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

ants rationality and recruitment this paper offers an explanation of behavior that puzzled entomologists and economists ants faced with two identical food sources were observed to concentrate more on one of these but after a period they would turn their attention to the other the same phenomenon has been observed in humans choosing between restaurants after discussing the nature of foraging and recruitment behavior in ants a simple model of stochastic recruitment is suggested this explains the herding and epidemics described in the literature on financial markets as corresponding to the equilibrium distribution of a stochastic process rather than to switching between multiple equilibria

the market for quacks a group of n quacks plays a price competition game facing a continuum of patients who recover with probability whether or not they acquire a quack s treatment if patients chose rationally the market would be inactive i assume however that patients choose according to a boundedly rational procedure which re ects anecdotal reasoning this element of bounded rationality has signi cant

bubbles and volatility of stock prices effect of mimetic contagion the author discusses the effect of the mimetic contagion on the dynamics of stock prices each investor bids and or asks prices such that adjusts to his present value calculated from his incomplete information set and to the average price of others buyers and sellers mimetic contagion an original stochastic treatment based on the equation of motion of the probability density function is used to calculate the equations of the mean and variance of the market price as soon as the agents are mimetic and or have correlated present values then the moments of the market price are driven away from the fundamental ones copyright 1991 by royal economic society

penny wise and pound foolish the left digit effect in price cognition through five experiments we provide a cognitive account of when and why nine ending prices are perceived to be smaller than a price one cent higher first this occurs only when the leftmost digits of the prices differ e g 2 99 vs 3 00 second the left digit effect also depends on the numerical and psychological distances between the target price and a competing product s price the closer the two prices being compared the more likely is the left digit effect third the left digit effect is not restricted to the domain of prices it also manifests with other multidigit numbers

what do college seniors know about economics if college seniors who have taken an economics course were asked questions that test their knowledge of basic economics what would the results show would seniors give correct answers to most questions or would they show significant deficiencies students are exposed to many ideas during their undergraduate education so one would not expect them to retain all of the economic content they were taught but one would hope that they would retain at least a knowledge of basic economics this study investigates whether that is the case two data sources were used for the study the first was from a gallup survey of a national random sample of 300 college seniors walstad and max larsen 1992 the survey includes 15 multiple choice questions testing economic knowledge the responses from that survey can be separated according to whether students took economics the second data set came from the economics scores for 12 854 students who took the major field test in business ii mftb sponsored by higher education assessment of the educational testing service ets 1998 the mftb covers content typically taught in an undergraduate program in business and contains about 20 multiple choice questions on basic economics although there are differences between the two data sets we viewed this as an advantage for our study our hypothesis is that most college seniors would show relatively limited knowledge of basic economics no matter what questions were asked or how the data were collected we expected students responding to the gallup questions to score higher than students taking the mftb because the gallup questions were simpler and designed for telephone in

classroom experiments not just fun and games i introduction historically economics was the classic example of a science in which laboratory methods are impossible consistent with this view economics has traditionally been taught as a theory intensive science rather than as an experimental one however the view that economics is not a laboratory science has been changing in large part due to the increase in research conducted using experimental methods in addition as evidence of the benefits of active learning for students has been gathered leaders in the field of education have been urging faculty to actively engage students in the process of learning introducing experimental methods into the economics classroom is a natural step warranted both by the evolution of the discipline itself and the need to more actively involve students in the learning process this paper presents results from a research project examining the effectiveness of using economics experiments in the classroom the project involved designing course packages for the principles of microeconomics and principles of macroeconomics classes that integrate basic economic experiments into the curricula and then evaluating their success as a teaching tool the evaluation phase focused on assessing the impact of this curriculum on student performance student attitudes towards economics and economic knowledge retention the project was conducted over a three year period during the initial phase of the research project both the course materials and an assessment instrument for evaluating the effectiveness of those materials were developed 1 next a controlled experiment using students at the university of arkansas was conducted students who enrolled in principles of macroeconomics and principles of microeconomics courses were separated into control and treatment classes both groups were taught using a general lecture class discussion format but experiments designed to illustrate specific economic concepts were used in the treatment sections in place of the additional lecture class discussion and examples used in the control classes for those topics relative performance on the assessment instrument serves as the basis for evaluating the impact of the new curricula on student learning while controlling for other factors that might affect student performance an attitude survey was administered to the students at the beginning and at the end of the courses in both the treatment and control groups to gain insight into their attitudes towards the study of economics and whether those attitudes changed over the course of the semester 2 in addition to assessing the impact of classroom experiments on student performance and attitudes towards economics their impact on knowledge retention was also investigated students were tracked into a required advanced business course where their performance on a test of material covered in the introductory economics courses was used to evaluate the impact of classroom experiments on their retention of this material although we had no a priori expectations of what the specific outcomes from the evaluative portion would be we hypothesized that students would benefit overall from the use of experiments and that this benefit would be dispersed differentially based on student learning styles we also anticipated that we would find an improved attitude towards the study of economics and an increase in knowledge retention when experiments were implemented as active learning tools ii background in their 1985 edition of principles of economics samuelson and nordhaus argued one possible way of figuring out economic laws is by controlled experiments economists unfortunately cannot perform the controlled experiments of chemists or biologists because they cannot easily control other important factors like astronomers or meteorologists they generally must be content largely to observe

