Time Discounting in Strategic Contests

In many contests, such as political campaigns or R&D expenditures, there is at least some trade‐off between immediate money outlay and potential future benefits. This timing aspect has mostly been ignored by the contest literature. If contestants exhibit a strong present bias, such as that shown by past individual choice experiments, then benefits that are deferred to the future will lead to a significant drop in investment. This paper uses controlled laboratory experiments to explore how the timing of prize payment impacts behavior in a contest with a unique Nash equilibrium strategy. We find no evidence that people significantly discount future prizes in our contests, despite the fact that we do replicate present bias in a separate individual choice experiment.     

Assigning Intentions when Actions Are Unobservable: The Impact of Trembling in the Trust Game

This article reports laboratory experiments investigating behavior in which players may make inferences about the intentions behind others' prior actions based on higher- or lower-accuracy information about those actions. We investigate a trust game with first mover trembling, a game in which nature determines whether the first mover's decision is implemented or reversed. The results indicate that second movers give first movers the benefit of the doubt. However, first movers do not anticipate this response. Ultimately, it appears that subjects are thinking on at least three levels when making decisions: they are concerned with their own material well-being, the trustworthiness of their counterpart, and how their own actions will be perceived.     

Empirical Research in Continuous Disclosure

Empirical analysis has much to offer the world of continuous disclosure, and with the emergence of larger datasets on which to perform such analyses empirical studies have begun to bear some interesting fruit. This commentary discusses recent work and areas for future development in this space.     

Executive stress: A ten-country comparison

In recent years, many companies have become conscious of the dire effects of excessive managerial stress on the performance of the organization, as well as on the health of their executives. Moreover, the so called “boss's disease” was long considered strictly a phenomenon of the affluent, industrialized Western world. The results of this investigation, however, reveal that the spectre of executive stress is not only taking on critical dimensions for companies in developing countries (in terms of mental well being and job satisfaction) but that its incidence is worrying, especially in newly industrialized Japan. The pressures on managers to perform in a climate of rapid sociological, technological, and economic change in emerging countries such as Brazil, Nigeria, Egypt, and Singapore, as well as Japan, are beginning to produce negative effects. Executives in all five countries show a higher incidence of mental stress symptoms and job dissatisfaction than their counterparts from other highly industrialized countries surveyed, e.g., the United States, Sweden, and West Germany.     

Application of Relational Models in Mortality Immunization

The prediction of future mortality rates by any existing mortality models is hardly exact, which causes an exposure to mortality (longevity) risk for life insurers (annuity providers). Since a change in mortality rates has opposite impacts on the surpluses of life insurance and annuity, hedging strategies of mortality and longevity risks can be implemented by creating an insurance portfolio of both life insurance and annuity products. In this article, we apply relational models to capture the mortality movements by assuming that the realized mortality sequence is a proportional change and/or a constant shift of the expected one, and the size of the changes varies in the length of the sequences. Then we create a variety of non-size-free matching strategies to determine the weights of life insurance and annuity products in an insurance portfolio for mortality immunization, where the weights depend on the sizes of the proportional and/or constant changes. Comparing the hedging performances of four non-size-free matching strategies with corresponding size-free ones proposed by Lin and Tsai, we demonstrate with simulation illustrations that the non-size-free matching strategies can hedge against mortality and longevity risks more effectively than the size-free ones.     

Bargaining over an Uncertain Value: Arbitration Mechanisms Compared

This article explores the theoretical and behavioral impactof conventional arbitration and final-offer arbitration (FOA)when parties are bargaining over an uncertain value. In thiscontext, one player receives a fixed payment while the otherplayer receives the uncertain residual. Although both formsof arbitration have identically sized contract zones, we showtheoretically that in FOA the contract zone shifts in favorof the residual claimant. In addition, as the variance of thepossible values rises, the contract zone shifts further in favorof the residual claimant. In laboratory testing, the contractzone roughly reflects the central tendencies of behavior; however,both forms of arbitration increase conflict relative to a no-arbitrationbaseline. This is caused by residual claimants being more aggressivewhen arbitration is available while fixed-payment recipientsare not. However, both parties play a role in the conflict escalationdue to the increased proposal variation.     

An experimental analysis of cooperation and productivity in the trust game

In the standard trust game the surplus is increased by the risk taking first mover while cooperation by the second mover is a one-to-one transfer. This paper reports results from experiments in which the reverse holds; the first mover’s risky trust is not productive and the second mover’s cooperation is productive. This subtle difference significantly lowers the likelihood of trust but increases the likelihood of cooperation conditional on trust. Evidence is presented that the change in trust is consistent with first movers failing to anticipate the later result. Drawing upon the analogy that the trust game represents a model of exchange, the results suggest that markets should be organized so that the buyer moves first and not the seller as in the original trust game.

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