the effects of induced mood on bidding in random nth price auctions we investigate the effects of mood on decisions in random nth price auctions there are two possible ways in which mood can affect behavior 1 mood can affect the valuation of the object being auctioned or the willingness to pay wtp and 2 mood can affect the bidding behavior itself to identify these two possible effects we study decisions with induced values and with homegrown values our data show that positive mood generates an upward bidding bias in the induced value condition however only under certain conditions do we observe weak mood effects on wtp

estimating the public good value of preserving a local historic landmark the role of non substitutability and citizen information this study applies stated preference methods to estimate the public good values of preservation and restoration of a local historic landmark in a medium sized us city the survey device centres on

the behavior of unemployment durations over the cycle this paper examines the relationship between unemployment durations and cyclical movements in unemployment using an employment calendar constructed from recent questions in the panel study of income dynamics we find that unemployment durations increase with the unemployment rate with the strongest effects for individuals with the longest elapsed durations copyright 1990 by mit press

estimating willingness to pay for improved water quality in the presence of item nonresponse bias this article deals with the problem of item nonresponse in contingent valuation surveys using a payment card method by applying a grouped data sample selection estimation technique that is capable of imputing the missing values conditional upon a respondent s decision to answer a willingness to pay question the advantage of the technique lies in its ability to utilize all of the information in the sample permitting a more efficient estimation in the presence of item nonresponse bias the major determinants of willingness to pay appear to be household income number of children education perception of existing water quality and identification with environmental issues copyright 2003 oxford university press

individual behavior and market performance of behavioral regularities which appear inconsistent with economic theory machina camerer 1989 this work is of interest to economists for at least two reasons first the results challenge expected utility theory as a descriptive theory of human behavior second the observations or anomalies may have important implications for resource allocation since many decisions e g choice of career or marriage partner awarding prizes or grants choosing colleagues committee chairs or speakers from other disciplines are made infrequently and with no opportunities for arbitrage it follows that widespread subrationality suggests that decisions frequently may be far from optimal further it could be that even with welldefined incentives and a well functioning market or other allocative institution the presence of boundedly rational agents will cause inefficient allocation of resources this paper discusses the latter possibility by examining three examples the representativeness heuristic the preference reversal phenomenon and the endowment effect in all three cases there are

risk based pricing of interest rates for consumer loans abstract by focusing on observable default risk s role in loan terms and the subsequent consequences for household behavior this paper shows that lenders increasingly used risk based pricing of interest rates in consumer loan markets during the mid 1990s it tests three resulting predictions first the premium paid per unit of risk should have increased over this period second debt levels should have reacted accordingly third fewer high risk households should have been denied credit further contributing to the interest rate spread between the highest and lowest risk borrowers for people obtaining loans the premium paid per unit of risk did indeed become significantly larger after the mid 1990s for example for a 0 01 increase in the probability of bankruptcy the corresponding interest rate increase tripled for first mortgages doubled for automobile loans and rose nearly six fold for second mortgages additionally changes in borrowing levels and debt access reflected these new pricing practices particularly for secured debt borrowing increased most for the low risk households who saw their relative borrowing costs fall furthermore while very high risk households gained expanded access to credit the increases in their risk premiums implied that their borrowing as a whole either rose less or sometimes fell

divergence in alternative hicksian welfare measures the case of revealed preference for public amenities this paper investigates the divergence between the two hicksian welfare measures of non traded amenity improvement associated with housing first the hicksian surplus measures for amenity changes are analytically developed based on explicit specification of utility structures a hedonic two stage approach is then applied to empirically show that for quantity changes in contrast to hypothetical markets divergence in real market is small the paper also analytically develops expressions for the income and substitution effects and empirically shows that for a given income effect the greater the substitution effect the smaller the divergence between the two measures copyright 2002 john wiley sons ltd

a test of the theory of reference dependent preferences eight alternative methods of eliciting preferences between money and a consumption good are identified two of these are standard willingness to accept and willingness to pay measures these methods differ with respect to the reference point used and the dimension in which responses are expressed the loss aversion hypothesis of tversky and kahneman s theory of reference dependent preferences predicts systematic differences between the preferences elicited by these methods these predictions are tested by eliciting individuals preferences for two private consumption goods the experimental design is incentive compatible and controls for income and substitution effects the theory s predictions are broadly confirmed

the source of the new canadian job stability patterns this paper explores the causes of the recent change in the canadian job stability patterns using the labour force survey master files 1977 2008 i find that what was previously seen as a cyclical increase in job stability is actually a secular change results indicate that the ageing of the workforce the increased educational attainment and the increased labour force attachment of women play important roles in explaining the aggregate job stability patterns that emerge for education the declining importance of low educated workers is the key and not the rising importance of workers with university degrees with respect to gender the evidence points towards a cohortbased explanation surprisingly the changing industry structure has little explanatory powers finally only the rising educational attainment matters for newer jobs leaving a large part of the increase still unexplained

the impact of interest rate ceilings on households credit access evidence from a 2013 chilean legislation abstract this study analyzes the impact of a legislation introduced in chile in 2013 which gradually reduced the maximum legal interest rate for consumer loans from 54 to 36 using a representative sample of households that matches survey data and banking loan records i compare consumers with risk adjusted interest rates slightly above and slightly below the legal interest rate ceiling two groups of similar characteristics but who are differently affected by the law after accounting for both macroeconomic shocks and unobserved household heterogeneity the results show that being above the interest rate cap reduces the probability of credit access by 8 7 on average a counterfactual exercise shows that the new legislation excluded 9 7 of the borrowers from banking consumer loans the law s impact was strongest on the youngest least educated and poorest families finally i show that the new law affected all lenders of consumer loans in chile not just banks

what happens when information leaves a market evidence from postbankruptcy consumers federal law mandates the removal of personal bankruptcies from credit reports after 10 years the removal s effect is market efficiency in reverse the short term effect is a spurious boost in apparent creditworthiness especially for the more creditworthy bankrupts delivering a substantial increase in both credit scores and the number and aggregate limit of bank cards the longer term effect is lower scores and higher delinquency than initial full information scores predict these findings relate to both the debate over the bankruptcy code and the wisdom of influencing market clearing by removing information