use it or lose it teaching literacy in the economics principles course americans know little about economics recent surveys document shocking gaps in understanding of markets macroeconomic policy and the economics of government both the general public and college students including economics course takers do poorly on questions that check their knowledge in a gallup survey william b walstad and max larsen 1992 most knew that competitive prices are determined by supply and demand but 65 percent of the public and 43 percent of college seniors believed that during a crisis in the middle east government should prohibit oil companies from raising prices p 65 in a harris poll parade magazine 1999 only 58 percent of adults knew that people are likely to respond to a doubling in the relative price of beef by buying more poultry and less beef only one in three understood that those who borrow money at a fixed interest rate are most likely to benefit from inflation in a minneapolis federal reserve survey david fettig 1998 only 30 percent knew that government could reduce high inflation by decreasing spending and the money supply taking a high school or college economics course has little impact on economic understanding walstad and ken rebeck 2002 in a 15 question gallup survey of college seniors college economics course takers scored 9 highschool economics course takers scored 8 and those who took no economics scored 7 walstad and sam allgood 1999 there is hope test takers do better with questions that concern their day to day lives louis harris and associates 1999 and adults believe economics is important 88 percent want politicians to have a good understanding of economics and 96 percent think that basic economics should be taught in high school harris and associates 1999 while objections can be raised about what questions were asked and how they were worded national surveys administered by several respected firms support the same conclusion americans know little about economics

the state of economic education during the first fifty years of the american economic association aea its leaders considered the teaching of economics to be an important subject for discussion and debate aea founders set as a goal to educate public opinion about economic questions and economic literature elton hinshaw and siegfried 1991 p 373 during the last 50 years aea leaders have largely ceded questions on teaching to specialists in 1955 the association created the committee on economic education cee and charged it with improving the status of economic education within the profession stimulating and encouraging professional work on economic education and arranging economics education sessions at the aea meetings the association later revised the charge to include actively improving the quality of economic education at all levels from pre college to college adult and general economic education hinshaw and siegfried 1991 it is time to direct the attention of the entire profession not just economic education specialists toward the importance of educating a broad spectrum of the public about economics

the effects of attendance on student learning in principles of economics does attendance affect performance in college economics courses david romer 1993 found that attendance did contribute significantly to the academic performance of students in a large intermediate macroeconomics course that he taught in the fall of 1990 see the summer 1994 journal of economic perspectives vol 8 no 3 pp 205 15 for numerous comments on romer this conclusion held even after controlling for student motivation which it may be argued is the true factor determining performance and is only approximated by attendance an earlier study by kang park and peter kerr 1990 found that attendance was a determinant of student performance in a money and banking course but not as important as a student s gpa and the percentile rank on a college entrance exam a study by robert schmidt 1983 reported that time spent attending lectures contributed positively to performance in a macroeconomic principles course on the other side of the ledger is evidence from neil browne et al 1991 showing that students who did not attend a typically structured class with lectures did just as well on the test of understanding college economics tuce as those students who attended a standard microeconomic principles course they also reported however that those students who attended the lectures performed better on essay questions than those who did not a similar study by campbell mcconnell and c lamphear 1969 found no significant difference in the performance of students with no classroom attendance vis a vis those attending class finally stephen buckles and m e mcmahon 1971 found attendance at lectures that simply explained material covered in reading assignments did not enhance students understanding of economics in this paper we present new evidence on the effects of class attendance on student performance our results pertain to the principles of economics course as it is taught in a two semester sequence at a medium size comprehensive state university

