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Behavioral Economics Commons

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2005

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Articles 1 - 30 of 34

Full-Text Articles in Behavioral Economics

Competitive Auction Markets In British Columbia, Peter Cramton, Susan Athey Dec 2005

Competitive Auction Markets In British Columbia, Peter Cramton, Susan Athey

Peter Cramton

US-Canada Softwood Lumber Trade Dispute, On behalf of British Columbia Ministry of Forests.


Managing Quality Under Heterogeneous Consumer Demand And Product Quality, Miguel Carriquiry, Bruce A. Babcock Oct 2005

Managing Quality Under Heterogeneous Consumer Demand And Product Quality, Miguel Carriquiry, Bruce A. Babcock

CARD Working Papers

Based on accepted advances in the marketing, economics, consumer behavior, and satisfaction literatures, we develop a micro-foundations model of a firm that needs to manage the quality of a product that is inherently heterogeneous in the presence of varying customer tastes or expectations for quality. Our model blends elements of the returns to quality, customer lifetime value, and service profit chain approaches to marketing. The model is then used to explain several empirical results pertaining to the marketing literature by explicitly articulating the trade-offs between customer satisfaction and costs (including opportunity costs) of quality. In this environment firms will find ...


Future Targets And Multiple Equilibria, Ashok S. Guha, Brishti Guha Oct 2005

Future Targets And Multiple Equilibria, Ashok S. Guha, Brishti Guha

Research Collection School Of Economics

Multiple Pareto-rankable equilibria may obtain in an overlapping generations model where consumers save to reach a fixed target. Existence and uniqueness conditions are discussed. The model displays excess consumption sensitivity to current income and perfect old-age insurance.


Honesty And Intermediation: Corporate Cheating, Auditor Involvement And The Implications For Development, Brishti Guha Sep 2005

Honesty And Intermediation: Corporate Cheating, Auditor Involvement And The Implications For Development, Brishti Guha

Research Collection School Of Economics

We examine self-enforcing honesty in firm-investor relations in an imperfect public information game. Minimum firm size requirements and moral hazard limit ability to raise outside capital, yielding a floor on personal wealth required to enter entrepreneurship. Credible auditing could create efficiency gains. We propose mandatory disclosure of audit fees and an interpretation of international differences in shareholding patterns. We endogenize auditor-firm collusion and extortion by auditors. We embed our game-theoretic analysis in a general equilibrium model to generate unique equilibria that trace the impact of the distribution of wealth on the existence of the market and consequences for development.


The Auditor And The Firm: A Simple Model Of Corporate Cheating And Intermediation, Brishti Guha Sep 2005

The Auditor And The Firm: A Simple Model Of Corporate Cheating And Intermediation, Brishti Guha

Research Collection School Of Economics

We apply a game-theoretic model to the analysis of the recent spate of corporate scandals in which firms have cheated their investors, often with the aid of external auditors. We characterize the different types of equilibria that obtain for different parameter ranges in an auditor’s absence (the parameters we consider being early signal accuracy – a measure of transparency – and withdrawal costs – a measure of the liquidity of investments). We also analyze whether and under what conditions the presence of an informed auditor could lead to an improvement in the sense of honest behavior replacing cheating as the firms’ equilibrium ...


The Case Of The Errant Executive: Management, Control And Firm Size In Corporate Cheating, Brishti Guha Sep 2005

The Case Of The Errant Executive: Management, Control And Firm Size In Corporate Cheating, Brishti Guha

Research Collection School Of Economics

Firm insiders – a manager and a board – face moral hazard in relation to their outside shareholders in a repeated game with asymmetric information and stochastic market outcomes. The manager determines whether or not outsiders are cheated; the board, whose objectives differ from those of outside shareholders, attempts to control the manager through compensation contracts and dismissal threats Since compensation determines the manager’s incentive to cheat, firms competing for outside capital publicly announce their managerial contracts. However, secret renegotiation between firm and manager is still possible: so outsiders guard against being cheated by limiting their total stake in any firm ...


