IFREE will no longer be accepting applications. The deadline for the final round of awards was February 1, 2021.Please visit the Small Grants Program page to learn more.
Read IFREE-funded published research papers that were funded by the IFREE Small Grants Program.
IFREE Proudly Announces Spring 2020 Small Grant Awards
“Rule-based Behavior, Punishment and Long Run Cooperation,” Diego Aycinena, Universidad del Rosario, Bogota, Columbia; Praveen Kujal, Middlesex University, UK
Long-run cooperation is at the heart of the economic betterment and smooth functioning of society. When interactions are impersonal and not always stable, reciprocity is ineffective and reputation building difficult. Under these conditions, cooperation is hard to sustain in small groups, and even more difficult as groups get larger. It is therefore important to understand the fundamental underpinnings that allow sustained cooperation in large open societies.
Our project aims to identify causal links between the underlying ability to explicitly coordinate on sanctions for norm-deviations, and the frequency of cooperative outcomes. This is relevant from both a social and a theoretical perspective. On the one hand, current events reveal centrifugal forces within and between countries that get in the way of cooperation (Trump’s unilateral approach to climate change and trade negotiations, and Brexit, being two examples). On the other, the proposed project can also inform theory by revealing whether it is the credibility of threats that prevents cooperation in the lab, or strategic uncertainty about the equilibrium that individuals find desirable. The proposed project contributes by bringing together theory and experimental observations to understand how rule-based behavior emerges in society, and what purposes it serves in sustaining cooperation in the long run.
“Monetary Networks,” Edoardo Gallo, University of Cambridge; Maria Bigoni, University of Bologna; Gabriele Camera, Chapman University and University of Bologna
In the past few decades, the US has experienced an erosion of norms of cooperation. Partly responsible is a decline in the social networks that used to sustain them. Concurrently, market-based mechanisms and financial institutions replaced the function of networks in several domains, leading many to believe a causal connection exists between these trends. This project aims to investigate experimentally the causal role played by social networks on the development of financial institutions used to sustain cooperation. It will bring closer together the micro literature on networks and cooperation, and the macro literature on decentralized models of money and financial intermediation.
Experimental research can contribute to the policy debate in the US of how to counteract this decline in the role of social networks by mapping the mechanisms that allow networks to sustain cooperative outcomes. The causal identification of these mechanisms can shed light on whether formal institutions inevitably replace the function of social networks, or whether they can reinforce each other, and under which conditions.
Beyond the US context, informal networks continue to play a primary role in the economy of many developing countries. Development inevitably brings the introduction of financial institutions that disrupts the function of these networks. The insights of this project will inform policies that minimize this disruption and may suggest ways in which informal social networks and formal market institutions can complement, rather than substitute, each other avoiding the erosion of norms of cooperation documented in the American economy.
“Potential Entry and Heterogeneity in Sequential Contests,” John D. McMahan, University of Tennessee; Scott Gilpatric, University of Tennessee
Rent-seeking contests have important examples that permeate the economy. These include, R&D races, political elections, firms producing in a market, and global conflicts. Research in this area provides insights into how potential rivals interact to produce important outcomes. Sequential contests, in particular, most accurately reflect the type of contests we experience. For example, Firms produce observable outputs that may deter potential rivals from producing in the future.
Theoretical and empirical results that result from this study, and the study of sequential contests in general, can serve to inform policy makers. For instance, a legislator who is working to regulate an emerging industry may issue permits to allow for production of a good. Issuing these permits creates a sequential structure. If the legislator is aware of cost differences between firms, he could organize the contest and issue permits that either maximizes or minimizes the total output from the firms, depending on his objectives. Further, this design may have important distributional impacts and the legislator may be able to increase/decrease inequality between firms/individuals by his choices. On the other hand, if a legislator is unaware that he is creating a sequential environment, he may inadvertently be creating adverse environments.
