an experimental investigation of the hahn noll revenue neutral auction for emissions licenses abstract this paper reports on three series of laboratory experiments designed to test the performance of the hahn noll revenue neutral auction rna an alternative institution a no rebate uniform price auction upa is also examined as a benchmark in these experiments the rna markets were little different from upa markets in terms of either prices or market efficiencies the two institutions did differ in terms of the distribution of the gains from exchange and of the propensity of bidders to engage in a certain type of overbidding

bubbles and experience an experiment we investigate the occurrence of bubble crash pricing patterns in laboratory financial markets with a mixture of experienced and inexperienced traders we find that even with a minority of experienced traders bubbles are substantially abated

reference dependent preferences and labor supply the case of new york city taxi drivers i develop a model of daily labor supply where preferences are dependent on a reference daily income level and i apply this model to data on the labor supply of new york city taxi drivers i find that there may be a reference level of income on a given day that affects labor supply however there is substantial day to day variation in a given driver s reference level and most shifts end before reaching the reference income level this pattern is inconsistent with an important role for reference dependent preferences

the effects of nonstationarities on performance in call markets abstract this experiment investigates the responsiveness of laboratory call markets to repetitive systematic shocks in underlying demand or supply conditions results of nine call markets conducted under three treatment conditions are compared with nine previously reported double auctions the informationally sparse call auctions perform no worse than the double auctions allocative efficiency is similar across institutions and call markets appear to track underlying equilibrium price movements more accurately than double auctions

the effect of initial lease periods on price discovery in laboratory tradable fishing allowance markets abstract newly established tradable fishing allowance markets are often accompanied by a period of high price volatility these fluctuations complicate capital investment decisions and play a significant role in determining outcomes for the traders involved this paper reports an evaluation of two market design features that may reduce volatility during price discovery a uniform price auction in which all trades within a period take place at the same price and an initial lease period which prohibits permanent allowance transfers at the beginning of the program we find that initial lease periods effectively reduce volatility once permanent trading is introduced

using contests to allocate pollution rights in this paper we advocate a new initial allocation mechanism for a tradable pollution permit market we outline a permit allocation contest pac that distributes permits to firms based on their rank relative to other firms this ranking is achieved by ordering firms based on an observable external action where the external action is an activity or characteristic of the firm that is independent of their choice of emissions in the tradable permit market we argue that this mechanism has a number of benefits over auctioning and grandfathering using this mechanism efficiently distributes permits allows for the attainment of a secondary policy objective and has the potential to be more politically appealing than existing alternatives

attitudes toward risk and compliance in emission permit markets we investigate the effects of uncertainty and concomitant risk aversion as they impact the incentive structure and subsequent operation of an emissions permit market modeled after the u s s02 market our theoretical results suggest that uncertainty dulls incentives to achieve cost savings through permit trading and inhibits efficient allocation of abatement efforts by firms we test hypotheses in an experimental laboratory setting and find that the irreversibility of investment in abatement technology may present countervailing incentives for potential sellers of permits resulting in a wait and see attitude toward adoption of efficient levels of abatement technology

an experimental investigation of the patterns of international trade this study is the first attempt to create and study a laboratory economy with some of the prominent features of an international economic system the concept of multiple countries in which each country has its own technology preferences and resource endowments is introduced and operationalized the questions posed in the study are related to the law of comparative advantage factor price equalization terms of trade efficiency in production and exchange as guided by multiple and interacting markets and the effects of tariffs on international transactions the study builds on previous work in the experimental study of general equilibrium phenomena

bubbles crashes and endogenous uncertainty in linked asset and product markets in laboratory asset markets subjects trade shares of a firm whose profits in a linked product market determine dividends treatments vary whether dividend information is revealed once per period or in real time and whether the firm is controlled by a profit maximizing robot or human subject the latter variation induces uncertainty about firm behavior bridging the gap between laboratory and field markets our data replicate well known features of laboratory asset markets e g bubbles suggesting these are robust to a market based dividend process compared to a sample of previous experiments both real time information revelation and endogenous uncertainty impede the bubble mitigating impact of experience

collective choice in the commons experimental results on proposed allocation rules and votes we analyse and empirically examine a multi level common pool resource cpr game consisting of a collective choice level game and an operational level game in the collective choice game participants anonymously propose allocation rules to be used in the operational game and vote anonymously on the proposed rules majority and unanimity rules are investigated our major finding is that both types of voting rules substantially increase efficiency relative to a baseline with no opportunity for collective choice but the distributional consequences of the rules differ to understand the process by which efficiency is improved better we examine four predictive theories related to proposals votes and outcomes

an empirical analysis of the daily labor supply of stadium venors this paper analyzes the daily labor supply behavior of food and beverage vendors at a single stadium over an entire baseball season this labor market is attractive for the study of labor supply both because ofvendors unilateraly decide whether to participate on each game date and because canges in product demand conditions across days are large and highly predictable generating exogenous game to game variation in the vendor wage i exploit the observable shift in product demand conditions across games to esumate the labor supply participation elasticity of stadium vendors estimates that recognize that demand conditions and vendor labor supply decisions simultancously determine the venofdor wage always find substantial labor supply elasticities typically in the 55 65 range in contract estimates that ignore the endoreneity of the ties these results highlight the imporatance of using demand shift markets

how trading institutions affect financial market performance some laboratory evidence i introduction trading institutions vary considerably across contemporary financial markets 1 but most can be classified into one of two basic types the continuous double auction da allows traders to submit public offers to buy or to sell and to accept other traders offers at any moment in time the double auction institution offers immediacy but non uniform transaction prices the other basic trading institution the clearinghouse ch gathers offers and clears them at a unified price at a pre specified time it sacrifices immediacy for uniform transaction prices 2 the two types of institutions have co existed and evolved for centuries but now are emerging in new electronic versions market participants and policy makers would like to know which institution or variant or combination is most efficient but theoretical and empirical work to date provides little guidance this paper reports on a series of laboratory asset markets experiments designed to compare variants of the double auction and clearinghouse trading institutions the markets are small usually with eight or nine traders but the traders are profit motivated and experienced with the trading institutions the traded asset has uncertain market value and traders receive useful but inconclusive private information they can only learn the asset s true value during the course of trade laboratory markets offer several advantages for empirical study of financial market institutions first private information is observable even controllable in the laboratory and therefore the investigator can directly measure market efficiency 3 second the complexity of the environment can be varied systematically in the laboratory and its effects on market performance can be separated from the effects of the market institution and other forces finally the market institution itself is controllable in the laboratory so it is possible to make valid causal inferences on how the market institution shapes market performance i begin with a survey of relevant literature and other preliminaries in the rest of this section section ii outlines the laboratory procedures the creation of trading environments of varying complexity the electronic implementation of the clearinghouse and double auction trading institutions the computation of theoretical benchmark prices and allocations and the measurement of market performance section iii collects the results following an illustrative account of a double auction trading period and a clearinghouse trading period i use descriptive statistics to summarize market performance in each of the thirty nine experiments the main conclusions are based on statistical comparisons of market performance across alternative market institutions the clearinghouse institution does surprisingly well it delivers greater market depth than the double auction discovers prices at least as efficiently and produces final allocations almost as efficient as the double auction the main institutional variants examined in this paper concern the amount of information made public regarding order placement orderflow the data suggest that public display of the orderflow enhances double auction efficiency but may impair clearinghouse efficiency a study of trading volume shows higher volume in the double auction in both institutions volume increases when important private news arrives and when the trading period is about to end the paper concludes with a brief summary and discussion of the results a companion paper friedman 1991 considers the effects of awarding various privileges to some but not all traders copeland and friedman 1987 1991 provide useful background information on laboratory procedures and computerized double auction markets instructions for the current experiments are available on request the need for empirical work a skeptic might argue that empirical work is unnecessary the mere fact that the double auction and clearinghouse institutions both persist in major financial markets implies that both are highly efficient because a more efficient institution would displace less efficient institutions