modeling the economic interaction of agents with diverse abilities to recognize equilibrium patterns we model differences among agents in their ability to recognize temporal patterns of prices using the concept of debruijn sequences in two dynamic models of markets we demonstrate the existence of equilibria in which prices fluctuate in a pattern that is independent of the fundamentals and that can be recognized only by the more competent agents jel c7 d4 s477

unsystematic security price movements management earnings forecasts and revisions in consensus analyst earnings forecasts empirical evidence suggests that information about a firm s future earnings prospects is important to investors griffin 1976 givoly and lakonishok 1979 1980 and imhoff and lobo 1984 reported statistically significant abnormal stock returns before at and after announcements of analyst earnings forecast revisions in addition imhoff and lobo documented positive correlation between the magnitudes of the forecast revisions and the abnormal returns these findings are consistent with the hypothesis that investors find analyst forecast revisions informative another source of information about future earnings is projections from corporate officials several studies have found unsystematic stock price changes prior to and or immediately surrounding the public release of management earnings forecasts e g foster 1973 nichols and tsay 1979 patell 1976 jaggi 1978 penman 1980 and waymire 1984 the conclusion from this research is that management forecasts also convey information to investors

the joint effect of management s prior forecast accuracy and the form of its financial forecasts on investor judgment in this paper we examine how investor reaction to management earnings forecasts is a joint function of the form of the forecast point or range forecasts and management s prior forecast accuracy high or low drawing on ajinkya and gift s 1984 expectations adjustment hypothesis king pownall and waymire 1990 argue that the value relevance of forecasts is a function of their timing credibility and form we extend the king pownall and waymire framework by hypothesizing that forecast form and one aspect of management credibility namely prior forecast accuracy will interact in their effects on investor judgment

engaging students in quantitative analysis with short case examples from the academic and popular press following the completion of microand macroeconomics principles courses for which the majority of students are enrolled to fulfill requirements for other majors economics majors take two intermediate micro and macro courses a course in statistics econometrics and some field courses that may or may not include more quantitative methods john siegfried et al 1991 in a national survey michael watts and i found some differences between the way statistics and econometrics courses are taught and the way the other undergraduate economics courses are taught becker and watts 1996 in particular problem sets are used more in statistics and econometrics than in other undergraduate economics courses curiously however those applications are not based on events reported in newspapers magazines and journals that economists read how timely and relevant can problem sets be if they are not documented in current events ideally instructors set problems raised by their own research and consulting problems students can expect to see on their jobs after all the rationale for teaching statistics and econometrics outside a mathematics department rests on a belief that there is something special about economic analyses that is economists use of statistics is tied to the issues they face although the calculation of a mean and a median for example is the same in medicine and economics a discussion of the average duration of economic expansions since world war ii is more pertinent to those majoring in economics than is a discussion of average blood pressure or average time to dementia with mad cow disease the importance of economic tleory is often lost when mathematicians attempt to make situations real as seen for example in the chance course j laurie snell and john finn 1992 where a potpourri of statistical applications are presented with no disciplinegrounded analyses to teach students to apply the tools of statistics to actual situations and data encountered by economists there is little justification for examples involving the drawing of balls from urns flickng of spinners tossing of coins or contrived card and dice tricks yet these methods of generating data continue to be found in the activity based teaching and assessment discussants william greene new york university robin lumsdaine brown university kim sosin university of nebraska omaha

