The deadline for the most recent round of awards was February 15, 2017. The next round of applications will be due no later than August 15, 2017.
Please visit the Small Grants Program page to learn more.
The following research has been funded by the IFREE Small Grants program:
IFREE Proudly Announces Spring 2017 Small Grant Awards
“Unethical and Prosocial Behavior: The Role of Hedonic and Instrumental Social Image Concerns,” Fatemeh Momeni, University of Chicago, post doc
Engaging in prosocial behavior visible to others can create a “halo effect” which influences the judgment of others about unethical acts committed by the same individual. Through prosocial behavior, a misbehaving agent whose action is observed by a third party with (or without) the power to influence the agent’s payoff can create a halo effect and alter the judgment of the third party about his unethical choice, and consequently lower his potential punishment. The experimental design allows exploration of the extent to which various elements each contribute to the correlation between prosocial and unethical choices.
“Stability and Dissolution of Economic and Monetary Unions: an Experimental Investigation,” PI: Gabriele Camera, Professor, Chapman University
We seek to understand how countries form and dissolve economic and monetary unions when there are heterogeneous returns to cooperation (representing weak and strong countries). In this study subjects make decisions as countries; they experience environments in which there are returns to cooperation; they are allowed to vote on whether they will stay in a union. Various treatments examine how different distributions of returns to cooperation, monetary policies, and limits on entry/exit affect the returns and stability of unions.
“An Experimental test of Prediction Markets,” PI: Antonio Filippin, Associate Professor, University of Milan
Prediction markets are an increasingly called-upon tool for aggregating diffuse information. What can one really infer from the observed prices in such markets? Theoretically, this depends on the underlying risk attitudes of the traders and the distribution of their prior beliefs. This is the first study that has tried to directly measure trader beliefs and risk attitude in a lab setting in the context of these markets. In preliminary results, it is found that risk attitudes do not play a strong role in explaining the observed mispricing. Also, people’s beliefs are influenced by market prices, and where markets do not aggregate information well this actually leads to poorer quality posterior beliefs.
“Government Buyback Programs for Commodity Markets: An Experimental Investigation of the Subtle Effects of Floor Price Changes,” PI: Neslihan Uler, Assistant Professor, AREC Department, University of Maryland
This research examines the effect of price floors on trading and storage decisions in a dynamic market setting comprised of government, producers and consumers. The aim of the research is to explore how various nonbinding price floors, in environments where the possibility of negative shocks could push spot prices to the floor, affect behavior. The results could better inform interventionist policies in agricultural markets.
“Coordination Under Fear,” PI: Lauren Young, Assistant Professor, UC Davis
The authors use a coordination game to model citizens who could mobilize against a government regime. The players are uncertain about the regime’s strength, which determines the costs of revolting. Each of two players receives a private, noisy signal about the regime’s strength, and then players simultaneously choose whether to mobilize or abstain. The authors manipulate the emotion of fear by using a video from previous research, then test the effects of fear on citizens’ attempts to coordinate against the regime.
“Cursed Buyers in the Marketplace,” Lukas Wenner, post-doc, University of Cologne
The focus of this research is on markets where quality is known by sellers, but not buyers. The classic lemons result is that only low quality products will trade in equilibrium, but past experiments have found that buyers have a difficult time recognizing this. The design varies the number of buyers and sellers who are in the market (one of each or two of each) and who makes price proposals. The main point of the experiment is to see if competition will reduce the degree to which buyers are exploited.
“An Experimental Study of Matching Markets with Incomplete Information,” Leeat Yariv, Marina Aganov, and Ahrash Dianat, California Institute of Technology; Larry Samuelson, Yale.
