Budget processes: Theory and experimental evidence

This paper studies budget processes, both theoretically and experimentally. We compare the outcomes of bottom-up and top-down budget processes. It is often presumed that a top-down budget process leads to a smaller overall budget than a bottom-up budget process. Ferejohn and Krehbiel [Ferejohn, J., Krehbiel, K., 1987. The budget process and the size of the budget, Amer. J. Polit. Sci. 31, 296–320] showed theoretically that this need not be the case. We test experimentally the theoretical predictions of their work. The evidence from these experiments lends strong support to their theory, both at the aggregate and the individual subject level.     

The geometry of voting power: Weighted voting and hyper-ellipsoids

Suppose legislators represent districts of varying population, and their assembly's voting rule is intended to implement the principle of one person, one vote. How should legislators' voting weights appropriately reflect these population differences? An analysis requires an understanding of the relationship between voting weight and some measure of the influence that each legislator has over collective decisions. We provide three new characterizations of weighted voting that embody this relationship. Each is based on the intuition that winning coalitions should be close to one another. The locally minimal and tightly packed characterizations use a weighted Hamming metric. Ellipsoidal separability employs the Euclidean metric: a separating hyper-ellipsoid contains all winning coalitions, and omits losing ones. The ellipsoid's proportions, and the Hamming weights, reflect the ratio of voting weight to influence, measured as Penrose–Banzhaf voting power. In particular, the spherically separable rules are those for which voting powers can serve as voting weights.     

Entrepreneurial overconfidence and ambiguity aversion: dealing with the devil you know,than the devil you don't know

Various empirical studies find that entrepreneurs are systematically overconfident in their venture's probabilistic chances of success. Yet, entrepreneurs often face an ambiguous future that precludes them from making such probabilistic judgements. A theoretical framework based on ambiguity aversion is developed to explain an entrepreneur's overconfidence under complex and novel conditions of ambiguity. Unlike optimistic explanations, this ambiguity-averse form of overconfidence offers a non-probabilistic approach to entrepreneurial judgements of uncertainty.     

Political economy of eastern enlargement of the European Union: Budgetary costs and reforms in voting rules

Eastern European countries are likely to be major recipients of European Union (EU) funds after membership, which has created serious concern among incumbent members. The EU has devised reforms of budgetary rules to limit the funds that will flow to the East. Using a political economy model and drawing on the experience of previous enlargements, this paper argues that such pre-accession reforms will be ineffective because they can be reversed by a coalition of Eastern European countries after membership. The paper then estimates budgetary costs of eastern enlargement. A better way to resolve budgetary concerns is to reform voting rules rather than budgetary rules, before eastern enlargement.     

Voting on voting with the feet: a cross-county analysis of the Tennessee popular referenda to secede from the union

We analyze a unique case of voting on voting with the feet, when Tennessee twice considered secession from the Union in 1861 by popular referenda. The initial votes to hold a convention, and to send disunion delegates to a convention, failed, but after the Confederate states adopted a new constitution and the bombing of Fort Sumter took place, a second set of votes to separate from the union, and to join the confederacy, passed. Regression results support the importance of both economic interests and political tendencies, along with regional differences, in explaining the variation in votes across counties. Class distinctions were not found to be significant.

Inter-ethnic trust and reciprocity: results of an experiment with small businessmen

We investigate inter-ethnic trust and reciprocity by having subjects from distinct ethnic origins play the trust game [Games Econom. Behav. 10 (1995) 122]. The participants in the experiment are male small businessmen of Turkish or Belgian ethnic origin, all of whom have a business in the same city (Ghent, Belgium). Our main finding is that the average levels of trust and reciprocity are independent of ethnic origin and, moreover, independent of the ethnic origin of the opposite party.     

Batch queues with choice of arrivals: Equilibrium analysis and experimental study

We study the decisions agents make in two queueing games with endogenously determined arrivals and batch service. In both games, agents are asked to independently decide when to join a queue, or they may simply choose not to join it at all. The symmetric mixed-strategy equilibrium of two games in discrete time where balking is prohibited and where it is allowed are tested experimentally in a study that varies the game type (balking vs. no balking) and information structure (private vs. public information). With repeated iterations of the stage game, all four experimental conditions result in aggregate, but not individual, behavior approaching mixed-strategy equilibrium play. Individual behavior can be accounted for by relatively simple heuristics.     

