efficient fair outcome can not be achieved because of the exploitation opportunity for the second mover the observed behavior is quite different from that in ultimatum and trust game experiments 2000 elsevier science b v all rights reserved

risk sharing commitment and information an experimental analysis this paper describes and analyzes the results of a unique field experiment especially designed to test the eects of the level of commitment and information available to individuals when sharing risk we find that limiting exogenously provided commitment is associated with less risk sharing while limiting information on defections can be associated with more risk sharing these results can be understood by distinguishing between intrinsic and extrinsic incentives and by recognizing that social sanctions are costly to inflict or that individuals suer from time inconsistent preferences comparing the groups formed within our experiment with the real life risk sharing networks in a few villages allows us to test the external validity of our experiment and suggests that the results are salient to our understanding of risk sharing arrangements observed in developing countries jel classification numbers c93 d71 d81 o12

inequality reciprocity and credit in social networks while informal insurance and social networks are important in all societies networks are critical in rural areas of developing countries townsend 1994 was one of the first to document the importance of risk sharing within villages more recently theorists have begun to model sharing as taking place within a network rather than within the village as a whole bramoulle and kranton 2007 bloch genicot and ray 2008 ambrus mobius and szeidl 2010 empirical studies have also shown the importance of risk sharing within social networks rosenzweig 1988 udry 1994 de weerdt and dercon 2006 given this local nature of risksharing within networks it is important to analyze who forms links with whom and the types of relationships formed the effects of development policies will depend on the operation of social networks and the features that cause individuals to form links research on the determinants of risk sharing links has found contradictory results experimental studies such as attanasio et al 2009 find that risk sharing groups are assortative on consumption survey based evidence such as de weerdt 2004 and fafchamps and gubert 2007 find laura schechter is an assistant professor of economics at michigan state university alex yuskavage is a financial economist in the office of tax analysis at the u s treasury schechter thanks the wisconsin alumni research foundation the russell sage foundation and the delta foundation for funding we are grateful to idelin molinas and instituto desarrollo for their support in paraguay jennifer alix garcia joachim de weerdt garance genicot paul niehaus mark rosenzweig and guanming shi gave helpful comments

creating a lab in the field economics experiments for policymaking in this paper i focus on the role that artefactual and certain framed field experiments what i term lab like field experiments or lfes play in informing policymaking using examples primarily from rural contexts in developing countries i identify four main purposes of lfes 1 to test theories or heuristic principles 2 to identify and estimate parameters associated with characteristics 3 to explore the structural nature of parameters derived from empirical methods including other types of experiments and 4 to assess methodological difficulties associated with lfes and how these can impact parameter estimates i address the importance of generalizability for lfes that are intended to inform policymaking and in the process emphasize the complementary role between lfes and other empirical methods in particular other experiments finally i discuss nine basic principles for conducting lfes and suggest four directions for future research

electronic tickets smart cards and online prepayments when and how to advance sell advance selling occurs when sellers allow buyers to purchase at a time preceding consumption shugan and xie 2000 electronic tickets smart cards online prepayments and other technological advances make advance selling possible for many if not all service providers these technologies lower the cost of making complex transactions at a greater distance from the seller s site they also give sellers more control over advance selling by decreasing arbitrage as technology enhances the capability to advance sell more academic attention is vital this paper strives to exploit these technologies by developing advance selling strategies until recently advance selling research focused on the airline industry and specific characteristics of that industry these characteristics included the price insensitivity of late arrivals e g business travelers compared with early arrivals e g leisure travelers demand uncertainty across flights on the same day and capacity constraints recent findings by shugan and xie 2000 show that advance selling is a far more general marketing tool than previously thought it does not require these industry specific characteristics it only requires the existence of buyer uncertainty about future valuations moreover sellers without the ability to price discriminate can use advance selling to improve profits to the level of first degree price discrimination this finding is important because buyers are nearly always uncertain about their future valuations for most services e g the utility of next year s vacation or a future college education in this paper we take the next step from shugan and xie 2000 we show that advance selling profits do not come from buyer surplus but from more buyers being able to purchase we determine when and how to advance sell in a variety of situations including situations with limited capacity second period arrivals refunds buyer risk aversion exogenous credibility continuous preference distributions and premium pricing we determine when advance selling improves profits and when it does how to set advance prices we ask and answer seven questions first when should sellers advance sell second how much can advance selling improve profits compared with only spot selling third what factors impact the profitability of advance selling and how fourth should advance prices be higher or lower or the same as spot prices fifth how do capacity constraints impact advance selling strategies sixth should sellers limit the number of advance sales finally what is the possible impact of buyer risk aversion first we provide precise conditions when sellers should advance sell for example without capacity constraints we show that sellers should advance sell when marginal costs are sufficiently low to make it profitable to sell to buyers with low valuations and sufficiently high to convince buyers that the spot price will be higher than the advance price second we find that advance selling can almost double the profits from optimal spot selling to early arrivals we also show that advance selling has no impact on consumer surplus in markets with homogenous consumers and no capacity constraints therefore advance selling can increase social welfare because seller profits increase third we find that two very important factors impacting the profitability of advance selling are seller credibility and marginal costs buyers only advance buy when they expect an advantage from advance buying over spot buying without capacity constraints sellers must credibly convince buyers that the advance price is at a discount to the spot price we show that this condition is met under different circumstances for example large marginal costs can create credibility because buyers believe that these costs will lead to high spot prices fourth we find although optimal advance prices can be at a discount to the spot price that sometimes a premium is optimal premiums are optimal when capacity is large but limited and marginal costs are not too large buyers advance purchase at a premium to spot prices when capacity is limited and spot prices are low note that this is not a risk premium and risk aversion is not required no prior research has suggested this strategy because that research relies on the assumption that early arrivals are more price sensitive than later ones without that assumption premium advance pricing is sometimes optimal fifth we find that binding capacity constraints can impact the profitability of advance selling in opposite ways on one hand capacity constraints create seller credibility buyers believe that spot prices will be high when they know spot capacity is limited and perhaps more limited by advance sales on the other hand when capacity is limited the need to increase sales from discounted advance prices diminishes sixth consistent with desiraju and shugan 1999 we find that limiting advance sales can be profitable but only under restrictive conditions these conditions are 1 selling to all early arrivals would leave insufficient capacity in the spot period to sell to all second period arrivals with high valuations 2 the optimal spot price is high and 3 marginal costs are sufficiently small to make advance selling profitable finally we find that buyer risk aversion can sometimes increase the profitability of advance selling our findings provide precise guidelines for a large number of service providers that will have the technical capability to advance sell for those service providers advance selling provides a creative pricing strategy that can potentially provide substantial improvements in profits