Exchange in many markets involves two-sided matching processes: hospitals/interns, workers/employers, organ donors/patients, students/schools, Uber drivers/passengers. Applications use algorithms for efficient matching, based on each side’s rank order preference for the other. Theory assumes each has complete information on others’ preferences. But recent theory enables the prediction of final outcomes in match/rematch processes that are expected to emerge as preferences are revealed by decisions in repeat interactions. How would you test that prediction? In the field, we don’t know individual preferences for predicting final allocations. But in the lab, one can use payoffs to induce preferences, and vary payoff structures and initial allocations. In the baseline experiments, subjects know all others’ value types. In the incomplete information setting, all know firms’ value types, but workers’ value types are strictly private. With target prediction well defined, information and the sophistication requirement of firms’ decisions about workers are varied across treatments. By inaugurating the study of matching markets under incomplete information, this research holds promise for improving and expanding the many applications.
“Status and Trust in Representative Leaders: A Lab-in-the-Field Experiment,” Nor Izzatina Abdul Aziz, Abhijit Ramalingam, Robert Sudgen, University of East Anglia, UK.
The role of representative leadership in the setting of villages in rural Sarawak, Federation of Malaysia, is studied by investigating how the relative status rankings between representative leaders and their followers affect the level of mutual trust and its impact on a groups’ ability to achieve efficient outcomes. The experiment uses a novel modification of a public goods game. The research aims are to gain understanding of the relationship between naturally occurring prestige and trust and trustworthiness. Can NGOs and government agencies assist economic development in small-scale societies and discourage leadership from engaging in rent-seeking?
“Experiments on Social Safety Nets,” Peter DeScioli, Scott Bokemper, Stony Brook University.
Many workers face uncertain job markets and uncertainty about their income next year, month, or even tomorrow. Unemployed workers can request aid from peers or government sources but they might claim they need assistance when they do not. How can individuals decide whether a worker honestly needs help? Treatments in three experiments will vary whether the same partners interact repeatedly, with a partner of their choosing, or a new partner each period. We test how these different interaction protocols enable honest communication to help individuals insure each other against short-term hardship. Can reciprocity and partner selection promote honest signaling to achieve socially desirable outcomes? How can honest communication allow individuals to create a social safety net when help comes from other individuals or a central institution? What is the role of reciprocity in facilitating long run cooperative benefit to outweigh strategic short term benefit from defection? Understanding how people’s select choice can eliminate subtle cheating is a key challenge for understanding exchange.
“An Experimental Study of Matching Markets with Incomplete Information,” Leeat Yariv, Marina Aganov, and Ahrash Dianat, California Institute of Technology; Larry Samuelson, Yale.
Exchange in some important markets occurs through two-sided matching processes: matching hospitals with interns, workers with employers, organ donors with patients, children available for adoption with adoptive parents, and students with schools. Market design for these applications apply algorithmic procedures for efficient matching—say schools with students—based on one or each side’s rank order preference for the other side. The theoretical literature has dealt with the problem under the assumption that the participants have complete information on the preferences of others. But recent theory enables the prediction of final outcomes in match-rematch processes that are expected to emerge as preferences are revealed by decisions in decentralized repeat interactions. The theory, for example, might predict convergence to efficient stable outcomes in matching temporary workers with firms through an agency. But, how would you test that prediction? In the field, precise preferences cannot be readily and independently elicited or deduced for comparison with final allocations. In the lab, one can use payoffs to induce preferences, vary payoff structures and initial allocations (which define stable efficient outcomes). In the baseline experiments, subjects know all others’ value types. In the incomplete information setting, all know firms’ value types, but workers’ value types are strictly private. Hence, a target prediction is well defined; then, information and the sophistication requirement of firms’ decisions about workers is varied across treatments. By inaugurating the study of matching markets under incomplete information, this research holds promise for improving and expanding the many applications.
“Status and Trust in Representative Leaders: A Lab-in-the-Field Experiment,” Nor Izzatina Abdul Aziz, Robert Sudgen, University of East Anglia, UK.
This research will study the role of representative leadership in the setting of villages in a rural Sarawak, Federation of Malaysia, by investigating how the relative status rankings between representative leaders and their followers affect the level of mutual trust and the resulting impact on a groups’ ability to achieve efficient outcomes. The experiment will use a novel modification of a public goods game. This research will contribute to a better understanding of the factors that support or hinder trust relationships between groups involved in team production and their “representative leaders.” In particular, the research will aim to gain understanding of the relationship between naturally occurring prestige and trust and trustworthiness. Findings may possibly show how NGOs and government agencies can assist economic development in small-scale societies and discourage leadership from engaging in rent-seeking.