Simon's and Siegel's responses to the 'mixed strategy anomaly': a missed case in the sensitivity of economics to empirical evidence

In some of their papers published in the 1950s, Herbert Simonand Sidney Siegel responded to the so-called mixed strategyanomaly in ways which deserve more attention. They producednot only (i) immediate defences of the economic theory of theirown time, but also (ii) ideas and solutions that have laterturned out to be significant contributions to the developmentof the economic theory of choice and decision-making and theseparation of experimental economics from experimental psychology.These observations suggest that economics can be more responsiveto empirical anomalies than has been assumed. Furthermore, knowledgeof the desirable responsiveness to anomalies can provide meansof avoiding the non-desirable immunity to anomalies.     

Exploring the role of gender in common-pool resource extraction: evidence from laboratory and field experiments in fisheries

There is active debate on gender issues in natural resource management. For example, it is proposed that women are more cooperative than men when dealing with natural resources decisions; however, few scientific studies have directly addressed this hypothesis. We provide evidence for a greater cooperative attitude in women compared to men in both college students and coastal fishing communities of Baja California, Mexico, by means of game theory experiments. In both laboratory and field experiments, women changed their behaviour towards lower extraction compared to men, when regulations, sanctions or social scolding were introduced in the games. These results suggest that raising the role of women in decision-making, along with an adequate institutional framework, may lead to a more sustainable use of natural resources.     

Exploring the capability to reason backwards: An experimental study with children,adolescents, and young adults

This is the first study investigating the development of the capability to reason backwards in children, adolescents, and young adults aged 6 to 23 under controlled laboratory conditions. The experimental design employs a modified version of the race game. As in the original game, subjects need to apply backward analysis in order to solve the games. We find that subjects’ capability to reason backwards improves with age, but that this process systematically differs across genders. Our repetition of the games indicates that differences exist also in learning between age groups and across genders.     

Effects of runoff voting rules on number of parties and candidates' political experience: Evidence from a law change in Peru

We study the effect of a change in electoral rules on political competition, measured by the number of candidates and their political experience. We explore the effects of a change in legislation, introduced a year before the gubernatorial elections in Peru on the number of parties that participated in these elections. We also investigate how the legislative change affected the political experience of the candidates. Given that the legislative change did not apply to elections for provincial mayors, we use those elections as a control group, in a difference-in-differences design. Our estimates show the number of parties registered increased by a margin of around 2.2 after the legislative change. The change also increased the candidates' years of accumulated political experience, particularly in the subsequent gubernatorial elections.     

Information and the persistence of private-order contract enforcement institutions: An experimental analysis

We study an experimental market in which some sellers are prone to moral hazard, and in which a private-order contract enforcement institution exists that can mediate trade and prevent sellers from reneging on their contractual obligations. Using the institution to resolve the moral-hazard problem is costly. We demonstrate that in this market, the utilization of the private-order contract enforcement institution may make public and private market signals uninformative and inhibit learning. We study whether this potential information externality can limit adaptation away from the private-order institution when it is efficient to do so. Consistent with theory, we find inefficient persistence when the institution is used, but by contrast, efficient adaptation in other situations. Providing information to individuals who are using the private-order institution allows them to partially adapt.     

Institutions, motivations and public goods: An experimental test of motivational crowding

Contributions to public goods can be motivated by intrinsic factors such as warm glow altruism and fairness, as well as extrinsic incentives such as sanctions and payments. However, psychological studies suggest that formal extrinsic incentives may crowd out intrinsic motivations. In an experimental study of individual contributions to a public good we find that suasion crowded in voluntary contributions, while an extrinsic incentive in the form of a regulation led to crowding out. This has implications for the design of public policy where ranges of motivations are present.     

Economic value and cost-effectiveness of biventricular versus right ventricular pacing: results from the BLOCK-HF study

Abstract

Aims: The Biventricular vs Right Ventricular Pacing in Heart Failure Patients with Atrioventricular Block (BLOCK-HF) demonstrated that biventricular (BiV) pacing resulted in better clinical and structural outcomes compared to right ventricular (RV) pacing in patients with atrioventricular (AV) block and reduced left ventricular ejection fraction (LVEF; ≤50%). This study investigated the cost-effectiveness of BiV vs RV pacing in the patient population enrolled in the BLOCK-HF trial.

Methods: All-cause mortality, New York Heart Association (NYHA) Class distribution over time, and NYHA-specific heart failure (HF)-related healthcare utilization rates were predicted using statistical models based on BLOCK-HF patient data. A proportion-in-state model calculated cost-effectiveness from the Medicare payer perspective.