risk aversion and the winner s curse this article analyzes an auction in which bidders see independent components of a common prize value the nash equilibrium for two rational bidders is shown to be independent of risk attitudes the information structure allows explicit calculation of an alternative equilibrium in which naive bidders do not correctly discount the value of the prize contingent on winning and thus they suffer the winner s curse subjects in a laboratory experiment clearly fall prey to the winner s curse the data conform most closely to the predictions of the naive model moreover the level of risk aversion implied by fitting the naive model is similar to an independent risk aversion measure obtained in a separate private value bidding exercise

heterogeneity and unemployment dynamics many previous articles have studied the contribution of inflows and outflows to the cyclical variation in unemployment but ignored the critical role of unobserved heterogeneity across workers thi

screening and labor market flows in a model with heterogeneous workers we construct a monetary model in which workers are heterogeneous and productivity is worker specific resulting in time varying deviations between the average productivity of employed and unemployed workers we assume the worker specific component of productivity which we label as the worker s efficiency level is unobservable ex ante by firms and job search is nondirected by interviewing an unemployed worker firms can observe the worker s efficiency level workers with low overall productivity may be interviewed but not hired as firms screen these workers out during the interview process we show that screening amplifies the volatility of the exit rate from unemployment capturing the idea that firms become more selective in a recession reducing the vacancy yield relative to a model with homogeneous levels of efficiency following a negative productivity shock the

business cycles and compositional variation in u s unemployment in this article we study u s unemployment dynamics using grouped unemployment data from the current population survey over the period 1968 1992 we estimate a model that traces variation in these unemployment data both over time and between demographic groups back to the underlying variation in the inflow and the outflow in turn we model the outflow as a transition process in which we allow the exit probabilities to depend on calendar time duration and demographic group we use the estimation results to provide a decomposition of aggregate u s unemployment dynamics in various incidence and duration components

willingness to pay and willingness to accept some evidence of an endowment effect the source of the disparity between willingness to pay wtp and willingness to accept wta measures of value has been the subject of recent debate in the literature this paper presents the results of a pilot experiment designed to test whether contrary to the findings of shogren et al 1994 the endowment effect might be a significant source of the wtp wta divergence the results are a direct contradiction of what the substitutability argument would predict and thus indicate that the endowment effect cannot yet be dismissed as a possible driving force behind the disparity

common failings how corporate defaults are correlated we test the doubly stochastic assumption under which firms default times are correlated only as implied by the correlation of factors determining their default intensities using data on u s corporations from 1979 to 2004 this assumption is violated in the presence of contagion or frailty unobservable explanatory variables that are correlated across firms our tests do not depend on the time series properties of default intensities the data do not support the joint hypothesis of well specified default intensities and the doubly stochastic assumption we find some evidence of default clustering exceeding that implied by the doubly stochastic model with the given intensities why do corporate defaults cluster in time several explanations have been explored first firms may be exposed to common or correlated risk factors whose co movements cause correlated changes in conditional default probabilities second the event of default by one firm may be contagious in that one such event may directly induce other corporate failures as with the collapse of penn central railway in 1970 third learning from default may generate default correlation for example to the extent that the defaults of enron and worldcom revealed accounting irregularities that could be present in other firms they may have had a direct impact on the conditional default probabilities of other firms our primary objective is to examine whether cross firm default correlation that is associated with observable factors determining conditional default probabilities the first channel on its own is sufficient to account for the degree of time clustering in defaults that we find in the data

does production labeling stigmatize conventional milk production labeling is a common approach for differentiating otherwise similar products in the marketplace while these labels may convey positive messages to consumers about the new product they may simultaneously stigmatize the conventionally produced product by highlighting perceived problems the net economic result for producers can be negative since consumers may decrease their willingness to pay for the conventional product that dominates the market while the new product has a relatively small market share this experimental research identifies this stigma effect in the case of milk where the introduction of rbst free and organic milk reduces consumers willingness to purchase conventional milk copyright 2009 oxford university press

a canonical model of choice with initial endowments we use the revealed preference method to derive a model of individual decision making when the endowment of an agent provides a reference point that may influence her choices this model generalizes the classical rational choice model which views choice as a consequence of utility maximization instead our model sees choice as arising from psychologically constrained utility maximization where the constraints are induced by one s initial endowment in particular this model produces status quo bias as a natural consequence but not necessarily the endowment effect a range of economic applications identify the predictive and explanatory strength of the model in particular we demonstrate that the status quo bias phenomenon reduces the size of the substitution effect in problems of consumption choice

values of gains and losses reference states and choice of measure the available empirical evidence continues to suggest that people commonly value losses more and often much more than otherwise commensurate gains consequently current practice of using the wtp measure for all changes is often likely to lead to misleading assessments of welfare changes the reference dependence of preferences implies instead that while the wtp measure is appropriate for gains the value of both positive and negative changes in the domain of losses will usually be more accurately assessed with the wta measure

resolving differences in willingness to pay and willingness to accept reply gwendolyn c morrison 1997 raises a logical point regarding our experimental test of the divergence between willingness to pay wtp and willingness to accept wta measures of economic value shogren et al 1994 she argues that our design does not provide a true test of the existence of a fundamental endowment effect since we did not control for the potential of a pivoting indifference map daniel kahneman et al 1990 she concludes that even though our ev idence shows that the mean wtp and wta bids for market goods with close substitutes e g candy bars and coffee mugs converge after market experience the endowment effect might still be alive and well albeit at statisti cally insignificant levels