Games Suppliers And Producers Play: Upstream And Downstream Moral Hazard With Unverifiable Input Quality, Brishti Guha Sep 2005

Games Suppliers And Producers Play: Upstream And Downstream Moral Hazard With Unverifiable Input Quality, Brishti Guha

Research Collection School Of Economics

We pin down the optimal relational contract between an input supplier and a final goods producer given a framework of bilateral moral hazard with variable but non-verifiable input quality. Given the inability of third parties to verify input quality, each party has an incentive to cheat the other by making a false claim about input quality. We derive the contract which (a) induces honest behavior and brings about the Pareto superior first-best outcome for the widest possible range of exogenous parameters, and (b) maximizes the Nash product of both parties’ payoffs subject to incentive compatibility. An interesting feature of the ...


A Capacity Market That Makes Sense, Peter Cramton, Steven Stoft Aug 2005

A Capacity Market That Makes Sense, Peter Cramton, Steven Stoft

Peter Cramton

We argue that a capacity market is needed in most restructured electricity markets, and present a design that avoids problems found in the early capacity markets. The proposed market only rewards capacity that contributes to reliability as demonstrated by its performance during hours in which there is a shortage of operating reserves. The capacity price responds to market conditions, increasing when and where capacity is scarce and decreasing to zero when and where it is sufficiently plentiful. Market power in the capacity market is addressed by basing the capacity price on actual capacity, rather than bid capacity, so generators cannot ...


Comments On Doc Notice Of Preliminary Results Of Countervailing Duty Review, Peter Cramton, Susan Athey Jul 2005

Comments On Doc Notice Of Preliminary Results Of Countervailing Duty Review, Peter Cramton, Susan Athey

Peter Cramton

US-Canada Softwood Lumber Trade Dispute, On behalf of British Columbia Ministry of Forests.


Rice Consumption In The United States: New Evidence From Food Consumption Surveys, S. Patricia Batres-Marquez, Helen H. Jensen Jul 2005

Rice Consumption In The United States: New Evidence From Food Consumption Surveys, S. Patricia Batres-Marquez, Helen H. Jensen

CARD Staff Reports

Evidence from recent U.S. food consumption surveys provides new information on the distribution of rice consumption, the characteristics of rice consumers, and the diets of people who consume rice. Recently available data from nationally representative surveys of food consumed by individuals in the United States allowed comparison of consumption today (2001-02) with consumption in the mid-1990s. Data come from the Continuing Survey of Food Intakes by Individuals (1994-96) and the National Health and Nutrition Examination Survey (2001-02). Rice is consumed by a significant portion of the U.S. adult population. In 2001-02, over 18 percent (18.2 percent) of ...


Shades Of Meaning: The Effect Of Color And Flavor Names On Consumer Choice, Elizabeth G. Miller, Barbara E. Kahn Jun 2005

Shades Of Meaning: The Effect Of Color And Flavor Names On Consumer Choice, Elizabeth G. Miller, Barbara E. Kahn

Marketing Papers

Building on Grice's (1975) theory of “conversational implicature,” we propose that consumers will react favorably to unusual color or flavor names (e.g., blue haze or Alpine snow) because they expect marketing messages to convey useful information. If the message is not informative or does not conform to expectations, consumers search for the reason for the deviation. This search results in additional (positive) attributions about the product, and thus, a more favorable response. The results of a series of experiments provide empirical support for our proposal and rule out some alternative explanations for the success of ambiguous naming strategies.


Optimal Sequential Decision Architectures And The Robustness Of Hierarchies And Polyarchies, Winston T. H. Koh Jun 2005

Optimal Sequential Decision Architectures And The Robustness Of Hierarchies And Polyarchies, Winston T. H. Koh

Research Collection School Of Economics

This paper studies collective decision making in the context of a project selection model. We derive the optimal decision architecture in the presence of marginal decision costs, and investigate the circumstances under which the hierarchy and polyarchy emerge as optimal sequential architectures. Our analysis extends previous results on optimal organizational decision-making to a sequential setting, and further demonstrates the fragility of the hierarchy and polyarchy as optimal architectures.


