Download or read book Essays in Market Design and Behavioral Economics written by Edward Gilbert Augenblick and published by . This book was released on 2010 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is the combination of three distinct papers on Behavioral Economics and Market Design. In the first paper, I theoretically and empirically analyze consumer and producer behavior in a relatively new auction format, in which each bid costs a small amount and must be a small increment above the current high bid. I describe the set of equilibrium hazard functions over winning bids and identify a unique function with desirable conditions. Then, I examine bidder behavior using two datasets of 166,000 auctions and 13 million individual bids, captured with a real-time collection algorithm from a company called Swoopo. I find that players overbid significantly in aggregate, yielding average revenues of 150% of the good's value and generating profits of €18 million over four years. While the empirical hazard rate is close to the predicted hazard rate at the beginning of the auction, it deviates as the auction progresses, matching the predictions of my model when agents exhibit a sunk cost fallacy. I show that players' expected losses are mitigated by experience. Finally, I estimate both the current and optimal supply rules for Swoopo using high frequency data, demonstrating that the company achieves 98.6% of potential profit. The analysis suggests that over-supplying auctions in order to attract a larger userbase is costly in the short run, creating a large structural barrier to entrants. I support this conclusion using auction-level data from five competitors, which establishes that entrants collect relatively small or negative daily profits. The second paper (joint with Scott Nicholson) addresses the impact of making multiple previous choices on decision making, which we call "choice fatigue." We exploit a natural experiment in which different voters in San Diego County are presented with the same contest decision at different points on the ballot, providing variation in the number of previous decisions made by the voters. We find that increasing the position of a contest on the ballot increases the tendency to abstain and to rely on decision shortcuts, such as voting for the status-quo or the first candidate listed in a contest. Our estimates suggest that if an average contest was placed at the top of the ballot (when voters are "fresh"), abstentions would decrease by 10%, the percentage of "no" votes on propositions (a vote for the status-quo) would fall by 2.9 percentage points, and the percentage of votes for the first candidate would fall by .5 percentage points. Interestingly, if this occurred, our results suggests that 22 (6.25%) of the 352 propositions in our dataset would have passed rather than failed. Implications of the results range from the dissemination of information by firms and policy makers to the design of electoral institutions and the strategic use of ballot propositions. The third paper (joint with Jesse Cuhna) paper presents evidence from a field experiment on the impact of inter-group competition on intra-group contributions to a public good. We sent political solicitations to potential congressional campaign donors that contained either reference information about the past donations of those in the same party (cooperative treatment), those in the competing party (competition treatment), or no information (the control group). The donation rate in the competitive and cooperative treatment groups was 85% and 42% above that in the control, respectively. Both treatments contained a monetary reference point, which influenced the distribution of donations. While the cooperative treatment induced more contributions concentrated near the mentioned reference point, the competitive treatment induced more contributions at nearly twice the level of the given reference point, leading to a higher total contributed amount. This suggests that both cooperative and "pro-social" motives can drive higher contribution rates and total contributions, but the elicitation of competitive behavior can be more profitable in certain fundraising situations.

Download or read book Essays on Market Design and Experimental Economics written by Eric Samuel Mayefsky and published by Stanford University. This book was released on 2011 with total page 106 pages. Available in PDF, EPUB and Kindle. Book excerpt: I explore fundamental behavioral aspects of several market design environments in a variety of projects using both theoretical models and laboratory experiments. I show that human tendencies can drastically shift potential outcomes away from those which would result if individuals were fully 'rational' and unbiased in decision problems similar to those found frequently in the field. I explore two common classes of centralized matching mechanisms--Deferred Acceptance and Priority--which have wildly different success rates in practice despite both being open to manipulation by agents who have incomplete information about the other participants in the match. For this reason, theory predicts both mechanisms in equilibrium will yield match outcomes which are unstable, meaning some agents will desire to renegotiate with one another after receiving their match assignments, and thus reduce participants' confidence in using the match. I provide laboratory evidence that out-of-equilibrium truth telling by agents is substantially more frequent in the Deferred Acceptance environment and thus Deferred Acceptance matches will generally be more stable in practice than matches using a Priority mechanism. This may explain why Deferred Acceptance mechanisms appear to be more viable in the field. I also explore two different models of decentralized two-sided matching environments where establishing scarce signaling methods can improve market outcomes. In a laboratory experiment, I show that allowing potential receiving job offers to send a single signal to their favorite potential employer before job offers are made increases overall match rates in the market, but is potentially damaging to the firms making offers when compared to the market without such a signal. Then, in a theoretical model where pre-offer communication takes the form of an interview process where workers have natural limits on the number of interviews in which they can participate, I show that in many cases firms can benefit themselves and the market as a whole by voluntarily restricting the number of interviews they offer to participate in. While not traditionally thought of as market design problems, voting mechanisms are fundamentally goods allocation problems as well and have many of the same issues as traditional markets do. I explore the effects of voter bias on outcomes in an otherwise standard voting model and find that even slight external pressure on individuals in a committee tasked with coming to a collective decision can destroy the ability of that committee to arrive at the correct result, even when individuals have good information about the best decision to make. Furthermore, the quality of the decision made by such a committee can actually degrade as the committee size increases, in contrast with the canonical Condorcet Jury Theorem which predicts that a committee's ability to choose the right outcome increases quickly as more members are added.

