A comment on “School choice: An experimental study” [J. Econ. Theory 127 (1) (2006) 202-231]

We show that one of the main results in Chen and Sönmez (2006, 2008) [6] and [7] does no longer hold when the number of recombinations is sufficiently increased to obtain reliable conclusions. No school choice mechanism is significantly superior in terms of efficiency.     

Comment on “Correlated information, mechanism design and informational rents” [J. Econ. Theory 123 (2) (2005) 210–217]

We amend an error in [S. Parreiras, Correlated information, mechanism design and informational rents, J. Econ. Theory 123 (2005) 210–217]. Consequently, it is in general not possible to reinterpret a mechanism design model that violates the spanning condition of Crémer and McLean [J. Crémer, R. McLean, Full extraction of the surplus in bayesian, dominant strategy auctions, Econometrica 56 (1988) 1247–1258] as one in which agents hold private information about the informativeness of their signals about other agents? types. Instead, such an interpretation is warranted only when the weights used to span an agent?s set of beliefs stand in a singular relation with the prior type distribution that is known as an alternative characterization of Blackwell dominance.     

A ‘technically level playing-field’ profit efficiency analysis of enforced competition between publicly funded institutions

The study demonstrates how recent advances in the data envelopment analysis (DEA) of profit efficiency, and in combining DEA and stochastic frontier analysis (SFA) to measure producer performance, can be used to obtain a ‘technically level playing-field’ profit efficiency performance measure. A three-stage analysis is used to provide an empirical investigation of public-sector universities facing regulatory pressures to attain both profit efficiency and output quality. Stage one employs directional distance function analysis to decompose DEA profit efficiency measures into technical and allocative components. As these performance measures incorporate the impacts of managerial inefficiency, the operating environment and luck (statistical noise), stage two applies SFA to total (radial and non-radial) slacks to obtain a degree of disentanglement from the latter two impacts. The stage-two results are used to define a common environment and common luck scenario, thus permitting university producers’ inputs to be adjusted so as to reflect operation within this more level playing-field scenario. Stage three recomputes the first-stage DEA for this scenario, to yield an (input-focused) ‘technically level playing-field’ measure of profit efficiency that unifies the regulatory financial audit and output-quality indicators in a single, best-practice-benchmarked, performance measure.     

A comment on “Egalitarianism and efficiency in repeated symmetric games” by V. Bhaskar [Games Econ. Behav. 32 (2000) 247-262]

We identify an error in Bhaskar?s (2000) Proposition 4. We provide counterexamples to this result and demonstrate that it is not correctable.     

School choice: an experimental study

We present an experimental study of three school choice mechanisms. The Boston mechanism is influential in practice, while the Gale-Shapley and Top Trading Cycles mechanisms have superior theoretical properties. Consistent with theory, this study indicates a high preference manipulation rate under Boston. As a result, efficiency under Boston is significantly lower than that of the two competing mechanisms in the designed environment. However, contrary to theory, Gale-Shapley outperforms Top Trading Cycles and generates the highest efficiency. Our results suggest that replacing the Boston mechanism with either Gale-Shapley or Top Trading Cycles mechanism might significantly improve efficiency.     

THE FOCAL POINT IN THE TRAVELLER'S DILEMMA: AN EXPERIMENTAL STUDY

This paper provides an experimental test of the traveller's dilemma. Our investigation aims to address the research hypothesis that introducing a reference point à la Schelling (set equal to the Pareto optimal solution) might drive people away from rationality even when the size of the penalty/reward is high. Experimental findings reported in this paper provide answers to this question showing that the reference point did not encourage coordination around the Pareto optimal choice.     

The computational complexity of random serial dictatorship

In social choice settings with linear preferences, random dictatorship is known to be the only social decision scheme satisfying strategyproofness and ex post efficiency. When also allowing indifferences, random serial dictatorship (RSD) is a well-known generalization of random dictatorship that retains both properties. RSD has been particularly successful in the special domain of random assignment where indifferences are unavoidable. While executing RSD is obviously feasible, we show that computing the resulting probabilities is #P-complete, and thus intractable, both in the context of voting and assignment.     

Hurting hurts more than helping helps

Previous experimental work suggests that both a dislike for an unequal division of payoffs and intentionality play a role to explain reciprocal behavior. This paper focuses on intentionality, and in particular on the question of whether negative intentionality matters more than positive intentionality. Experimental evidence obtained in the ‘hot response game’ suggests that this is the case: subjects are 67% more likely to reciprocate an intentional hurtful choice over an unintentional hurtful choice. Subjects are only 25% more likely to reciprocate an intentional helpful choice over an unintentional helpful choice. Additional evidence on the role of emotions helps explain this asymmetry between positive and negative intentionality. It is argued that a self-serving attributional style may be responsible for the observed phenomenon.     

