regret and feedback information in first price sealed bid auctions we investigate the effect of regret related feedback information on bidding behavior in sealed bid first price auctions two types of regret are possible in this auction format a winner of the auction may regret paying too much relative to the second highest bid and a loser may regret missing an opportunity to win at a favorable price in theory under very general conditions being sensitive to winning and paying too much should result in lower average bids and being sensitive to missing opportunities to win at a favorable price should result in higher bids for example the u s government s policy of revealing losing bids may cause regret sensitive bidders to anticipate regret and bid conservatively decreasing the government s revenue we test these predictions in the laboratory and find strong support for both

two bidder all pay auctions with interdependent valuations including the highly competitive case abstract we analyze symmetric two bidder all pay auctions with interdependent valuations and discrete type spaces relaxing previous restrictions on the distribution of types and the valuation structure we present a construction that characterizes all symmetric equilibria we show how the search problem this construction faces can be complex in equilibrium randomization can take place over disjoint intervals of bids equilibrium supports can have a rich structure and non monotonicity of the equilibrium may result in a positive probability of allocative inefficiency when the value of the prize is not common particular attention is paid to the case in which an increase in a bidder s posterior expected value of winning the auction is likely to be accompanied by a corresponding increase for the other bidder such environments are highly competitive in the sense that the bidder s higher valuation also signals that the other bidder has an incentive to bid aggressively

common trends the government s budget constraint and revenue smoothing abstract the requirement that the government s budget be balanced in present value terms is shown to be equivalent to the condition that government expenditures inclusive of interest tax receipts and seignorage be cointegrated the condition is in fact stronger requiring that the deficit inclusive of interest be stationary stationarity of the net of interest deficit is neither necessary nor sufficient for intertemporal budget balance however it does have implications for barro s tax smoothing hypothesis data for the period 1890 1986 are consistent with intertemporal budget balance but not with tax smoothing

sealed bids sunk costs and the process of competition how do firms recover precontract costs for example suppose 10 firms compete in a sealed bid auction for the right to explore and develop an offshore oil field each spends 500 000 to estimate the value of the field and to prepare its bid suppose this investigation reveals that the tract is worth approximately 20 million if sunk costs do not matter competition dictates that the winner must bid 20 million but if the winner is to recover its prebid costs the maximum offer can be only 19 5 million furthermore long run industry equilibrium considerations suggest that the highest bid will be only 15 million 20 million minus the total bid preparation costs of 5 million if competition forces firms to charge marginal cost why do firms ever invest in resources which become sunk in some industries inframarginal rents can be used to recover these costs however the example above as well as many others involves an all or none deci

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

equilibrium in auctions with entry the authors model entry incentives in auctions with risk neutral bidders and characterize a symmetric equilibrium in which the number of entrants is stochastic the presence of too many potential bidders raises coordination costs that detract from welfare the authors show that the seller and society can benefit from policies that reduce market thickness i e the relative abundance of buyers their analysis extends well known revenue equivalence and ranking theorems but also demonstrates that variations in the auction environment affect optimal policies e g reservation prices in ways not anticipated by models that ignore entry copyright 1994 by american economic association

why can t a woman bid more like a man abstract we investigate gender differences and menstrual cycle effects in first price and second price sealed bid auctions with independent private values in a laboratory setting we find that women bid significantly higher and earn significantly less than men do in the first price auction while we find no evidence of a gender difference in bidding or earnings in the second price auction focusing on the first price auction we find that while the gender gap in bidding and earnings persists over the entire course of the menstrual cycle bidding of contraceptive pill users follows a sine like pattern throughout the menstrual cycle with higher than average bidding in the follicular phase and lower than average bidding in the luteal phase in comparison pill non users have a flat bidding profile throughout the cycle

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

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

caps on political lobbying the cost of political campaigns in the u s has risen substantially in recent years for example real spending on congressional election campaigns doubled between 1976 and 1992 steven d levitt 1995 there are many reasons why increased campaign spending might be socially harmful first increased spending means increased fund raising which may keep politicians from their legislative duties 1 second a lobbyist who makes a large campaign contribution may have undue influence on electoral outcomes on the shaping of legislation or on the outcome of regulatory proceedings 2 that is the socially preferred candidate or legislation may not prevail likewise a lobbyist involved in a regulatory matter or a competition for a government contract may benefit unduly from a legislator s intervention 3 third a perception that campaign contributions purchase influence may lead to increased tolerance of corruption in the private sector a desire to control campaign spending has spawned many initiatives to limit both campaign contributions and spending beginning with the passage of the federal election campaign act feca political action committees pacs can contribute at most 5 000 per election to a candidate while individuals can contribute at most 1 000 restrictions have also been put on in kind contributions making it more difficult to circumvent these limits 4 while direct restrictions on campaign spending have proven difficult to implement recent initiatives aim to impose voluntary spending limits and stricter limits on contributions 5 despite the existing legislation and the proposals to limit contributions little is known about the impact of contribution limits on aggregate expenditures while it is intuitively appealing that aggregate expenditures would drop we challenge that intuition here we study a lobbying game and show that a cap on individual lobbyists expenditures may have the perverse effect of increasing aggregate expenditures and loweri this abstract was borrowed from another version of this item