Similarly, we seek to study how potential entry into these contests affect total output. Again, by learning about the mechanisms of a sequential contest, policy makers may be able to potentially influence the probability that firms enter into a market with regulation, and ultimately influence the total market or contest output.
“Does Income Mobility Predict Preferences for Income Redistribution?” Bradley Ruffle, McMaster University, Ontario, Canada; Tongzhe Li, University of Guelph, Ontario, Canada
The American Dream is predicated on the notion of “freedom [which] includes the opportunity for prosperity and success, as well as an upward social mobility for the family and children, achieved through hard work in a society with few barriers” (Wikipedia page on “American Dream”).
At least anecdotally, many immigrants are drawn to the U.S. to pursue their American Dream. At the same time, using World Values Survey data, Alm and Torgler (2006) show that Americans exhibit higher tax morality than any of the 15 European countries also in their sample. Could these two concepts be linked? That is, could a society in which economic mobility is unobstructed and depends primarily on one’s hard work exhibit a greater tolerance for income taxation and redistribution? Or, conversely, do individuals in such a society oppose redistribution since everyone gets their just desserts? By the same token, societies facing limited economic mobility may evoke broad support for redistribution out of recognition that the poor have little hope of escaping their plight. Our research design will answer these questions.
Moreover, in economically mobile societies, understanding whether certain individual income trajectories predict strong opposition to income taxes and redistribution could serve to flag potential tax evaders. More generally, insight into the roles of societal income mobility and one’s own income trajectory in determining the preferences for redistribution would contribute to a more optimally designed tax and redistribution policy tailored to the local population’s needs and preferences. An increase in tax morality and compliance would ensue.
“Advice and its Impact on Social Learning in Developing Countries,” Marie Clair Villeval, University of Lyon, France; Lata Gangadharan, Monash University, Australia; Maitra, Pushkar, Monash University; Joseph Vecci, University of Gothenburg, Sweden
This project directly aims to promote human betterment by examining the influence of social learning and whether advice from individuals with varying identity across generations can be leveraged to improve the outcomes of individuals in developing countries.
First, this project directly contributes to the literature on social learning. Social learning describes any situation in which individuals learn from others. While this literature has shown the importance of advice for behavioural change, it is mainly limited to a sample of students in developed countries. Second, in addition to introducing the setting of a developing country, where such advice can be an extremely cost-effective policy tool, to the best of our knowledge, there is no research investigating the transmission of advice over generations in the presence of group identity concerns. We believe that understanding the social learning process may contribute to explaining the inertia of some groups while others are able to innovate and reach higher efficiency levels. We will thus also contribute to the literature on social identity (e.g., Akerlof and Kranton 2001; Chen and Li, 2009) by showing how group identity contributes to influencing the impact of intergenerational advice.
Overall, our project will substantially add to the literature by analysing the behaviour of those who send advice and the recipients of the advice while also investigating i) how social learning develops across generations, and ii) how group identity conditions the nature of advice and the impact of advice across generations on how people learn to solve social dilemmas and to innovate. Our study will further determine in which conditions social learning leads to improved efficiency in the context of a developing country.
IFREE Proudly Announces Fall 2019 Small Grant Awards
“Beyond Dominant Strategy Mechanism Design: Is Strategic Simplicity Good Enough?”Ahrash Dianat and Mikhail Freer, University of Essex, UK
In recent years, economists have taken a more active role in providing policymakers with advice on the design of markets and other mechanisms that facilitate exchange (e.g., auctions, matching firms and workers in entry-level labor markets, allocating students to universities). In this capacity, economists typically advocate the use of mechanisms that limit the scope of strategic behavior. There are many obvious benefits to using “strategy proof” mechanisms in the real world. For example, they level the playing field and encourage participation by individuals who are less informed or less sophisticated. In addition, they save participants from the potential cognitive/monetary costs of deliberating and plotting their strategies. Recent theoretical research has introduced a larger class of “strategically simple” mechanisms that – while not strategy proof – are still easy enough for participants to understand and to determine their optimal strategies (in a precise sense). We propose to conduct the first experimental test of the performance of strategically simple mechanisms. To demonstrate that our findings are not overly sensitive to the details of the environment, we use two different settings in our experiment: bilateral trade mechanisms (i.e., where one buyer and one seller bargain over an item that they both value) and voting mechanisms (i.e., where a group of voters with different preferences decide on which one of two alternatives to implement).
