a test of independence of discounting from quality of life the quality adjusted life years qaly model assumes quality and quantity of life can be multiplied into a single index and requires quality and quantity to be mutually independent which need not hold empirically this paper proposes a new test for measuring independence of utility of life duration from quality of life in a riskless setting we use a large representative sample of dutch citizens and include two health states generally considered better than dead btd and one health state considered worse than dead wtd independence cannot be rejected when comparing the btd health states but is rejected when comparing the btd states with the wtd state in particular utility of life duration becomes more concave for the wtd state this may suggest that independence holds only for btd health states this has implications for the qaly model and would require using sign dependent utility of life duration functions

loss aversion and learning to bid bidding challenges learning theories even with the same bid experiences vary stochastically the same choice can result in either a gain or a loss in such an environment the question arises of how the nearly universally documented phenomenon of loss aversion affects the adaptive dynamics we analyse the impact of loss aversion in a simple auction using the experienced weighted attraction model of learning our experimental results suggest that individual learning dynamics are highly heterogeneous and affected by loss aversion to different degrees apart from that the experiment shows that loss aversion is not specific to rare decision making

the winner s curse experiments with buyers and with sellers this paper explores the winner s curse phenomena as it was studied experimentally by kagel and levin experiments with the winner s curse are complicated by the fact that subjects can lose money and the experimenter has only a limited means of collecting it from them thus subjects enjoy only limited liability which has theoretical implications for behavior in the kagel and levin experiments subjects were removed from the bidders competition after losses reached a predetermined value this experimental procedure has unknown implications for the results so ambiguity exists about whether the winner s curse was actually observed in this study their results were replicated in an environment in which subjects were not removed the case in which competitors are sellers is also studied bankruptcy cannot be a problem in sellers competition in both cases the winner s curse is observed thus the limited liability cannot be an explanation for the phenomenon reported by kagel and levin in addition the paper examines the bidding behavior of all individuals and shows that this behavior does not fit any of the tested theories either on the aggregate or individual level the winner s curse did not disappear over time during the conduct of the research

measuring discounting without measuring utility we introduce a new method to measure the temporal discounting of money unlike preceding methods our method requires neither knowledge nor measurement of utility it is easier to implement clearer to subjects and requires fewer measurements than existing methods

winner s curse without overbidding abstract we report the results of a series of second price auction experiments where each bidder s signal is given by a normally distributed value plus a normally distributed error while bidders values differ in one treatment they are the same in another which allows for a direct test of the winner s curse irrespective of confounding factors bidders may also fall prey to a news curse when they do not sufficiently take into account that signals and errors are correlated we find that the effects of the winner s curse are mitigated by a news curse and loss or risk aversion

goodwill can hurt a theoretical and experimental investigation of return policies in auctions abstract will generous return policies in auctions benefit bidders we investigate this issue using second price common value auctions theoretically we find that the symmetric bidding equilibrium is unique unless returns are free and when returns are free there exist multiple equilibria with different implications for sellers moreover more generous return policies mitigate the winner s curse but also push the bids higher thus hurting bidders by eroding their surplus in the experiment bids increase and bidders earnings decrease with more generous return policies as predicted with free returns many bidders bid above the highest possible value subsequently returning the item regardless of value though consistent with equilibrium behavior this is not optimal for sellers

skills in the marketplace market efficiency social orientation and ability in a field based experiment abstract neoclassical economic theory predicts that markets will clear leaving little or no marginal gains from trade laboratory experiments have largely confirmed this prediction though the results of recent field experiments have been mixed especially in developing countries i create a multiround trading market in uganda to explore the efficiency of trading and test whether traders personal traits are associated with market efficiency and individual bargaining success to test the effects of individual traits i utilize data on measures of the traders human and physical capital risk and time preferences and social orientation specifically pro and antisocial behavior and aggression i find that the buyers and sellers relative levels of social orientation and human capital are associated with levels of market efficiency within rounds measures of social orientation however are less associated with individual success i also find that rents obtained in the experiment are strongly associated with the wealth levels of participants two years later but this association is limited to those who were randomly assigned to be buyers in the experiment i present evidence that this association is driven by greater buyer bargaining ability

on negative time preferences abstract survey data show that subjects positively discount both gains and losses but discount gains more heavily than losses this holds for monetary and non monetary outcomes these results do not confirm the findings of two earlier studies about negative time preferences for non monetary outcomes