Download or read book Essays on Behavioral Economics and Policy Design written by and published by . This book was released on 2015 with total page 131 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Behavioral Market Design written by Ignacio Andres Rios Uribe and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In this dissertation, I study how centralized systems and platforms can improve their operational efficiency by taking into account the behavior of their users. To accomplish this, I combine two key elements: (1) understand users' behavior, and (2) identify sources of inefficiency and design solutions to address them. To better understand what drives user behavior, I combine techniques from behavioral operations and economics to derive models and hypotheses of how users make decisions. Then, I use tools from the econometrics literature to test these hypotheses and validate the proposed models. Finally, I combine this knowledge with tools from market design and operations to design and implement solutions that alleviate the inefficiencies identified in these markets. In the first chapter, I analyze the effect of increasing transparency in procurement platforms. The second chapter studies how the assortment composition and the history of past usage affect users' behavior in a two-sided market, and how we can take this into account to increase the number of matches generated. Finally, in the third chapter, I study the application behavior of students in the Chilean college admissions problem and propose an estimation procedure to account for their strategic behavior.

Download or read book Essays on Market Design and Experimental Economics written by Eric Samuel Mayefsky and published by . This book was released on 2011 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: I explore fundamental behavioral aspects of several market design environments in a variety of projects using both theoretical models and laboratory experiments. I show that human tendencies can drastically shift potential outcomes away from those which would result if individuals were fully 'rational' and unbiased in decision problems similar to those found frequently in the field. I explore two common classes of centralized matching mechanisms--Deferred Acceptance and Priority--which have wildly different success rates in practice despite both being open to manipulation by agents who have incomplete information about the other participants in the match. For this reason, theory predicts both mechanisms in equilibrium will yield match outcomes which are unstable, meaning some agents will desire to renegotiate with one another after receiving their match assignments, and thus reduce participants' confidence in using the match. I provide laboratory evidence that out-of-equilibrium truth telling by agents is substantially more frequent in the Deferred Acceptance environment and thus Deferred Acceptance matches will generally be more stable in practice than matches using a Priority mechanism. This may explain why Deferred Acceptance mechanisms appear to be more viable in the field. I also explore two different models of decentralized two-sided matching environments where establishing scarce signaling methods can improve market outcomes. In a laboratory experiment, I show that allowing potential receiving job offers to send a single signal to their favorite potential employer before job offers are made increases overall match rates in the market, but is potentially damaging to the firms making offers when compared to the market without such a signal. Then, in a theoretical model where pre-offer communication takes the form of an interview process where workers have natural limits on the number of interviews in which they can participate, I show that in many cases firms can benefit themselves and the market as a whole by voluntarily restricting the number of interviews they offer to participate in. While not traditionally thought of as market design problems, voting mechanisms are fundamentally goods allocation problems as well and have many of the same issues as traditional markets do. I explore the effects of voter bias on outcomes in an otherwise standard voting model and find that even slight external pressure on individuals in a committee tasked with coming to a collective decision can destroy the ability of that committee to arrive at the correct result, even when individuals have good information about the best decision to make. Furthermore, the quality of the decision made by such a committee can actually degrade as the committee size increases, in contrast with the canonical Condorcet Jury Theorem which predicts that a committee's ability to choose the right outcome increases quickly as more members are added.