“Experiments on Social Safety Nets,” Peter DeScioli, Scott Bokemper, Stony Brook University.
Many workers face uncertain job markets and uncertainty about their income next year, month, or even tomorrow. Unemployed workers can request aid from peers or government sources but they might claim they need assistance even when they do not. How can individuals decide whether a worker honestly needs help? Treatments in three experiments will vary whether the same partners interact repeatedly, with a partner of their choosing, or a new partner each period. This research will test how these different interaction protocols enable honest communication to help individuals insure each other against short-term hardship. Can reciprocity and partner selection promote honest signaling to achieve socially desirable outcomes? How can honest communication allow individuals to create a social safety net when help comes from other individuals or a central institution? Many social relationships are maintained by reciprocity, wherein the long run benefit of cooperation outweighs the short-term incentives’ benefits they receive by defection. Understanding how people’s ability to change who they interact with can eliminate subtle cheating is a key challenge for understanding economic exchange.
“Strategic Investment: Do Executives Exploit the Market?”
Radovan Vadovic, Till Gross, Carleton University, Ottawa, Canada
The past fifty years of experimental research have shown that markets do an excellent job at aggregating information and allocating resources to their most productive uses. Occasionally we do observe signs of mispricing or insider manipulation. It is crucial to understand when markets have underperformed so that we are better prepared to deal with consequences of financial turmoil, such as what followed the real-estate bubble of 2008. This research concentrates on an argument by Brandenburger & Polak (1996), who show that in the presence of mispricing, firms’ executives (who are paid in part according to the stock price) may be able to exploit the market by investing strategically. When the stock is overpriced, they may invest too much; and vice- versa when the stock is underpriced. This typically leads to real economic losses. The argument relies on two key ingredients: (i) the market prices have to misrepresent firms’ fundamentals and (ii) at least part of executive compensation has to derive from the stock price (e.g., stock options or stock grants). In the past decade we have witnessed both – a major financial bubble and an unprecedented growth in the share of stock-price-based incentives. We propose to conduct the first empirical test of this conjecture by applying the methods of laboratory experimentation. In addition, we explore a promising possibility of mitigating the threat of strategic investment by restricting the share of stock-price-based incentives in managerial compensation. This will have implications for economic design and regulation of executive contracts.
“Experiments on Strategic Behavior in Two-Sided Matching Markets”
Marco Castillo, Ahrash Dianat, George Mason University
“Matching theory” has informed the design of institutions in areas as diverse as kidney exchange, entry-level labor markets, and school choice. These institutions often operate as centralized clearing houses, in which participants submit rank-order lists of their preferences and a particular algorithm calculates the final outcome, i.e., who is paired with whom in the final matching. There are some environments where agents on one side of the market have an incentive to misrepresent their preferences in order to bring about a more favorable outcome. In these situations the particular outcome that is finally implemented depends on agents’ ability to behave strategically either in isolation or as a group. Our work uses laboratory experiments to investigate whether the ability of agents to coordinate on misrepresenting their preferences in a particular fashion depends on features such as how profitable and safe it is to misrepresent and also the size of the market. We hypothesize that strategic behavior will be more likely to arise where it is more profitable and safer. In addition, we hypothesize that agents will coordinate on strategic behavior in small markets but not in large markets. However, we predict that coordination in large markets can be obtained by starting with small markets and incrementally adding players who are aware of the market’s history.
“Information Acquisition and Provision in School Choice”
Yan Chen, University of Michigan
In school choice in the real world, providing information on school test scores to low-income families has been shown to increase the fraction of parents choosing higher-performing schools. When students do not know their preferences over schools and information acquisition is costly, we show theoretically that, while both strategy-proof and non-strategy-proof mechanisms incentivize students to acquire information on their own ordinal preferences, which improves efficiency, non-strategy-proof mechanisms also induce students to acquire information on others’ preferences, which might be welfare reducing. We propose to test our theory of endogenous information acquisition in school choice in the laboratory, using two canonical mechanisms, the Boston mechanism, which is conducive to strategic manipulation, and the Deferred Acceptance mechanism, which is strategy-proof. We expect that students’ incentives to acquire information vary across mechanisms.