impact of post restatement actions taken by a firm on non professional investors credibility perceptions the frequency of earnings restatements has been increasing over the last decade restating previous earnings erodes perceived trustworthiness and competence of management giving firms strong incentives to take actions to enhance perceived credibility of future financial reports farber d b 2005 the accounting review 80 2 539 561 using an experimental case we examine the ability of post restatement actions taken by a firm to positively influence non professional investors perceptions of management s financial reporting credibility our examination considers credibility judgments following two types of restatements those resulting from fraud in which the character ethics and values of an organization may be called into question cf copeland jr j e 2005 accounting horizons19 1 35 43 and those resulting from non fraud i e aggressive accounting

striking a balance between rules and principles based approaches for effective governance a risks based approach several recent studies and initiatives have emphasized the importance of a strong ethical organizational dna odna to create and promote an effective corporate governance culture of trust integrity and intellectual honesty this paper highlights the drawbacks of an excessively heavy reliance on rules based approaches that increase the cost of doing business overshadow essential elements of good corporate governance create a culture of dependency and can result in legal absolutism the paper makes the case that the way forward for effective corporate governance is to strike an optimal balance between rules based and principles based approaches the recent corporate scandals have demonstrated that the ethical odna is critical to the driving force and basis of legal and regulatory requirements effective governance means adhering to ethical principles not merely complying with rules and is a crucial guardian of a firm s reputation and integrity it is through an effective corporate governance program that is one that optimally captures and integrates the appropriate aspects of rules based and principles based approaches and identifies and assesses the related risks that an organization can reconfigure its odna for improved performance focusing on the ethical odna as the basis of new governance measures provides an opportunity to develop a competitive advantage as it represents a potential source of differentiation strengthens the relationship with all stakeholders of the organization by building a culture of trust and integrity and re instills investor confidence this paper employs dialectical reasoning that links the odna through principles driven rules in developing a risks based approach a comparison from a risk assessment perspective between rules based and principles based approaches is presented although there have been few applications employing dialectical reasoning in business research this methodology can be extremely useful in isolating ethical issues and integrating them into the business process the risks based approach captures the benefits of both rules based and principles based approaches and incorporates trust based principles such as solidarity subsidiarity and covenantal relationships

becoming a bad doctor we analyze a market with n rational rms doctors and a continuum of boundedly rational consumers patients following spiegler 2006a we assume that patients are not familiar with the market and rely on anecdotes we analyze the price setting game played by doctors with given dierent healing qualities doctors know their own quality as well as the qualities of their competitors in the unique equilibrium all doctors no matter how bad earn positive prots if doctors even costlessly choose their qualities doctors mainly oer mediocre qualities in all spne welfare may strictly decrease in the number of doctors

classroom experiments is more more studies have demonstrated that classroom experiments have a positive effect on student achievement in economics courses questions remain regarding the appropriate number of experiments in the current study we attempt to determine whether more intensive use of classroom experiments is associated with greater student achievement our data contains variation in the number of experiments administered in a principles of microeconomics course we find that participation in classroom experiments has a positive but diminishing marginal benefit on students final course scores we also find that classroom experiments can bridge some achievement gaps between older and younger students between whites and minorities

chalk and talk a national survey on teaching undergraduate economics reports on the desirable goals and characteristics of economics programs and reforms proposed to attain such programs e g w lee hansen 1991 hirschel kasper et al 1991 have ignored the issue of how economics is to be taught that is surprising because several popular trade books have recently appeared condemning teaching practices at american colleges and universities some of these books were written by economists e g martin anderson s 1992 impostors in the temple and used economics courses as notable examples of these problems long before these reports and books appeared the national council on economic education ncee together with the american economic association s aea committee on economic education began sponsoring programs to improve the teaching of economics and to promote innovative teaching methods in becker and watts 1995 we describe many of these improvements and explain how economists could use alternative teaching methods in different undergraduate courses until now however we could not provide data on how widely those approaches were used we do that here based on responses to a national survey