Download or read book Bargaining and Market Behavior written by Vernon L. Smith and published by Cambridge University Press. This book was released on 2000-06-12 with total page 474 pages. Available in PDF, EPUB and Kindle. Book excerpt: This second Cambridge University Press collection of papers by Vernon L. Smith, a creator of the field of experimental economics, includes many of his primary authored and coauthored contributions on bargaining and market behavior between 1990 and 1998. The essays explore the use of laboratory experiments to test propositions derived from economics and game theory. They also investigate the relationship between experimental economics and psychology, particularly the field of evolutionary psychology, using the latter to broaden the perspective in which experimental results are interpreted. The volume complements Professor Smith's earlier work by demonstrating the importance of institutional features of markets in understanding behavior and market performance. Specific themes investigated include rational choice, the notion of fairness, game theory and extensive form experimental interactions, institutions and market behavior, and the study of laboratory stock markets.

Download or read book Morals Markets and Malleability written by Marius-Florentin Krämer and published by . This book was released on 2017 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Behavioural Economics and Incentive Design written by V. Chaudhary and published by . This book was released on 2022 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Essays in Industrial Organization and Behavioral Economics written by Ting-Hao Jordan Ou and published by . This book was released on 2017 with total page 58 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation is comprised of two essays at the intersection of Empirical Industrial Organization and Behavioral Economics. They explore how business decisions are more richly explained with additions in psychological insights commonly found among consumers. These behavioral biases can affect a firm's decision to participate and their supply in the market, ultimately impacting market competition, supply thickness, and equilibrium. In Chapter 1, I explore how retailers make entry and exit decisions in the context of an online marketplace. Using a rich panel of internal data from eBay on dedicated sellers, I analyze a feature of the platform requiring sellers to select among monthly contracts that differ in the listing fee schedules. I further exploit a regime change that introduced a monthly allowance of free listings of inventory, altering all contracts from a two-part tariff to a three-part tariff design. This design change was effective in attracting new users and sellers to the platform, encouraging experienced users to become high-volume sellers, and increasing total inventory listed in the marketplace. This is despite little changes in average costs of selling. I demonstrate that standard entry and exit models cannot explain this increase in supply and competition. Instead, I propose loss aversion as an additional factor impacting participation. Chapter 2 investigates how high-volume, experienced retailers value their products and make supply decisions. Using similar data from eBay and exploiting the same contract feature and policy change, I analyze both the sellers' contract choice decisions and the timing of product listings. By estimating a dynamic model of plan choice and listing decisions, I find that sellers have a limited learning period and hold biased beliefs on the option values of their products. Furthermore, they respond heterogeneously to dynamic incentives and future listing costs, leading to an uneven supply of products on the platform. Using the model estimates, I show that debiasing sellers would increase seller surplus by 6\% but decrease platform listing revenue by 26%. However, since many platforms generate the majority of revenue from percentage fees on the listings' values, they may prefer to pursue policies that increase total listings. By targeting specific sellers, such policies can increase aggregate listings on the platform by up to 4.8% at a loss of 5.5% in listing revenue.

Download or read book The Handbook of Market Design written by Nir Vulkan and published by OUP Oxford. This book was released on 2013-08-29 with total page 706 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economists often look at markets as given, and try to make predictions about who will do what and what will happen in these markets. Market design, by contrast, does not take markets as given; instead, it combines insights from economic and game theory together with common sense and lessons learned from empirical work and experimental analysis to aid in the design and implementation of actual markets In recent years the field has grown dramatically, partially because of the successful wave of spectrum auctions in the US and in Europe, which have been designed by a number of prominent economists, and partially because of the increase use of the Internet as the platform over which markets are designed and run There is now a large number of applications and a growing theoretical literature. The Handbook of Market Design brings together the latest research from leading experts to provide a comprehensive description of applied market design over the last two decades In particular, it surveys matching markets: environments where there is a need to match large two-sided populations to one another, such as medical residents and hospitals, law clerks and judges, or patients and kidney donors It also examines a number of applications related to electronic markets, e-commerce, and the effect of the Internet on competition between exchanges.