The Prudent Village: Risk Pooling Institutions In Medieval English Agriculture, Gary Richardson May 2005

The Prudent Village: Risk Pooling Institutions In Medieval English Agriculture, Gary Richardson

Gary Richardson

The prudent peasant mitigated the risk of crop failures by scattering his arable land throughout his village, Deirdre McCloskey argued, because alternative risksharing institutions did not exist. But, alternatives did exist, this essay concludes. Medieval English peasants formed two types of farmers’ cooperatives. Fraternities protected members from the perils of everyday life. Customary poor laws redistributed resources towards villagers beset by bad luck. In both institutions, the expectation of reciprocation motivated farmers with surpluses to aid neighbors with shortages.


Connections Between U.S. Consumer Magazine Cover Characteristics And Single Copy Sales Circulation, Stephanie C. Barlow May 2005

Connections Between U.S. Consumer Magazine Cover Characteristics And Single Copy Sales Circulation, Stephanie C. Barlow

Syracuse University Honors Program Capstone Projects

In the realm of journalism, conventional wisdom suggests that magazine covers “sell” magazines at newsstands. This study explores this idea by looking at the econometric relationship between cover characteristics such as presence of people and “catch” words and single copy sales. Several significant characteristics influencing such sales are found. In addition, this study is based on a new data set developed by the author indicating various characteristics of numbers of magazine covers over a five-year time span.

Specifically, a set of 14 magazines were observed for 10 characteristics. The percentage of the presence of these characteristics on magazine covers over ...


Influence Of The Premium Subsidy On Farmers' Crop Insurance Coverage Decisions, Bruce A. Babcock, Chad E. Hart Apr 2005

Influence Of The Premium Subsidy On Farmers' Crop Insurance Coverage Decisions, Bruce A. Babcock, Chad E. Hart

CARD Working Papers

The Agricultural Risk Protection Act greatly increased the expected marginal net benefit of farmers buying high-coverage crop insurance policies by coupling premium subsidies to coverage level. This policy change, combined with cross-sectional variations in expected marginal net benefits of high-coverage policies, is used to estimate the role that premium subsidies play in farmers' crop insurance decisions. We use county data for corn, soybeans, and wheat to estimate regression equations that are then used to obtain insight into two policy scenarios. We first estimate that eventual adoption of actuarially fair incremental premiums, combined with current coupled subsidies, would increase farmers' purchase ...


Emotional Bidders — An Analytical And Experimental Examination Of Consumers' Behavior In Reverse Action, Min Ding, Jehoshua Eliashberg, Joel Huber, Ritesh Saini Mar 2005

Emotional Bidders — An Analytical And Experimental Examination Of Consumers' Behavior In Reverse Action, Min Ding, Jehoshua Eliashberg, Joel Huber, Ritesh Saini

Marketing Papers

E-commerce has proved to be fertile ground for new business models, which may be patented (for up to 20 years) and have potentially far-reaching impact on the e-commerce landscape. One such electronic market is the reverse-auction model popularized by Priceline.com. There is still uncertainty surrounding the survival of such new electronic markets currently available on the Internet. Understanding user behavior is necessary for better assessment of these sites' survival. This paper adds to economic analysis a formal representation of the emotions evoked by the auction process, specifically, the excitement of winning if a bid is accepted, and the frustration ...


Corruption Across Countries And Regions: Some Consequences Of Local Osmosis, Raaj Sah Mar 2005

Corruption Across Countries And Regions: Some Consequences Of Local Osmosis, Raaj Sah

Research Collection School Of Economics

Large and persistent differences in corruption across comparable countries is a challenging research issue. Even more intriguing are such differences across regions within the same country, because the typically considered socioeconomic and governance characteristics are generally more similar across such regions than across different countries. This paper's principal theme is that individuals’ perceptions of their environments are influenced by the realities that they have faced in the past; these perceptions affect their current and future actions; which in turn influence the current and future realities. An articulation and analysis of these dynamics yields significant observations concerning individuals’ behavior and ...