the ins and outs of unemployment in canada 1976 2008 this paper studies the flows into and out of unemployment in canada at an aggregate and a number of disaggregated levels i find that inflows into unemployment are countercyclical and outflows are procyclical at an aggregate level changes in the rate at which individuals leave unemployment account for most of the changes in unemployment rates in canada between 1976 and 2008 however flows into unemployment matter more at some disaggregated levels there are also some differences in the contributions of flows into and out of unemployment to changes in unemployment rates across the 1981 82 and 1990 92 recessions ce texte etudie les entrees et sorties du chomage au canada au niveau agrege et a un certain nombre de niveaux de desagregation on decouvre que les entrees en chomage sont contre cycliques et les sorties pro cycliques au niveau agrege les changements dans le taux de sorties du chomage expliquent le gros des changements dans les taux de chomage au canada entre 1976 et 2008 cependant les flux a l entree sont plus importants a certains niveaux de desagregation on note aussi des differences dans la contribution des flux a l entree et a la sortie du chomage aux changements dans les taux de chomage au cours des recessions de 1981 82 et de 1990 92

values elicited from open ended real experiments abstract the idea that preferences are only revealed by real incentives is deeply embedded in economists worldview consequently evidence from hypothetical experiments has not readily permeated economic thinking one method for determining whether hypothetical experiments provide useful information about preferences is to compare them to similar real goods experiments this study looks at responses elicited by three real experiments we examine the proportion of responses that meet a series of criteria that range from a broad appeal of plausibility to a narrow restriction based on quasi concavity of preferences we argue that these proportions are unreasonably low

measuring the duration of unemployment spells an understanding of the duration of unemployment spells is important for at least two reasons first the length of time spent unemployed has a direct bearing on individual welfare few people would feel so threatened by unemployment if they were certain it would only last a few weeks second changes in the duration of unemployment spells are an important influence on the aggregate unemployment rate the persistence of high unemployment after a recession and well into recovery and expansion is a puzzle to many one that requires an appreciation of changes in the incidence and duration of unemployment if it is to be solved the research summarized in this paper derives a measure of the complete length of unemployment spells in canada and analyzes how it changes over the business cycle the cyclical movement of the average complete duration of unemployment contrasts sharply with that of the average incomplete duration which is regularly published by statistics canada the first section of the paper discusses these differences by highlighting aggregate developments during the last two recessions while the second section outlines the methodology used and some of the results of comparing the experience during the recession of the early 1990s with that during the early 1980s

an experimental approach to valuing new differentiated products abstract an experimental store was created to evaluate initial demand for locally produced and guaranteed tender steak products as a more realistic alternative to contingent valuation cv and dichotomous choice experimental methods strengths of the approach are incentive compatibility a realistic consumption set and a familiar choice environment consumers selected among usda choice premium quality lean guaranteed tender and locally produced strip steaks a double hurdle count data model indicated initial willingness to pay wtp for locally produced steak comparable to prior cv results but demand was highly elastic demand for premium quality steak crowded out demand for the guaranteed tender product contrasting with prior dichotomous choice experimental results

estimating labour market transitions and continuations using repeated cross sectional data abstract this paper proposes a population cohort approach for estimating labour market continuations or transitions using repeated cross sectional data this approach allows for the construction of consistent standard errors that account for the full variability of cross sectional data

rational risk valuation given sequential reduction opportunities abstract we design experimental auctions with sequential risk reduction opportunities between private and collective self protection or self insurance we reject two hypotheses of rational risk valuation individuals do not prefer self protection to self insurance and the sequencing of private and collective mechanisms matters

understanding the disparity between wtp and wta endowment effect substitutability or imprecise preferences abstract although it is now generally accepted that willingness to accept exceeds willingness to pay disagreement remains as to why this disparity is shown to persist even when controlling for learning substitutability and respondents imprecision thus lending further support for the endowment effect

market simulation and the provision of public goods a non paternalistic response to anomalies in environmental evaluation most normative economics assumes that individuals have coherent preferences this paper responds to growing evidence of failures of this assumption particularly in the context of stated preference methods widely used in environmental policy analysis it proposes a non paternalistic concept of consumer sovereignty that does not assume preference coherence is satisfied by competitive markets and can be applied to the provision of public goods a key implication is that decisions should reflect valuations revealed at the point of consumption such valuations which can be inferred from hedonic prices may be less susceptible to willingness to accept wta willingness to pay wtp disparities than those elicited by stated preference methods

price discontinuities in an online market for used cars we study the price setting behavior in a competitive market for used cars and provide empirical evidence for coarse information processing based on detailed field data from one of europe s largest online marketplaces for automotive vehicles we document systematic and sizable price discontinuities at salient car age and mileage thresholds the price difference between two otherwise identical cars across registration years where one was first registered in january and the other in december of the previous year is up to five times larger than that between two cars first registered in any two subsequent months within a registration year a similar pattern can be observed in the mileage dimension at 10 000 km odometer marks which is in line with earlier findings in the literature being able to study discontinuities along two dimensions of the same good allows us to further our understanding toward a more general notion of inattentive behavior while our results are compatible with a behavioral model of l

willingness to pay and willingness to accept how much can they differ comment i agree with the point made by edoh y amiran and daniel a hagen 2003 that there can be a substantial or even infinite divergence between the wta and wtp for a public good even where there is a nonzero elasticity of substitution between market goods and the public good provided that the indifference curves are asymptotically bounded with respect to market goods in the manner they describe this is an important point they are also correct to point out that the elasticity of substitution is a local concept whereas their asymptotic boundedness condition applies also for discrete changes my 1991 paper used a local analysis because it was following the structure of the analysis in robert d willig 1976 and alan randall and john r stoll 1980 i wanted to show that while randall and stoll appeared to extend willig s local result on wta versus wtp from price changes to changes in the quantity of a public good the relevant elasticity was in fact different and involved the substitution elasticity as well as the income elasticity i view these points by amiran and hagen as not two separate results but essentially the same result their asymptotic boundedness condition generalizes my zero elasticity of substitution condition to discrete changes the asymptotic boundedness condition can be expressed as follows assuming a bivariate utility function u x q and given a reference point x q associated with a reference utility level u u x q there exists some q q such that for all q q there exists no x such that u x q u in other words no amount of x can substitute for the reduction in public good from q to q q in the case of a zero elasticity of substitution q q but as amiran and hagen show in their theorem 1 this is unnecessarily restrictive when dealing with a discrete reduction in q furthermore their theorem 2 can be viewed as a special case of their theorem 1 in which q 0 which makes q an essential commodity it is well known in consumer theory that the wta to avoid the loss of an essential market good is infinite their theorem 2 extends this result to the case of an essential nonmarket good but as their theorem 1 shows essentialness is not necessary for an infinite wta the boundedness condition is the key and this implies a fundamental lack of substitutability between money market goods and the public good