Download or read book Essays on Matching Theory and Behavioral Market Design written by Siqi Pan and published by . This book was released on 2017 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation focuses on the design and implementation of matching markets where transfers are not available, such as college admissions, school choice, and certain labor markets. The results contribute to the literature from both a theoretical and a behavioral perspective, and may have policy implications for the design of some real-life matching markets. Chapter 1, “Exploding Offers and Unraveling in Two-Sided Matching Markets,” studies the unraveling problem prevalent in many two-sided matching markets that occurs when transactions become inefficiently early. In a two-period decentralized model, I examine whether the use of exploding offers can affect agents' early moving incentives. The results show that when the culture of the market allows firms to make exploding offers, unraveling is more likely to occur, leading to a less socially desirable matching outcome. A market with an excess supply of labor is less vulnerable to the presence of exploding offers; yet the conclusion is ambiguous for a market with a greater degree of uncertainty in early stages, which depends on the specific information structure. While a policy banning exploding offers tends to be supported by high quality firms and workers, it can be opposed by those of lower quality. This explains the prevalence of exploding offers in practice. Chapter 2, “Constrained School Choice and Information Acquisition,” investigates a common practice of many school choice programs in the field, where the length of students' submitted preference lists are constrained. In an environment where students have incomplete information about others’ preferences, I theoretically study the effect of such a constraint under both a Deferred Acceptance mechanism (DA) and a Boston mechanism (BOS). The result shows that ex-ante stability can only be ensured under an unconstrained DA, but not under a constrained DA, an unconstrained BOS, or a constrained BOS. In a lab experiment, I find that the constraint also affects students’ information acquisition behavior. Specifically, when faced with a constraint, students tend to acquire less wasteful information and distribute more efforts to acquire relevant information under DA; such an effect is not significant under BOS. Overall, the constraint has a negative effect on efficiency and stability under both mechanisms. Chapter 3, “Targeted Advertising on Competing Platforms,” is jointly written with Huanxing Yang. We investigate targeted advertising in two-sided markets. Each of the two competing platforms has single-homing consumers on one side and multi-homing advertising firms on the other. We focus on how asymmetry in platforms’ targeting abilities translates into asymmetric equilibrium outcomes, and how changes in targeting ability affect the price and volume of ads, consumer welfare, and advertising firms' profits. We also compare social incentives and equilibrium incentives in investing in targeting ability. Chapter 4, “The Instability of Matching with Overconfident Agents: Laboratory and Field Investigations,” focuses on centralized college admissions markets where students are evaluated and allocated based on their performance on a standardized exam. A single exam’s measurement error causes the exam-based priorities to deviate from colleges' aptitude-based preferences: a student who underperforms in one exam may lose her placement at a preferred college to someone with a lower aptitude. The previous literature proposes a solution of combining a Boston algorithm with pre-exam preference submission. Under the assumption that students have perfect knowledge of their relative aptitudes before taking the exam, the suggested mechanism intends to trigger a self-sorting process, with students of higher (lower) aptitudes targeting more (less) preferred colleges. However, in a laboratory experiment, I find that such a self-sorting process is skewed by overconfidence, which leads to a welfare loss larger than the purported benefits. Moreover, the mechanism introduces unfairness by rewarding overconfidence and punishing underconfidence, thus serving as a gender penalty for women. I also analyze field data from Chinese high schools; the results suggest similar conclusions as in the lab.