bubbles crashes and endogenous expectations in experimental spot asset markets1 spot asset trading is studied in an environment in which all investors receive the same dividend from a known probability distribution at the end of each of t 15 or 30 trading periods fourteen of twenty two experiments exhibit price bubbles followed by crashes relative to intrinsic dividend value when traders are experienced this reduces but does not eliminate the probability of a bubble the regression of changes in mean price on lagged excess bids number of bids minus the number of offers in the previous period p pt a f b 1 o l supports the hypothesis that a e d the one period expected value of the dividend and that f 0 where excess bids is a surrogate measure of excess demand arising from homegrown capital gains losses expectations thus when bt 1 o goes to zero we have convergence to rational expectations in the sense of fama 1970 that arbitrage becomes unprofitable the observed bubble phenomenon can also be interpreted as a form of temporary myopia tirole 1982 from which agents learn that capital gains expectations are only temporarily sustainable ultimately inducing common expectations or priors tirole 1982 four of twenty six experiments all using experienced subjects yield outcomes that appear to the chart s eye to converge early to rational expectations although even in these cases we get 0 and small price fluctuations of a few cents that invite scalping

traders expectations in asset markets experimental evidence we elicit traders predictions of future price trajectories in repeated experimental markets for a 15 period lived asset we find that individuals beliefs about prices are adaptive and primarily based on past trends in the current and previous markets in which they have participated most traders do not anticipate market downturns the first time they participate in a market and when experienced they typically overestimate the time remaining before market peaks and downturns occur when prices deviate from fundamental values belief data are informative to an observer in predicting the direction of future price movements and the timing of market peaks

fees and the efficiency of tradable permit systems an experimental approach the paper presents the results of an economic experiment in which the effects of fees on allocative efficiency of tradable utilization permits e g pollution permits are explored laboratory subjects university students play the roles of firms whose generic product requires a specific input or permits scarcity is exogenously introduced by a fixed supply of tradable production permits three treatments are compared no fee imposed n a fixed tax per permit t and partial retraction of permits and subsequent redistribution by auction a treatments t and a represent two different ways of imposing fees which are designed to be revenue equivalent our results indicate that after controlling for deviation of permit prices from a prediction based on fundamentals fees have an impact on distribution of permits interestingly a fixed tax enhances efficiency compared to the case of no fees while retraction and reallocation by auction tends to reduce efficiency apparently subjects decision making is affected by the imposition of fees but how and to what extent depends on the method used

minimum information management in fisheries this paper deals with problems of optimal management of common property fisheries it advances the proposition that many fisheries management schemes which are theoretically capable of generating efficiency are actually not practicable owing to their huge informational requirements this applies for instance to management by means of corrective taxes subsidies the paper proceeds to show that there exists under fairly unrestrictive conditions market based management systems that require minimal information for their operation but lead nevertheless to efficiency in common property fisheries one such system is the individual transferable share quota system

price bubbles and crashes in experimental call markets abstract price bubbles relative to intrinsic dividend value are observed using a call market trading institution market prices tend to track intrinsic value only when the same group of highly experienced traders participate in three consecutive 15 round markets

how do experienced traders respond to inflows of inexperienced traders an experimental analysis we conducted asset market experiments where one experienced subject interacts with five inexperienced subjects to investigate how experienced subjects change their price forecasts and trading behavior when faced with strategic uncertainty caused by inflows of inexperienced subjects only half the experienced subjects initially forecasted prices deviating more from the fundamental values in the market with five inexperienced subjects than in the final round of the experiment in which they had previously participated furthermore the majority of our experienced subjects did not change their trading behavior many experienced subjects act as price stabilizers when the inflow of inexperienced subjects is not associated with other changes in market conditions

the optimal initial allocation of pollution permits a relative performance approach the initial allocation of pollution permits is an important aspect of emissions trading schemes we generalize the analysis of bohringer and lange 2005 eur econ rev 49 8 2041 2055 to initial allocation mechanisms that are based on inter firm relative performance comparisons including grandfathering and auctions as well as novel mechanisms we show that using firms historical output for allocating permits is never optimal in a dynamic permit market setting while using firms historical emissions is optimal only in closed trading systems and only for a narrow class of allocation mechanisms instead it is possible to achieve social optimality by allocating permits based only on an external factor which is independent of output and emissions we then outline sufficient conditions for a socially optimal relative performance mechanism

effects and value of verifiable information in a controversial market evidence from lab auctions of genetically modified food food products containing genetically modified gm ingredients have entered the market over the past decade the biotech industry and environmental groups have disseminated conflicting private information about gm foods this paper develops a unique methodology for valuing independent third party information in such a setting and applies this method to consumers willingness to pay for food products that might be gm data are collected from real consumers in an auction market setting with randomized information and labeling treatments the average value of third party information per lab participant is small but the public good value across u s consumers is shown to be quite large jel c91 d12 d82

governing a groundwater commons a strategic and laboratory analysis of western water law we examine strategic behavior in groundwater depletion within the setting of state governance of groundwater resources in the american west solving a dynamic common pool resource model for its optimal solution and its subgame perfect equilibrium provides benchmarks for behavior observed in laboratory experiments three forms of legal rules common pool depletion with a rule of capture to establish ownership absolute ownership doctrine entry restrictions prior appropriation doctrine and stock quotas correlative rights doctrinekre examined in terms of their impact on individual strategic behavior in laboratory experiments