Re‐Examining the Technical Efficiency of Australian Banks: A Bootstrap DEA Approach

This study re‐examines both pure technical and scale efficiency of Australian banks using bootstrap data envelopment analysis (DEA). The aim is to improve the choice of variables of the core profit efficiency model which is commonly used in earlier Australian banking efficiency studies. After we introduce the “interest income” over “net interest income” variable in the core profit efficiency model, the proportion of fully pure technical efficient banks decreased to 23% which is significantly lower than 81% which was reported in a recent study. This research argues that the main issue that has contributed to this difference is that improving the choice of variables significantly increases the discriminatory power of efficiency estimates. Additionally, emphasising on statistical properties of efficiency estimates, this study employs bootstrap DEA to provide confidence intervals and bias corrected estimates of pure technical efficiency scores of the sample banks. The bootstrap results show the importance of incorporating sample variation and bias in estimating efficiency scores. Earlier Australian banking efficiency studies ignored such issues. The new findings from the sample banks could have important implications for the banking industry in Australia.     

Interlinkage and Generous Tit‐for‐Tat Strategy

We investigate an infinitely‐repeated prisoners' dilemma with imperfect monitoring and consider the possibility that the interlinkage of the players' distinct activities enhances implicit collusion. We show a necessary and sufficient condition for the existence of a generous tit‐for‐tat Nash equilibrium. Such an equilibrium, if it exists, is unique. This equilibrium achieves approximate efficiency when monitoring is almost perfect, where the discount factors are fixed.     

New axioms for top trading cycles

The school choice problem is of great importance both in theory and practice. This paper studies the (student-optimal) top trading cycles mechanism (TTCM) in an axiomatic way. We introduce two new axioms: MBG (mutual best group)-quota-rationality and MBG-robust efficiency. While stability implies MBG-quota rationality, MBG-robust efficiency is weaker than robust efficiency, which is stronger than the combination of efficiency and group strategy proofness. The TTCM is characterized by MBG-quota rationality and MBG-robust efficiency. Our results construct a new basis to compare the TTCM with the other school choice mechanisms, in terms of both fairness and incentive-related axioms.     

Consumer valuation of energy-saving features of residential air conditioners with hedonic and choice models

The promotion of energy-efficient appliances is necessary to reduce the energetic and environmental burden of the household sector. However, many studies have reported that a typical consumer underestimates the benefits of energy-saving investment on the purchase of household electric appliances. To analyze this energy-efficiency-gap problem, many scholars have estimated implicit discount rates that consumers use for energy-consuming durables. Although both hedonic and choice models have been used in previous studies, a comparison between the two models has not yet been made. This study uses point-of-sale data about Japanese residential air conditioners and estimates implicit discount rates with both hedonic and choice models. Both models demonstrate that a typical consumer underinvests in energy efficiency. Although choice models generally estimate a lower implicit discount rate than hedonic models, the latter models estimate the values of other product characteristics more consistently than choice models.     

The Effect of the Quasi–market on the Efficiency–equity Trade–off in the Secondary School Sector

Britain’s education system was radically transformed during the 1990s following the Education Reform Act (1988). The primary objective of these reforms was to raise educational standards through the creation of a quasi–market based upon greater parental choice and the transfer of control over resources from local education authorities to schools. The purpose of this paper is to investigate the effects of the quasi–market on efficiency and equity in the secondary education sector in England during the 1990s. Two primary questions are addressed. Has the quasi–market led to an improvement in efficiency in the secondary education sector? Has the quasi–market had any adverse consequences on the social segregation of pupils between schools? Using data obtained from the Schools’ Census and the School Performance Tables, we find strong evidence that the quasi–market has led to a substantial improvement in efficiency (as measured by a school’s exam performance and by the productivity of staff) during the 1990s. The same market forces have led to a greater social segregation of pupils between schools.     

Imitation—theory and experimental evidence

We introduce a generalized theoretical approach to study imitation and subject it to rigorous experimental testing. In our theoretical analysis we find that the different predictions of previous imitation models are mainly explained by different informational assumptions, and to a lesser extent by different behavioral rules. In a laboratory experiment we test the different theories by systematically varying information conditions. We find significant effects of seemingly innocent changes in information. Moreover, the generalized imitation model predicts the differences between treatments well. The data provide support for imitation on the individual level, both in terms of choice and in terms of perception. Furthermore, individuals’ propensity to imitate more successful actions is increasing in payoff differences.     