Download or read book Essays in Behavioral Economics and Development written by Christian Johannes Meyer and published by . This book was released on 2019 with total page 152 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation presents three independent chapters that build on the tools of behavioral economics to study issues related to labor markets in low-income countries and charitable giving. In the first chapter, I investigate whether present bias correlates with savings and job search behavior in a population of low-skill workers in Ethiopia. I conduct a field experiment with 460 women who begin employment in the ready-made garment industry. Most are rural-urban migrants without work experience for whom the job represents a stepping stone into the labor market. Almost all workers plan to use their jobs to save money and to look for higher-wage employment, but many fall short of their intentions. I propose self-control problems as a candidate explanation. I elicit a measure of present bias in a tightly-controlled experiment and match results to highfrequency survey data that I collect over a period of three months. Present bias is a significant predictor of job search effort, controlling for liquidity and a broad range of covariates. Present-biased workers spend 57 percent less time on job search per week. As a result of reduced search, present-biased workers generate fewer offers and stay in their jobs significantly longer. In contrast, I find no significant correlation between present bias and savings behavior. I discuss implications for the design of commitment devices in this context. In the second chapter, co-authored with Egon Tripodi, we study incentivized voluntary contributions to charitable activities. Motivated by the market for blood donations in Germany, we consider a setting where different incentives coexist and agents can choose to donate without receiving monetary compensation. We use a model that interacts image concerns of agents with intrinsic and extrinsic incentives to donate. Laboratory results show that a collection system where compensation can be turned down can improve the efficiency of collection. Image effects and incentive effects do not crowd each other out. A significant share of donors turn down compensation. Heterogeneity in treatment effects suggests gender-specific preferences over signaling. In the third chapter, also co-authored with Egon Tripodi, we use a field experiment to study how social image concerns affect pledges to engage in a charitable activity. We work with two different blood banks and a municipal government in Germany to offer sign-ups for human whole blood donations. Motivated by a simple signaling framework, we randomly vary the type of organization to donate to and the visibility of the pledge to donate. Our setting also provides natural variation in the group of people that form the "audience" for social image concerns. We find evidence for strong social image concerns when subjects are asked in public whether they would like to pledge a donation with a well-known charity. Almost all subjects renege on their pledge, with no detectable differences between treatments. We discuss avenues for further research and end on a cautionary note for organizations looking to harness pledges to encourage individuals to do good.

Download or read book Essays in Theoretical and Behavioral Economics written by Shengwu Li and published by . This book was released on 2016 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation consists of three essays in theoretical and behavioral economics. They all concern decision-making in complex environments. The first chapter is entitled Obviously Strategy-Proof Mechanisms. It is generally held that some strategy-proof mechanisms are easy for non-experts to understand, and others are difficult to understand. However, this distinction is not captured by standard game theory. In this chapter, I define obviously dominant strategies. Whether a strategy is obviously dominant depends (just) on the extensive game form. I characterize this definition in two ways: Obviously dominant strategies are exactly those strategies that a cognitively limited agent can recognize as dominant. Obviously strategy-proof (OSP) mechanisms are those that can be run by a social planner with only partial commitment power. For an environment with one-dimensional types and transfers, I characterize the OSP mechanisms and the OSP-implementable allocation rules. I test and corroborate the theory with a laboratory experiment. The second chapter is entitled Context Effects as Explained by Foraging Theory, and is coauthored with Neil Yu. This chapter reconciles two seemingly competing explanations of context-dependent choice, one invoking psychological mechanisms, and the other Bayesian learning. We prove that standard context effects are features of the optimal solution to a general dynamic stochastic resource- acquisition problem. The model has two key ingredients: inter-temporal substitution and learning about the environment. Interpreted as a description of animal foraging behavior, it explains why context effects might be adaptive in nature. Interpreted as a description of consumer choice problems, it suggests that context effects might result from rational inference. A simple experiment shows that the latter interpretation sometimes holds. The third chapter is entitled Thickness and Information in Dynamic Matching Markets, and is coauthored with Mohammad Akbarpour and Shayan Oveis Gharan. We introduce a simple model of dynamic matching in networked markets, where agents arrive and depart stochastically, and the composition of the trade network depends endogenously on the matching algorithm. We show that if the planner can identify agents who are about to depart, then waiting to thicken the market is highly valuable, and if the planner cannot identify such agents, then matching agents greedily is close to optimal. We characterize the optimal waiting time (in a restricted class of mechanisms) as a function of waiting costs and network sparsity. The planner's decision problem in our model involves a combinatorially complex state space. However, we show that simple local algorithms that choose the right time to match agents, but do not exploit the global network structure, can perform close to complex optimal algorithms. Finally, we consider a setting where agents have private information about their departure times, and design a continuous-time dynamic mechanism to elicit this information.

