An alternative proof of Fishburn’s axiomatization of lexicographic preferences

We present an alternative proof of Fishburn’s (1975) axiomatization of lexicographic preferences. The essence of our proof lies in identifying “an extremely pivotal factor”. Our proof reconfirms the strong interconnections between Arrow’s and Gibbard–Satterthwaite’s theorems with Fishburn’s axiomatization.     

Risk attitudes and the stag-hunt game

A stag-hunt game (with the risky and safe actions) has two pure Nash equilibria that are Pareto-rankable. The risky action leads either to the Pareto-superior equilibrium (high payoff) or to out of equilibrium (low payoff) depending on the opponent’s action. Both players may want to obtain high payoff but uncertainty about the opponent’s action may prevent them to take such strategic risk. This paper investigates how information about the risk attitude of an opponent affects a player’s action choice in the stag-hunt game. I find that although a subject’s propensity to choose the risky action depends on her opponent’s risk attitude, it does not depend on her own risk attitude.     

Does It Matter if You Are Observed by Others? Evidence from Donations in the Field*

We investigate whether people's donations in the field are affected by the presence of others. In the analysis, we distinguish between individuals who arrived at a national park alone and those who arrived as members of a group. We also investigated the effect of donations being made in the presence of a third party made in the presence of a third party. We find that donations are significantly more frequent for individuals who are members of a group. When a third party is present, we find that the total donations by individuals who are a part of a group are significantly higher than those of lone travelers, mainly because of the increased probability of donating.     

Do the world’s largest cities follow Zipf’s and Gibrat’s laws?

We examine whether the size distribution and the growth process of the world’s largest cities follow Zipf’s law and Gibrat’s law. The parametric results of the size distribution analysis reject Zipf’s law for all sample sizes and also show the Zipf exponent systematically declines as the sample size increases. The growth process analysis confirms Gibrat’s law and yields a local Zipf exponent of one for cities with a normalized population less than 0.53%, which includes about 95% of the total observations. The deviations from Zipf’s law occur at the extreme upper tail and are likely a result of restricted mobility of population across countries. However, given that Gibrat’s law holds, we can expect the size distribution to converge to Zipf’s law with a decline in the barriers to immigration.     

Removed preferences

In formalizing a ‘veil of ignorance’ type procedure, this paper considers how an agent?s preferences over a set of alternatives change as he is placed at an increasing ‘distance’ from the consequences of his choices. A definition for such ‘removed preferences’ is presented and its properties studied. As an application, it is demonstrated that present biased agents are ‘essentially’ exponential when distanced from the present, and that rank-dependent expected utility agents are ‘essentially’ expected utility when distanced from risk.     

Financial expectations and the ‘left-right’ political value scale: Testing for the POUM hypothesis

Using a uniquely defined indicator of political ideology we test whether expectations of future financial well-being have an effect on an individual’s position on the political ‘left-right’ spectrum. We find evidence of a significant “prospect of upward mobility” effect.     

Why do people place lower weight on advice far from their own initial opinion?

Experimental studies find that the weight put on advice is negatively related to the distance between the advice and the decision-maker’s initial opinion. We show that this can be rational if the decision-maker has imperfect knowledge about the advisor’s competence.     

Impatience among preschool children and their mothers

Using experimental data of children and their mothers, this paper explores the intergenerational relationship of impatience. The child’s impatience stems from a delay of gratification experiment, the mother’s from a choice task. Findings demonstrate an intergenerational relationship in decision making.     

Citizens’ trust in government and their willingness-to-pay

We employ the Hicksian compensating variation and a citizen’s subjective perspective on trustworthiness of government, and draw a positive association between citizens’ trust in government and their willingness-to-pay. Our finding suggests that public projects can be hindered by prevailing distrust toward government.     

Evaluating the median voter model’s explanatory power

We match individual senators’ voting behavior on legislative proposals with 24 real referendum decisions on exactly the same issues with identical wording. This setting allows us to evaluate the median voter model’s quality with revealed constituents’ preferences. Results indicate a limited explanatory power of the median voter model: It explains 17.6% points more than random voting and that a senator’s probability to accept a proposal in parliament increases on average by 8.4% points when the district median voter accepts the proposal.     