“Anchor or Asset? Reporting External Obligation.” Laura Razzolini (University of Alabama), Shakun Mago (University of Richmond) and Jennifer Pate (Loyola Marymount University)
In market negotiations, deeply entrenched gendered expectations result in significant economic and social penalties for women. Both practitioners and academics advocate not fighting the gender stereotype but working within its confines. Specifically, by citing outside obligations, women can transform self-interested negotiations into other-advocacy. In this project, we explore whether the existence, and/or communication of outside obligations are of help or hindrance to women in negotiations. Our basic game is between an ‘employee’ with an outside obligation whose performance determines the firm’s profit, and an ‘employer’ with power-to-give, who decides the employee’s wage. In their interaction, first, the employee learns the outside obligation and makes a “wage ask.” We propose three treatments, wherein the employee (a) cannot reveal the outside obligation, (b) must truthfully reveal the outside obligation, and (c) must indicate the outside obligation, but the message need not be truthful. Next, the employer learns the wage ask and, accounting for the outside obligation, either accepts the proposed wage or offers an alternate split. If the employee accepts, the split is implemented; but in case negotiations break down, both parties get the minimum subsistence earnings. Systematically controlling for paired-gender composition, we propose to study the differences in negotiated outcomes – wage ask, wage offer and the report of the outside obligation – across both same-gender and mixed-gender pairs. We hypothesize that, if reporting outside obligations is perceived as other-advocacy, women may be more inclined to act assertively in their asks, but also more likely to exaggerate their outside obligations.
“The Effect of Seed Money and Matching Gifts in Fundraising: A Lab Experiment.” Piruz Saboury, Silvana Krasteva and Marco Palma, Texas A&M University
The nonprofit sector features significant quality variation, with around a third of rated nonprofits failing to meet minimum industry standards. This coupled with donors’ limited knowledge of existing nonprofits, poses a challenge for well-run nonprofits to distinguish themselves from their poorly performing counterparts. Our goal is to experimentally investigate the role of leadership giving in informing donors. That is a fundraising strategy of soliciting a large public donation from a wealthy donor to incentivize giving by others. It can be in the form of an unconditional lump sum called “seed money” or a promise of matching small donations by a fixed ratio called “matching gift”. We have theoretically shown that when the public good’s quality is observable by the lead donor, she can convey information to others through the size of her contribution. Thus, the fundraiser will not have any more signaling concerns and opts for matching to mitigate the free-riding problem. However, when the lead donor’s information is limited, her contribution is less informative. Thus, a high quality fundraiser uses seed money as a costly signaling device to convince donors of her high quality. Our aim is to test these theoretical predictions. First we will examine the relative performance of the two schemes and the fundraiser’s choice of scheme in a transparent environment to establish the relative disadvantage of seed money. Next we will introduce uncertainty and vary the information available to the lead donor to show how seed money can be utilized as a credible signal of quality.
“Social Signaling: A Study in Welfare Stigma.” Natalia Valdez Gonzalez and Marco A. Palma, Texas A&M University
Social signaling influences economic behavior. Perceived social status can drive other decisions such as choices in competitiveness. However, individuals may avoid signaling their status in order to minimize the stigma associated with low status. Few studies have explored how low status drives economic behaviors, but exploring this issue is important. For example, in the United States, people in the lowest income bracket are eligible to receive welfare benefits; however, many eligible individuals decide not to accept them. One proposed explanation for non-participation in welfare programs may be the stigma associated with being part of this low-income bracket. Moffitt (1983) was among the first to develop a model that directly incorporates stigma in the utility function.