Download or read book Essays in Behavioral Economics and Environmental Policy written by Steven E. Sexton and published by . This book was released on 2012 with total page 202 pages. Available in PDF, EPUB and Kindle. Book excerpt: Social planners have long relied upon non-coercive interventions in order to achieve social welfare improvements that are not obtained by markets or direct policy. Such policies are perhaps nowhere more relevant and common than in environmental economics. Environmental goods and services are typically not traded in markets because of the difficulties of property rights assignment. And yet efforts to create markets or correct market failures by coercive policy are fraught with controversy. Thus, in addition to coercive mechanisms, social planners use information provision campaigns, appeals for cooperation, and "nudges" to improve the efficiency of environmental resource allocations. Non-coercive interventions have grown in popularity among social planners as behavioral economics has gained acceptance within the mainstream of the field. Indeed, such policies typically affect market outcomes and achieve environmental goals only insofar as they can exploit or correct decision making that deviates from standard theory. In this dissertation, agent behavior is analyzed to assess the potential of non-coercive interventions to achieve socially preferred environmental outcomes. In a first essay, the concept of conspicuous conservation is introduced as a modern variant of conspicuous consumption that affords status for displays of austerity meant to signal environmental preferences rather than displays of ostentation meant to signal wealth. I identify conspicuous conservation in the automobile market and estimate a willingness to pay up to several thousand dollars for the "green" signal transmitted by ownership of the Toyota Prius. In a second essay, I demonstrate how automatic bill payment programs can induce excessive consumption of goods and services by boundedly rational consumers who exhibit inattention to prices. As automatic payment programs have spread throughout industries characterized by recurring payments, from utility and telecommunication services to insurance and loan markets, this essay is the first to consider their implications for consumer demand and welfare. It is also the first to test empirically whether enrollment in such programs increases demand, as price salience theory suggests. It is shown that residential electricity consumption increases on average 2-4.5% due to enrollment in automatic payment programs, while commercial electricity consumption grows much as 6%. Moreover, bill-smoothing programs that utilities offer to low-income households are shown to induce an 8-9% increase in electricity consumption. A final essay examines the extent to which free transit fares and appeals for car-trip avoidance reduce car pollution on smoggy days. With data on freeway traffic volumes and transit ridership, public appeals for cooperation are shown to have no significant effect on car trip demand. Free transit fares, however, do have a significant effect on car trip demand. But the effect is perverse in that it generates an increase in car trips and related pollution. Free fares also increase transit ridership. These results suggest that free transit rides do not induce motorists to substitute to transit, but instead subsidize regular transit rides and additional trips. Appeals for cooperation also have no affect on carpooling behavior. Viewed in their totality, these essays communicate the importance of behavioral theories in formulating environmental policies and predicting agents' responses to such policies. Policies formulated without due regard for agents' bounded rationality and multifaceted motivations are doomed to unintended consequeces. However, recognition of these behavioral responses and their incorporation in policy design can result in improved environmental outcomes and efficient policies.

Download or read book Essays in Behavioral Economics written by Ashling M Scott and published by . This book was released on 2018 with total page 112 pages. Available in PDF, EPUB and Kindle. Book excerpt: Economic theory hinges on the fact that humans are rational. However, in the wild, research demonstrates human behavior often deviates from rationality. This deviation may result in suboptimal behavior. Researchers in behavioral economics and psychology have tried understand these irrational behaviors and clarified many of the ways humans are likely to be biased. Yet, we are still exploring ways to help people overcome their behavioral biases. This dissertation explores behavioral biases in three different contexts: technology, human cooperation, and banking. This dissertation demonstrates a behavioral bias in A/B testing in technology and quantifies the amount to which this bias is a problem. Second, this dissertation proposes a light institutional intervention of giving more information to study the impacts on trust. Third, this dissertation explores the effects of offering a new financial product to overcome behavioral biases around opening bank accounts and savings. Overall, these papers demonstrate behavioral biases can lead to suboptimal outcomes such as making the wrong business decision or missing out on the benefits of cooperation, or failure to open a bank account and save. Luckily, there are some ways we can overcome biases (Chapter 3), but not all interventions work in the ways we would expect (Chapter 2). The first chapter introduces the behavior of ''p-hacking", where decision makers stop experiments earlier or later than proper statistical validity requires, possibly because they are overly eager to obtain significant results. Such behavior may result in invalid test conclusions and financial losses. We investigate whether online A/B