experimental tests of the endowment effect abstract the endowment effect which predicts undertrading and a willingness to accept greater than willingness to pay is studied using responses that remove all reference to buying or selling and focuses only on choice tasks the results significantly lower the willingness to pay willingness to accept discrepancy but the latter is still significant a high efficiency open display uniform price auction is used to exchange mugs for money since mugs are randomly assigned to half of 2n subjects n 2 mugs are predicted to trade less than n 2 mugs trade on average but more than previously reported the phenomenon exists but is less prominent than reported previously

benefit evaluation of the country of origin labeling in taiwan results from an auction experiment this research is aimed at investigating the consumer s preference for food produced in taiwan and the economic benefits for the country of origin labeling cool the study used vickrey second price sealed bid auction to elicit the consumer s willingness to pay wtp for products under cool the study compared the bid functions estimated with tobit model and the premium functions estimated with ordinary least squares ols due to price affiliation it is more reliable to use the estimated premium functions the estimated premiums are 67 5 84 7 and 99 for taiwan products over their alternatives of china olives china oolong tea and vietnam oolong tea respectively the study concludes that enacting and rigorously enforcing a cool law would increase economic benefits to consumers in taiwan and at the same time placing the imported products in the leveled playing field

unemployment insurance and unemployment spells this paper tests the effects of the level and length of unemployment insurance benefits on unemployment durations the paper particularly studies individual behavior during the weeks just prior to when benefits lapse higher unemployment insurance benefits are found to have a strong negative effect on the probability of leaving unemployment however the probability of leaving unemployment rises dramatically just prior to when benefits lapse individual data are used with accurate information of spell durations and the level and length of benefits the semiparametric estimation techniques used in the paper yield more plausible estimates than conventional approaches and provide useful diagnostics copyright 1990 by the econometric society

duration dependence in the exit rate out of unemployment in belgium is it true or spurious on the basis of aggregate data for the early 1990s we analyse the determinants of unemployment duration for laid off male workers in wallonia belgium our results indicate that if ranking in recruitment occurs the standard mixed proportional hazard specification can be too restrictive leading to an overstatement of the extent of true negative duration dependence we conclude that negative duration dependence is largely spurious we also decompose the time variation of the hazard in unobserved compositional and direct cyclical and seasonal effects we find counter cyclical variation in the quality of young workers but none for the prime aged copyright c 2004 john wiley sons ltd

the disparity between willingness to accept and willingness to pay measures of value psychologists have long argued that people are much more averse to a loss than attracted to an equivalent gain this behavior termed loss aversion has been formalized by kahneman and tversky 1979 in their reformulation of expected utility theory prospect theory in prospect theory the utility function is replaced by a value function that evaluates changes in income from the current level increases in income are weighted by a relatively small marginal utility decreases in income are weighted by a much larger marginal utility in effect the value function implies that a kink in the relationship between utility and income occurs at the initial income or reference point and that the slope of the utility function for losses in income is steeper than it is for gains in a recent paper knetsch and sinden 1984 report a series of experiments that demonstrate the existence of a large disparity between willingness to accept wta and willingness to pay wtp measures of value they argue that the psychological theory of loss aversion explains this difference economic theory would suggest that individuals who exhibit a large disparity between wta and wtp are perhaps underperceiving the value of gains or overperceiving the value of losses are behaving in an irrational manner and will consequently achieve a lower level of well being than if they behaved in a true utility maximizing manner this would in contrast to loss aversion usually imply near equal values for wta and wtp see willig 1976 further documentation of a larger than expected disparity between wta and wtp has been obtained in surveys asking for the value of a variety of public goods for example cummings brookshire and schulze 1986 document six

loss aversion without the endowment effect and other explanations for the wta wtp disparity abstract to learn why wta regularly exceeds wtp in economic experiments involving inexpensive market goods with ample substitutes the verbal protocol technique was used in a real cash experiment employing a random price auction results suggest that the primary reason for the disparity was subjects reluctance to suffer a net loss from any transaction whether purchase or sale and tendency to consider sale much below assumed market price as a loss this interpretation indicates a kind of loss aversion but not the kind envisioned in the endowment effect which maintains that selling creates a loss and buying creates a gain

on the importance of the participation margin for labor market fluctuations abstract conventional analyses of labor market fluctuations ascribe a minor role to labor force participation we show by contrast that flows based analyses imply that the participation margin accounts for around one third of unemployment fluctuations a novel stock flow apparatus establishes these facts delivering three further contributions first the role of the participation margin appears robust to adjustments for spurious transitions induced by reporting error second conventional stocks based analyses are subject to a stock flow fallacy neglecting offsetting forces of worker flows on the participation rate third increases in labor force attachment among the unemployed during recessions are a leading explanation for the role of the participation margin

environmental damage evaluation in a willingness to accept scenario a latent class approach based on familiarity in this paper we report on the results of the application of a latent class model that was designed to identify and characterize unobserved preference heterogeneity in the context of a willingness to accept wta framework involving negative environmental externalities stemming from the expansion of the port of valencia we investigated the hypothesis that respondents with greater familiarity with the targeted good and any related environmental damage would demand more compensation that is they would have a significantly higher wta based on respondents familiarity with the port of valencia and their pre existing knowledge about the negative consequences of its potential expansion three clusters based on six indicators are identified results show that contrary to what might be expected familiarity with a public good does not in all cases have a significant effect on stated wta