Substitution effects across charitable donations

This paper examines substitution effects across charitable donations, specifically the effect of 2nd collections on 1st collections at Catholic Masses. While 2nd collections increased total donations by 17.8%, 18.4% of 2nd collection donations came from 1st collections which fell 4.3%.     

Best-of-three all-pay auctions

We study a best-of-three all-pay auction. It is shown that with values of winning and without values of losing, this auction is less productive (the players’ total expected effort is smaller) than the one-stage all-pay auction. However, with different values of losing over the contest’s stages it may be more productive than the one-stage all-pay auction.     

On the welfare implications of restricting bankruptcy information

The Fair Credit Reporting Act (FCRA) dictates that adverse events such as a Chapter 7 bankruptcy filing must be removed from an individual’s credit record after 10 years. The intent of the law is to provide partial consumption insurance by giving an individual a fresh start. However, the law obviously weakens incentives not to default, which can result in higher interest rates that in turn reduce intertemporal insurance. Because of this tradeoff, it is unclear how long is the optimal length of time that an adverse event remains on an individual’s credit record. In this paper we assess the welfare consequences of varying the length of time that adverse events can be on one’s credit record. We calibrate the model to US data where the exclusion parameter is set to be 10 years on average. Then we run a counterfactual to find the length that maximizes ex-post economywide welfare using a consumption equivalent measure. The model predicts agents prefer to remove the bankruptcy flag after one year, though the gains are small.     

A simple model of herd behavior, a comment

In this paper we analyze the role played by the tie-breaking assumptions in Banerjee’s model of herd behavior. Changing one assumption we obtain three important results: players’ strategies are parameter dependent; an incorrect herd could be reversed; a correct herd is irreversible.     

A mechanism for eliciting a probability distribution

This work extends Karni’s direct revelation mechanism for eliciting agents’ subjective beliefs over the distribution of a random variable.     

Sabotage in teams

We show that a team may favor self-sabotage to influence the principal’s contract decision. Sabotage increases a team member’s bonus and total team effort. If these benefits outweigh the reduction in the success probability, sabotaging the team is rational.     

Price discrimination via information provision

We study price discrimination where different prices are offered as a bundle with different levels of information about a product. The seller’s price discrimination induces high valuation buyers to purchase a good without information and low valuation buyers to purchase with information. Our analysis highlights several interesting results about price discrimination: (i) the seller’s choice of information provision is the combination of full information and no information, (ii) products can be cheaper without information provision than with information provision, (iii) as a result of price discrimination, prices can be more dispersed as buyers’ valuations become largely similar, and (iv) the high valuation buyers purchase a damaged good and may earn negative surplus. Furthermore, we investigate under which circumstances price discrimination is more profitable than uniform pricing. We show that a decline in transportation costs which facilitate price discrimination can be welfare reducing.     

Working under pressure: Evidence from the impacts of soccer fans on players’ performance

In this paper we study how pressure affects individual’s behavior. For this purpose we use sports data, where the attendance is a proxy for pressure, to investigate if the number of fans in the stadium affects the performance of the players. We overcome the reverse causality problem by proposing an instrument variable: a promotion in Brazil during which low cost tickets were assigned to random soccer matches. In contrast to previous literature, our results suggest that pressure does not significantly affect players’ behavior.     

A note on Kuhn’s Theorem with ambiguity averse players

Kuhn’s Theorem shows that extensive games with perfect recall can equivalently be analyzed using mixed or behavioral strategies, as long as players are expected utility maximizers. This note constructs an example that illustrates the limits of Kuhn’s Theorem in an environment with ambiguity averse players who use a maxmin decision rule and full Bayesian updating.     

Self-regulatory strength and dynamic optimal purchase

I study a single-agent dynamic purchase problem by using a Gul and Pesendorfer’s [Gul, F., Pesendorfer, W., 2007. Harmful addiction. Review of Economic Studies 74 (1), 147-172] dynamic preference: extreme self-control cannot be sustained and leads to addiction. This type of agent exhibits a behavioral pattern of self-regulatory depletion.