the effect of carbon tax on farm income comment olale et al environ resour econ 605 623 2019 argue that the introduction of a carbon tax substantially reduced farm income in the canadian province of british columbia in this comment we raise serious concerns with their data empirical methods and theory most importantly olale et al 2019 assume that the difference in farm income between british columbia and the rest of canada would have remained constant over time without the introduction of the carbon tax we provide evidence that this is unlikely to be true and show that their results disappear when we account for differential trends we conclude that the estimates in olale et al 2019 do not represent the effect of a carbon tax on farm income

do auctions induce a winner s curse new evidence from the corporate takeover market abstract we contrast the winner s curse hypothesis and the competitive market hypothesis as potential explanations for the observed returns to bidders in corporate takeovers the winner s curse hypothesis posits suboptimal behavior in which winning bidders fail to adapt their strategies to the level of competition and the amount of uncertainty in the takeover environment and predicts that bidder returns are inversely related to the level of competition in a given deal and to the uncertainty in the value of the target our measure of takeover competition comes from a unique data set on the auction process that occurs prior to the announcement of a takeover in our empirical estimation we control for the endogeneity between bidder returns and the level of competition in takeover deals controlling for endogeneity we find that the returns to bidders are not significantly related to takeover competition we also find that uncertainty in the value of the target does not reduce bidder returns related analysis indicates that prestigious investment banks do not promote overbidding analysis of post takeover operating performance also fails to find any negative effects of takeover competition as a whole the results indicate that the breakeven returns to bidders in corporate takeovers stem not from the winner s curse but from the competitive market for targets that occurs predominantly prior to the public announcement of bids

efficiency in auctions with private and common values an experimental study this discussion has resulted in a publication in the american economic review 2002 92 3 625 43 auctions are generally not efficient when the object s expected value depends on private and common value information we report a series of first price auction experiments to measure the degree of inefficiency that occurs with financially motivated bidders while some subjects fall prey to the winner s curse they weigh their private and common value information in roughly the same manner as rational bidders with observed efficiencies close to predicted levels increased competition and reduced uncertainty about the common value positively affect revenues and efficiency the public release of information about the common value also raises efficiency although less than predicted

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

super experienced bidders in first price common value auctions rules of thumb nash equilibrium bidding and the winner s curse super experienced bidders have learned to overcome the winner s curse but still earn less than 50 of nash equilibrium profits subjects deviate from the complicated nash strategy employing piecew

on the existence of predatory pricing an experimental study of reputation and entry deterrence in the chain store game a single monopolist plays a sequence of eight periods against a series of different entrants there are two types of monopolists weak monopolists whose single period best response is to acquiesce after entry and strong monopolists whose dominant strategy is to fight entry data show high levels of predatory pricing defined as weak monopolists fighting all entrants in early periods both with and without experimenter induced strong monopolists we reject a number of predictions of the asymmetric information sequential equilibrium model of kreps and wilson 1982 and find important deviations from more general sequential equilibrium models as well

the effect of shill bidding upon prices experimental evidence this paper explores through a series of experiments the effect of shill bidding upon revenues and prices in auctions we study the practice of shill bidding in a common value framework our findings are consistent with the prediction that if bidders are aware of the possibility of seller participation in an auction profits will be reduced on average we also study factors that affect bidder and seller participation decisions shill bidding can alleviate the problem of the winner s curse by lowering the price and it can thus provide benefits to bidders

frames of reference and the quality of life asked to choose most people state confidently that they would rather be killed in an automobile accident than to survive a quadraplegic and so we are not surprised to learn that severely disabled people experience a period of devastating depression and disorientation in the wake of their accidents what we do not expect however are the speed and extent to which many of these victims accommodate to their new circumstances within a year s time many quadraplegics report the same mix of moods and emotions as able bodied people do there is also evidence that the blind the retarded and the malformed are no less happy than other people ads for the new york state lottery show participants fantasizing about how their lives would change if they won i d buy the company and fire my boss people who actually do win the lottery report the anticipated rush of euphoria in the weeks after their good fortune followup studies done after several years however indicate that these people are no happier indeed are in many ways less happy than before as a young man fresh out of college i served as a peace corps volunteer in rural nepal my one room house had no electricity no heat no indoor toilet no running water the local diet offered little variety and virtually no meat and yet at no time during my two year stay in nepal did i experience a sense of material deprivation on the contrary my monthly stipend of 40 was much more than most others in my village had and with it i experienced a feeling of prosperity that i have recaptured only in recent years these observations illustrate the critical role of context as a determinant of human satisfaction the neoclassical economic model of choice abstracts from context saying that utility depends only on the level of consumption consumption levels obviously are important and the neoclassical model performs reasonably well in many instances and yet its narrow focus misses something important to predict people s behavior to draw inferences about their well being or to make intelligent policy decisions we must not only know the relevant levels of consumption but also have an appropriate frame of reference within which to evaluate them