technology improves learning in large principles of economics classes using our wits much recent innovation in teaching economics has focused on active learning strategies and on the use of technology at the same time budget realities make large lecture classes a fact of life for principles of economics courses at many universities unfortunately neither active learning strategies nor teaching with technology tend to work well in large classes active learning is difficult to facilitate with many students and learning with technology in economics has been limited for the most part to classes small enough to fit in computer labs we have developed a system that uses handheld devices and wireless technology to facilitate interactive learning in large classes by putting technology in the hands of the students during class the wireless interactive teaching system wits consists of handspring visors a hand held pda equipped with wireless capabilities a laptop server a wireless access point and projector and proprietary software this intranet uses the 802 11b wireless standard wits allows students to trade in markets play standard economics games prisoner s dilemma public goods 2 2 matrix etc take multiple choice quizzes and communicate with the instructor during class see http lshta vt edu index html for a sample exercise and instructional material we report the results of a controlled experiment to test the impact of wits facilitated active learning exercises our study differs from previous work in three important ways first use of the wits system allows us to implement experiments in larger classes than previous studies using hand run exercises second we measure learning using exam scores rather than the test of understanding in college economics tuce so that improved results are understandable in terms of students grades the metric that students and universities use to evaluate performance finally to isolate whether changes in learning are from substituting experiment based material for standard lectures or whether gains are the result of active learning the control class held parallel research days where students discussed the same experiment students in the wits class earned final grades that averaged 3 2 points higher than the control class though impact varies by gender and class level the impact on learning is highest for freshmen and women groups that often struggle with introductory economics and lowest for male seniors who in our sample tend to be engineering majors satisfying a general education requirement teaching evaluations are also significantly higher in the experimental class

limited memory categorization and competition this paper investigates the effects of a limited consumer memory on the price competition between firms it studies a specific aspect of memory namely the categorization of available price information that the consumers may need to recall for decision making this paper analyzes competition between firms in a market with uninformed consumers who do not compare prices informed consumers who compare prices but with limited memory and informed consumers who have perfect memory consumers aware of their memory limitations choose how to encode the prices into categories whereas firms take the limitations of consumers into account in choosing their pricing strategies two distinct types of categorization processes are investigated 1 a symmetric one in which consumers compare only the labels of price categories from the competing firms and 2 an asymmetric one in which consumers compare the recalled price of one firm with the actual price of the other we find that the equilibrium partition for the consumers calls for finer categorization toward the bottom of the price distribution thus consumers have a motivation to invest in greater memory resources in encoding lower prices to induce firms to charge more favorable prices the interaction between the categorization strategies of the consumers and the price competition between the firms is such that small initial improvements in recall move the market outcomes quickly toward the case of perfect recall even with few memory categories the expected price consumers pay and their surplus is close to the case of perfect recall there is thus a suggestion in this model that market competition adjusts to the memory limitations of consumers

teaching economics at the start of the 21st century still chalk and talk in spring 2000 we conducted a national survey of academic economists to determine how economics is taught in four different types of undergraduate courses principles intermediate theory statistics and econometrics and other upper division courses at institutions in the five carnegie classifications research doctoral master s baccalaureate and associate as listed in a classification of institutions of higher education 1994 edition this new survey replicates our 1995 survey becker and watts 1996 therefore we can compare the results from the two surveys to document changes in teaching methods as well as the related academic issues that were addressed in the background information section of the surveys a key reason for believing that teaching methods might have changed during this period was the sharp decrease in economics enrollments during the early 1990 s becker 1997 john siegfried and david k round 2001 as we have documented elsewhere becker and watts 1998 there is evidence that economists are less likely to use non lecture teaching methods than instructors in other fields and that students rate economics instructors somewhat lower than they rate other instructors changing teaching methods and increasing the importance of teaching within economics departments in response to falling enrollments is therefore a plausible and endogenous response for faculty members and departments concerned about losing resources furthermore there is at least circumstantial evidence that economists are devoting more attention to teaching than in the recent past becker 2000 since our 1995 survey several books have been published to illustrate how economists can use a wide range of alternative teaching methods in undergraduate courses e g becker and watts 1998 william walstad and philip saunders 1998 other books have appeared focusing on specific teaching methods such as using classroom experiments spreadsheet applications or active learning and cooperative learning assignments e g diane keenan and mark h maier 1995 tod s porter and teresa riley 1995 theodore bergstrom and john h miller 1997 denise hazlett 1999 becker 2000 documents the increase in aea sessions devoted to teaching economics at the annual meetings of the allied social sciences association during the mid 1990 s at the 1998 2000 allied social sciences association assa meetings the number of sessions devoted to teaching economics ranged from 11 to 14 and presented sessions dealt with such topics as teaching economics in the transition economies chaired by world bank chief economist joseph stiglitz a retrospective on nobel laureate paul samuelson s principles textbook how faculty advisors can deal with student apprehensiveness about taking economics courses and teaching business economics chaired by nobel laureate ronald coase as recently as the 1996 assa meetings in san francisco there were only six sessions on teaching economics and at the 1994 meetings in boston there were only four such sessions similarly small numbers of sessions were scheduled through the 1980 s here we ask whether any increased emphasis on teaching in economics departments has led to changes in how economics is taught do academic economists report that they are now becker department of economics indiana university bloomington in 47405 e mail beckerw indiana edu and adjunct professor school of international business university of south australia watts department of economics purdue university west lafayette in 47905 e mail bfp mgmt purdue edu we thank julia k huffer kevin m green siddhartha kapoor chatchai meteveravong alexandre skiba and suzanne becker for help in the mailing data entry and tabulation and preparing of this paper financial support from the purdue university center for international business education and research university of south australia school of international business and the national council on economic education through its sponsorship of the journal of economic education is gratefully acknowledged