Peer‐based comparison and firms' discretionary cost decisions

This study investigates whether firms engage in peer‐based benchmarking in their decision‐making regarding selling, general and administrative expenses (SG&A) for a large sample of U.S. listed firms. Peer‐based comparison relates to comparing own performance against the performance of a meaningful reference group of other firms. SG&A are to a large extent discretionary, but optimal levels of (relative) SG&A are hard to assess. Based on the behavioural theory of the firm and institutional theory, we argue that peer‐based comparison is likely to be an important input to managers' SG&A decision processes. Results show that peer‐based comparison significantly drives changes in firms' reported SG&A. In addition, the effect of peer‐based comparison is found to depend on the firm's life cycle stage. Findings further indicate that peer‐based comparison has a significantly stronger effect in reference groups characterised by high(er) SG&A similarity. Results are robust to using several industry classification systems, as well as, multiple approaches to identify firm life cycles.     

Retail‐bank efficiency: Nonstandard goals and environmental determinants

This paper analyzes technical and scale efficiency of Austrian savings and cooperative banks. Non‐profit objectives are also considered with respect to input–output choice, which contributes to adequate performance measurements for alternative banks. Efficiency score estimates obtained via Data Envelopment Analysis (DEA) reveal considerable potential for improvement in terms of intermediation efficiency. Several environmental determinants prove significant, but the cumulative predictive content of exogenous factors is rather modest. Bank efficiency improves in both underdeveloped and prosperous markets, while increased rival size and distance appear to be detriments to efficiency. A concluding discussion of confounding factors reveals the managerial, stakeholder, and policy implications of the results.     

The endowment effect and intertemporal choice: a laboratory investigation

We present a laboratory investigation of intertemporal choice (i.e., elicited discount rates) allowing for the influence of the endowment effect. Consistent with the previous literature, we hypothesize that the endowment effect in an intertemporal choice setting results in substantially higher discount rates relative to when individuals treat the resources in question as found money. Our results support this hypothesis and our experimental design provides a new protocol for conducting choice experiments wherein the endowment effect is an important determinant of behaviour.     

Are we nice(r) to nice(r) people?—An experimental analysis

We experimentally investigate whether individuals can reliably detect cooperators (the nice(r) people) in an anonymous decision environment involving “connected games.” Participants can condition their choices in an asymmetric prisoners’ dilemma and a trust game on past individual (their partner’s donation share to a self-selected charity) and social (whether their partner belongs to a group with high or low average donations) information. Thus, the two measures of niceness are the individual donation share in the donation task, and the cooperativeness of one’s choice in the two games. We find that high donors achieve a higher-than-average expected payoff by cooperating predominantly with other high donors. Group affiliation proved to be irrelevant. Electronic Supplementary Material Supplementary material is available in the online version of this article at . JEL Classification C91, C72, D3     

Self-tuning experience weighted attraction learning in games

Self-tuning experience weighted attraction (EWA) is a one-parameter theory of learning in games. It addresses a criticism that an earlier model (EWA) has too many parameters, by fixing some parameters at plausible values and replacing others with functions of experience so that they no longer need to be estimated. Consequently, it is econometrically simpler than the popular weighted fictitious play and reinforcement learning models. The functions of experience which replace free parameters “self-tune” over time, adjusting in a way that selects a sensible learning rule to capture subjects’ choice dynamics. For instance, the self-tuning EWA model can turn from a weighted fictitious play into an averaging reinforcement learning as subjects equilibrate and learn to ignore inferior foregone payoffs. The theory was tested on seven different games, and compared to the earlier parametric EWA model and a one-parameter stochastic equilibrium theory (QRE). Self-tuning EWA does as well as EWA in predicting behavior in new games, even though it has fewer parameters, and fits reliably better than the QRE equilibrium benchmark.     

Heterogeneous quantal response equilibrium and cognitive hierarchies

We explore an equilibrium model of games where behavior is given by logit response functions, but payoff responsiveness and beliefs about others' responsiveness are heterogeneous. We study two substantively different ways of extending quantal response equilibrium (QRE) to this setting: (1) Heterogeneus QRE, where players share identical correct beliefs about the distribution of payoff responsiveness; and (2) Truncated QRE, where players have downward looking beliefs, systematically underestimating others' responsiveness. We show that the cognitive hierarchy model is a special case of Truncated QRE. We conduct experiments designed to differentiate these approaches. We find significant evidence of payoff responsive stochastic choice, and of heterogeneity and downward looking beliefs in some games.