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

the effect of carbon tax on farm income evidence from a canadian province british columbia bc introduced north america s first carbon tax in 2008 an analysis of the impact of the bc carbon tax is of interest to various stakeholders in the jurisdiction where the tax was implemented other canadian provinces and other countries contemplating a carbon tax policy are looking for insights on how to optimize potential positive and negative consequences given that government agri environmental policies often emphasize farm level support and environmental performance there is interest in understanding the farm level impacts of the carbon tax the effect of the bc carbon tax on farm income and related production cost variables is investigated panel data from 2000 to 2015 are analyzed using both tabular and econometric approaches of the difference in difference method the results indicate that the carbon tax is associated with a decline in net farm income to receipts ratios ranging between 8 and 12 cents per dollar of farm receipts the analysis for costs to receipts ratios suggest that the carbon tax is directly related to higher commercial feed costs farm labour costs interest costs and depreciation costs results of the regression analysis indicate that all the carbon tax effects are highly statistically significant these findings can inform policy discussions about carbon tax effects on farmers

on the positive correlation between income inequality and unemployment abstract two papers published in this journal jantti 1994 and mocan 1999 among others find empirical evidence that increases in structural unemployment have a substantial aggravating impact on income inequality the main point of this work is to show that standard job search models can help us understand this empirical regularity as a byproduct of the analysis the paper also provides a closed form general expression that enables direct calculation of the gini coefficient of wage income inequality as a function of any arbitrary initial distribution of wage offers three numerical examples illustrate the results

the source of optimality in action it is well known that the nature of the information set and the axioms of rational choice are critical in determining the type of ranking on which agents are held to act in economic theory this paper argues that the concept of the optimising agent is also sensitive to the conception of the relation between a ranking of options facing an agent and concrete action what is termed the realisation process three conceptions of the realisation process are examined which are seen to lead to three quite distinct views on the role of agency the enabling conditions under which the concept of the optimising agent may be legitimately applied and the resulting domain of application of optimisation

learning in common value auctions some initial observations abstract inexperienced bidders in first price common value auctions suffer from a winner s curse losing money on average with experience bidders approximate the nash equilibrium the mechanisms underlying this adjustment are 1 a market selection effect as the most aggressive bidders are less likely to return for subsequent sessions and 2 players who lose money bid less experiential learning and those who would have lost money had they won the auction with the high bidder s signal bid less observational learning

selection bias demographic effects and ability effects in common value auction experiments inexperienced women along with economics and business majors are much more susceptible to the winner s curse as are subjects with lower sat act scores there are strong selection effects in bid function estimates for inexperienced and experienced subjects due to bankruptcies and bidders who have lower earnings returning less frequently as experienced subjects these selection effects are not identified using standard econometric techniques but are identified through experimental treatment effects ignoring these selection effects leads to misleading estimates of learning

anatomy of a crisis the causes and consequences of surging food prices although the potential causes and consequences of recent rising international food prices have attracted widespread attention many existing appraisals are superficial and or piecemeal this article attempts to provide a more comprehensive review of these issues based on the best and most recent research as well as on fresh theoretical and empirical analysis we first analyze the causes of the current crisis by considering how well standard explanations hold up against relevant economic theory and important stylized facts some explanations turn out to hold up much better than others especially rising oil prices the depreciation of the u s dollar biofuels demand and some commodity specific explanations we then provide an appraisal of the likely macro and microeconomic impacts of the crisis on developing countries we observe a large gap between macro and micro factors which when identifying the most vulnerable countries often point in different directions we conclude with a brief discussion of what ought to be learned from this crisis

