The BCD of response time analysis in experimental economics

For decisions in the wild, time is of the essence. Available decision time is often cut short through natural or artificial constraints, or is impinged upon by the opportunity cost of time. Experimental economists have only recently begun to conduct experiments with time constraints and to analyze response time (RT) data, in contrast to experimental psychologists. RT analysis has proven valuable for the identification of individual and strategic decision processes including identification of social preferences in the latter case, model comparison/selection, and the investigation of heuristics that combine speed and performance by exploiting environmental regularities. Here we focus on the benefits, challenges, and desiderata of RT analysis in strategic decision making. We argue that unlocking the potential of RT analysis requires the adoption of process-based models instead of outcome-based models, and discuss how RT in the wild can be captured by time-constrained experiments in the lab. We conclude that RT analysis holds considerable potential for experimental economics, deserves greater attention as a methodological tool, and promises important insights on strategic decision making in naturally occurring environments.     

Fairness versus efficiency: how procedural fairness concerns affect coordination

We investigate in a laboratory experiment whether procedural fairness concerns affect how well individuals are able to solve a coordination problem in a two-player Volunteer’s Dilemma. Subjects receive external action recommendations, either to volunteer or to abstain from it, in order to facilitate coordination and improve efficiency. We manipulate the fairness of the recommendation procedure by varying the probabilities of receiving the disadvantageous recommendation to volunteer between players. We find evidence that while recommendations improve overall efficiency regardless of their implications for expected payoffs, there are behavioural asymmetries depending on the recommendation: advantageous recommendations are followed less frequently than disadvantageous ones and beliefs about others’ actions are more pessimistic in the treatment with recommendations inducing unequal expected payoffs.     

Impatience and Inconsistency in Intertemporal Choice: An Experimental Analysis

In this article the experiment carried out by Takahashi et al. [2009 Takahashi, T., T. Hadzibeganovic, S. A. Cannas, T. Makino, H. Fukui, and S. Kitayama. “Cultural Neuroeconomics of Intertemporal Choice.” Neuroendocrinology Letters, 30, (2009), pp. 185–191.[PubMed], [Web of Science ®] , [Google Scholar]] is replicated to analyze the influence of culture, gender, origin (urban or rural), and socioeconomic level on the impulsivity and consistency of decision-making processes concerning monetary gains and losses. The results indicate that Spanish students show inconsistency, and more impulsivity over gains (i.e., more impatience, as they discount delayed outcomes more rapidly) than do Japanese and American students. Additionally, participants from urban areas show more impatience over gains than do participants from rural ones, women are more impatient than men are over losses, and participants of different socioeconomic levels show differences in their impulsivity parameters.     

Banking,currency, stock market and debt crises in Spain, 1850–1995

What type of crisis is generated when debt increases? We extend the literature by framework by introducing currency and stock market crises in the analysis. We apply our proposal to the case of Spain, since this is a country that has experienced a very important amount of financial crises from the nineteenth century onwards. We find the same results as the previous literature for the determinants of banking and debt crises but substituting external and public debt with perpetual debt and where perpetual debt has a less important role than crises in the private sector. Moreover, we find evidence in favour of the hypothesis that currency crises depend strongly and positively on financial centre crises and negatively and mildly on perpetual debt. We justify the negative relalionship due to an inflation tax. We also find evidence in favour of the hypothesis that stock market crises depend only positively and strongly on financial centre crises.     

Exclusivity and exclusion on platform Markets

We examine conditions under which an exclusive license granted by the upstream producer of a component that some consumers regard as essential to one of two potential suppliers of a downstream platform market can make the unlicensed supplier unprofitable, although both firms would be profitable if both were licensed. If downstream varieties are close substitutes, an exclusive license need not be exclusionary. If downstream varieties are highly differentiated, an exclusive license is exclusionary, but it is not in the interest of the upstream firm to grant an exclusive license. For intermediate levels of product differentiation, an exclusive license is exclusionary and maximizes the upstream firm’s payoff.     

Clever enough to tell the truth

We conduct a field experiment on 427 Israeli soldiers who each rolled a six-sided die in private and reported the outcome. For every point reported, the soldier received an additional half-hour early release from the army base on Thursday afternoon. We find that the higher a soldier’s military entrance score, the more honest he is on average. We replicate this finding on a sample of 156 civilians paid in cash for their die reports. Furthermore, the civilian experiments reveal that two measures of cognitive ability predict honesty, whereas general self-report honesty questions and a consistency check among them are of no value. We provide a rationale for the relationship between cognitive ability and honesty and discuss its generalizability.     

AGRICULTURAL REFORMS IN CHILE AND NEW ZEALAND: A REVIEW*

Chile and New Zealand are both small countries for which agricultural exports are important: both undertook comprehensive economic reforms during the 1970s and 1980s respectively. Comparison of the experiences shows that macroeconomic policy, above all the resulting movements in the real exchange rate and in interest rates, has a critical impact on agriculture. In both cases, rolling back the state has encouraged private responses. In Chile the challenges ahead lie in continuing productivity improvements, and in raising the welfare of smallholders in marginal areas. Six years after the initiation of reforms, New Zealand agriculture shows a healthy recovery. Once committed to economy-wide reforms – stabilisation, adjustment, and trade liberalisation – and companion reforms of institutions, how do governments best proceed? With what reforms and in what mix, sequence, strength, and speed? For agriculture, specifically, this paper takes a close look at which reforms, or aspects of their implementation, can accelerate or slow down private investment and aggregate supply response.     

On forecasting of innovations

The forecasting of basic technological innovations is focused. Clarification of the involved key concepts and an analytical framework are given. The forest industry serves as a background and illustration to the discussion. Considerable uncertainty prevails with respect to strategic investments in production in this industry. Industries, technological products, etc. have empirically been shown to pass similar phases of development over time. This life cycle starts with a basic innovation following on a previous invention. Due to competetion from more recent basic innovations the final phase is one of decline. Basic innovations are suggested to be exogenously determined and to cause structural change. The choice of forecasting strategy is suggested to be made dependent on the type of innovation, knowledge base, and life cycle position.