“The Market for Talent: Competition for Resources and Self Governance”
Abhijit Ramalingam, University of East Anglia; M.T. Aditya Srinivasan, Berklee College of Music; Brock V. Stoddard, University of South Dakota; and James M. Walker, Indiana University
Free-riding is a ubiquitous problem in social dilemmas and leads to severe and persistent losses in efficiency. Solutions proposed to raise cooperation levels within groups and teams include sanctioning or punishment and inter-group competition for rewards. These solutions are interventionist in that they change incentive structures to modify behavior. By contrast, we propose to examine the effectiveness of competition inherent in the production process which does not require the imposition of additional mechanisms, changes in the payoff/incentive structures or the intervention of designers. (For example, think of teachers at a particular public school as a team, delivering ‘education’ for the students. Suppose, however, that different schools compete for teachers who are free to move between schools in response to each school’s demand.) One way members could attract new members to their team is to increase their input (and hence their output), thus signaling higher earnings potential in their team. That is, interaction between teams in a naturally occurring ‘market for talent’ can itself provide a boost to team effort. Our experiment will examine competition in the market for talent where teams compete over the resources of a common member. To capture the dynamic nature of team composition, we will include treatments wherein members can ‘opt out’ of a team in favor of solo careers and where members can vote to ostracize team members.
“Asymmetric Sequential Auctions”
Ro’i Zultan, Ella Segev, Ben-Gurion University of the Negev
Auctions are all around us, from government procurement procedures to on-line platforms such as eBay. An auction designer—be it the government or an individual—seeks to achieve the best outcome in the auction. If the bidders in the auction are not evenly matched, competitive pressure is low and the auction may not yield the desired outcome. In our experiment the theoretical analysis suggests that it may be beneficial to give the weak bidder(s) an advantage in the form of allowing them to bid after observing the bid(s) of stronger player(s). This may not only increase expected revenue but also increase the weak bidder’s expected payoff and can thus serve as a tool to encourage participation of weak bidders. We study sequential auctions, in which two or three bidders place bids one after another, with all previous bids observable to the current bidder. Our experiments will test whether such sequential bidding is better suited to auctions with asymmetric bidders than simultaneous auctions, in which all bidders place their bids without knowing the others’ bids. We also test how sequential auctions fare when the auction designer only has partial information about who is the stronger and who is the weaker bidder. Specifically, we predict that identifying the strongest bidder—and placing this bidder first—is sufficient to obtain a satisfactory outcome in terms of revenue.
Auctions for Charity and For-Profit: A Field Experiment”
Joshua Foster, graduate student, Economics Department, University of Arkansas
This proposal addresses how best to raise money. This is the first field study comparing revenues and bidder behavior across charity and for-profit variants of four distinct auction formats. The study should advance understanding of bidder behavior and the motives underlying charitable giving, and should provide insights regarding the design and implementation of charitable auctions.
Testing the Causal Influence of Testosterone on Rent-Seeking and Competition in Humans
Colin Camerer, Division of the Humanities and Social Sciences, California Institute of Technology; Amos Nadler, Assistant Professor, Ivey Business, Western University, Ontario, Canada; Gideon Nave, PhD Student, Cal Tech.
Is there a causal effect of testosterone on behavior in rent seeking, risk taking and competition? The experimenters will administer testosterone or a placebo in a double blind protocol. The participants will then participate in rent seeking, competition and risk taking experiments. Will those with more testosterone be more competitive and risk taking?