Experiencing low status relies on social interactions. Friedrichsen, König, and Schmacker (2018) (henceforth, FKS) recently published a paper where they induced stigma in a laboratory setting. We wish to explore mechanisms to reduce stigma associated with being low status. In our first treatment, we will replicate the findings from a treatment featured in FKS, inducing stigma in the lab. We then propose an additional treatment in which the low-status group is hidden. Our design is unique in that we induce high, medium, and low status levels rather than focusing only on high status or low status independently. We will also add biometric data to observe emotional reactions associated with social status through eye-tracking and facial expression analysis. Furthermore, we will explore how social status interacts with preferences for competitiveness and investigate potential gender differences.
“Competition In Information: An Experimental Study of Bayesian Persuasion in a Search Environment.” Daniel Woods and Tim Cason, Purdue University
This project seeks to experimentally test how advanced tracking technology on the Internet, as well as competition between online retailers, affects how much information online retailers provide to consumers. Advanced tracking technology is using cookies, social media logins, etc., in combination with machine-learning and other ‘big data’ techniques to accurately identify online consumers. A monopolist online retailer would always provide the minimum level of information to entice that specific type of consumer to purchase a high-markup product. A search model is considered, where consumers sequentially visit online retailers to acquire information. The model predicts that with sufficiently advanced tracking technology, the monopoly level of information results even in the presence of competing online retailers. Without advanced tracking technology, the model predicts that the level of information provided increases when the feasibility of consumers seeking competing retailers increases. An experiment is designed that provides a parsimonious environment in which to test the above predictions of the model.
“Natural Resource Windfalls and Demands for Government Accountability: Evidence from the Lab.” James Alexander and James Murphy (University of Alaska, Anchorage) and Maros Servatka, (Macquarie Graduate School of Managemeny)
Resource-rich economies often suffer from a variety of bad economic and political outcomes including slow growth, political corruption, and a lack of democratic representation. One leading theory is that of the “rentier state” in which a reduced tax burden reduces constituent demands for transparency, good governance, and accountability. In essence, this theory suggests that taxation is actually necessary for democratic representation. While intuitively pleasing, there is surprisingly little direct empirical evidence in support of the theory, or the various underlying mechanisms. We propose a laboratory experiment that 1) tests whether resource windfalls reduce demands for government accountability, and 2) uncovers the underlying mechanism(s) that may exist.
Spring 2019 IFREE Small Grant Awards
There is an ongoing debate as to how the rising popularity of exchange traded funds (ETFs) affects the efficiency of financial markets, with the major concern focusing on the effect of ETFs on the pricing of the underlying assets. On the one hand, ETFs combine portfolio diversification with the ability to trade bundles of securities all at once and continuously (as opposed to mutual funds), thus potentially improving market efficiency. On the other hand, since ETFs provide investors with a diversified portfolio, the fear is that if too many investors invest only in ETFs, they may fail to monitor changes in the fundamental values of the underlying assets that make up the ETFs, leading to considerable mispricing of the underlying assets. Mispricing can result in increased volatility in financial markets. Corrections to market prices, when they occur, might be greater in a world with ETFs. The proposed research will shed important light on how investors respond to ETFs, and how that behavior affects asset prices, trading volume and market volatility.