posted prices and bid affiliation evidence from experimental auctions in most experimental auctions researchers ask participants to bid on the same item in multiple po tentially binding rounds posting the price submitted by the top bidder or bidders after each of those rounds if bids submitted in later rounds are affiliated with posted prices from earlier rounds this practice could result in biased value estimates in this article we discuss the results of an experiment designed explicitly to test whether posted prices affect bidding behavior we find that for familiar items high posted prices lead to increased bids in subsequent rounds our results have implications for researchers conducting experimental auctions article advances the literature in several im portant ways first we report the design and results of the only study designed specifically to control for the effects of posted prices on bids in subsequent rounds we do this with the aid of confederate bidders who were instructed to bid within a certain narrow range thus we have multiple treatments that vary only by the presence or absence of confederate bidders al lowing for what we believe to be the cleanest possible test of the effect of posted prices on bidding behavior in later rounds while list and shogren 1999 model bids in round t as a function of the posted price in round t 1 through our use of confederate bidders to con trol posted prices we are able to test whether exposure to high posted prices has an effect that accumulates over the course of multiple rounds leading to a gradual increase in mean bids second our methods of analysis are more complete than previous work examining bid af filiation we not only compare summary statis tics from early and late rounds but we also use panel data analysis to understand how in dividual participants bids are affected by the presence of confederate bidders focusing on individuals rather than summary statistics al lows us to understand how individual specific characteristics influence affiliation and it also allows us to better understand the role of out liers

learning your own ability abstract families human capital investments depend on beliefs about their children s performance i build a dynamic model of expectation formation to show how agents use both observable and unobservable information to predict their school scores the model shows parents and students have substantial knowledge of unobservable factors affecting their performance especially in middle and high school families are overconfident towards expecting higher grades and expectation formation differs by race families ability to predict future scores improved substantially during middle school due to several factors lower bias and variance of the prediction errors and a better use of past scores as predictors

can t pay or won t pay unemployment negative equity and strategic default this paper uses new data from the psid to quantify the relative importance of negative equity versus ability to pay in driving mortgage defaults between 2009 and 2013 these data allow us to construct household budgets sets that provide better measures of ability to pay changes in ability to pay have large estimated effects job loss has an equivalent effect on the propensity to default as a 35 decline in equity strategic motives are also found to be quantitatively important as we estimate more than 38 of households in default could make their mortgage payments without reducing consumption received september 29 2015 editorial decision june 2 2017 by editor philip strahan authors have furnished an internet appendix which is available on the oxford university pressweb site next to the link to the final published paper online

markets and the measurement of value consumer s surplus and the hicksian measures of compensating and equivalent variation have a long history in empirical economic analysis however at both the theoretical and the empirical level economists psychologists and public choice theorists have not been able to reach a significant consensus regarding the usefulness of these measures economic theorists have only recently dissected the differences which exist between alternative welfare measures in a systematic and transparent fashion in willig 1976 hausman 1981 and takayama 1984 the role of income in determining the correct theoretical measurements of compensating and equivalent variations was exposed during this same period of time theoretical results obtained by the psychologists kahneman and tversky 1979 indicated that the fundamental structure of preferences upon which the theoretical economic results are based is flawed the so called prospect theory of decision developed by these authors indicated that measured of welfare based upon payment will differ from measures of welfare based upon compensation because of the fact that individuals will value losses at a greater marginal rate than gains this difference was then predicted to dominate any income effect important in the economist s model finally this period recorded the emergence of many demand revealing processes which provide individuals with appropriate incentives to accurately reveal their preferences as summarized in coursey and schulze 1986 one interpretation of the literature on incentive compatibility suggests a set of well defined guidelines for improving both the accuracy and validity of compensating and equivalent variation measures these differences in professional preferences regarding what is important in improving the accuracy of economic welfare measurements led john

introduction special issue crises and complexity in november 2011 an eu fp7 interdisciplinary collaborative project complexity research initiative for systemic instabilities crisis started to develop a complexity interactions agent based model for the european financial economic crisis this special issue on crises and complexity reflects some of the ongoing work of this interdisciplinary collaboration between economists physicists computer scientists etc that has been presented and discussed at various crisis workshops in milan london paris and leiden throughout 2012 2014

valuing an eu animal welfare label using experimental auctions the aim of this article is to determine consumers valuation for an eu animal welfare eu caw label for products providing higher animal welfare standards than the current legal requirements using revealed preference data from random nth price auction mechanism and two auction procedures our results generally suggest that consumers are willing to pay a premium for an eu animal welfare eu caw label for cured ham this finding is consistent in both the endowment and full bidding auction approaches we employed in our experiments conducted in spain the average premium that consumers are willing to pay for a cured ham with the eu caw label ranges between 19 and 23 of the average price of the regular cured ham that is currently available in supermarkets

comparative advantage and unemployment worker heterogeneity in productivity and labor supply is introduced into a matching model workers who earn high wages and work high hours are identified as those with strong market comparative advantage high rents from being employed the model is calibrated to match separation job finding and employment in the sipp data the model predicts a big drop in employment for workers with weak comparative advantage during recessions but the data show that workers with strong comparative advantage also display sizable employment fluctuations implying that aggregate employment fluctuations are not explained by the responses of workers with small rents to employment

is food and drug administration policy governing artisan cheese consistent with consumers preferences abstract united states government policy prohibits the sale of cheese made from unpasteurized milk aged less than 60 days despite contested science behind the policy we use experimental auctions for artisan cheese to estimate the value of pasteurization and age as food safety attributes which is the rationale for the policy we also look at consumers perception of the tradeoff between safety and quality a survey was conducted with participants at farmers markets including experimental auctions and sensory analysis of pasteurized and unpasteurized cheese and questions concerning attitudes about food safety there is no evidence of positive demand for pasteurization and there is no evidence of a tradeoff between safety and quality on average artisan cheese consumers make purchasing decisions based on taste not their attitude toward food safety the results of this study raise questions about the possible extension of a minimum aging period for cheese made from unpasteurized milk

choice under uncertainty problems solved and unsolved ffifteen years ago the theory of choice under uncertainty could be considered one of the success stories of economic analysis it rested on solid axiomatic foundations it had seen important breakthroughs in the analytics of risk risk aversion and their applications to economic issues and it stood ready to provide the theoretical underpinnings for the newly emerging information revolution in economics 1 today choice under uncertainty is a field in flux the standard theory is being challenged on several grounds from both within and outside economics the nature of these challenges and of our profession s responses to them is the topic of this paper