Rockets and Feathers in Gas Markets—The Experimental Approach
Yaron Lahav, Assistant Professor, Ben-Gurion University of the Negev, Beer Sheva, Israel
The proposal examines the rockets and feathers phenomenon in experimental gas markets. Will prices fall more slowly than they rise following an exogenous shock? The study will examine the effects of introducing competition and information asymmetries between buyers and sellers. What are the factors affecting the speed of price responses in posted offer markets to changes in seller costs?
Strategic Delegation in Asymmetric Cost Duopolies: An Experimental Study
Chineze E. Christopher, PhD student, Purdue University
This project studies delegation and cost asymmetry in two-seller markets. The research asks: if owners optionally delegate production levels to managers, do they produce at the predicted level? This research aims to provide an experimental test on whether and how the strategic use of managers and managerial incentives influences rivalry among firms under asymmetric cost. In such a market, strategic delegation improves welfare but reduces the market power of the efficient firm—the efficient firm produces a larger fraction of demand at lower prices. However, since the efficient firm can profitably alter the payoffs to a greater extent than the inefficient firm can, it becomes dominant and its decision to delegate can be interpreted as exercising its market power. Results from this study should be relevant for antitrust policy in light of controversial market reorganizations—vertical integrations, mergers, acquisitions—likely to create cost asymmetries among firms.
Endogenous Institution Formation
David Kingsley, Assistant Professor, University of Massachusetts Lowell
Alleged market failure motivates the formation of institutions regulating individual behavior and enhancing welfare. Despite the ubiquity and importance of institutions little is known about their emergence. This experiment allows groups to choose both institutional deterrence and cost. To increase deterrence the group must incur increased cost, impacting individual relationships with formal institutions; e.g., to limit speeding or combat fraud, society has developed a variety of sanctioning institutions. These monitor behavior and administer legally agreed upon sanctions for observed infractions. If the institution is ineffective in altering behavior, then – absent corruption – theory suggests two options: additional resources to monitor behavior or increase sanctions. Consequently, higher sanction levels may be more efficient if fewer resources must be devoted to monitoring-enforcement. The experimental design examines these trade-offs to potentially inform public policy as to whether groups appear to always prefer efficiency, lower cost non-deterrent or higher cost institutions of deterrence. Experimental economics is uniquely capable of investigating the social formation of and behavior within formal institutions.
A Zero Cost Incentives Mechanism Against Free-riding: Field Experiments on Italian Local Transportation Systems
Marco Fabbri, PhD candidate and Erasmus Mundus Scholar at the European Doctorate in Law & Economics; Paola Nicola Barbieri, PhD candidate in Economics, University of Bologna; Maria Bigoni, Assistant Professor, Economics, University of Bologna
Previous research suggests that when people face probabilistic decisions, many choose as though they overestimate the value of low probability, high-stakes events. Indeed, Las Vegas is driven by the fact that people from many walks of life are willing to take gambles that on average are unfavorable, and which enable gambling houses to profit from supplying people with opportunities to immerse themselves in such risks.
Now consider the problem of improving the incentives of individuals to contribute to a public good, a facility available in common to all users. A naturally occurring example is the stock of king crab in a common property fishing ground that all fishermen are dipping into to harvest crabs. But there are artificial examples created by public policy. Thus, in Europe public transportation systems are available for all to use such that anyone can board and each is expected to voluntarily pay the fare. Free riders caught not paying are subject to penalty. The system works very imperfectly: there are lots of free-riders, revenue is reduced, and more of the cost of the facility is financed by taxpayers.
Are there better ways? Much research shows that carrots are often better than sticks in prodding people to do what they might otherwise not choose to do.
The hypothesis testing in this proposal is: will people contribute more in total to the public transportation facility if they can buy a lottery ticket when they board, as an alternative to voluntarily paying the fare? In effect, the street car becomes a mini-casino and the profits support the facility cost.
This field experiment will be conducted in Italy with the cooperation of a transportation company. The basic idea has huge potential for application to other common property resource problems, whether naturally or artificially created.
Eminent Domain and Efficient Land Assembly
Abel Winn and Matthew McCarter, George L. Argyros School of Business and Economics and Chapman University
Eminent domain explicitly abrogates free choice with the justification that free choice would fail to efficiently coordinate decentralized knowledge in the case of land assembly. The purpose of the research proposal is to compare the efficiency of land assembly under regimes of eminent domain vs. secure property rights.