the us so2 auction analysis and generalization abstract the new acid rain program allows electric utilities all over the us to trade so 2 emission permits an annual discriminative and revenue neutral auction is linked to this program this innovative so 2 auction distributes 3 of the permits in circulation and takes place at the chicago board of trade early results showed that the auction generated a clearing price signal lower than the market price now the auction price seems to be determined by the outside market price still in the important starting phase a non discriminative auction design would probably have generated better price signals since potentially severe downward biases in both seller price offers and buyer bids are due to the discriminative feature of the epa auction

theory experiment and the federal communications commission spectrum auctions abstract the fcc uses the simultaneous multi round auction sma to assign spectrum licenses congress mandated that the sma be compared to an auction that allows combinatorial bids we review the theoretical and experimental evidence relevant to the sma procedures and their inherent defects results from experiments evaluating the sma in comparison to a combinatorial auction designed by charles river and associates show that several of the sma rules hinder efficiency and create a trade off between efficiency and auction length the combinatorial auction outperforms the sma when license values are superadditive but requires more time to complete and is not robust

behavioral uncertainty and the dynamics of traders confidence in their price forecasts by how much does the presence of behavioral uncertainty in an experimental asset market reduce subjects confidence in their price forecasts an incentivized interval forecast elicitation method is employed to answer this question each market consists of six traders and the value of dividends is known two treatments are considered six human traders 6h and one human interacting with five computer traders whose behavior is known 1h5c we find that while the deviation of the initial price forecasts from fundamental value is smaller in the 1h5c treatment than in the 6h treatment albeit not statistically significantly the average confidence regarding the forecasts is not we further analyze the relationships between subjects confidence in their forecasts and their trading behavior as well as their trading performance in the 6h treatment while subjects high confidence in their short term forecasts shows a negative correlation with their trading performance high confidence in their long term forecasts shows a positive correlation with trading performance

the impact of monetary policy on stock market bubbles and trading behavior evidence from the lab we investigate the effect of monetary policy on stock market bubbles and trading behavior in experimental asset markets we introduce the possibility of investing in interest bearing bonds to the widely used laboratory asset market design of smith et al 1988 treatment groups face a variable interest rate policy which depends on asset prices while control groups are subjected to a constant interest rate we observe a strong impact of our interest rate policy on liquidity in the stock market but only a small impact on bubbles however we find that announcing the possibility of reserve requirements significantly reduces bubbles

an experimental analysis of optimal renewable resource management the fishery this paper experimentally studies the extraction decisions of a sole owner in a fishery the population dynamics of which behave according to the standard deterministic logistic growth model four treatments were implemented which differed in the level of information supplied to the subjects compared to the theoretic benchmark the data reveal that efficiency losses increase as the information on population dynamics and stock size deteriorates three common patterns of behaviour are identified the distribution of these patterns is significantly affected by the informational setting

loss aversion and labor supply in many occupations workers labor supply choices are constrained by institutional rules regulating labor time and effort provision this renders explicit tests of the neoclassical theory of labor supply difficult here we present evidence from studies examining labor supply responses in neoclassical environments in which workers are free to choose when and how much to work despite the favorable environment the results cast doubt on the neoclassical model they are however consistent with a model of reference dependent preferences exhibiting loss aversion and diminishing sensitivity jel j22 b49

economic assessment of the regional clean air incentives market a new emissions trading program for los angeles this article documents the methodology used to compare policy alternatives considered for reclaim an emissions trading program for los angeles which commenced january 1994 reclaim reduces no x and so x emissions from stationary sources with declining emissions credit allocations the emissions trading model etm includes credit supply and demand spatial restrictions and opportunity costs of owning credits the etm solves interactively with a regional model that estimates economic impacts predicted emissions distributions are input into airshed and exposure models the models predict similar improvements in air quality and public health as command and control regulations but with lower costs and employment impacts

papers in experimental economics competitive market institutions double auctions vs sealed bid offer auctions consider a market with the following characteristics 1 privacy that is each agent knows only his own valuation or cost conditions 2 exchange follows the rules of the oral double auction that is buyers freely announce bids or accept offers and sellers freely announce offers or accept bids 3 aggregate market supply and demand per trading period is stationary for at least two to three periods and 4 there are at least four buyers and as many sellers the literature reporting the results of a large number of experimental markets with these characteristics documents what appears to be a remarkably rapid convergence to a competitive equilibrium ce however any claim of double auction da convergence to the ce can only have meaning in one of three senses i the ce is attained immediately ii after t periods of trading some measure of the market s state such as mean price is nearer relative to experimental sampling variability to a ce than to some distinct alternative equilibrium such as a monopoly or nash equilibrium iii after t periods of trading this measure is nearer to a ce in da experimental markets than in markets organized under a different institution of contract for example a sealed bid auction since everything from electrons and the stars to rats and people yield state measures subject to error or random variation the deterministic criterion i can have no serious scientific standing by such criteria any hypothesis can be rejected and there could be no science of physics biology or economics 2 with the exception of certain very simple markets such as single object auctions or certain idealized markets such as the cournot quantity adjuster model economics has only two concepts of equilibrium monopoly and competitive the only formal model of da trading that has been proposed see david easley and john ledyard p 6 predicts stochastic convergence in finite time with probability one to a ce hence the only test alternative to the ce research hypothesis in da markets is a monopoly or monopsony equilibrium experimentalists have not reported statistical tests of the ce professor department of economics university of arizona assistant professor department of economics indiana university instructor department of economics university of arizona and sandia national laboratories albuquerque nm respectively we are indebted to the national science foundation for research support and to art denzau and mort kamien for helpful comments there is an early and recently growing body of experimental evidence for convergence to a competitive equilibrium under double auction rules the earliest evidence contained in experiments initiated in january 1956 is reported in smith 1962 1964 1965 1976 however these early experiments used between twenty and fifty or so participant buyers and sellers because in keeping with prevailing professional beliefs it was thought that a ce was unlikely to be approached unless numbers were quite large using large numbers was not unreasonable since it is a good beginning procedure to give a theory whatever is believed to be its best shot more recent evidence using six buyers six sellers and two traders in speculative da markets with cyclical demand is reported by r m miller charles plott and smith and williams 1979 for evidence from a comparison of oral and computerized da experiments with four buyers and four sellers see williams 1980 for further evidence in the context of the study of price controls see m isaac and plott 1981b and smith and williams 1981b in the context of a conspiracy study see isaac and plott 1981a in the context of comparisons between da and posted offer pricing see jon ketcham smith and williams in the context of a study of four variations on da rules see smith and williams 1980 all of these more recent papers report double auction experiments using no more than four buyers and four sellers 2as frederick mosteller once noted if you wanted to reject the inverse square law of attraction try tossing a sheet of paper out the window

evidence on substitutability of adult and child labour whether child labour displaces adult labour giving rise to unemployment is a matter of their substitutability in production using a flexible form production function fitted to data on egypt s economy we generate hicks elasticities of complementarity own and cross price elasticities as well as simulate employment effects on adult labour as a result of changing the fixed quantity of labour in compliance with the international call to end child labour adult males appear to be complementary with and adult females substitutes for child labour although the employment effects of banning child labour are inconclusive