6 revenue effects and information processing in english common value auctions an experiment analyzing behavior in english common value auctions is reported english auctions raise more revenue than first price auctions only when bidders do not suffer from a strong winner s curse agents employ other bidders dropout prices along with their private information as nash bidding theory predicts however a simple and natural signal averaging rule which does not require recognizing the adverse selection effect of winning the auction better characterizes the data than the nash rule monte carlo simulations using fiml estimates of the signal averaging rule predict a number of data characteristics not directly employed in the estimation procedure copyright 1996 by american economic association

structural unemployment cyclical unemployment and income inequality this is the first study that decomposes unemployment into its structural and cyclical components and investigates their impact on income distribution controlling for the influence of inflation increases in structural unemployment have a substantial aggravating impact on income inequality inflation has a progressive impact which is due to the unexpected component the study demonstrates that previous work failed to take into account the stochastic trend behavior of the variables consequently specifications used by previous research cannot predict the behavior of income shares after 1983 whereas the specification used by this paper generates accurate forecasts the results also indicate that a sustained gnp growth is not necessarily associated with an improvement in income inequality because sustained gnp growth can coexist with increased structural unemployment

cross game learning experimental evidence from first price and english common value auctions abstract experience in first price auctions improves performance in english auctions but experience in english auctions has no transfer value to first price auctions these results are discussed in terms of psychologists models of learning generalizability and the learning literature in economics

inexperienced and experienced players in an oligopolistic market game with minimal information we consider an oligopolistic market game in which the players are competing firms in the same market of a homogeneous consumption good the consumer side is represented by a fixed demand function the firms decide how much to produce of a perishable consumption good and they decide upon a number of information signals to be sent into the population in order to attract customers due to the minimal information provided the players do not have a well specified model of their environment given a simple mode of adaptive behavior which we showed in a previous paper explained the data relatively well our main objective here is to analyze whether experienced players behave differently to inexperienced players copyright 1999 by oxford university press

incentives in experiments a theoretical analysis experimental economists currently lack a convention for how to pay subjects in experiments with multiple tasks we provide a theoretical framework for analyzing this question assuming statewise mo

positive time preference the case for positive time preference is absolutely compelling unless there is an infinite time horizon with the expectation of unending technological advance combined with what we call drastically diminishing marginal utility this finding holds both in the positive and normative senses a corollary is that savings are interest elastic

impacts of climate policy on the competitiveness of canadian industry how big and how to mitigate competitiveness concerns have been at the forefront of climate policy debates in canada particularly as a result of its high energy intensity and significant exposure to international markets this paper uses a dynamic computable general equilibrium model to assess the likely impacts on sectoral competitiveness that would accompany efforts to meet greenhouse gas mitigation targets that have been set by the canadian government additionally it evaluates several design mechanisms that could be used to reduce the negative competiveness impacts associated with adoption of domestic climate policies the analysis suggests that several sectors would likely face significant competiveness challenges under a reference scenario in which permits are given to emitters in lump sum however it finds that competiveness impacts can be minimized by using output based recycling of permits or by using border tax adjustments

do workers prefer increasing wage profiles we present survey data challenging the assumption implicit in analyses of labor supply that all else being equal workers prefer declining over increasing wage profiles we test several explanations for our results including that a there is something special about wages e g their association with productivity as opposed to other types of payments that induces the preference for increasing wages b utility depends not only on absolute levels of consumption but also on changes in consumption over time and c respondents who prefer increasing wage profiles are irrational and would change their behavior if the rationale for preferring declining wages were explained