does risk sharing increase with risk aversion and risk when commitment is limited i consider a risk sharing game with limited commitment and study how the discount factor above which perfect risk sharing is self enforcing in the long run depends on agents risk aversion and the riskiness of their endowment when agents face no aggregate risk a mean preserving spread may destroy the sustainability of perfect risk sharing if each agent s endowment may take more than three values with aggregate risk the same can happen with only two possible endowment realizations with respect to risk aversion the intuitive comparative statics result holds without aggregate risk but it holds only under strong assumptions in the presence of aggregate risk in simple settings with two endowment values i also show that the threshold discount factor co moves with popular measures of risk sharing

efficient rent seeking in experiment in a series of experiments we show that people learn to playthe efficient outcome in an open ended rent seeking game thisresult persists despite quite different experimentenvironments and designs like different propensities ofcompetition group sizes etc and is interpretable as aresolution of the so called tullock paradox which states thatreal world rent seeking expenditures are much lower than whatthe standard rent seeking model predicts

sovereign debt as intertemporal barter author s kletzer kenneth m wright brian d abstract borrowing and lending between sovereign parties is modeled as intertemporal barter that smoothes the consumption of a risk averse party subject to endowment shocks the surplus anticipated in the relationship offers sufficient incentive for cooperation by all parties including any other competitive agents who are potential lenders to the sovereign the sole punishments consist of renegotiation proof changes in the path of future payments we show that intertemporal trade can be sustained in the absence of any exogenous enforcement of lending relationships whatsoever that is borrowing and lending are possible under anarchy and are supported by punishments that consist of cheating any cheater long term implicit relationships may be fulfilled as the continual renegotiation of simple incomplete short term loans the analysis suggests that the crucial role of the explicit loan contract is the identification of the relationship and the parties involved

social norms and gift behavior theory and evidence from romania in many developing and transitional countries with limited public income redistribution inter household transfers in general and gifts in particular are sizable and very important we use unique romanian survey data that enables us to isolate pure gifts from other private transfers we explicitly focus on the importance of community wide social norms and find that they indeed play a major role for both the occurrence and the values of gifts more exactly our results suggest that the overall predominant gift motive among romanian households is a norm of reciprocity moreover this norm seems to be dominating for gifts to middle and high income households even though poor households receive to the same extent norms of both impure altruism and reciprocity tend to be important hence although the poor may not reciprocate gifts to the same extent as the rich they still receive since there is a social norm to give especially to the poor

risk pooling through physical probabilistic selling abstract this paper investigates the impacts of a new type of probabilistic selling p s where the retailer orders specific products and package some as a discounted physical probabilistic product ppp rather than merely a virtual choice we call this p s strategy as physical probabilistic selling p p s the price gap between the specific products and the probabilistic product results in demand reshape i e some customers who originally buy specific products will switch to buying the probabilistic product which decreases aggregate demand uncertainty however the price discount decreases the profit margin considering this trade off we develop a three product newsvendor model to address the question of how to set the price for the ppp and make inventory allocation decisions we prove that there are two effects under p p s namely the risk pooling effect due to demand reshape and the risk diversification effect due to inventory flexibility with demand uncertainty p p s can improve the retailer s profit at lower inventory levels with proper demand reshape induced by the optimal price discount p p s is more profitable with smaller product differentiation higher customer price sensitivity higher demand uncertainty and lower package cost with supply uncertainty we demonstrate through numerical studies that p p s is a viable strategy to combat asymmetrical supply risk that yields higher profits and service levels

land accumulation dynamics in developing country agriculture abstractunderstanding land accumulation dynamics is relevant for policy makers interested in the economic effects of land inequality in developing country agriculture we thus explore and simultaneously test the leading theories of micro level land accumulation dynamics using unique panel data from paraguay the results suggest that farm growth varies systematically with farm size a formal rejection of stochastic growth theories that is gibrat s law and that titled land area may have considerable influence on land accumulation furthermore our estimates indicate that a dualistic agrarian structure is the likely product of the unfettered operation of land markets

theft gift giving and trustworthiness honesty is its own reward in rural paraguay in developing countries lacking legal enforcement villagers may use implicit contracts to minimize crime i construct a dynamic limited commitment model in which a thief cannot commit to forego stealing but is induced to steal less by the promise of future gifts combining survey data on production theft gifts and trust with experiments measuring trustworthiness i provide supporting evidence farmers living near more relatives or with plots that are difficult to steal from give fewer gifts and trust more and those living near more relatives also experience less theft giving increases when trust is lower and the threat of theft is greater