Prior laboratory experiments have demonstrated that land assembly under secure property regimes is not perfectly efficient, though it is highly efficient in the presence of seller competition. It is tempting to conclude on these grounds that eminent domain is an economically justifiable policy. Yet we must remember that while experimental researchers have examined secure property rights and found imperfections, they have not examined eminent domain at all.
Society does not face the choice of imperfect markets versus perfect governments. This proposed study would provide more context in which to place our knowledge of inefficiency in land assembly. This study is a first to experimentally test the effectiveness of eminent domain at overcoming the holdout problem. This study could prove useful to policy makers. Knowing the strengths and weaknesses of eminent domain will be useful to state and local government in crafting their legal framework for land development.
An Experimental Investigation into the Success or Failure of Joint Ventures
Kyle Hyndman (School of Business and Economics, Maastricht University, Netherlands)
- Goal is to evaluate whether and when long-term contracts are preferable to short-term and vice-versa.
- What is the impact on output and profitability of contract duration in joint ventures under varying information conditions?
Creativity and Incentives
Gary Charness (Dept. of Economics, Univ. of CA Santa Barbara)
- Aim is to investigate two types of creativity: “inbox” (creativity for a clearly specified goal) vs. “blue-sky” (no ex-ante goal, just pure creativity of thinking outside the box).
- How may the two types of creativity be affected by financial incentives?
- How might corporate culture (cooperative vs. competitive) affect the two types of creativity?
- Read the research results
Ciril Bosch-Rosa (5th year PhD student, Univ. of CA Santa Cruz)
- Provides system for measurement of the ability to backwards induct and engage in level-k reasoning (how deeply do people take account of what others think) using online programs.
- Uses the new system to study the effect of such measures of backwards induction and level-k thinking as elements in bubble formation in asset markets.
Cost- sharing Allocation in Networks: An Experimental Study on the Choice of Mode of Transportation
Caiyun Liu, Vincent Mak, Amnon Rapoport (The Graduate School of Management, Univ. of CA Riverside and Cambridge Judge Business School)
- Study of individual choice among transportation networks as it is affected by cost sharing arrangements;
- The information conditions people have after the fact about whether they should have taken the action they did.
Correlation Neglect in Belief Formation
Benjamin Enke, Florian Zimmermann (Dept. of Economics, Institute for Applied Macroeconomics, Bonn, Germany)
- In markets where individual choice is aggregated based on information, how are the results affected by correlated information?
- Are beliefs distorted by individuals who fail to take into account correlation, and who infer too much from highly correlated information, thus leading to excessive optimism or pessimism?
- Read the research results
An Experimental Analysis of Speculation and Strategic Demand Reduction in Multi-Object Auction
Marco Pagnozzi, Universita di Napoli Federico II, Department of Economics
Krista Jabs Saral, Webster University Geneva, Department of Business and Technology
This work begins with the observation that in the real world, people may sell items they purchase in auctions afterwards. This observation hints at the possibility that people (speculators) who have no value for an object itself might try to purchase one in an auction in order to subsequently sell it. To investigate this, the researchers propose to have human subjects participate in a series of multi-object auctions, followed by a resale market, in which ‘chatting’ is permitted, to establish a price for reselling the object. The experimental manipulation consists of varying the number of agents in the auction and the outside options available to speculators (i.e., agents who have no value for the object being auctions.) The researchers hope to use their findings to understand bidders’ strategies in the presence of speculators.