credit chains and bankruptcy propagation in production networks abstract we present a simple model of a production network in which firms are linked by supplier customer relationships involving extension of trade credit our aim is to identify the minimal set of mechanisms which reproduce qualitatively the main stylized facts of industrial demography such as firms size distribution and at the same time the correlation over time and across firms of output growth and bankruptcies the behavior of aggregate variables can be traced back to the direct firm firm interdependence in this paper we assume that the number of firms is constant and the network has a periodic static structure but the framework allows further extensions to investigate which network structures are more robust against domino effects and if the network is let to evolve in time which structures emerge spontaneously depending on the individual strategies for orders and delivery

the anatomy of unemployment dynamics abstract this paper examines the relation between individual unemployment durations and incidence inflow size on the one hand and the time varying macroeconomic conditions in the economy on the other we develop a model for the analysis of aggregate unemployment incidence and duration data and estimate this model on quarterly french data over the period 1982 1994 stratified by sex we find upward trends in both incidence and durations the former is relatively important for females the latter for males male incidence and durations are countercyclical with only a minor role for cohort effects on durations in contrast female cohorts entering at the top of the cycle have relatively short unemployment spells and the female incidence is if anything procyclical there is strong seasonal variation in particular in the incidence finally we find relatively small non monotonic individual duration dependence in the first six quarters of unemployment unobserved heterogeneity explains the observed negative duration dependence at these durations we provide some evidence that negative individual duration dependence and not heterogeneity is important at higher durations

allocative efficiency of markets with zero intelligence traders market as a partial substitute for individual rationality we report market experiments in which human traders are replaced by zero intelligence programs that submit random bids and offers imposing a budget constraint i e not permitting traders to sell below their costs or buy above their values is sufficient to raise the allocative efficiency of these auctions close to 100 percent allocative efficiency of a double auction derives largely from its structure independent of traders motivation intelligence or learning adam smith s invisible hand may be more powerful than some may have thought it can generate aggregate rationality not only from individual rationality but also from individual irrationality

despairing over disparities explaining the difference between willingness to pay and willingness to accept this paper examines the three major explanations for the disparity between willingness to pay wtp and willingness to accept wta observed in contingent value surveys and laboratory experiments a belief that the results must be biased in some fashion hanemann s 1991 substitutes hypothesis and the loss aversion model proposed by tversky and kahneman 1991 starting from the assumption that individuals make utility maximizing choices we develop structural equations that yield parametric tests of the hypotheses within a single non experimental framework the approach is flexible enough to incorporate a variety of functional form and distributional assumptions and can be applied to either data from either open ended bids or dichotomous choice questions the usefulness of the approach is demonstrated using data from a survey that asked both wtp and wta questions the results provide weak support for loss aversion

consumer welfare effects of introducing and labeling genetically modified food abstract non hypothetical valuations obtained from experimental auctions in three united states and two european locations were used to calculate welfare effects of introducing and labeling of genetically modified food under certain assumptions we find that introduction of genetically modified food has been welfare enhancing on average for united states consumers but not so for europeans and while mandatory labeling has been beneficial for european consumers such a policy would be detrimental in the united states

agent based stock flow consistent macroeconomics towards a benchmark model abstract the paper moves from a discussion of the challenges posed by the crisis to standard macroeconomics and the solutions adopted within the dsge community although several recent improvements have enhanced the realism of standard models we argue that major drawbacks still undermine their reliability in particular dsge models still fail to recognize the complex adaptive nature of economic systems and the implications of money endogeneity the paper argues that a coherent and exhaustive representation of the inter linkages between the real and financial sides of the economy should be a pivotal feature of every macroeconomic model and proposes a macroeconomic framework based on the combination of the agent based and stock flow consistent approaches the papers aims at contributing to the nascent ab sfc literature under two fundamental respects first we develop a fully decentralized ab sfc model with several innovative features and we thoroughly validate it in order to check whether the model is a good candidate for policy analysis applications results suggest that the properties of the model match many empirical regularities ranking among the best performers in the related literature and that these properties are robust across different parameterizations second the paper has also a methodological purpose in that we try to provide a set or rules and tools to build calibrate validate and display ab sfc models

towards a credit network based early warning indicator for crises this paper presents an agent based model which underlines the importance of credit network and leverage dynamics in determining the resilience of the system defining an early warning indicator for crises the model reproduces macroeconomic dynamics emerging from the interactions of heterogeneous banks and firms in an endogenous credit network banks and firms are linked through multiple credit relations which derive from individual target leverage choices agents choose the more convenient leverage level according to a basic reinforcement learning algorithm simulations are calibrated on balance sheet data of banks and firms quoted in the japanese stock exchange markets from 1980 to 2012

winners losers and the nuclear waste dilemma this paper explores how property right assignment affects social efficiency when a public program has both public good and public bad components we show that when willingness to accept a public bad exceeds the willingness to pay the net benefit is unambiguously lower when the property right supports the status quo institutional structure thus kaldor hicks efficiency tests tend to favor public programs and mitigation over the status quo even when mitigation negatively affects another group to illustrate the result we develop social cost estimates for moving nuclear waste from current temporary storage facilities to a permanent central repository at yucca mountain nv usa for a representative city with a population of 226 195 the present value of the external cost of shipping waste is 1 42 billion when those living near temporary nuclear waste storage facilities are assigned the property right to health and safety that number swells to 5 95 billion when those living near the transport route are assigned the property right thus property right assignment affects the efficient level of nuclear waste and thus nuclear energy produced

value elicitation in laboratory markets discussion and applicability to contingent valuation in discussing the preceding three papers my assignment was to add the perspective of someone who uses contingent valuation methods my view is that contingent valuation cv is one tool for economic analysis that offers unique opportunities to clarify the preferences of the public for environmental economic policy and management tradeoffs i look to the lab for two reasons i the lab offers opportunities to examine the assumptions and techniques of cv and ii the lab offers an alternative approach to conducting cv my intention is to stimulate thinking on the scope of the lab s value for cv research and to stimulate use of the