We propose an in-depth investigation of the structure of normative beliefs, in particular, normative uncertainty and its influence on behavior. We plan to run three experiments each of which is designed to address a specific issue that needs to be resolved. In Experiment 1 we will test a new task (Task 1) for the precise estimation of normative beliefs in any economic environment. Apart from the direct benefits in increased precision of measurement of social norms specific to personal exchange that has not been achieved before, Task 1 will be useful to the experimental community as a whole. Specifically, it can be used by other researchers in order to measure social norms that guide the behavior in their experiments, which will have a broad impact on studies of all types of social interactions. The same holds for the task that we will test in Experiment 2, which should provide the first direct measures of normative uncertainty in experimental games. When applied to a specific economic situation, the two tasks together should give an exhaustive picture of normative beliefs, thus presenting any researcher with an unprecedented possibility to clearly understand the motives behind social behavior. Finally, the task in Experiment 3 will allow us to learn whether people understand that others may have different opinions about social norms (pluralism) or are more narrow-minded and do not consider this possibility. The answers can be very helpful for policy-making, conflict resolution, and other applied fields where understanding of social norms is crucial.
There has been considerable speculation about the effects of “partisan media sources,” both traditional and online, on both individual behavior and the collective choices of voters. The last presidential campaign also drew attention to the possible effects of not only slanted, but fake, news. There is little doubt, for example, that voters have more access than ever to news sources whose biases are more consistent with their own and, no less important, find it easier than ever to share news, including fake news, with one another over social media. We believe, however, that ours will be the first controlled experiment to explore the consequences at both the individual and aggregate levels. As such, we hope to provide more persuasive answers to some basic questions: for example, does monopolistic competition in news produce collective decisions that reflect the balanced consideration of individual voters, or does it instead facilitate more extreme manifestations of partisanship? Or, does the sharing of news, “real” or otherwise, over social media, change outcomes?
Fall 2018 IFREE Small Grant Awards
This proposal builds from the lack of consensus in economics on the plausibility of interpersonal preference comparisons in making joint or collective decisions. However, these types of comparisons are common in everyday life, as with friends deciding what restaurant to eat dinner at or a married couple deciding who will wash the dishes. In an effort to reconcile the inconsistency between the prevailing theories and observed behavior, Narens and Skryms have developed a mathematical formalization of a theory, called accommodation dynamics, which provides a dynamic process with which agents can learn over time how others’ “utilities” compare to their own.
The theorem assumes agents have perfect knowledge of each other’s preferences and always interact in a fixed manner, which is not representative of the interaction between real people. Therefore, this empirical study will test whether the result is preserved when applied to human subjects, not computational agents.
Spring 2018 IFREE Small Grant Awards
This research project can be considered part of the strand of literature that investigates the behavioral drivers of tax compliance. In a context of sizeable tax evasion (as is the case in Italy for example, where the amount of yearly evaded taxes has been recently estimated to be around 124 to 132 billion of euros) it is essential to understand what behavioral mechanisms can be exploited by policy-makers to increase the effectiveness of interventions aimed at counteracting its outspread.
In particular, we want to test whether tax evasion is somehow sensitive to concerns for the degree of fairness of income inequality induced by the presence of the ‘shadow of cheating’, which is a situation that closely resembles the reality of the income-production processes in many countries, both developed and developing, where corruption and connections play a relevant role in the determination of individuals’ incomes.
Our research could provide valuable guidance to policy makers on how to design a more efficient allocation of the (scarce) public resources available to tackle both problems of tax evasion and unfair tax inequality, maximizing aggregate welfare in the society and policy efficiency.
Various social experiments have explored how different institutions impact the management or conservation of a common pool resource (CPR). However, oftentimes access to this resource is exogenously assigned to subjects in CPR experiments. We seek to contribute to the literature exploring CPR management by focusing on the process through which a group of insiders, with access to the CPR, is formed (i.e., whether “earning” the right to have access to the resource matters) when there is an external threat (outsiders who did not earn the right to access the resource). Given the presence of an external threat, it is also natural that insiders try to deter outsiders from poaching or extracting the insider’s resource. Provision of such deterrence is also a social dilemma as insiders may wish to free ride on the actions of other insiders. Therefore, we also test whether voting (or group decision-making) improves CPR management. We intend to tackle these questions by running a series of controlled laboratory experiments examining the dynamics created by earning a place among insiders, as well as using voting to coordinate a level of deterrence among insiders, in the presence of an external threat (outsiders). Our study will provide empirical evidence on the impact these two institutions have in the CPR environment with an external threat. The insights gained by these experiments may have implications for the process through which groups handling CPRs are formed, as well as how they choose to deter poaching.