Enforcing Compliance with Voluntary Agreements in the Absence of Strong Institutions: An Experimental Analysis
Todd L. Cherry, Appalachian State University, Department of Economics
David M. McEvoy, Appalachian State University, Department of Economics
The background for this project is international environmental agreements (IEAs) which can be understood as agreements surrounding public goods problems of particular natural resources. This project addresses the question of how compliance with such agreements can be enforced. The researchers propose to investigate this through laboratory studies. In the first stage of the games proposed, players can decide whether or not to join an agreement. Players who join pay a deposit. In the second state, players make contributions to the public good, and if a player complies with the agreement, his deposit is refunded (proportionally). The experimental design varies key parameters of the environment (e.g., whether all the subject have the same or different costs if they fail to comply with the agreement.) This work may contribute to understanding in the context of the perennial issue of solving for public goods resource problems regarding the regulatory environment which surrounds them, particularly in the area of international agreements.
Experimental Investigations of Alliance-building
Peter DeScioli, Departments of Psychology and Economics,Brandeis University
Peter DeScioli was awarded an IFREE Small Grant for his proposal “Experimental investigations of alliance-building.” The project examines human alliance-building in a laboratory environment in which participants can dispute over resources, recruit allies, and choose sides in other people’s disputes. The experiments will test predictions from theories about alliances, specifically that people will build alliances when disputes allow for side-taking, that alliance-building will equalize power across individuals, and that alliances will result in more costly disputes. The experiments will also vary the information available to participants about other participants’ side-taking decisions to test whether more complete information facilitates alliance formation. The findings will improve our understanding of how people choose sides in disputes, offering insight into how resources are distributed in strategic social environments where people take sides in other people’s conflicts. These insights in turn can illuminate a variety of complex human social behaviors such as friendship, gossip, and moral judgment.
An Experimental Inquiry into the Ecological Determinants of Property Rights
Erik O. Kimbrough, Assistant Professor of Economics, Simon Fraser University
Around the world, societies have developed extremely diverse systems of property rights to manage resources and reduce conflict. From rules governing access to common grazing lands to land titling rules, all property systems share certain fundamental features (e.g. delineating access rights and rules of transfer), but each particular instance differs in response to local circumstances. This project will explore the hypothesis that how each system differs is a predictable consequence of local ecological conditions, specific to the regions and resources over which rights are established. Using stylized laboratory experiments, in which these ecological conditions are subject to direct control, this project seeks to observe emergent institutional dynamics across various ecological settings in order to demonstrate the sensitivity of rules to the environment. Often development policy consists of manipulations intended to impose “good” institutions on less developed societies to align their policies with those that have proven successful in more developed countries. If, however, the choice of proper institution is contingent on ecological conditions, this may help to explain the failure of so many development initiatives to reap the promised gains.
BUBBLES AND TESTOSTERONE
Moana Vercoe, post-doctoral fellow at the Center for Neuroconomics Studies; Paul J. Zak, Founding Director of the Center for Neuroeconomics Studies and Professor of Economics, Psychology and Management, Claremont Graduate University
The vast majority of trades on the NYST are made by male institutional traders. In part this research has been designed to study the role testosterone might play in asset market bubbles, the kind of bubbles for which the sources are not clearly understood. This study combines elements of two studies previously conducted at the Center for Neuroeconomics Studies: one examining the role of testosterone in decision making in the trust, ultimatum and dictator games, and the other based on an experimental asset. It aims to test the effects of testosterone on the formation of asset bubbles (deviations from fundamental price) in a laboratory asset trading experiment. This study will be the first to directly manipulate testosterone levels in males and to relate this causally to asset prices, and may shed light in determining how testosterone influences risk taking and confidence in individuals.
POOLING IN AUCTIONS WITH RESALE: EVIDENCE FROM THE LAB AND FIELD
Michael K. Price, Department of Economics, University of Tennessee; Robert Hammond, Department of Economics, North Carolina State University
Investigators use an auction structure, and vary parameters of the auction to investigate a question from the real world relating to issues in land auctions conducted by the Nevada Bureau of Land Management (BLM) that in some auctions a number of bidders “pool” at the reserve price. The design varies three independent variables, the key one being whether or not there is the possibility of exchanging the objects on which people bid in a second phase. The other two independent variables are parameters (the reserve price, range of bidders’ values). The proposed research will use the institutional details of BLM auctions to design a series of laboratory experiments aimed at isolating the effect of resale opportunities on pooling at the reserve price. The laboratory setting will allow researchers to control key parameters – i.e., the distribution of values and associated reserve prices – that should theoretically influence pooling at the reserve price.