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

producer attitudes toward peanut market alternatives an application of multivariate probit joint estimation attitudes of peanut producers toward different market alternatives were analyzed assuming the absence of the government support program a multivariate probit joint estimation model for ungrouped data was utilized to ascertain profiles of producers favoring private treaty markets and proposed organized markets the joint estimation model allows for and measures correlation among market alternatives for greater accuracy in profile analysis the analysis suggests considerable support for all three of the proposed organized markets however choice of alternatives should be considered by a group of potential traders selected on the basis of the profile analysis

optimal privatisation using qualifying auctions this article explores use of auctions for privatising public assets in our model a single insider bidder possesses information about the asset s common value bidders are privately informed about their costs of exploiting the asset due to the insider s presence uninformed bidders face a strong winner s curse in standard auctions we show that the optimal mechanism discriminates against the informationally advantaged bidder it can be implemented via a two stage qualifying auction in the first stage non binding bids are submitted to determine who enters the second stage which consists of a standard second price auction augmented with a reserve price

deficits government expenditures and tax smoothing in the united states 1929 1988 abstract barro s tax smoothing hypothesis tsh implies that the government runs a budget deficit whenever it anticipates the growth rate of national income to increase or the growth rate of its expenditure to decline we test this implication of the hypothesis by examining the implied cross equation restrictions on a vector autoregression var model using u s data for the period ranging from 1929 to 1988 our formal tests reject the hypothesis for the full sample period but cannot reject it for the post 1947 period further investigations show that the statistical rejection should be attributed to sharp differences in the statistical properties of the pre 1947 and the post 1947 data rather than the failure of the hypothesis itself

optimal auctions revisited in symmetric privately known values oral auctions with costly entry for bidders the seller can do no better than by committing ex ante to a reservation price and entry fees or subsidies which result in no fewer and at most one more bidders than a reservation price equal to the seller s value would in the absence of entry fees or subsidies journal of economic literature classification numbers d44 c72

selling at the farmgate or traveling to market using detailed survey data from uganda this article examines whether coffee producers sell to itinerant traders or directly to markets where they can get a higher price but must incur a transport cost we find that selling to the market is more likely when the quantity sold is large and the market is close by wealthy farmers are less likely to sell to the market possibly because the shadow value of their time is higher but if they have a large quantity of coffee for sale they are more likely to sell it to the market they are also more likely to travel to a distant market these findings are consistent with their better ability to pay for public transportation we find no evidence that the decision to sell at the farmgate is driven by a self control motive

testing the positive theory of government finance researchers characterizing optimal tax policies for dynamic economies have reasoned that tax rates should follow a random walk we conduct a frequency domain examination of u s tax rates and reject the hypothesis that the first difference in the series is white noise the source of the rejection is pronounced activity of tax changes at an eight year cycle regression analysis confirms the finding that there is a cyclical component to tax changes corresponding to changes in political party administration the results suggest that the positive theory of government finance needs to be refined to incorporate features of political equilibrium

non existence of monotone equilibria in games with correlated signals abstract participation in economic games such as auctions is typically costly which means that players potential bidders must consider whether to participate such decisions may be no less crucial than how to bid and yet the literature has been mostly concerned with bidding assuming an exogenously given number of bidders see krishna auction theory academic press new york 2002 landsberger and tsirelson correlated signals against monotone equilibria preprint ssrn 222308 social science research network electronic library may 2000 available online http papers ssrn com abstract 222308 have shown that fundamental results established in symmetric auction theory with correlated signals such as the existence of a monotone equilibrium may not hold if participation decisions are part of equilibrium the major goal of this paper is to illustrate and explain this result that may be considered counter intuitive given the emphasis placed on monotone equilibria in the auction literature