the influence of unrelated and related diversification on fraudulent reporting this study suggests that unrelated diversification has a positive influence on the probability of fraudulent reporting whereas related diversification has a negative influence on the probability of fraudulent reporting the strength of the influence of these corporate level strategies is contingent on the moral character of the firm unrelated diversification provides opportunity for financial innovation within the firm s internal capital market which can result in fraudulent reporting this is more likely when the moral character of the firm is driven by a conscienceless financial self interest motive as implied by the firm s contempt toward the larger community in terms of damage inflicted on the interests of people outside the firm in contrast related diversification where product divisions focus on mutual sharing and monitoring of operational activities can reduce the probability of fraudulent reporting this is more likely when constituents within the firm view themselves as moral citizens as implied by the firm s benevolence toward the larger community hence while unrelated diversification focuses the energies of managers within the firm on financial manipulation related diversification focuses these energies on productive purposes

the economics of rumours this paper studies a class of information transmission processes which we call rumours the distinctive features of these processes are that the information transmission takes place in such a way that the recipient does not quite know whether or not to believe the information and that the probability that someone receives the information depends on how many people already have it specifically we study an example in which there is an investment project with returns only known to a few people these people have a cost of undertaking the project and this cost is private information the only information the other agents receive is that someone else has invested they are not told whether that person actually knew the returns or whether he too was just acting on the basis of his observation of others they use their optimal bayesian decision rule to decide whether to invest we show that for a wide class of alternative specifications this decision rule has the property that a positive fraction of those who observe the rumour will not invest in this sense a rumour cannot mislead everybody counter intuitive comparative statics results are obtained for example more information and higher productivity may reduce welfare while changing the speed with which the rumour spreads has no welfare effect

impact of the financial crisis on bank run risk danger of the days after abstract we examine the developments of depositor knowledge attitudes and behavior throughout the recent financial crisis and discuss their impact on bank run risk based on a self collected data set surveying depositors before 2007 at 2008 and after the peak of the crisis 2009 we observe a worrying dynamic pattern at the peak depositors knew more about deposit insurance placed more importance on deposit security and slightly raised their deposits however in the aftermath of the crisis the enhanced depositor knowledge proved to be non permanent while the increased importance of deposit security and the exposure of depositors persisted the proportion of completely uninformed strongly involved and highly exposed depositors who carry the highest risk of triggering a bank run was reduced around the peak of the crisis but rebounded strongly afterwards even exceeding pre crisis levels these findings point to a higher bank run risk in the aftermath than during the financial crisis