SPECIALIZATION AS A COORDINATION MECHANISM: A VIRTUAL WORLDS EXPERIMENT
Peter Twieg, graduate student in economics working with Professor Kevin McCabe, Kevin McCabe, Director of the Center for the Study of Neuroeconomics, GMU
This projects investigates specialization using “Second Life,” a virtual environment that allows unstructured interaction. It seeks to explore the possibility that the potential to specialize might carry more subtle benefits such as the creation of focal points which serve to facilitate the establishment of informal property norms in environments without secure property-rights regimes. A confirmation of the main hypothesis of this experiment should have implications that can be tested against historical data, which could perhaps provide some truly valuable insight into historical patterns of institutional development, and may serve to advance our understanding of the factors underlying the historical establishment of property rights in different real-world communities.
– SMALL VICTORIES: EXAMINING MARKET-DRIVEN SOLUTIONS IN SAVINGS AND DEBT REDUCTION EXPERIMENTS
Alexander L. Brown (Department of Economics, Texas A&M University), Joanna Lahey (Bush School of Government and Public Service, Texas A&M University)
This project is concerned with individuals’ savings decisions, specifically aimed at “suboptimal savings behavior;” that is, people who do not save “enough.” The phrase, “small victories,” refers to the idea that motivation to defer consumption can be enhanced by first successfully doing something small. To investigate this, subjects are faced with a set of unpleasant tasks, and in some cases, the tasks get larger if they are left uncompleted (simulating interest on debt). Do people choose to complete a small unpleasant task first—winning a “small victory” — and then work on the larger unpleasant task? Does ordering tasks in this way improve overall performance? This project has the potential for valuable insights.
– DICTATOR GAME GENEROSITY AND REAL WORLD LABOR MARKET OUTCOMES: THIRD WAVE OF A LONGITUDINAL STUDY
Catherine J. Weinberger (Independent Scholar affiliated with the University of CA Santa Barbara, Department of Economics, and ISBER)
In 2002, more than 1,800 students played a dictator game in which the Receiver was a charity. The researchers intend to relate behavior in this game to labor market outcomes. For instance, do people who play generously in a dictator game wind up with lower paying jobs? This grant will provide funding to run a wave of surveys to gather employment information, including educational attainment, salary, and job sector information. The project is an interesting attempt to link laboratory game behavior to outcomes in the real world.
– RELUCTANT PRO-SOCIALITY
Jason Dana (Assistant Professor, Psychology, University of Pennsylvania)
This proposal extends work that shows that people will ignore free information about others’ payoffs. Remaining “strategically ignorant” might give people moral license to choose a selfish option, given their lack of knowledge about the effect of their choice on others. This work presents strong challenges to “social preference” models. The present work looks at the effects of paying choosers (Dictators, in this case) to look at (others’) payoff information.
This project investigates a bid mechanism in which buyers purchase from the seller who comes closest to the average price of the submitted bids. The first part of this work is theoretical development. The second part is experimental work. In the first part, the researchers will analyze the mechanism under different assumptions (seller costs and quality). The second part will test the predictions derived from this analysis in the lab.
– BIDDER BEHAVIOR AND PERFORMANCE OF AUCTION INSTITUTIONS WITH COSTLY PARTICIPATION
Diego Aycinena (Assistant Professor, Universad Francisco Marroquin)
This project investigates auctions in which there is a cost to participate. One line of research investigates entry decisions into auctions, and tests the fit of a Pure Strategy Entry Equilibrium model based on a cutoff value. The second line compares first price sealed bid and ascending auctions, asking about entry under the two mechanisms. The third line investigates bidding behavior after entry decisions have been made. The studies vary the task subjects face. In one case, subjects are told the number of bidders and the cost of entry, and subjects are asked the (private) value they must have in order for them to choose to enter. In another set of treatments, subjects are given the number of bidders and their value, and asked the price below which they would enter.