Household Demand, Network Externality Effects And Intertemporal Price Discrimination, Winston T. H. Koh Mar 2005

Household Demand, Network Externality Effects And Intertemporal Price Discrimination, Winston T. H. Koh

Research Collection School Of Economics

This paper examines the optimality of intertemporal price discrimination when network externality effects are present in the consumption of a durable good. We conduct our study in two settings. In a model with two household types, utilities are dependent on the cumulative proportion of households that have purchased the durable good. Next, in a model with a continuum of household types, we extend the analysis to the case where households consume both a durable good and a stream of non-durable goods. We show that in both settings, the presence of network externalities facilitates a sales strategy with intertemporal price discrimination.


Household Demand, Network Externality Effects And Intertemporal Price Discrimination, Winston T. H. Koh Feb 2005

Household Demand, Network Externality Effects And Intertemporal Price Discrimination, Winston T. H. Koh

Research Collection School Of Economics

This paper examines the optimality of intertemporal price discrimination when network externality effects are present in the consumption of a durable good. We conduct our study in two settings. In a model with two household types, utilities are dependent on the cumulative proportion of households that have purchased the durable good. Next, in a model with a continuum of household types, we extend the analysis to the case where households consume both a durable good and a stream of non-durable goods. We show that in both settings, the presence of network externalities facilitates a sales strategy with intertemporal price discrimination ...


An Experimental Analysis Of Learning From Experience About Natural-Hazards, Robert Meyer, Howard Kunreuther Jan 2005

An Experimental Analysis Of Learning From Experience About Natural-Hazards, Robert Meyer, Howard Kunreuther

Marketing Papers

The ability of individuals to learn optimal strategies for mitigation against infrequently-occurring natural hazards is explored. We report the results of two experiments in which participants are faced with the problem of learning the most cost-effective means of protecting against earthquake losses. The experiments utilize dynamic computer simulations in which participants are endowed with homes in virtual communities that are prone to periodic impacts by earthquakes. Participants can invest in measures that potentially mitigate losses from quakes but the effectiveness of these measures is initially uncertain. Over time participants have the opportunity to learn about true effectiveness both by direct ...


Bearing The Costs Of Human-Wildlife Conflict: The Challenges Of Compensation Schemes, Philip J. Nyhus, Steve A. Osofsky, Paul Ferraro, H Fischer, Francine Madden Jan 2005

Bearing The Costs Of Human-Wildlife Conflict: The Challenges Of Compensation Schemes, Philip J. Nyhus, Steve A. Osofsky, Paul Ferraro, H Fischer, Francine Madden

Faculty Scholarship

No abstract provided.


Review Of Sweet Dreams: Philosophical Obstacles To A Science Of Consciousness, Leslie Marsh Jan 2005

Review Of Sweet Dreams: Philosophical Obstacles To A Science Of Consciousness, Leslie Marsh

Leslie Marsh

The question of how a physical system gives rise to the phenomenal or experiential (olfactory, visual, somatosensitive, gestatory and auditory), is considered the most intractable of scientific and philosophical puzzles. Though this question has dominated the philosophy of mind over the last quarter century, it articulates a version of the age-old mind–body problem. The most famous response, Cartesian dualism, is on Daniel Dennett’s view still a corrosively residual and redundant feature of popular (and academic) thinking on these matters. Fifteen years on from his anti-Cartesian theory of consciousness (Consciousness Explained, 1991), Dennett’s frustration with this tradition is ...


Review Of The Proposed Reserve Markets In New England, Peter Cramton, Hung-Po Chao, Robert Wilson Jan 2005

Review Of The Proposed Reserve Markets In New England, Peter Cramton, Hung-Po Chao, Robert Wilson

Peter Cramton

New England Power Pool, Federal Energy Regulatory Commission.