How do young aspiring international development practitioners and prospective future donors respond to scientific information regarding a development strategy’s ineffectiveness? Do they shift support to more effective strategies, or become disillusioned with development efforts and decrease overall support? This study attempts to answer these questions by utilizing a series of experiments with a sample of undergraduate students interested in careers in international development.
The World Bank estimates that the microfinance industry includes $60 to $100 billion in assets with approximately 200 million clients. It has been touted as a particularly effective poverty alleviation tool by numerous organizations, including the Norwegian Nobel Committee, who awarded the 2006 Nobel Peace Prize to the Grameen Bank for using “microcredit as a means of fighting poverty.” However, there are now numerous scientific studies that show no significant benefit from microcredit for the world’s poor. Furthermore, for every dollar donated and labor-hour expended towards promoting microcredit, resources are diverted from alternative, more effective strategies, such as deworming, cash transfers, insecticide-treated bed nets, and early childhood education. Therefore, understanding why resources are devoted to one development strategy over another is an important contribution to development policy. Furthermore, our sample of undergraduate students interested in careers in international development is in some sense the most important population to study, as they represent the next generation of donors, researchers and development practitioners, and will influence development policy into the next generation. This study is, as far as we are aware, the first rigorous attempt to determine how prevalent narratives regarding a development policy’s (in)effectiveness influence support for that initiative, and how that support can be more effectively reallocated. However, the findings not only hold implications for development policy, but for any field that relies on people’s goodwill for labor and donations and is subject to rigorous scientific evaluation, such as health interventions, education policy, and various government programs.
The proposed research will investigate a competitive double auction market in the presence of storage opportunities. Understanding the role of storage in behavior of markets is important, as theoretically harvest uncertainty with added possibility of storage can explain the empirically observed price volatility in commodity markets. However, the empirically observed commodity prices exhibit excessive autocorrelation beyond the levels explained by theory, and the inventories are often above those predicted under stationary distribution of supply shock. We use a controlled laboratory experiment to discriminate between two possible reasons for the empirically observed phenomena: (1) agents’ behavioral imperfections, or (2) non-stationarity of supply shock. Further, we vary the information environments across treatments to gain a clearer understanding of how policies, such as government reporting of production and inventories, help to abate commodity bubble formation. Third, we study whether and how the markets with stochastic supply adjust to the changes in the distribution of supply shock. While studies on experimental commodity markets without storage indicate that markets efficiently aggregate dispersed information and quickly adjust to new equilibria, it is less clear whether the markets will quickly converge to theoretical stochastic dynamic equilibria, and whether they will adequately adjust when the distribution of exogenous shocks shifts in an ambiguous way.
A better understanding of the role of storage in the behavior of commodity markets, and their price dynamics in particular, will help to inform researchers, policy-makers and the public about likely implications of growing harvest uncertainty and variability on the supply of essential goods such as food and oil. This issue is of key relevance as international commodity prices have been volatile over the last 15-20 years, with record spikes and declines in food and energy prices surrounding the Great Recession and its aftermath. Commodity bubbles, unlike the usual price spikes, are typically characterized by hoarding, and often some ambiguity about the level of inventory. An investigation of the role of inventories in controlled laboratory market environments is therefore important for informing policies in view of increased climate variability and commodity price volatility.
Recently, several large firms such as Google started using small double auction prediction markets to forecast whether a project deadline will be met. A typical asset in these markets pays $1 if the deadline is met and $0 if it is not. Thus, employees working on the project can bet on their information, and prices should inform management about the feasibility of the deadline, with low prices predicting a missed deadline. While rational expectations theory and experimental tests of it suggest that such markets work well, recent theoretical results show this is no longer the case if management reacts to market prices by assigning additional resources to meet the deadline. In this case, the management reaction punishes traders for betting on a missed deadline because the intervention prevents the deadline from being missed.