cognitive ability and earnings performance evidence from double auction market experiments abstract our goal in this paper is to understand how heterogeneity in people s cognitive ability leads to different market behavior and thus different market performance to do this subjects with heterogeneous working memory capacity wmc were placed in a double auction environment to compete against artificial traders we considered two treatments which differ in the artificial traders the artificial traders are truth telling in the first treatment but demonstrate adaptive trading behavior in the second one our results show that working memory capacity has a significantly positive effect on subjects market performance and the performance gap caused by cognitive ability while narrowing over time remains significant by the end of experiment we find that differences in subjects performance resulted from their behavior high wmc subjects were better at exploiting extra profit opportunities and avoiding unprofitable transactions and they tended to underbid more than those with lower wmc among the five constituent abilities of wmc we find that it is distinctive abilities which contribute to the overall significance in these two treatments for the treatment involving truth telling traders the relevant factor is the ability of simultaneous processing and storing information whereas for the treatment involving adaptive traders the only one that matters is subjects ability to coordinate elements into structures

independent private value auctions bidder behaviour in first second and third price auctions with varying numbers of bidders the symmetric equilibrium of third price auctions is characterized it makes a number of contrasting predictions relative to firms and second price auctions bids exceed private values the marginal effects on bids of an increase in private values is greater than one increasing numbers of bidders reduces bids and risk aversion requires bidding below the risk neutral nash equilibrium in the experiment bidders do not always satisfy the point predictions of the theory however the game theoretic models correctly anticipate at least directionally the important effects of the price rule changes copyright 1993 by royal economic society

unemployment insurance and male unemployment duration in canada a model of unemployment duration is estimated with weekly micro data on canadian men entitlement provisions in the unemployment insurance program and demand conditions are found to have a significant effect on the probability of leaving unemployment the probability of a worker leaving unemployment declines with the duration of unemployment holding unemployment insurance entitlement constant when entitlement is allowed to vary the probability of leaving first falls and then generally rises with unemployment duration these results are robust with respect to allowing for person specific unobserved heterogeneity and alternative specifications of duration dependence

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

emergent complexity in agent based computational economics abstract in this paper we shall review two kinds of emergent complexity in agent based computational economics ace the first kind is based on the complex systems initiated in the 1980s or even earlier by mathematicians and physicists whereas the second kind is based on the idea of complex adaptive systems composed of autonomous agents for which many representative works have been collected in rosser for the latter we shall go further to examine the two elements which have just recently been incorporated in agent based economic modelling namely intelligence and modularity this augmentation leads to the development of neurocognitive software agents which can guide the generation and direction of future ace studies with a multistage brain behaviour to emergency to brain behaviour approach

indicative bidding an experimental analysis indicative bidding is a practice commonly used in sales of complex and very expensive assets theoretical analysis shows that efficient entry is not guaranteed under indicative bidding since there is no equilibrium in which more qualified bidders are more likely to be selected for the final sale furthermore there exist alternative bid procedures that in theory at least guarantee 100 efficiency and higher revenue for the seller we employ experiments to compare actual performance between indicative bidding and one of these alternative procedures the data shows that indicative bidding performs as well as the alternative procedure in terms of entry efficiency while having other characteristics that favor it over the alternative procedure our results provide an explanation for the widespread use of indicative bidding despite the potential problem identified in the equilibrium analysis

who is behavioral cognitive ability and anomalous preferences in this paper we ask whether variation in preference anomalies is related to variation in cognitive ability evidence from a new laboratory study of chilean high school students with similar schooling backgrounds shows that small stakes risk aversion and short run discounting are less common among those with higher standardized test scores the relationship with test scores survives controls for parental education and wealth we find some evidence that elementary school gpa is predictive of preferences measured at the end of high school two laboratory interventions provide suggestive evidence of a possible causal impact of cognitive resources on expressed preferences jel j24 d14 c91

auctions and information acquisition sealed bid or dynamic formats the value of an asset is generally not known a priori and it requires costly investments to be discovered in such contexts with endogenous information acquisition which selling procedure generates more revenues we show that dynamic formats such as ascending price or multistage auctions perform better than their static counterpart this is because dynamic formats allow bidders to observe the number of competitors left throughout the selling procedure thus even if competition appears strong ex ante it may turn out to be weak along the dynamic format thereby making the option to acquire information valuable this very possibility also induces the bidders to stay longer in the auction just to learn about the state of competition both effects boost revenues and our analysis provides a rationale for using dynamic formats rather than sealed bid ones

regulating bidder participation in auctions regulating bidder participation in auctions can potentially increase efficiency compared to standard auction formats with free entry we show that the relative performance of two such mechanisms a standard first price auction with free entry and an entry rights auction depends nonmonotonically on the precision of information that bidders have about their costs prior to deciding whether to participate in a mechanism as an empirical application we estimate parameters from first price auctions with free entry for bridge building contracts in oklahoma and texas and predict that an entry rights auction increases efficiency and reduces procurement costs significantly