experimenters ``p-hack'' by stopping their experiment based on the p-value of the effect. Our data comes from a leading platform and contains 2,101 A/B tests that track the magnitude and significance level of the effect on every day of the experiment. We estimate the causal effect of reaching a particular p-value on stopping behavior by applying a regression discontinuity design to hazard modeling. Experimenters indeed p-hack, especially for positive lift values. Moreover, experimenters p-hack more if the lift is mildly positive rather than strongly positive. A latent class analysis shows that approximately 57% of experimenters p-hack at the 90% confidence threshold. A false discovery rate (FDR) analysis estimates that p-hacking increases false discoveries by 27.5%, while the overall rate of false-discoveries is 38%. This chapter is coauthored with Ron Berman, Leo Pekelis, and Christophe Van den Bulte. In the second chapter, I introduce an information signal and role organization that may engender more trusting behavior. Trust is an essential ingredient for unlocking economic surplus. However, consider the prisoner's dilemma--all parties gain from cooperation, yet each party has an incentive to deviate. How can we organize society to unlock the possible gains from trust in such situations? We've all had experiences that indicate it is possible. Studies have shown prosocial individuals are more trustworthy. We can take advantage of this fact and suggest pairing prosocial individuals with less prosocial individuals who will trust them if their type is known. In this case, it takes information, timing, and only one pro-social individual to unlock the trust surplus. I find information actually decreases overall trust and does not impact . Consequently, too much information might negatively influence cooperation and trust by changing our biases. In the final chapter coauthored with Paul Gertler, Sean Higgins, and Enrique Siera, I explore whether a financial incentive can nudge people into opening a bank account and saving. Despite the benefits of saving in formal financial institutions, take-up of no-fee formal savings accounts is low among the poor. Surprisingly, even after opening a savings account, use of the account is often low. In a large randomized experiment across 110 bank branches throughout Mexico, we provide a temporary incentive to both open and use a savings account: we offer prize-linked savings accounts with cash-prize lotteries, where lottery tickets are awarded as a function of savings balances. We find that 41% more accounts are opened in treatment branches than in control branches on average, and the number of accounts opened in treatment branches increases steadily over time while the lotteries were being offered. Although the incentive to save is temporary as lotteries are only offered for two months, the new accounts continue to be used over time. After five years, clients who opened accounts in response to the lottery continue saving and making transactions at the same rates as those who opened accounts in control branches during the same months.

Download or read book Essays in Behavioral Economics written by and published by . This book was released on 2015 with total page 205 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Three Essays on Behavioral Economics written by Juanjuan Meng and published by . This book was released on 2010 with total page 292 pages. Available in PDF, EPUB and Kindle. Book excerpt: This dissertation investigates two topics on behavioral economics: reference-dependent preferences and social utility. Chapter 1 and 2 provide field evidence from labor market and financial market to support reference-dependent model that treats expectations as reference points. Chapter 3 explores the implications of social distance on the endogenous emergence of personal relationships and impersonal market exchange. Chapter 1 : A model of cabdrivers' labor supply is proposed, building on Farber's (2005, 2008) empirical analyses and Kószegi and Rabin's (2006; henceforth "KR") theory of reference-dependent preferences. Following KR, the proposed model has targets for hours as well as income, determined by proxied rational expectations. The model, estimated with Farber's data, reconciles his finding that stopping probabilities are significantly related to hours but not income with Colin Camerer et al.'s (1997) negative "wage" elasticity of hours; and avoids Farber's criticism that estimates of drivers' income targets are too unstable to yield a useful model of labor supply. Chapter 2 : An investor' aversion to losses relative to a reference point in the stock market predicts a V-shaped relationship between the optimal position in a stock and current gains from that stock. Estimates from Odean's (1999) individual trading records show that (i) the predicted V-shape relationship exists for a large majority of investors, and (ii) expectations are the most likely determinant of investors' reference points. The V-shaped relationship and the implication of the initial purchase decision that expectations are mostly positive yield a simple explanation of the disposition effect. Chapter 3 : Personal relationships and impersonal exchange have been previously modeled in ways that prevent them from coexisting in equilibrium as contract enforcement mechanisms. Empirical evidence nonetheless suggests that they sometimes coexist. This paper introduces social surplus into exchange payoff, which is determined by social distance and specific to personal relationships but not to impersonal exchange. This approach allows the two modes of exchange to coexist in equilibrium. The possibility of impersonal exchange improves welfare and equality among buyers in general. But there also exist cases where competition between the two forms of exchange makes welfare and equality deteriorate.