Based on this theory–which also suggests a different market design that corrects for these incentive issues–we propose a lab experiment that tests whether these corporate prediction markets work better with the new design. The outcomes of interest are how often the deadline is met and how often management makes the right intervention decision. Moreover, we plan to test whether such markets introduce incentives for employees to sabotage the project when betting on a missed deadline by adding an additional effort stage for workers after the double auction trading. This design also allows us to test if the new market design curbs the adverse sabotage incentives.
Our project contributes to the broader question how financial market prices can guide and influence real (non-financial) decisions. This question is important because financial market traders have valuable information that can increase decisions/policy/welfare if it is revealed to decision makers. Consequently, our study investigates double auction markets as one mechanism that provides incentives for information revelation–at virtually no cost for the mechanism designer.
While prediction markets have been used successfully to forecast elections, their use in corporate settings is not yet well understood. Our project is the first to test how management decisions, reacting to market prices, affect trader incentives and the information conveyed by prices. Our results will have implications for the informational effects of financial markets in general, not just prediction markets. While price manipulation has been investigated in experiments before, the manipulation of the underlying real outcomes has not yet been addressed. In corporate markets employees are in a position to influence project outcomes. Our results will help to properly design prediction markets that are used to guide decisions.
Read the research results
Labor relations and efficiency in the workplace are an important part of social and living conditions. The firm’s profits depend (in part) on workers’ behavior, which is not always enforceable or observable. Thus, some combination of control and incentive devices is needed to harness alternative motivations to get the best performance and social outcome. However, the common use of compensation schemes with weak monetary incentives has long been a subject of debate in economics. In this study, we will recruit people to the lab to play a game, and in this game each one will be randomly assigned a role, either “firm” or “worker”. We try to test the advantage of promises by allowing the worker to install a “claim and promises” (If the firm gives me the wage=_____, I will choose the effort level=___”) before the firm sets the wage level. The “claim and promises” is nonbinding. We expect this treatment to increase reciprocity, with the firm setting a higher wage, and the worker delivering higher effort levels. The combination of wage and effort level determines monetary payoffs from this game for both firm and worker, and we expect such “promises” setting will improve the profits for both firm and worker.
Semco, a Brazilian manufacturing company, has operated as a real-world laboratory in the last two decades. One of Semco’s policy innovations has been to allow workers to set their own salaries and working hours. The Semco experiment has been a huge success. We expect this “promises” device to become another valuable method in the real workplace, as it helps improve the profits of firms and living conditions of workers, and then the overall outcome of the labor market.
Fall 2017 IFREE Small Grant Award
We experimentally test a prediction market to make economic decisions. A prediction market is run using partially informed participants about outcome states. Then, an economic decision based upon the information is voted upon. In this initial analysis we will determine whether markets can aggregate price information when market outcomes are known to influence future collective decision-making and to determine whether this influence produces better decisions. Then, preferences mis-aligned with the organization are induced on a minority to determine the extent of their manipulative success, including “false news” about outcomes.Read Research Results
An agency problem occurs if agents with private information compete for resources from a principal and are biased towards their own favored projects. Possible future interaction can mitigate this problem if an agent accepts a low-valued project today, but consumes resources that crowd out better future opportunities. The experiments are based on a principle/agent model to study this incentive problem. We test the hypothesis that revelation is easier to support, the larger is this future benefit.
We will measure the effects of performance-pay contracts for citizen journalists in an online English-language news firm in Kenya. The firm is a growing source of local news, garnering more than a million monthly views, receiving submissions from hundreds of active reporters. Currently, the author receives a fixed fee, independent of quality. By randomly allocating active reporters on the site to one control or two treatment groups, we will compare the current contractual approach to two new types of incentive contracts: (i) fee plus bonus based on number of readers and (ii) the writer chooses fixed-fee vs performance-pay.