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

asymmetric tournaments equal opportunity laws and affirmative action some experimental results this paper assesses whether affirmative action programs and equal opportunity laws affect the output of economic agents more precisely we find that equal opportunity laws and affirmative action programs always benefit disadvantaged groups equal opportunity laws also increase the effort levels of all subjects and hence the profits of the tournament administrator usually the firm the effects of affirmative action programs depend on the severity of a group s cost disadvantage when the cost disadvantage is severe these programs significantly increase effort levels and hence profits the opposite is true when the disadvantage is slight

are state and provincial governments tax smoothing evidence from panel data the theory of debt examined here is known variously as efficient taxation over time optimal taxation over time the equilibrium approach to fiscal policy or tax smoothing tax smoothing results when an efficient government fixes tax rates today to minimize the costs of taxation over time given the long run constraint of a balanced budget if the marginal costs of taxation are an increasing function of the amount of resources taxed i e the tax rate then minimization of the total costs of taxation implies that the planned tax rate will be constant over time tax rate changes will be unpredictable and the tax rate will behave as a random walk efficient governments will not adjust tax rates to accommodate temporary changes in expenditures and revenues instead governments will minimize tax rate changes by tax smoothing smoothing tax rates implies that temporary changes in government spending and output result in deficits and surpluses therefore tax smoothing provides a theory of government debt the model is primarily due to barro 1 the goal of this paper is to contribute to our understanding of government debt the focus of this paper is on state and provincial debt or what is generally referred to as state and local debt nearly every state government in the united states has a balanced budget rule however balanced budget rules are not sufficient to rule out tax smoothing as state governments could build up budget surpluses in good times to smooth budgets over the business cycle if state governments are smoothing tax rates then their budget surpluses are endogenous contrary to the state governments provincial governments in canada have no balanced budget rules if provincial governments are smoothing tax rates it could explain the behavior of their budget deficits and surpluses as shown by barro tax smoothing implies that the overall tax rate behaves as a random walk and the tax rate would be a nonstationary time series with a unit root this study examines the tax smoothing hypothesis in two ways first the random walk implication is examined directly by testing the null hypothesis that the tax rate time series has a unit root second if the tax rate behaves as a random walk then changes in the tax rate should be unpredictable from past information if past information can predict tax rate changes this would provide evidence in favor of an alternative hypothesis a rejection of tax smoothing suggests that state and provincial tax rates respond to current

anticipated loser regret in third price auctions abstract losing the auction at an affordable price generates loser regret in third price auctions if bidders anticipate loser regret then in line with the experimental findings in a symmetric equilibrium the bids are more than the risk neutral nash equilibrium

the determinants of the public debt in the united states 1953 1978 barro claims that since the public rationally forecasts and discounts future taxes government debt does not represent net wealth to the public and therefore does not affect any real economic variables then why are there ever deficits barro has presented a theory of optimal deficits based on intertemporal tax smoothing the theory predicts that nominal debt grows in proportion to anticipated inflation varies contracyclically with respect to real income cycles and varies procyclically with respect to war cycles barro tested his theory using annual american data for 1922 76 and found weak support for his theory this paper reexamines barro s tests using quarterly american data for 1953 q1 to 1978 q4 and finds stronger support for barro s theory than barro found using annual data this paper also concludes that state and local governments do not engage in tax smoothing behavior probably due to considerations of migration and that the debt held by the central bank should be included in the definition of public debt

rent seeking with regretful agents theory and experiment abstract we investigate both theoretically and experimentally the role that information disclosure has on behavior in all pay environments in which all agents must exert costly effort but only the winner is rewarded through the lens of all pay auctions we show that bidders who have regret concerns when they lose an auction may alter their bids whether or not information about the winning bid is disclosed all losing bidders regret not bidding 0 however when feedback on the winning bid is provided those bidders who lost at an affordable price may regret not bidding more we show that the former effect causes bidders to lower their bids while the latter effect causes bidders to raise their bids our experimental results indicate overbidding whether or not the winning bid is disclosed to losing bidders however disclosing the winning bid leads to even more aggressive bidding increases revenues decreases the frequency of dropouts and also leads to more efficient allocations thus our results show that information disclosure is a powerful tool that mechanism designers may wish to exploit to extract more rents in all pay environments

evaluating the econometric evaluations of training programs with experimental data this paper takes the results of an employment and training program thatwas run as a field experiment in which the participants were randomlyassigned into a treatment or a control group and compares these results to the estimates that might have been produced by an econometrician who evaluated the program using the same econometric procedures that have been used in the program evaluation literature this comparison shows that many of these econometric procedures fail toreplicate the experimentally determined results and suggests that researchers should be aware of the potential for specification errorsin other nonexperimental evaluations copyright 1986 by american economic association