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

to see is to believe common expectations in experimental asset markets abstract we experimentally manipulate agents information regarding the rationality of others in a setting in which previous studies have found irrationality to be present namely the asset market experiments introduced by smith et al 1988 recent studies suggest that mispricing in such markets may be an artefact of confusion which can be reduced by training subjects to understand the diminishing fundamental value we reconsider this view and propose that when it is made public knowledge that training has occurred this may also reduce uncertainty over the behavior of others and facilitate the formation of common expectations our design disentangles the direct effect of training from the indirect effect of its public knowledge and our results demonstrate a distinct and statistically significant effect of public knowledge over and above that of training alone

experience and confidence in an internet based asset market experiment the experience effect in asset markets is one that was thought to be settled as subjects gained experience with the interface and each other they typically exhibit fewer instances of mispricing and at lower magnitudes but questions regarding trading experience are not easy to address in the lab with the typical subject pool since the kind of experience one can typically generate in the lab is experience with the experimental environment itself not with external environments however in virtual worlds asset markets are highly evolved providing a subject pool with skilled and experienced traders that can be accessed via the internet this study compares experimental asset markets with participants recruited from virtual world trading groups to experimental markets with participants recruited from the virtual world at large i further examine trader performance and trading behavior within markets the findings indicate that asset markets with virtual world participants recruited from trading groups are more prone to exhibit bubbles than are markets with virtual world participants recruited at large within condition experienced traders are less likely to follow fundamentals and more likely to engage in strategies that result in loss of earnings excess confidence is rejected as an explanation for this pattern as confidence is found to be related to higher earnings and fundamental value trading strategies

do anomalies disappear in repeated markets there is some evidence that as individuals participate in repeated markets anomalies tend to disappear one interpretation is that individuals particularly marginal traders are learning to act on underlying preferences which satisfy standard assumptions an alternative interpretation the shaping hypothesis is that individuals preferences are adjusting in response to cues given by market prices the paper reports an experiment designed to discriminate between these hypotheses with particular reference to the disparity between willingness to pay and willingness to accept

minimum information management systems and itq fisheries management abstract in 1986 new zealand reformed its fisheries management regime with the introduction of a rights based system of management at the beginning of each fishing season a government agency sets an allowable commercial catch individual firms hold an entitlement to harvest a share of the allowable commercial catch to date the government agency has relied almost exclusively on the results of stock assessment research when setting the allowable harvest excessive reliance on biological data in fisheries management has attracted criticism an alternative a minimum information management system uses information contained in quota prices as a guide to set limits on commercial harvest this paper examines price formation in one quota market we find evidence in the data that supports the use of quota prices to guide the setting of limits to commercial harvest furthermore time series analysis provides a basis for studying the temporal response of changes in asset prices to perturbations in the allowable harvest the results illustrate how information summarized in quota prices can complement the findings of stock assessment research in fisheries management

overexploitation of renewable resources the role of misperceptions abstract numerous renewable resources have been exploited beyond limits for sustainable and economic development at times over exploitation has been observed even in cases where management regimes have been in place thus it seems pertinent to search for explanations beyond the theory of the commons an experiment is performed where subjects set reindeer quotas in a district where lichen has been severely depleted by preceding overgrazing all subjects err on the side of over exploitation behavior seems to be dominated by inappropriate static mental models and inefficient heuristics hence a subtle information problem is revealed

free and slave labor in the antebellum south perfect substitutes or different inputs the substitutability between free and slave labor is examined and the permissibility of aggregating the two in to a single labor variab le is investigated using a translog production function slaves on large cotton farms worked in gangs free labor was not observed to do so despite this previous research has aggregated free and slave labor and employed functional forms imposing strong restrictions on substitution estimation of the translog function shows that simple additive aggregation is not acceptable on large farms slaves and free labor were complements while on small nongang farms they were substitutes copyright 1988 by mit press

heterogeneity of beliefs and trade in experimental asset markets we investigate the relationship between traders expectations and market outcomes with experimental asset market data the data show that those who have high price expectations buy more frequently and submit higher bids and those who hold low price expectations sell more frequently and submit lower bids traders who have more accurate expectations achieve greater earnings simulations using only belief data reproduce the pricing patterns observed in the market well indicating that the heterogeneity of expectations is a key to explaining market activity

boundaries of the tournament pricing effect in asset markets evidence from experimental markets 1 introduction when traders in experimental asset markets are compensated according to a tournament contract a salary plus bonus scheme in which a trader s bonus is proportional to the amount by which that trader exceeds the average performance in that market we observe violation of convergence results obtained in experiments that did not use such compensation schemes this effect of tournament incentives has been documented by james and isaac 2000 in this paper we search for what smith and williams 1990 have termed the boundaries of falsification for the proposition that tournament contracts affect asset market prices specifically we examine the robustness of the tournament pricing effect on market prices on several fronts first we ask whether the pricing effect survives when not all traders are being compensated according to the beat the market contract second we ask whether the tournament pricing effect is robust with respect to perturbations in the trader s compensation contract third we ask whether the pricing effect is observed in two period asset life markets hereafter 2 p a l markets as it is in 15 period asset life markets hereafter 15 p a l markets 1 section 2 presents the background of the current experiments the research conjectures and the experimental design the experimental results are contained in section 3 section 4 discusses a phenomenon that we had not encountered until these experiments section 5 offers the conclusions and thoughts for further reflection 2 conjectures and experimental design background james and isaac 2000 was the first paper to assess the effect on asset market prices of tournament contracts imposed at the individual level this is distinct from an earlier paper by brown harlow and starks 1996 that examines how individual portfolio managers allocation decisions change in response to such contracts but that does not address the issue of any effects on prices of the assets the portfolio managers are trading brown harlow and starks is itself a specific application of a wider literature on using tournament contracts to address principal agent conflicts see also nalebuff and stiglitz 1983 bull schotter and weigelt 1987 and ehrenburg and bognanno 1990 the issue of the effect on market prices is arguably the most important one surrounding the imposition of tournament contracts on portfolio managers because it is these capital market prices that help allocate savings to different forms of investment naturally misleading capital market prices can potentially lead to catastrophically misdirected capital spending 2 this key aspect of james and isaac that it addresses the effect at the market level of using tournament incentives at the individual level is also present in this paper the research objective of this paper is to document the eventual market level ramifications of varying the use of tournament contracts the nature of those variations will be discussed here the effect of tournament incentives on asset market prices prior to this paper it has been established that the way in which traders in experimental asset markets are compensated on an individual basis can significantly change the prices that eventuate at the market level in a seminal paper on experimental asset markets smith suchanek and williams 1988 hereafter ssw find that as groups of traders were called back for repeat sessions of a 15 p a l market which can be viewed as an experimental implementation of the theoretical market analyzed by tirole 1982 the market price of the asset bubbled less in each successive 15 period asset market this suggests that the no trading common expectations equilibrium derived by tirole might be reached eventually but requires experience on the part of the pool of traders of note in ssw the traders are compensated such that an experimental dollar corresponds to a u s dollar that is the traders respective experimental dollar holdings deriving variously from cash endowments dividend payments and capital gains are translated one for one into u