We study whether (and how) negative external random shocks (e.g., war, earthquakes, personal health) impede trust and trustworthiness in sequential exchange. We propose an innovative design that relies on the Berg, et al.(1995) investment game. The experiments are designed to disentangle the effects of the shock, the inequality it creates and the uncertainty involved.
IFREE Proudly Announces Spring 2017 Small Grant Awards
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.
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.
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.
Read the research results
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.
Previous Awards:
- “Legal Restrictions and International Currencies: An Experimental Approach”
Daniela Puzzello, Shuze Ding
Read the research results - Coordination Under Fear
Lauren Young, Assistant Professor, UC Davis
Lukas Wenner, post-doc, University of CologneRead the research results
Leeat Yariv, Marina Aganov, and Ahrash Dianat, California Institute of Technology; Larry Samuelson, Yale.
Nor Izzatina Abdul Aziz, Abhijit Ramalingam, Robert Sudgen, University of East Anglia, UK.
Peter DeScioli, Scott Bokemper, Stony Brook University.Read the research results
Radovan Vadovic, Till Gross, Carleton University, Ottawa, Canada
Marco Castillo, Ahrash Dianat, George Mason University
Yan Chen, University of Michigan
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
Ro’i Zultan, Ella Segev, Ben-Gurion University of the NegevRead the research results
Joshua Foster, graduate student, Economics Department, University of Arkansas
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.Read the research results
Yaron Lahav, Assistant Professor, Ben-Gurion University of the Negev, Beer Sheva, IsraelRead the research results
Chineze E. Christopher, PhD student, Purdue University
David Kingsley, Assistant Professor, University of Massachusetts LowellRead the research results
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 BolognaRead the research results
Abel Winn and Matthew McCarter, George L. Argyros School of Business and Economics and Chapman UniversityRead research results
Kyle Hyndman (School of Business and Economics, Maastricht University, Netherlands)
Gary Charness (Dept. of Economics, Univ. of CA Santa Barbara)Read the research resultsRead the research paper
Ciril Bosch-Rosa (5th year PhD student, Univ. of CA Santa Cruz)Read the research results
Caiyun Liu, Vincent Mak, Amnon Rapoport (The Graduate School of Management, Univ. of CA Riverside and Cambridge Judge Business School)
Benjamin Enke, Florian Zimmermann (Dept. of Economics, Institute for Applied Macroeconomics, Bonn, Germany)Read the research results
Marco Pagnozzi, Universita di Napoli Federico II, Department of Economics, Krista Jabs Saral, Webster University Geneva, Department of Business and TechnologyRead the research results
Todd L. Cherry, Appalachian State University, Department of Economics, David M. McEvoy, Appalachian State University, Department of EconomicsRead the research results
Peter DeScioli, Departments of Psychology and Economics, Brandeis UniversityRead the research results
Erik O. Kimbrough, Assistant Professor of Economics, Simon Fraser UniversityRead the research results
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 UniversityRead the research results
Michael K. Price, Department of Economics, University of Tennessee; Robert Hammond, Department of Economics, North Carolina State University
Peter Twieg, graduate student in economics working with Professor Kevin McCabe, Kevin McCabe, Director of the Center for the Study of Neuroeconomics, GMU
April 2011
Alexander L. Brown (Department of Economics, Texas A&M University), Joanna Lahey (Bush School of Government and Public Service, Texas A&M University)Read the research results
Catherine J. Weinberger (Independent Scholar affiliated with the University of CA Santa Barbara, Department of Economics, and ISBER)
Jason Dana (Assistant Professor, Psychology, University of Pennsylvania)
Wei Shiun Chang (Pre-doc, Economics), and Timothy Salmon, (Professor/Advisor, Economics) Florida State University)Read the research results
Diego Aycinena (Assistant Professor, Universad Francisco Marroquin)