information and conspiracy in sealed bid auctions abstract this paper examines the allocative properties of the sealed bid institution when different aspects of the available information to bidders are considered specifically we examine a the effect on price determination in repeated sealed bid auctions of post auction revelation of losing bids and b the effect on price determination when conspiratorial discussions are allowed

a comparison of naive and experienced bidders in common value offer auctions a laboratory analysis laboratory economics experiments typically use financially motivated students as subjects an ongoing issue is whether this is an appropriate subject pool since the students are typically inexperienced in the types of decision making required of them in the lab this paper addresses this issue in the context of common value offer auctions as we compare the behaviour of experienced business executives in the construction contract industry experts with that of naive student subjects results of previous research of this sort have been equivocal in some cases experts make the same errors as novices in other cases they do not hogarth and reder i987 a series of sealed bid common value offer auctions in which bidders compete for the right to supply an item of unknown cost were conducted inherent to common value auctions cvas is an adverse selection problem which may result in below normal or negative profits the winner s curse experimental studies have documented the presence of the winner s curse with financially motivated student subjects in high price demand side auctions kagel et al i986 kagel and levin i986 the experiments reported here generalise these earlier studies from bid to offer auctions also in employing offer auctions we establish a setting with which our experts are familiar thus allowing their experience the best chance to manifest itself

the optimal allocation of prizes in contests we study a contest with multiple not necessarily equal prizes contestants have private information about an ability parameter that affects their costs of bidding the contestant with the highest bid wins the first prize the contestant with the second highest bid wins the second prize and so on until all the prizes are allocated all contestants incur their respective costs of bidding the contest s designer maximizes the expected sum of bids our main results are 1 we display bidding equlibria for any number of contestants having linear convex or concave cost functions and for any distribution of abilities 2 if the cost functions are linear or concave then no matter what the distribution of abilities is it is optimal for the designer to allocate the entire prize sum to a single first prize 3 we give a necessary and sufficient conditions ensuring that several prizes are optimal if contestants have a convex cost function

entry into winner take all and proportional prize contests an experimental study this experiment compares the performance of two contest designs a standard winner take all tournament with a single fixed prize and a novel proportional payment design in which that same prize is divided among contestants by their share of total achievement we find that proportional prizes elicit more entry and more total achievement than the winner take all tournament the proportional prize contest performs better by limiting the degree to which heterogeneity among contestants discourages weaker entrants without altering the performance of stronger entrants these findings could inform the design of contests for technological and other improvements which are widely used by governments and philanthropic donors to elicit more effort on targeted economic and technological development activities

best of three contest experiments strategic versus psychological momentum abstract we conduct an experimental analysis of a best of three tullock contest intermediate prizes lead to higher efforts while increasing the role of luck as opposed to effort leads to lower efforts both intermediate prizes and luck reduce the probability of the contest ending in two rounds the patterns of players efforts and the probability that a contest ends in two rounds are consistent with strategic momentum i e a momentum generated due to strategic incentives inherent in the contest we do not find evidence for psychological momentum i e a momentum which emerges when winning affects players confidence similar to the previous studies of contests we find significantly higher efforts than predicted and strong heterogeneity in effort between the subjects

international evidence of tax smoothing in a panel of industrial countries a panel of industrial countries is examined for evidence of tax smoothing tax smoothing results when governments minimize tax distortions over time the model provides a positive theory of government debt and is due primarily to barro unit root tests are performed in panel data to test the null hypothesis of nonstationary tax rates panel regressions are then undertaken to test the null hypothesis that tax rate changes are unpredictable and test for evidence of an alternative hypothesis political and economic variables are examined for their ability to predict tax rate changes overall the results cannot reject the null hypotheses and support tax smoothing by national governments

the gender difference in the value of winning we design an all pay auction experiment in which we reveal the gender of the opponent using this design we find that women bid higher than men but only when bidding against other women these findings interpreted through a theoretical model incorporating differences in risk attitude and the value of winning suggest that women have a higher value of winning than men

the impact of being offered and receiving classroom training on the employment histories of disadvantaged women evidence from experimental data we address two questions using experimental data on disadvantaged women first what is the impact of being offered jtpa classroom training on the duration of unemployment and employment second what is the effect of actually participating in this training on the length of such spells belonging to the treatment group shortens unemployment spells but has no effect on employment spells actually participating in training has a larger positive effect on the exit rate from unemployment than the effect of simply being a member of the treatment group ignoring the endogeneity of actual training in estimation substantially underestimates its effect