sell probabilistic goods a behavioral explanation for opaque selling probabilistic or opaque selling whereby a seller hides the exact identity of a product until after the buyer makes a payment has been used in practice and received considerable attention in the literature under what conditions and why is probabilistic selling attractive to firms the extant literature has offered the following explanations to price discriminate heterogeneous consumers to reduce supply demand mismatches and to soften price competition in this paper we provide a new explanation to exploit consumer bounded rationality in the sense of anecdotal reasoning we build a simple model where the firm is a monopoly consumers are homogeneous and there is no demand uncertainty or capacity constraint this model allows us to isolate the impact of consumer bounded rationality on the adoption of opaque selling we find that although it is never optimal to use opaque selling when consumers have rational expectations it can be optimal when consumers are boundedly rational we show that opaque selling may soften price competition and increase the industry profits as a result of consumer bounded rationality our findings underscore the importance of consumer bounded rationality and show that opaque selling might be even more attractive than previously thought

can school sports reduce racial gaps in truancy and achievement while existing research supports that participation in high school athletics is associated with better education and labor market outcomes the mechanisms through which these benefits accrue are not well established using individual microdata collected daily and team specific schedules we retrieve estimates of the causal effect of high school athletic participation on absenteeism suggesting that participation decreases absences driven primarily by reductions in unexcused absences in boys there are also strong game day effects in truancy in both boys and girls with truancy declines on game days more than offset by subsequent absenteeism important heterogeneity by race gender and family structure may serve to substantially reduce racial gaps in truancy and achievement jel i21 l83

a market clearing classroom experiment this paper describes a classroom experiment demonstrating the price mechanism and the clearing of markets in an endowment economy participants receive random endowments of two goods they may trade in order to maximize a given utility function a market clearing price is reached when no mutually beneficial trades are possible the outcome is truly endogenous with no reservation prices or willingness to trade imposed on the participants a problem set allows the participants to study the equilibrium outcome analytically the experiment can be used in intermediate micro and macroeconomic courses

what students remember and say about college economics years later in his presidential address to the american economic association george stigler 1963 offered the provocative hypothesis that students would retain very little knowledge from principles courses in economics five years or more after taking the courses the few empirical studies that have been published on this topic generally found no or small lasting effects at least for those who took fewer than four courses see e g g l bach and phillip saunders 1965 gerald j lynch 1990 that raises even broader questions about the long term effects of studying economics in college in terms of individuals behavior as consumers workers and voters which we are now beginning to investigate using both survey and transcript data we have two major goals in this study first we want to learn how students perceive their classroom experience in economics courses years after leaving school both in absolute terms and compared to other courses they took we drew samples of economics business and other majors who attended our four universities in 1976 1986 and 1996 and asked which topics regularly covered in economics courses they now viewed as being most and least important we asked whether they now viewed the economics courses they took as interesting important too difficult or too abstract we also compared their perceptions of teaching methods and grading rigor in economics courses to those developed in other courses our second major goal represents an empirical test of the common claim that economics is a unique way of thinking if it is we might reasonably expect people with more training in economics to have different views on policy issues and to make different decisions as consumers workers savers investors and voters we collected survey data on many of these choices and by matching those responses with transcript data we plan to investigate whether there are observable behavioral responses associated with being an economics major or simply taking some minimum number of economics courses compared to students who took fewer courses or none at all there are other uses for these data they can likely be used to study choice of major and course taking behavior as well as common laboreconomics issues such as human capital versus screening in the labor market certainly the data can provide insight into curriculum development for economics departments and business schools as well there is obviously the potential for response biases in the analysis of these data but we expect that having transcript data for respondents and nonrespondents will allow us to deal with these issues econometrically this first brief report from this ongoing project addresses only the first goal of the project specifically how our former students evaluate their experience with economics courses and instructors what economic courses and concepts do they now believe are most important do they wish they had taken more or less coursework in economics what do they think now about various economic issues and allgood department of economics university of nebraska lincoln ne 68588 e mail sallgood unlnotes unl edu bosshardt department of economics florida atlantic university boca raton fl 33431 e mail wbosshar fau edu van der klaauw department of economics university of north carolina chapel hill nc 27599 e mail vanderkl email unc edu watts department of economics purdue university west lafayette in 47907 and while this paper was written the german international school of management and administration hanover germany e mail mwatts mgmt purdue edu we thank the board of the calvin k kazanjian economics foundation for the grant that made this work possible and the aea committee for economic education for bringing us together to write the proposal as described in michael salemi et al 2002 mike salemi provided helpful comments on an earlier draft of this paper april fidler provided major assistance in project coordination administration and data entry georg schaur worked extensively with data organization and preliminary tabulations