toward a more complete model of individual transferable fishing quotas implications of incorporating the processing sector abstract economic analyses of individual transferable quota itq fisheries management traditionally have focused on the harvesting sector however harvester decisions impact the economic performance of co dependent processing firms this paper incorporates both sectors in an analysis of the effect of itqs on commercial fisheries results show that as a consequence of season elongation under a harvester only allocation of fishing rights capital nonmalleability implies that processor quasi rents will be redistributed to harvesters these losses could promote political gridlock and jeopardize adoption of an itq policy unless they are fully compensated or unless redistribution is avoided by a policy superior initial allocation of rights to both harvesters and processors

is india s economic growth leaving the poor behind there has been much debate about how much india s poor have shared in the economic growth unleashed by economic reforms in the 1990s the authors argue that india has probably maintained its 1980s rate of poverty reduction in the 1990s however there is considerable diversity in performance across states this holds some important clues for understanding why economic growth has not done more for india s poor india s economic growth in the 1990s has not been occurring in the states where it would have the most impact on poverty nationally if not for the sectoral and geographic imbalance of growth the national rate of growth would have generated a rate of poverty reduction that was double india s historical trend rate states with relatively low levels of initial rural development and human capital development were not well suited to reduce poverty in response to economic growth the study s results are consistent with the view that achieving higher aggregate economic growth is only one element of an effective strategy for poverty reduction in india the sectoral and geographic composition of growth is also important as is the need to redress existing inequalities in human resource development and between rural and urban areas

emissions trading with shares and coupons when control over discharges is uncertain abstract two important decisions in designing markets for tradable emissions permits are whether to allow banking of permits coupons and whether to allow trading in entitlements to future permits shares banking is predicted to reduce price instability when firms trade in a reconciliation market after the quantity of emissions has been determined tradable shares are a common feature in proposals for emissions trading in canada we conduct a laboratory experiment to investigate how bankable coupons and tradable shares affect efficiency and prices under uncertainty cognitive demands on the subjects are reduced by computerized advice on the optimal allocation of coupons across periods and the implied marginal values of coupons and shares banking share trading and uncertainty conditions are introduced in a complete factorial design with three observations per cell high efficiencies are observed across all treatments uncertainty in the control of emissions leads to substantial price instability when banking is not allowed banking virtually eliminates the instability but reduces the efficiency of the market institution share trading reduces trading volumes increases price stability and improves efficiency

marketable emission permits efficiency profitability and substitutability research on marketable emission rights as a mechanism for controlling pollutants in the environment has intensified in recent years the resurgence of interest in this mechanism is in no small measure due to the 1990 amendments of the u s clean air act which introduced the most comprehensive tradeable permit scheme to date for s02 emissions canada is also flirting with the possibility of following suit with for instance the government of ontario now allowing ontario hydro to conduct some limited emissions trading across its plants nera 1992 however the literature often ignores two basic questions how permits are allocated and what substances should be covered by the permits there are two ways of allocating pollution permits by selling them e g by auction or by giving them away the advantages of auctions are that they can generate sizeable revenues for the regulator and they conform to the widely endorsed principle of polluter pays a frequently cited problem with auctions however is that they impose immediate financial burdens on emitting firms in the absence of perfect capital markets these burdens erect a formidable entry barrier to new and existing firms thus permits are usually freely distributed on the basis of historical market share however by allocating permits gratis policy makers are ignoring both the important polluter pays principle as well as an important source of revenue generation for example should emission permits be used to reduce nitrogen oxide emissions in accordance with recent canadian government proclamations the total value of these permits in ontario alone could be as much as c 300 million nera 1992 in this paper we examine the effects on efficiency and the burden imposed on heterogeneous firms from rent capture when permits are allocated gratis

are teams prone to myopic loss aversion an experimental study on individual versus team investment behavior abstract myopic loss aversion mla has been found to have a persistent influence on individual decision making under risk in this paper i show that team decision making attenuates mla but that teams are also prone to mla

an explanation of the international variation in the prevalence of child labour it is hypothesized that the institutional acceptability of child labor will be more prevalent when the other members of a society gain from its use therefore the cross country variation in the prevalence of child labor depends on the degree to which child labor affects the welfare of the remaining members of a society it is demonstrated theoretically that the non child labor factors gain from child labor when the economy is closed as an economy becomes more open to international trade those gains diminish and even turn negative as the size of the economy increases child labor will not exist in capital abundant countries since in them child labor makes the non child labor factors worse off it is shown empirically that the cross country prevalence of child labor falls with increases in a nation s per capita income its openness to trade and its economic size it is argued that trade sanctions as a remedy for child labor may be counter productive since an open economy reduces the benefits of child labor to the other members of a society and thereby reduces the society s incentive to allow child labor the model also demonstrates that the economic changes brought on by democracy undermine the practice of child labor

the effect of short selling on bubbles and crashes in experimental spot asset markets a series of experiments illustrate that relaxing short selling constraints lowers prices in experimental asset markets but does not induce prices to track fundamentals we argue that prices in experimental asset markets are influenced by restrictions on short selling capacity and limits on the cash available for purchases restrictions on short sales in the form of cash reserve requirements and quantity limits on short positions behave in a similar manner a simulation model based on delong et al 1990 generates average price patterns that are similar to the observed data asset market bubbles are persistent deviations of prices from fundamentals to the extent that bubbles exist they can influence investment levels and the allocation of capital and thereby have considerable economic effects in recognition of their potential importance the question of the existence and pervasiveness of bubbles has been a focus of extensive empirical investigation see e g shiller 1981 blanchard and watson 1982 diba and grossman 1988 and west 1988 these studies yield mixed results regarding the empirical relevance of bubble phenomena one source of the differences in conclusions may be that because the fundamental value of the assets cannot be observed tests of the presence of bubbles are joint tests with the particular specification of the process guiding the evolution of fundamentals also being tested the availability of short selling is widely believed to make bubble formation less likely one rationale for such a belief is the notion that the cause of asset market bubbles is a constraint on the ability of traders to speculate on future downward price movements see e g miller 1977 jarrow 1980 diamond and verrecchia 1987 or figlewski and webb 1993 in the absence of short sales traders may sell only the shares in their portfolios the availability of short sales relaxes this constraint in this paper we study empirically the effect of allowing short sales on both the incidence and magnitude of market bubbles we choose a setting in which the fundamental value of the asset is clearly and unambiguously defined and known at all times and bubbles typically occur namely we use the experimental environment that smith suchanek and williams 1988 introduce while