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

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

rigging the lobbying process an application of the all pay auction textabstractin a world where a politician can explicitly auction off a prize to the high bidder the standard auction literature can be used to analyse political behavior the justice system however precludes politicians from explicitly selling the prize to the highest bidder thus politicians cannot let it become public knowledge that they are in the business of selling political favors an institution has emerged in political markets to overcome this constraint which are termed as lobbying lobbyists make implicit payments to the politician through campaign contributions if these up front payments were rebated to those failing to receive the prize it would be clear that the politician was selling favors this article has examined an interesting principle arising in all pay auctions this principle states that a politician wishing to maximize political rents may find it in his best interest to exclude certain lobbyists from participating in the lobbying process particularly lobbyists valuing most the political prize

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

auctions with anticipated regret theory and experiment this paper demonstrates theoretically and experimentally that in first price auctions overbidding with respect to the risk neutral nash equilibrium might be driven from anticipated loser regret felt when bidders lose at an affordable price different information structures are created to elicit regret bidders know they will learn the winning bid if they lose loser regret condition or the second highest bid if they win winner regret condition or they will receive no feedback regarding the other bids bidders in loser regret condition anticipated regret and significantly overbid however bidders in the winner regret condition did not anticipate regret jel d44

collusion as public monitoring becomes noisy experimental evidence this paper uses laboratory experiments to test the implications of the theory of repeated games on equilibrium payoffs and estimate strategies in an infinitely repeated prisoners dilemma game with imperfect public monitoring we find that subjects payoffs i decrease as noise increases and ii are lower than the theoretical maximum for low noise but exceed it for high noise under the assumption that the subjects strategy uses thresholds on the public signal for transition between cooperation and punishment states we find that the best fitting strategy simply compares the most recent public signal against a single threshold

pricing efficiency in centralized and noncentralized markets pricing efficiency in centralized markets is compared with that in noncentralized markets on the basis of a price formation model centrally discovered prices are hypothesized to adjust more slowly to equilibrium but to have lower unpredictable variability than noncentrally discovered prices these hypotheses are borne out strongly in market experiments mean squared error is found to be lower in centralized than in noncentralized trading suggesting centralized markets are the more price efficient

experience and gender effects in an acquiring a company experiment allowing for value messages this paper focuses on a bargaining experiment in which the privately informed seller of a company sends a value message to the uninformed potential buyer who then proposes a price for acquiring the company participants are constantly in the role of either seller or buyer and interact over 30 rounds with randomly changing partners in the other role we test how overstating the value of the company underpricing the received value message and acceptance of price offers are affected by experience and gender constellation like in our companion paper on single play di cagno et al 2015 we control via treatments for awareness of gender constellation one main hypothesis is that gender constellation matters but that the effects become weaker with more experience and that the main experience effects apply across gender constellations

implementing efficient multi object auction institutions an experimental study of the performance of boundedly rational agents abstract we study three alternative implementations of the vickrey multi unit demand auction vickrey s original static sealed bid auction and two dynamic ausubel auctions with and without public dropout information reported during the auction although implemented by a weaker solution concept behavior in the dynamic vickrey auction with the public dropout information comes significantly closer to the theoretical prediction of sincere bidding bidding one s valuations than either the static vickrey auction or the dynamic auction without dropout information this suggests a possible tradeoff between the simplicity and transparency of a mechanism and the strength of its solution concept when agents are still learning and or when players are not fully rational drawing on results from related single unit and multi unit demand auctions and the results of a new single unit demand auction experiment we provide important insights into the behavioral mechanism underlying the superior performance of the ausubel auction with feedback information

gender effects in private value auctions abstract in a two stage auction women are significantly more likely to go bankrupt than men bidding more aggressively than the men in both phases of the auction process

varieties of agents in agent based computational economics a historical and an interdisciplinary perspective in this paper we trace four origins of agent based computational economics ace namely the markets origin the cellular automata origin the tournaments origin and the experiments origin along with this trace we examine how these origins have motivated different concepts and designs of agents in ace which starts from the early work on simple programmed agents randomly behaving agents zero intelligence agents human written programmed agents autonomous agents and empirically calibrated agents and extends to the newly developing cognitive agents psychological agents and culturally sensitive agents the review also shows that the intellectual ideas underlying these varieties of agents cross several disciplines which may be considered as a part of a general attempt to study humans and their behavior with an integrated interdisciplinary foundation

who does dot respond to the agricultural resource management survey and does it matter the agricultural resource management survey is the primary annual source of information on u s farms but in a typical year one third of sampled farms do not respond we use census of agriculture data to study nonresponse to the survey and how it affects estimates in two econometric models despite larger farms responding less the coefficients estimated from the respondent subsample always fall inside confidence intervals based on draws from the full sample of respondents and nonrespondents although nonresponse bias can vary by application the findings suggest that bias is unlikely to undermine conclusions based on econometrics using respondent data