games with procedurally rational players the authors study interactive situations in which players are boundedly rational each player rather than optimizing given a belief about the other players behavior as in the theory of nash equilibrium uses the following choice procedure she first associates one consequence with each of her actions by sampling literally or virtually each of her actions once then she chooses the action that has the best consequence the authors define a notion of equilibrium for such situations and study its properties copyright 1998 by american economic association

the impact of classroom experiments on the learning of economics an empirical investigation i introduction in economics experimental research is still less common than in the natural sciences therefore it is not surprising that economists also make much less use of experiments for teaching purposes yet intuitively it is by no means clear that confronting a group of students with rules and incentives and observing what happens has a lower marginal impact on learning than demonstrating what happens when you put some chemicals together in a test tube however fels 1993 365 and deyoung 1993 348 49 recently called on those who actually use classroom experiments to provide evidence of the impact on students learning of economics this paper provides some limited evidence section ii describes the method used to evaluate the impact of classroom experiments section iii describes the experiment and offers some hints for those who want to try it section iv provides the results ii method a first indication that experiments might be useful as a teaching tool comes from isaac and walker s 1991 experiment they found that those with experience in the experiment behave differently from those without presumably due to some reflection on the problem the approach of this study is more straightforward and not confined to those who actually take part in the experiment our hypothesis is that merely following the experiment and its outcome also has an impact on learning seven instructors teaching courses in environmental economics or public finance were asked to give their usual lecture on the tragedy of the commons afterwards the control group about half of the students filled out a multiple choice test on that topic as an incentive to put some thought into that task in each course one of those students with no mistakes won a book on environmental economics namely beckenbach 1991 worth 26 80 german marks 1 the questions are reported in section iv the same questions were answered by the other students following the classroom experiment iii the experiment the experiment itself which takes only five to ten minutes was a simple take some game of which a more general account is given by mitter 1986 it involves five students who volunteer before the rules are explained in order to give the participants a chance to clarify remaining open points the experimenter should not forget to mention that tabular data for table i omitted on average the volunteers will not be worse off or might even carry off a small profit but that nevertheless they need to have some change in their pockets because there might be losers each receives two cards with the stylized picture of one cow on one card and five on the other the rules are explained roughly as follows imagine you are peasants using a common field every one of you has to decide how many cattle to keep on the commons one cow or five cows if you give me the card which shows one cow you receive one german mark if you give me the card which shows five cows you receive five marks however for every five cow card i receive every one of you gets one mark less for example if two of you put five cows on the common those two will each receive three marks i e five minus two for the others the payoff is one mark minus two marks which means they have to pay one mark now you can calculate for yourself what the payoffs for other constellations will be please make your decision secretly the participants were placed at some distance from each other and it was ensured that they could not communicate immediately after the experiment the payments were made and the experiment was repeated once with a different group of students five cows is the dominant strategy but the collective payoff would be greater if no one played it this method of demonstrating the commons dilemma is less complicated than the procedures reported in powers 1987 and tsai 1993

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

contracting with diversely naive agents in standard contract theoretic models the underlying assumption is that agent types differ in their preference or cost parameters and the principal s objective is to design contracts in order to screen this type we study a contract theoretic model in which the heterogeneity among agent types is of a cognitive nature in our model the agent has dynamically inconsistent preferences agent types differ only in their degree of sophistication that is their ability to forecast the change in their future tastes we fully characterize the menu of contracts which the principal offers in order to screen the agent s sophistication the menu does not exclude any type it provides a perfect commitment device for relatively sophisticated types and exploitative contracts which involve speculation with relatively naive types more naive types are more heavily exploited and generate a greater profit for the principal our results allow us to interpret real life contractual arrangements in a variety of industries