new york city cab drivers labor supply revisited reference dependent preferences with rational expectations targets for hours and income this paper reconsiders whether cabdrivers labor supply decisions reflect reference dependent preferences following botond koszegi and matthew rabin 2006 we construct a model with targets for hours as well as income both determined by rational expectations estimating using henry s farber s 2005 2008 data we show that the reference dependent model can reconcile his 2005 finding that drivers stopping probabilities are significantly related to hours but not income with the negative wage elasticity of hours found by colin camerer et al 1997 and farber 2005 2008 the model yields sensible estimates that avoid farber s 2008 criticism that drivers income targets are too unstable to allow a useful reference dependent model of labor supply

cnild labors child schooling and their interaction with adult labor using data from peru and pakistan this article tests two hypotheses there is a positive association between hours of child labor and poverty and there is a negative association between child schooling and poverty both of these hypotheses are confirmed by the pakistani data but not by the peruvian data the reduction in poverty rates due to income from children s labor is greater in pakistan than in peru the nature of interaction between adult and child labor markets varies with the gender of the child and the adult in peru rising men s wages significantly reduce the labor hours of girls whereas in pakistan there is a strong complementarity between women s and girls labor markets both data sets agree on the positive role that increasing adult education can play in improving child welfare

nonspeculative bubbles in experimental asset markets lack of common knowledge of rationality vs actual irrationality we report the results of an experiment designed to study the role of speculation in the formation of bubbles and crashes in laboratory asset markets in a setting in which speculation is not possible bubbles and crashes are observed the results suggest that the departures from fundamental values are not caused by the lack of common knowledge of rationality leading to speculation but rather by behavior that itself exhibits elements of irrationality much of the trading activity that accompanies bubble formation in markets where speculation is possible is due to the fact that there is no other activity available for participants in the experiment

fishing quota markets abstract in 1986 new zealand responded to the open access problem by establishing the world s largest individual transferable quota itq system using a 15 year panel dataset from new zealand that covers 33 species and more than 150 markets for fishing quotas we assess trends in market activity price dispersion and the fundamentals determining quota prices we find that market activity is sufficiently high in the economically important markets and that price dispersion has decreased we also find evidence of economically rational behavior through the relationship between quota lease and sale prices and fishing output and input prices ecological variability and market interest rates controlling for these factors our results show a greater increase in quota prices for fish stocks that faced significant reductions consistent with increased profitability due to rationalization overall this suggests that these markets are operating reasonably well implying that itqs can be effective instruments for efficient fisheries management

global instability in experimental general equilibrium the scarf example scarf 1960 proposed a market environment and a model of dynamic adjustment in which the standard tatonnement price adjustment process orbits around rather than converges to the competitive equilibrium hirota 1981 characterized the price paths by the configuration of endowments we explore the predictions of scarf s model in a nontatonnement experimental double auction we find that the average transaction prices in each period do follow the path predicted by the scarf and hirota models when the model predicts prices will converge to the competitive equilibrium our data converge when the model predicts prices will orbit our data orbit the equilibrium and in the direction predicted by the model moreover we observe a weak tendency for prices within a period to follow the path predicted by the model

negative values in vickrey auctions some people assign negative values for new products sold on laboratory auction blocks i e irradiated meat we explore bidding behavior in two vickrey auctions when people have positive and negative induced values for the good aggregate bidding in the second price auction is precise but biased highest value positive bidders tend to overstate benefits whereas lowest negative bidders understate losses in contrast bidding behavior in the random nth price auction is demand revealing irrespective of induced value but it is imprecise examining on and off margin bidding behavior we cannot conclude that any segments of demand are significantly different than the demand revealing regression line

asset holdings caps and bubbles in experimental asset markets abstract we report the results of an experiment designed to study the effect of individual asset holdings restrictions on the formation of bubbles and crashes in laboratory asset markets bubbles and crashes are a quite robust phenomenon in experimental settings motivated by demand control policies employed in the chinese real estate market we explore the effects of permanent and short term caps on individual asset holdings we find that permanent caps greatly reduce positive bubbles but tend to generate negative bubbles in later periods under short term caps on the other hand neither positive nor negative bubbles are observed our results indicate that asset holdings caps can be effective in eliminating bubbles if properly designed

buyer liability and voluntary inspections in international greenhouse gas emissions trading a laboratory study this paper reports a preliminary laboratory experiment in which traders make investments to increase the reliability of tradable instruments that represent greenhouse gas emissions allowances in one half of the sessions these investments are unobservable while in the other half traders can invite costless and accurate inspections that make reliability investments public we implement a buyer liability rule so that if emissions reductions are unreliable i e sellers default the buyer of the allowances cannot redeem them to cover emissions we find that allowing inspections significantly increases the reliability investment rate and overall efficiency prices of uninspected allowances usually trade at a substantial discount due to the buyer liability rule which provides a strong market incentive for sellers to invest in reliability

bubbles and experience an experiment with a steady inflow of new traders we revisit the effect of traders experience on price bubbles by introducing either one third or two thirds steady inflow of new traders in each of four consecutive experimental asset markets we find that bubbles are still reduced in the treatments with a steady inflow of new traders but at a slower pace compared to the baseline treatment in which new traders are only introduced in the last market our analysis of individual trading behavior shows that the slower abatement of bubbles in the inflow treatments can be attributed mainly to the inexperienced traders who make more mistakes than experienced traders

is tomorrow another day the labor supply of new york city cabdrivers the labor supply of taxi drivers is consistent with the existence of intertemporal substitution my analysis of the stopping behavior of new york city cabdrivers shows that daily income effects are small and that the decision to stop work at a particular point on a given day is primarily related to cumulative daily hours to that point this is in contrast to the analysis of camerer et al who find that the daily wage elasticity of labor supply of new york city cabdrivers is substantially negative implying large daily income effects this difference in findings is due to important differences in empirical methods and to problems with the conception and measurement of the daily wage rate used by camerer et al

momentum and overreaction in experimental asset markets abstract price volatility and investor overreactions are commonplace in experimental asset markets understanding the price dynamics in these markets is crucial for designing successful new trading institutions we report on a series of experiments to test the predictions of a new momentum model using a dynamical systems approach this model is then pitted against several standard models to predict prices as well as against expert human forecasters the comparative results suggest that each model has its advantages and regions of best performance overall the best predictive methods are the momentum model and expert human forecasters