first price common value auctions bidder behavior and the winner s curse first price common value auctions bidder behavior and the winners curse john h kagel dan levin raymond c battalio and donald j meyer experimental auction markets are characterized by a strong winner s curse in early auction periods as high bidders consistently lose money failing to account for the adverse selection problem inherent in winning the auction with experience and bankruptcy on the part of the worst offenders subjects earn positive average profits but these are far below nash equilibrium predictions as a sizable minority of bids exceed the expected value of the item conditional on having the highest estimate of value individual bidding behavior is explored to identify the mechanism whereby market outcomes no longer display the worst effects of the winner s curse i introduction numerous occurrences of the winner s curse have been reported in bidding for items of uncertain value resulting in below normal or even negative average profits for bidders the winner s curse results from bidders failure to account for the adverse selection problem inherent in winning auctions for items of uncertain value capen clapp and campbell 1971 claim that the winner s curse resulted in low profits for oil companies in the 1960s in bidding on offshore oil and gas leases regarding corporate takeovers and mergers roll 1986 proposes a hubris hypothesis acquiring firms generally fall prey to the winner s curse paying too much on average for their targets he claims that from the samples he has observed the hubris hypothesis explains merger data as well as tax factors synergy or inefficient target management cassing and douglas 1980 find that many baseball players in the free agency market have been overpaid on account of the winner s curse and dessauer 1981 reports a similar finding of overbidding in auctions for the book publishing rights based on these occurrences it appears that many agents are not fully cognizant of the intricacies involved with bidding on alternatives that have uncertain worth the winner s curse results from the fact that although bidders may hold unbiased estimates of the auctioned item s value this estimate can be overly optimistic given that participants bids are influenced by their estimates of value in other words the winner s curse results from an adverse selection problem that bidders fail to account for fully in submitting their bids the existence of a winner s curse implies a breakdown of rational expectations on the bidder s part as discussed by milgrom 1981 and identifies a market that is out of equilibrium a winner s curse need not result from bidding on items with uncertain value provided proper adjustments are made one adjustment to the adverse selection problem is to deflate the expected value of the item and hence the bid before any action is taken for example cox and isaac 1984 show that agents who maximize expected utility will revise their expectations downward and submit bids that are strictly less than the expected value conditional on the event of winning when agents behave in this fashion a winner s curse does not result in the sense of bidders paying more on average than the items are worth this paper focuses on sealed bid auctions for objects of uncertain value a market institution for which theoretical predictions and empirical evidence concerning a winner s curse are mixed current theoretical development excludes the possibility of bidders paying more on average than the items are worth yet some empirical evidence in the sale of oil tracts as seen in capen clapp and campbell 1971 lohrenz and dougherty 1983 and mead moseidjord and sorenson 1983 suggests that the winner s curse may be present a series of experiments is designed and conducted in order to answer the following empirical research questions does the winner s curse exist in this auction framework and if it does what is its duration its relation to agent experience in the market and its breadth of impact across agents

unemployment and the size distribution of income the impact of changes in the level of unemployment on the u k size distribution of annual income is examined using cross section data increased unemployment is shown to have a discernible regressive effect however reductions in shares were not highly concentrated at the very bottom of the distribution many individuals affected by unemployment during the year are in households families not at the bottom of the distribution particularly because of the presence of other working members copyright 1986 by the review of economic studies limited

gain loss asymmetric stochastic differential utility abstract this study examines a gain loss asymmetric utility in continuous time in which the investor discounts their utility gain by more than the utility loss by employing the theory of stochastic differential utility the model allows an endogenously time varying subjective discount rate in addition the model can express various forms of utility functions including a version of the epstein zin utility under the model even if the state variables do not have any jump in their paths the optimal consumption wealth ratio and portfolio weight can change non smoothly

labour market structure and inequality a comparison of italy and the u s markets with rigid labour regulations and centralized wage setting are often thought to be inefficient but egalitarian using a model of off and on the job search and event history individual level data for italy and the u s we show that while the cross sectional wage distributions of young italian males are much more compressed than are the comparable distributions for young white u s males the estimated search model implies that the distribution of lifetime welfare is no more disperse in the u s than it is in italy our model implies that the high frequency of movements between labour market states leads to both a relatively equitable distribution of long run welfare in the u s and a high level of cross sectional inequality

is the agricultural industry spared from the influence of the australian carbon tax the australian agricultural sector provides food security for the nation and affects the livelihood of farmers and the development of rural communities this sector has been uneasy about the australian carbon tax scheme introduced in july 2012 although the government has exempted the agricultural sector from the scheme by employing a computable general equilibrium model and an environmentally extended social accounting matrix this article simulates the effects of different carbon tax policy scenarios the modeling results show that all agricultural sectors will be affected negatively but to differing degrees the household compensation policy will improve the performance of the poultry and fishing sectors while having opposite effects in the other agricultural sectors the inclusion of the agricultural industry into the carbon tax scheme will lead to a considerable further decrease in output employment and profitability in the agricultural sector and a significant further reduction in real gdp but a much larger emission reduction

a more efficient estimate of the effects of macroeconomic activity on the distribution of income the effects of unemployment and inflation on quintile shares of family income in the united states are estimated by means of generalized least squares inflation is found to have a significant progressive impact on the distribution of income the results also lend support to earlier findings regarding the regressive effects of unemployment copyright 1994 by mit press