digit preference in cps unemployment data abstract in analyses of cps unemployment duration data it is necessary to smooth the observed responses prior to inference to accommodate the effects of digit preference in this note i show that popular methods of smoothing have significant effects on estimates of expected duration the time series properties of this statistic are less severely affected

moral dimensions of the wta wtp disparity an experimental examination abstract contrary to welfare economic theory empirical evidence suggests that the amount of money people are willing to accept wta to forego a commodity will generally exceed the amount of money they are willing to pay wtp to gain the commodity this paper undertakes an experimental examination of the wta wtp disparity using conventional and ecologically produced eggs the results of this experiment reveal that the difference between the mean wtp and wta for conventional eggs is negligible while the mean wta is more than 1 5 times higher than the mean wtp in the case of ecological eggs an explanation for this result is offered following the boyce et al boyce r b brown t c mcclelland g h peterson g l schulze w d 1992 an experimental examination of intrinsic values as a source of the wta wtp disparity am econ rev 82 1366 1373 notion that an asymmetrical assignment of moral responsibility may cause wta to exceed wtp by comparing the two studies a tentative conclusion is that the valuation disparity is likely to increase with a corresponding increase in the degree of assigned moral responsibility

preference anomalies preference elicitation and the discovered preference hypothesis there is wide ranging evidence much of it deriving from economics experiments of anomalies in behaviour that challenge standard preference theories this paper explores the implications of these anomalies for preference elicitation methods because methods that are used to inform public policy such as contingent valuation are based on standard preference theories their validity may be called into question by the anomaly data however on a new interpretation these anomalies do not contradict standard theory but are errors in stated preference that can be expected to disappear as people become more experienced in relevant decision environments we explore the evidence for this interpretation and what implications follow for preference elicitation methodology

separations sorting and cyclical unemployment abstract this paper establishes a new fact about the compositional changes in the pool of unemployed over the us business cycle using microdata from the current population survey for the years 1962 2012 it documents that in recessions the pool of unemployed shifts toward workers with high wages in their previous job and that these shifts are driven by the high cyclicality of separations for high wage workers the paper finds that standard theories of wage setting and unemployment have difficulty in explaining these patterns and evaluates a number of alternative theories that do better in accounting for the new fact jel e24 e32 j31 j63 j64

a portfolio view of consumer credit abstract to compute risk adjusted returns and gauge the volatility of their portfolios lenders need to know the covariances of their loans returns with aggregate returns we use unique credit bureau data to measure individuals covariance risk i e the covariance of their default risk with aggregate consumer default rates and more generally to analyze the distribution of credit including the effects of credit scores we find significant heterogeneity in covariance risk across consumers also the amount of credit they obtain significantly increases with their credit scores and decreases with their covariance risk especially revolving credit though the effect of covariance risk is smaller

market experience eliminates some anomalies and creates new ones we report two experiments which investigate whether experience of decision making in repeated markets purges behaviour of preference reversals we investigate two behavioural mechanisms that may be shaping bids in repeated auctions a tendency to adjust bids towards previously observed market prices and a tendency to reduce bids following bad market outcomes we find little support for the former but strong support for the latter also whilst just enough market exposure eliminates the typical preference reversal phenomenon continued exposure fosters the mirror image anomaly therefore although market experience shapes behaviour in our experiments it does not generally promote consistency with standard preference theory

are adults better behaved than children age experience and the endowment effect we find that large increases in age do not reduce the endowment effect supporting the hypothesis that people have reference dependent preferences which are not changed by repeated experience getting and giving up goods

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

measuring the covariance risk of consumer debt portfolios abstract the covariance risk of consumer loans is difficult to measure due to high heterogeneity using the chilean household finance survey i simulate the default conditions of heterogeneous households over distinct macro scenarios i show that consumer loans have a high covariance beta relative to the stock market and bank assets banks loan portfolios have very different covariance betas with some banks being prone to high risk during recessions high income and older households have lower betas and help diversify banks portfolios households covariance risk increases the probability of being rejected for credit and has a negative impact on loan amounts

learning and the dynamics of consumer unsecured debt and bankruptcies during the great moderation the consumer unsecured debt to income ratio nearly doubled and the personal bankruptcy filing rate more than quadrupled this historically tranquil period ended in 2008 with a severe recession and a protracted credit crunch we develop a theory of learning in which consumers and lenders adjust their beliefs about the riskiness of the economic environment over time in response to the realized sequence of aggregate shocks and then embed it into an otherwise standard quantitative model of consumer default simulations of the model suggest that learning can explain as much as half of the recent boom and bust cycle in consumer unsecured debt and a modest fraction of the rise in bankruptcy filings prior to 2005

tests of market outcomes with asymmetric valuations of gains and losses smaller gains fewer trades and less value abstract the pervasive finding that individuals value losses more than gains suggests that actual gains from trade and numbers of market exchanges may well be much smaller than would be the case if people s buying and selling prices were equivalent as normally assumed the results of two sets of costless market simulations using actual gain and loss valuations show that the actual gains from exchange and trade volumes are less than half of those expected with conventional assumptions and that completion of all pareto efficient exchanges fail by wide margins to shift entitlements to those willing to pay the most for them these findings suggest the valuation disparity has significant welfare implications and may be a major cause of market stickiness

macroprudential and monetary policies implications for financial stability and welfare in this paper we analyze the implications of macroprudential and monetary policies for business cycles welfare and financial stability we consider a dynamic stochastic general equilibrium dsge model with housing and collateral constraints a macroprudential rule for the loan to value ratio ltv which responds to credit growth interacts with a traditional taylor rule for monetary policy we compute the optimal parameters of these rules both when monetary and macroprudential policies act in a coordinated and in a non coordinated way we find that both policies acting together unambiguously improves the stability of the system in both cases this interaction is welfare improving for the society especially in the case of the non coordinated game there is though a trade off between borrowers and savers however borrowers can compensate the saver s welfare loss view the mathml sourcela kaldor hicks to achieve a pareto superior outcome