Review Of The Proposed Reserve Markets In New England, Peter Cramton, Hung-Po Chao, Robert Wilson Jan 2005

Review Of The Proposed Reserve Markets In New England, Peter Cramton, Hung-Po Chao, Robert Wilson

Peter Cramton

ISO New England proposes reserve markets designed to improve the existing forward reserve market and improve pricing during real-time reserve shortages. We support all of the main elements of the proposal. For example, we agree that little is gained by allowing reserve availability bids in the day-ahead market. Doing so greatly increases the complexity of the market without the prospect of more efficient pricing. Rather, offline reserves are most efficiently priced and awarded well in advance, as is done by the improved forward reserve market.


Divergence In Cultural Practices: Tastes As Signals Of Identity, Jonah A. Berger, Chip Heath, Ben Ho Jan 2005

Divergence In Cultural Practices: Tastes As Signals Of Identity, Jonah A. Berger, Chip Heath, Ben Ho

Marketing Papers

Divergence is a fact of social life; people select different tastes to distinguish themselves from others and they abandon tastes when others adopt them. But while we know a great deal about conformity, it predicts convergence, and thus is less equipped to explain why people diverge. We suggest people diverge to maintain clear signals of identity. Our approach emphasizes that the meaning of signals is set at a social rather than individual level. Tastes gain signal value through association with groups or types or individuals, but become diluted when members of more than one type hold them. Thus different types ...


Law And Behavioral Biology, Owen D. Jones, Timothy H. Goldsmith Jan 2005

Law And Behavioral Biology, Owen D. Jones, Timothy H. Goldsmith

Vanderbilt Law School Faculty Publications

Society uses law to encourage people to behave differently than they would behave in the absence of law. This fundamental purpose makes law highly dependent on sound understandings of the multiple causes of human behavior. The better those understandings, the better law can achieve social goals with legal tools. In this Article, Professors Jones and Goldsmith argue that many long held understandings about where behavior comes from are rapidly obsolescing as a consequence of developments in the various fields constituting behavioral biology. By helping to refine law's understandings of behavior's causes, they argue, behavioral biology can help to ...


Consumer Choices And Welfare Gains From New, Healthy Products: A Virtual Prices Approach, Sonya K. Huffman, Ariun Ishdorj, Helen H. Jensen Jan 2005

Consumer Choices And Welfare Gains From New, Healthy Products: A Virtual Prices Approach, Sonya K. Huffman, Ariun Ishdorj, Helen H. Jensen

Economics Presentations, Posters and Proceedings

This paper models consumer food choices with respect to different margarine and spread brands that include a new healthy brand. The results show that the older and smaller size households with higher income and higher education are more likely to purchase the healthy brand. An Almost Ideal Demand System for six brands was estimated and the coefficients were used to calculate price and brand expenditure elasticities in order to examine the responsiveness of the consumers to economic variables.


Sex Mortality Differentials In The United States: The Role Of Cohort Smoking Patterns, Samuel H. Preston, Haidong Wong Jan 2005

Sex Mortality Differentials In The United States: The Role Of Cohort Smoking Patterns, Samuel H. Preston, Haidong Wong

Wharton Pension Research Council Working Papers

This paper demonstrates that, over the period 1948-2003, sex differentials in mortality in the age range 50-54 to 85+ widened and then narrowed on a cohort rather than on a period basis. The cohort with the maximum excess of male mortality was born shortly after the turn of the century. Three independent sources suggest that the turnaround in sex mortality differentials is consistent with sex differences in cigarette smoking by cohort. An age/period/cohort model reveals a highly significant effect of smoking histories on men’s and women’s mortality. This model suggests that improvements in mortality at older ...


The Microfoundations Of Standard Form Contracts: Price Discrimination Vs. Behavioral Bias, Jonathan Klick Jan 2005

The Microfoundations Of Standard Form Contracts: Price Discrimination Vs. Behavioral Bias, Jonathan Klick

Faculty Scholarship at Penn Law

No abstract provided.


Assessing The State Of Black America In Terms Of Black Buying Power From 1990 To Present, Samina J. Mcgill Jan 2005

Assessing The State Of Black America In Terms Of Black Buying Power From 1990 To Present, Samina J. Mcgill

Seton Hall University Dissertations and Theses (ETDs)

.