impulse balance equilibrium and feedback in first price auctions abstract experimental sealed bid first price auctions with private values in which feedback on the losing bids is provided yield lower revenues than auctions where this feedback is not given the concept of weighted impulse balance equilibrium which is based on a principle of ex post rationality and incorporates a concern for social comparison captures the data

financial decision making are women really more risk averse 40 males 33 females gain gambling gain domain loss gambling loss domain a contextual frames b abstract gambling frames studies the application of experimental methods provided stronger control of the economic environment in which decisions were made we elicited data which call into question the prevalence of stereotypic risk attitudes in financial decision making first we find that the comparative risk propensity of male and female subjects is strongly dependent on the financial decision setting second and more important we observe no gender differences in risk propensity when subjects face contextual decisions since in practice financial decisions are always contextual our results suggest that the above gender stereotype may not reflect true male and female attitudes toward financial risks i gender specific risk behavior an experimental design our experiment was designed to examine gender specific risk propensity in decisions relevant for investors and managers table 1 gives an overview of the experimental design in the main treatment we implemented risky choices in the form of investment and insurance decisions choice behavior in this treatment henceforth called the context treatment directly measures the risk behavior of male and female subjects in contextual financial decisions we also ran a control treatment in which the same risky choices were presented as abstract gambling decisions this control treatment henceforth called the abstract treatment allows us to validate the risk behavior induced by our experimental procedure in the light of the above mentioned gambling evidence in the context treatment subjects were confronted with risky choices in two different decision contexts subjects first had to complete a series of investment decisions they were then presented with a series of identical choices this time however framed as insur1 wealth effects from income differences outside the laboratory may still affect risk behavior in our experiment they are controlled for in our model 2 experimental instructions are available in german from the authors or in english from our web page www wif ethz ch publikationen htm ance decisions each investment and insurance decision incorporated a choice between a risky lottery and a certain payoff with the series of choices implemented in the two frames we elicited our subjects certainty equivalents for the same four risky lotteries l1 l2 l3 l4 in both contexts we implemented two frames in the context treatment in order to measure the risk propensity of subjects toward both perceived gains and perceived losses in both frames all possible payoffs for each decision were positive in the investment frame these payoffs were also presented as gains while in the insurance frame the same payoffs were presented as losses relative to an initial endowment therefore elicited certainty equivalents in the investment frame measure subjects risk propensities in the gain domain while certainty equivalents in the insurance frame measure risk propensity in the loss domain if in contextual financial decisions female subjects are generally more risk averse than men our results should display ceteris paribus lower female certainty equivalents in both the investment and insurance frames 3 the four lotteries l1 l2 l3 and l4 each had two possible outcomes payoffs in swiss francs 1 sfr a 0 60 and their probabilities were 30 sfr 6 10 sfr 6 30 sfr 2 10 sfr 2 30 sfr 6 10 sfr 6 and 50 sfr 2 20 sfr 2 respectively 4 experimental evidence suggests that individual risk propensity will vary systematically between the gain and loss domain daniel kahneman and amos tversky 1979 383 vol 89 no 2 gender and economic transactions 3y16 my68 mp 383 friday dec 10 08 20 am lp aer my68 figure 1 differences in mean certainty equivalents ce between male and female subjects by frame note certainty equivalents and male female differences are measured in swiss francs in the abstract treatment we confronted a different group of subjects with exactly the same risky decisions as those in the main treatment however as mentioned before all choices in this control treatment were framed as abstract gambling decisions again two frames were implemented in the gaingambling and loss gambling frames we measured the risk attitudes of subjects toward gambles in the gain and loss domain respectively subjects in both treatments were told in advance that one of their choices would determine their experimental earnings further all subjects completed a post experimental questionnaire which yielded information on each subject s disposable income this information is necessary to exclude wealth effects due to income differences outside the laboratory as an explanation of gender specific choice behavior

participation in auctions participation preparing offers in auction and procurement games e g bidding for spectrum rights or for control of corporations is very costly which calls for analyzing participation no less than how to play the games as part of equilibrium the result is a model with bi dimensional distribution of types as in jackson m o 1999 nonexistence of equilibria in auctions with both private and common values mimeo http www stanford edu jacksonm nonexist pdf and endogenous distribution of participants players with low production but high participation costs may decide not to participate forcing the auctioneer to pay higher than necessary prices to mitigate this phenomenon auctioneers may consider partially reimbursing participants for the costs they incur in preparing offers restricting attention to symmetric games we prove that the game we consider has a unique symmetric equilibrium with and without the reimbursement mechanism