Results: The predicted patient survival was 6.78?years with RV and 7.52?years with BiV pacing, a 10.9% increase over lifetime. BiV pacing resulted in 0.41 more quality-adjusted life years (QALYs) compared to RV pacing, at an additional cost of $12,537. The “base-case” incremental cost-effectiveness ratio (ICER) was $30,860/QALY gained. Within the clinical sub-groups, the highest observed ICER was $43,687 (NYHA Class I). Patients receiving combined BiV pacing and defibrillation (BiV-D) devices were projected to benefit more (0.84?years gained) than BiV pacemaker (BiV-P) recipients (0.49?years gained), compared to dual-chamber pacemakers.

Conclusions: BiV pacing in AV block patients improves survival and attenuates HF progression compared to RV pacing. ICERs were consistently below the US acceptability threshold ($50,000/QALY). From a US Medicare perspective, the additional up-front cost associated with offering BiV pacing to the BLOCK-HF patient population appears justified.     

Regional productivity variation and the impact of public capital stock: an analysis with spatial interaction,with reference to Spain

In this article, we examine whether variations in the level of public capital across Spain's Provinces affected productivity levels over the period 1996 to 2005. The analysis is motivated by contemporary urban economics theory, involving a production function for the competitive sector of the economy (‘industry’) which includes the level of composite services derived from ‘service’ firms under monopolistic competition. The outcome is potentially increasing returns to scale resulting from pecuniary externalities deriving from internal increasing returns in the monopolistic competition sector. We extend the production function by also making (log) labour efficiency a function of (log) total public capital stock and (log) human capital stock, leading to a simple and empirically tractable reduced form linking productivity level to density of employment, human capital and public capital stock. The model is further extended to include technological externalities or spillovers across provinces. Using panel data methodology, we find significant elasticities for total capital stock and for human capital stock, and a significant impact for employment density. The finding that the effect of public capital is significantly different from zero, indicating that it has a direct effect even after controlling for employment density, is contrary to some of the earlier research findings which leave the question of the impact of public capital unresolved.     

Interviews with Institutional Investors: The How and Why of Active Investing

We interview professional institutional investors to learn how they choose between active and passive management, select active equity managers and construct multi-manager portfolios. We find that many of the aspects emphasized in the fund management literature, such as returns generated by the average manager and emphasis on past performance, play a relatively minor role in decisions. In contrast, judgment is found to play a central role, particularly the evaluation of people when selecting managers, the role of confidence in retaining managers, and self-perceptions about capability to identify skilled managers. Past performance is not taken at face value, but analyzed to understand underlying sources of returns. Stated reasons for preferring active management relate to whether a handful of skilled active managers can be identified and combined to generate a better expected portfolio outcome; and are only vaguely associated with the performance of the average manager.     

Arrested development: the experience of European hard disk drive firms in comparison with US and Japanese firms

This paper analyses how US, Japanese, and European HDD firms responded to technological shifts in the hard disk industry from 1973 through 1996. Leading incumbent US HDD firms were frequently forced out of the market. Leading Japanese incumbent firms in the same industry, however, were not displaced by these changes. US startup firms thrived under these technological shifts, displacing US incumbent firms. Japanese startups did poorly. European firms encountered the worst of both worlds: its incumbent firms were frequently displaced by technological changes, as were US firms; while startup firms (with one exception) performed as poorly as those in Japan.     

品牌经济学的理论基础——引入品牌的需求曲线及其经济学分析

需求定律是经济学分析的理论基础之一,品牌经济学的理论基础为引入品牌的需求曲线或考虑选择成本的需求定律。把品牌引入经济学中后,品牌信用度的提高使需求曲线右移并变得更为陡峭,同时品牌信用度的提高改变了需求曲线的位置,使得均衡价格提高,均衡数量增加,增加了消费者剩余和生产者剩余,提高了社会福利水平。文章为“品牌战”替代“价格战”提供了理论依据,即通过品牌建设提高品牌信用度,使得在价格提高的条件下需求量增加,而这只有在需求曲线改变位置时方能做到。     

The incidence of import liberalization with and without a value added tax: an application to bangladesh

This paper examines the impact of import tariffs and tariff-replacing indirect taxes on the welfare of households grouped by the size distribution of income. A computable general equilibrium model for Bangladesh is simulated to examine the removal of quantitative restrictions and tariffs as well as the replacement of trade taxes with a value added tax (VAT). Import liberalization alone expands the manufacturing sector and increases the welfare of lower income households. If a uniform VAT is placed on both imports and all non-agricultural production in order to replace the lost tariff revenue for the government, some of the gains from import liberalization are diminished. If exports are exempted from the VAT, the gains are sustained to a greater degree. With a combination of tariff liberalization, quota markups, and the VAT, the economy goes through a contraction and the welfare of all households is reduced.