reference dependent behaviour of paua abalone divers in new zealand we study dynamic labour supply using data on paua abalone divers in new zealand the divers face stable flat prices per kilogram after each catch but experience transitory wage changes due to varying weather and water conditions and are free to vary their daily working hours and display an intermittent working pattern we find nonlinear wage elasticities rejecting the standard neo classical prediction that these divers should work long hours during days when wages are high and quit early during days when hourly wages are low we explore potentially distorting factors but find little evidence applying k szegi and rabin s 2006 theory where workers have both income and hours targets could explain our result in particular our divers appear to be primarily guided by the hours target

how does child labor affect the demand for adult labor evidence from rural mexico do employers substitute adults for children or do they treat them as complements using data from a mexican schooling experiment i find that decreasing child farmwork is accompanied by increasing adult labor demand this increase was not caused by treatment money reaching farm employers there were no significant increases in harvest prices and quantities nonlabor inputs or nonfarm labor supply furthermore coordinated movements in price and quantity can distinguish this increase in demand from changes in supply induced by the treatment s income effects thus declining child supply caused increasing adult demand employers substituted adults for children

an experimental investigation of the seller incentives in the epas emission trading auction the clean air act requires the epa to conduct annual auctions of emission allowances under the discriminative auction rules sellers with the lowest asking prices receive the highest bids this paper studies an inverted version of this auction in which buyers face the same incentives as sellers in the epa auction consistent with theoretical predictions buyers bid above their valuation auction outcomes are inefficient and increasing the number of buyers increases bids buyers facing human opponents compete more aggressively than the risk neutral prediction but bids do not differ systematically from this prediction when buyers face computerized nash robots copyright 1995 by american economic association

using laboratory experimental auctions in marketing research a case study of new packaging for fresh beef this paper illustrates the use of laboratory experimental auctions in a pretest market research program for new products we review the experimental auctions literature discuss the range of auction mechanisms available and present the advantages and disadvantages of using a particular mechanism for a laboratory pretest market we then present a step by step example of how a theoretically incentive compatible auction mechanism fifth price sealed bid was used in a laboratory pretest market for vacuum packaged beef based on the illustration we discuss the potential for using laboratory experimental auctions in pretest market research we present the limitations that may be encountered in such applications and outline research aimed at improving the behavioral properties of the technique

heterogeneity irreversible production choices and efficiency in emission permit markets abstract this paper investigates a class of market mechanisms for environmental regulation based on the clean air act tradable discharge permit program laboratory market experiments capture some of the more salient institutional features and focus on issues of firm technological heterogeneity and irreversible investment regarding the operation of the permit market experimental results suggest that higher degrees of abatement cost heterogeneity may lead to reduced trade volume while the implications of increased cost heterogeneity regarding price volatility are mixed finally increased cost heterogeneity appears to result in decreased laboratory efficiency

thar she blows can bubbles be rekindled with experienced subjects we report 28 new experiment sessions consisting of up to three experience levels to examine the robustness of learning and error elimination among participants in a laboratory asset market and its effect on price bubbles our answer to the title question is yes we impose a large increase in liquidity and dividend uncertainty to shock the environment of experienced subjects who have converged to equilibrium and this treatment rekindles a bubble however in replications of that same challenging environment across three experience levels we discover that the environment yields a rare residual tendency to bubble even in the third experience session therefore a caveat must be placed on the effect of twice experienced subjects in asset markets in order for price bubbles to be extinguished the environment in which the participants engage in exchange must be stationary and bounded by a range of parameters experience including possible error elimination is not robust to major new environment changes in determining the characteristics of a price bubble jel c91 d83

the impact of economics on environmental policy abstract environmental economists have seen their ideas translated into the rough and tumble policy world for over two decades they have witnessed the application of economic instruments to several environmental issues including preserving wetlands lowering lead levels and curbing acid rain this essay examines the impact of the rise of economics in the policy world on the making of environmental policy i focus on two related but distinct phenomena the increasing interest in the use of incentive based mechanisms such as tradable permits to achieve environmental goals and the increasing interest in the use of analytical tools such as benefit cost analysis in regulatory decision making i argue that economists and economic instruments have had a modest impact on shaping environmental health and safety regulation but that economists will play an increasingly important role in the future although the role of economics is becoming more prominent it does not follow that environmental policy will become more efficient this apparent inconsistency can be explained by the political economy of environmental policy

child labor child schooling and their interaction with adult labor empirical evidence for peru and pakistan using data from peru and pakistan this article tests two hypotheses there is a positive association between hours of child labor and poverty and there is a negative association between child schooling and poverty both of these hypotheses are confirmed by the pakistani data but not by the peruvian data the reduction in poverty rates due to income from children s labor is greater in pakistan than in peru the nature of interaction between adult and child labor markets varies with the gender of the child and the adult in peru rising men s wages significantly reduce the labor hours of girls whereas in pakistan there is a strong complementarity between women s and girls labor markets both data sets agree on the positive role that increasing adult education can play in improving child welfare

cash inflows and bubbles in asset markets with constant fundamental values previous experimental research on asset markets has reported that the level of cash available to traders does not affect asset prices when fundamentals follow a time trajectory that is constant over time this contrasts with other research indicating that greater cash levels increase prices when fundamental values are decreasing over time we report a new experiment in which we show that greater initial cash levels are indeed associated with higher prices when fundamental values are constant over time thus high cash levels will lead to bubbles if the cash is introduced before the market opens our results reconcile the two previous sets of findings jel c90 d03 g02 g12 i introduction smith suchanek and williams 1988 initiated the experimental study of markets for multiperiod finitely lived assets a considerable subsequent literature has consistently observed price bubbles in such markets this consistency makes the smith et al paradigm a popular one for identifying and studying the factors that promote or dampen bubbles see palan 2013 for a survey of this literature it is known that some key market parameters influence prices and the tendency for bubbles to form two of these parameters are 1 the time trajectory of fundamental values and 2 the quantity of cash available for purchases compared to the quantity of assets available for sale a number of studies in this literature have contrasted the behavior of different fundamental value time paths the speed and effectiveness of price discovery the tendency of market prices to track fundamentals depend on the time path of the fundamental value trajectory breaban and noussair 2015 giusti jiang and xu 2012 noussair and powell 2010 stockl huber and kirchler 2014 a trajectory that is constant over time generates closer adherence to fundamental values than a time path that is monotonically decreasing kirchler huber and stockl 2012 noussair robin and ruffieux 2001 smith van boening and wellford 2000 1 another variable influencing market prices is the amount of liquidity traders have available for purchases it is well established that in the case of decreasing fundamentals the price level is affected by liquidity as measured by cash endowment levels greater cash endowments lead to higher prices caginalp and ilieva 2008 caginalp porter and smith 1998 2000 2001 haruvy and noussair 2006 cash and asset endowment levels are typically normalized into a measure of liquidity called the cash to asset c a ratio caginalp porter and smith 2001 this is the ratio of cash in the economy the total amount available for purchases of assets to the value of all of the units of asset in the economy evaluated at the fundamental value in period t the c a ratio is given by c a sub t summation over i c sub it summation over i q sub it f sub t where c a sub t is the c a ratio in period t c sub it is the cash available to trader i in period t q sub it is the quantity of units that trader i holds in period t and f sub t is the period t fundamental value the ratio can be interpreted as the ratio of the largest long position to the largest short position an average trader can take assuming that the market price is equal to the fundamental to date it has been shown that the cash asset ratio affects prices only for the case when fundamental values are decreasing to our knowledge only two studies have explored the effect of cash on prices when fundamentals are constant over time kirchler huber and stockl 2012 hereafter khs and kirchler et al 2015 in both of these studies the additional cash is introduced after one or more periods of trading have elapsed rather than before the market opens khs report that increases in cash endowments do not affect prices in the case of constant fundamental values because the authors interpret bubbles as a consequence of subject confusion about the experimental environment they conclude that the constant fundamental value setting leads to less confusion on the part of subjects