an empirical analysis of personal bankruptcy and delinquency this article uses a new dataset of credit card accounts to analyze credit card delinquency personal bankruptcy and the stability of credit risk models we estimate duration models for default and assess the relative importance of different variables in predicting default we investigate how the propensity to default has changed over time disentangling the two leading explanations for the recent increase in default rates a deterioration in the risk composition of borrowers versus an increase in borrowers willingness to default due to declines in default costs even after controlling for risk composition and economic fundamentals the propensity to default significantly increased between 1995 and 1997 standard default models missed an important time varying default factor consistent with a decline in default costs debt issued by consumers is an understudied asset class there has been particularly little academic study of recent trends in default on this debt between 1994 and 1997 the number of personal bankruptcy filings in the united states rose by about 75 the 1 35 million filings in 1997 represented well over 1 of u s households delinquency rates on credit cards rose almost as sharply federal reserve bank of cleveland 1998 the resulting losses to lenders amounted to a sizable fraction of the interest payments they collect potentially raising the average cost of credit these trends in default both in bankruptcy and delinquency are especially surprising in light of the strong economy over the period they provide an unusually rich source of variation to test the stability of models that forecast personal default and of credit risk models more generally there are two leading explanations for these trends first the risk composition of borrowers might have worsened under the risk effect less

comparing open ended choice experiments and experimental auctions an application to golden rice we use two experimental valuation methods to estimate consumer demand for genetically modified golden rice the first is an open ended choice experiment oece where participants name the quantities of golden rice and conventional rice demanded at each of several price combinations one of which will be randomly chosen as binding this allows us to estimate market demand by aggregating demand across participants this estimate of market demand also allows us to estimate own price elasticity and consumer surplus for golden rice comparing willingness to pay wtp estimates from the oece with those from a uniform price auction we find that oece wtp estimates exhibit less affiliation across rounds and the effects of positive and negative information under the oece are more consistent with prior expectations and existing studies we also find that while auction wtp estimates more than double across five rounds oece wtp estimates are stable across rounds and are always roughly equal to those from the final auction round

the financial accelerator in an evolving credit network we model a credit network characterized by credit relationships connecting i downstream d and upstream u firms and ii firms and banks the net worth of d firms is the driver of fluctuations the production of d firms and of their suppliers u firms in fact is constrained by the availability of internal finance proxied by net worth to the d firms the structure of credit interlinkages changes over time due to an endogeneous process of partner selection which leads to the polarization of the network at the aggregate level the distribution of growth rates exhibits negative skewness and excess kurtosis when a shock hits the macroeconomy or a significant group of agents in the credit network a bankruptcy avalanche can follow if agents leverage is critically high in a nutshell we want to explore the properties of a network based financial accelerator

why did the average duration of unemployment become so much longer there has been a substantial increase in the average duration of unemployment relative to the unemployment rate in the u s over the last 30 years we evaluate the performance of a standard job search model in explaining this phenomenon in particular we examine whether the increase in within group wage inequality and the decline in the incidence of unemployment can account for the increase in unemployment duration the results indicate that these two changes can explain a significant part of the increase over the last 30 years although the model fails to match the behavior of unemployment duration during 1980s

consumer s surplus without apology the purpose of this paper is to settle the controversy surrounding consumer s surplus and by so doing to validate its use as a tool of welfare economics i will show that observed consumer s surplus can be rigorously utilized to estimate the unobservable compensating and equivalent variations the correct theoretical measures of the welfare impact of changes in prices and income on an individual i derive precise upper and lower bounds on the percentage errors of approximating the compensating and equivalent variations with consumer s surplus these bounds can be explicitly calculated from observable demand data and it is clear that in most applications the error of approximation will be very small in fact the error will often be overshadowed by the errors involved in estimating the demand curve the results in no way depend upon arguments about the constancy of the marginal utility of income consequently this paper supplies specific empirical criteria which can replace the apologetic caveats frequently employed by those who presently apply consumer s surplus moreover the results imply that consumer s surplus is usually a very good approximation to the appropriate welfare measures to preview below i establish the validity of these rules of thumb for a

leveraged network based financial accelerator abstract in this paper we build on the network based financial accelerator model of delli gatti et al 2010 modelling the firms financial structure following the dynamic trade off theory instead of the packing order theory moreover we allow for multiperiodal debt structure and consider multiple bank firm links based on a myopic preferred partner choice in case of default we also consider the loss given default rate lgdr we find many results i if leverage increases the economy is riskier ii a higher leverage pro cyclicality has a destabilizing effect iii a pro cyclical leverage weakens the monetary policy effect iv a central bank that wants to increase the interest rate should previously check if the banking system is well capitalized v an increase of the reserve coefficient has an impact similar to that produced by raising the policy rate but for the enlargement of bank reserves that improves the resilience of the banking system to shocks

willingness to pay and compensation demanded experimental evidence of an unexpected disparity in measures of value aside from possible income effects measures of the maximum amounts people will pay to avoid a loss and the minimum compensation necessary for them to accept it are generally assumed to be equivalent unexpectedly wide variations between these sums however have been noted in survey responses to hypothetical options this paper reports the results of a series of experiments that confronted people with actual money payments and cash compensations the results indicate that the compensation measure of value seems to exceed significantly the willingness to pay measure which would appear to call into some question various rules of entitlement damage assessments and interpretations of indifference curves

unemployment dynamics and duration dependence a major issue in the analysis of unemployment durations concerns distinguishing genuine duration dependence of the exit rate out of unemployment from unobserved heterogeneity we present a method for the nonparametric estimation of both phenomena designed to be applicable to time series data on aggregate outflows from different duration classes the model explicitly takes into account that individual exit rates are affected by the business cycle and by seasonal effects the method is applied to u s data we find diverging duration effects among black and white individuals however except for white males duration dependence is dominated by unobserved heterogeneity

bid sensitivity and the structure of the vickrey auction a research study explored a version of economist w vickrey s second price sealed bid auction used for the valuation of nonmarket goods the sensitivity of revealed values generated by this variation were examined a standard second price auction with repeated market trials was compared to a random nth price auction and a combinatorial private collection auction with sequentially revealed values results showed the consistency of revealed values in a low probability risk scenario