asset markets as an equilibrium selection mechanism coordination failure game form auctions and tacit communication abstract in this paper we explore the possibility that asset markets provide a means of tacit communication which may allow subjects to coordinate on the payoff dominant equilibrium in an underlying coordination game we find that the existence of a market price for the right to play does communicate information about the equilibrium selection problem specifically behavior never converged to the efficient outcome when subjects were endowed with the right to participate but always converged to the efficient outcome when subjects purchased the right to participate journal of economic literature classification numbers c720 g120

theoretical and experimental analysis of auctions with negative externalities abstract we investigate a private value auction in which a single entrant on winning imposes a negative externality on two regular bidders in an english auction when all bidders are active regular bidders free ride exiting before price reaches their values in a first price sealed bid auction incentives for free riding and aggressive bidding coexist limiting free riding compared to the english auction we find substantial though incomplete free riding in the clock auction in first price auctions regular bidders bid more aggressively than the entrant and both bid higher than in auctions with no externality predictions regarding revenue efficiency and successful entry between the two auctions are satisfied

behavioral equilibrium in economies with adverse selection i propose a new solution concept behavioral equilibrium to study environments with players who are naive in the sense that they fail to account for the informational content of other players actions a behavioral equilibrium requires that i players have no incentives to deviate given their beliefs about the consequences of deviating ii these beliefs are consistent with the information obtained from the actual equilibrium play of all players and iii when processing this information naive players fail to account for the correlation between other players actions and their own payouncertainty i apply the framework to certain adverse selection settings and show that contrary to the received literature the adverse selection problem is exacerbated when naive players fail to account for selection more generally the main distinguishing feature of the framework is that in equilibrium beliefs about both fundamentals and strategies are jointly restricted consequently whether a bias may arise or not is determined endogenously in equilibrium jel c72 d82 a large literature presents evidence that psychological and cognitive biases aect people s be havior this evidence raises some questions what are the eects of these biases and can they persist at all in economic settings where people strategically interact with each other and have the opportunity to learn from their experience 1 in this paper i introduce a game theoretic equilibrium framework to study these questions in the context of a particular bias people s failure to take into account the informational content of other people s actions i apply the framework to a class of games that arises naturally in adverse selection settings and then show that the adverse selection

performance in competitive environments gender differences even though the provision of equal opportunities for men and women has been a priority in many countries large gender differences prevail in competitive high ranking positions suggested explanations include discrimination and differences in preferences and human capital in this paper we present experimental evidence in support of an additional factor women may be less effective than men in competitive environments even if they are able to perform similarly in non competitive environments in a laboratory experiment we observe as we increase the competitiveness of the environment a significant increase in performance for men but not for women this results in a significant gender gap in performance in tournaments while there is no gap when participants are paid according to piece rate this effect is stronger when women have to compete against men than in single sex competitive environments this suggests that women may be able to perform in competitive environments per se

the loser s curse if the value of a commodity is unknown a prospective buyer must realize that a bid based on an overestimate of its value is likely to be accepted in this situation merely finding out that one s bid is accepted may cause one to reduce the estimate of a commodity s value so winning an auction can bring a feeling of regret 1 acceptance of a bid is an informative event and failure to incorporate this contingent information into the bidding strategy can lead to excessive bids and subsequent losses a result widely known as the winner s curse 2 there is considerable anecdotal evidence that bidders for a prize of uncertain value fall prey to the winner s curse and persistent overbidding has also been observed in laboratory experiments 3 there is a second factor that can also induce overbidding the thrill of winning this raises the possibility that overbidding is due to a utility of winning instead of being the result of an irrational failure to anticipate the informational content of a bid s acceptance one way to distinguish these explanations is to examine a situation in which the winner s curse effect is neutralized to see if bids are still too high in order to neutralize the winner s curse we identify an opposing bias a situation in which a failure to anticipate the informational content of a bid s acceptance will cause one to bid below the optimal bid resulting in a loser s curse since the loser s curse produces underbidding its effect is the opposite of that arising from the winner s curse

u s states the medicaid program and tax smoothing this paper tests the tax smoothing theory by focusing on its implication that a change in permanent government spending should result in an equal sized change in the tax rate the effect of medicaid a state administered federal and state funded medical insurance program for the poor on state tax rates is investigated the medicaid program provides a natural experiment for this test as states are required to cover certain groups in order to receive federal matching money additionally during the 1980s a series of federal mandates greatly increased state medicaid expenditures two stage least squares is used on a panel of u s states 1978 1994 to test whether changes in permanent state medicaid expenditures resulted in equal sized tax rate changes tax smoothing as a positive theory of state government behavior is rejected additionally it is found that this rejection cannot be attributed to the stringency of balanced budget rules