designing more efficient markets lessons from los angeles smog control market based approaches for environmental protection are beginning to take root around the world this article attempts to improve our understanding of the performance of environmental markets by constructing and evaluating an information base on trades in los angeles which includes the first detailed data on trading prices the analysis suggests that trading activity has been shaped by the detailed regulations governing the market in addition transaction costs have played a crucial role we argue that the move toward adopting market based approaches for environmental protection needs to be accompanied by a vigorous effort to assess the properties of these systems as they are actually implemented

the deadweight loss of christmas when economists comment on holiday gift giving it is usually to condone the healthy effect of spending on the macroeconomy however an important feature of gift giving is that consumption choices are made by someone other than the final consumer a potentially important microeconomic aspect of gift giving is that gifts may be mismatched with the recipients preferences in the standard microeconomic framework of consumer choice the best a gift giver can do with say 10 is to duplicate the choice that the recipient would have made while it is possible for a giver to choose a gift which the recipient ultimately values above its price for example if the recipient is not perfectly informed it is more likely that the gift will leave the recipient worse off than if she had made her own consumption choice with an equal amount of cash in short gift giving is a potential source of deadweight loss this paper gives estimates of the deadweight loss of holiday gift giving based on surveys given to yale undergraduates i find that holiday gift giving destroys between 10 percent and a third of the value of gifts while these recipients may be unrepresentative of the u s population their gifts are not necessarily unrepresentative holiday expenditures average 40 billion per year implying that a conservative estimate of the deadweight loss of christmas is a tenth as large as estimates of the deadweight loss of income taxation i also explore how deadweight loss and the tendency to give cash gifts vary with the relationship and age difference between giver and recipient i find that gifts from friends and significant others are most efficient while noncash gifts from members of the extended family are least efficient and destroy a third of their value i develop a simple expected utility model to explain the decision to give cash as opposed to in kind gifts the data are consistent with the model cash gifts are most common from the sorts of givers whose noncash gifts have the lowest expected value to recipients given their cost and high variability in recipient valuation

labor supply of new york city cabdrivers one day at a time life cycle models of labor supply predict a positive relationship between hours supplied and transitory changes in wages because such changes have virtually no effect on life cycle wealth previous attempts to test this hypothesis empirically with time series data have not been supportive estimated elasticities are typically negative or nonsignificant such analyses however are vulnerable to measurement error and other estimation problems we use data on daily observations of wages and hours for new york city cab drivers to estimate the supply response to transitory fluctuations in wages cab drivers decide daily how many hours to supply and face wages that are positively correlated within days but largely uncorrelated between days using these data our central finding is that wage elasticities are persistently negative from 5 to 1 in three different samples even after correcting for measurement error using instrumental variables these negative wage elasticities challenge the notion that cab drivers trade off labor and leisure at different points in time and question the empirical adequacy of life cycle formulations of labor supply

futures markets cognitive ability and mispricing in experimental asset markets we study the effect of a futures market in which contracts maturing in the last period of the life of the asset can be traded our experiment has two treatments one in which a spot market operates on its own and a second treatment in which a spot and a futures market are active simultaneously futures markets lower spot prices but increase price volatility the futures markets themselves exhibit considerable overpricing individuals with higher cognitive reflection test crt scores achieve greater earnings and tend to sell in the overpriced futures market while traders with lower crt scores make purchases in the futures market greater average crt score among a group of traders is associated with better price discovery when no futures market is present but there is no such relationship in the presence of a futures market modified measures of crt which take into account different types of incorrect responses are introduced

gender differences in land inheritance schooling and lifetime income evidence from the rural philippines this article examines the difference in lifetime incomes arising from parental preferences in the allocation of land inheritance and investments in schooling between sons and daughters in the rural philippines sons are preferred with respect to land inheritance receiving 0 15 additional hectares of land while daughters are treated more favourably in schooling investments receiving 1 5 more years of schooling however differences in both current and life cycle incomes between sons and daughters are insignificant this suggests that filipino parents allocate intergenerational transfers to equalise incomes among their children without sacrificing efficiency

a review of bubbles and crashes in experimental asset markets this paper discusses the literature on bubbles and crashes in the most commonly used experimental asset market design introduced by smith et al it documents the main findings based on the results from 41 published papers 3 book chapters and 20 working papers

reference points and effort provision a key open question for theories of reference dependent preferences is what determines the reference point one candidate is expectations what people expect could affect how they feel about what actually occurs in a real effort experiment we manipulate the rational expectations of subjects and check whether this manipulation influences their effort provision we find that effort provision is significantly different between treatments in the way predicted by models of expectation based reference dependent preferences if expectations are high subjects work longer and earn more money than if expectations are low

hours restrictions and labor supply the authors estimate a labor supply model that permits hours restrictions of a simple but general form each individual chooses from among a finite set of jobs drawn at random f rom a market distribution each offering a fixed quantity of hours the polar cases of no constraints on hours worked and exogenous hours ar e nested within the general case the authors results are consistent with a substantial amount of rationing in the work hours of a sample of low income men most of whom are working less than they would like copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

firm specific output limits in a posted offer market distributive and efficiency effects abstract in this paper we look at the effect of the removal of firm specific binding and non binding quotas in experimental posted offer markets in the experiments we see that the effect of both binding and non binding quotas is carried over to the deregulated regime the effect of non binding quotas while being in effect on the number of contracts is statistically significant we also see that distribution of surplus may actually affect the convergence path of prices that is with binding quotas price convergence is observed from below the competitive equilibrium