/pdf/the-theory-of-industrial-organization-19bejph0ej.pdf

The Theory of Industrial Organization

Governing the Commons

The analysis in Chapter 4 suggests that in a world of zero transaction costs, where participants in an exchange know the relevant characteristics of each other's preferences, technology, and endowments, mutually advantageous bargaining opportunities will not be ignored. The individuals may be expected to agree on a Pareto-efficient allocation. The traditional Pigouvian tax/subsidy literature, by contrast, assumes at the outset that equilibrium outcomes may indeed be inefficient. In particular, it presupposes that existing markets will not function in such a way as to eliminate all potential sources of inefficiency and that the introduction of taxes and subsidies into a market system can help by confronting individuals with those costs and benefits that their consumption and production activities generate for other parties and that are not internalized by the market mechanism. In order to justify the possibility of inefficiency in equilibrium, we need to examine more closely the idea of positive transaction costs. We hinted earlier that one way of thinking about such costs is to see them as arising from the presence of private information. Participants in an exchange may know their own preferences, endowments, and technology but may not be so well informed about the relevant characteristics of other potential participants. In analyzing the bargaining process that leads to an equilibrium, it is important to consider carefully the precise nature of the process, the information available to each party, and the implications of such matters for the properties of the equilibrium.

The theory of externalities, public goods, and club goods: Externalities and private information

Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risk-taking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and impartial spectators.

/pdf/just-luck-an-experimental-study-of-risk-taking-and-fairness-59v7vwamcy.pdf

Just Luck: An Experimental Study of Risk-Taking and Fairness

Heuristics guide the implementation of social preferences in one-shot Prisoner's Dilemma experiments

/pdf/heuristics-guide-the-implementation-of-social-preferences-in-31caf4tco1.pdf

Both in the field and in the lab, participants frequently cooperate, despite the fact that the situation can be modelled as a simultaneous, symmetric prisoner’s dilemma. This experiment manipulates the payoff in case both players defect, and explains the degree of cooperation by a combination of five motives: the size of gains from cooperation, expectations about cooperativeness in the population in question, the degree of risk and loss aversion, and the degree by which a participant is averse to inequity. Information about these motivational forces stems from additional within subjects tests. All five factors are significant only if one controls for all the other motives, which suggests that a prisoner’s dilemma is a game jointly characterised by these five motives. The need to control for the remaining explanations seems to be the reason why earlier attempts at explaining choices in the prisoner’s dilemma with personality have not been successful.

When is the Risk of Cooperation Worth Taking? The Prisoner’s Dilemma as a Game of Multiple Motives

This experimental article helps to understand the motives behind cooperation in the prisoner’s dilemma. It manipulates the pay-off in case both players defect in a two-player, one-shot prisoner’s dilemma and explains the degree of cooperation by a combination of four motives: efficiency, conditional cooperation, fear and greed. All motives are significant but some become only significant if one controls for all remaining ones. This seems to be the reason why earlier attempts at explaining choices in the prisoner’s dilemma with personality have not been successful.

https://www.tandfonline.com/doi/pdf/10.1080/13504851.2016.1139672

An extensive literature documents that providing the right incentives can reduce deception. We hypothesize that truthful communication can be promoted by the threat of ex-post disclosure, even in the absence of financial consequences. Our experiment identifies the effect of ex-post disclosure using a sender-receiver game in which the receiver can detect a dishonest message in one condition, but not in another. The advantages of a laboratory experiment are that it rules out reputational concerns by providing full anonymity and holds constant information availability. We find that ex-post disclosure almost doubles the incidence of truth-telling. Interestingly, the effect of ex-post disclosure on truthful communication is present for males, but not for females.

https://papers.ssrn.com/sol3/Delivery.cfm/SSRN_ID2587104_code1490619.pdf?abstractid=2544349&mirid=4

Promoting Truthful Communication Through Ex-Post Disclosure

Empirically, the commons are not as tragic as standard theory predicts. The predominant explanation for this finding is conditional cooperation. Yet many real life situations involve insiders, who are directly affected by a dilemma, and outsiders, who may be harmed if the insiders overcome the dilemma. The quintessential illustration is oligopoly. If insiders overcome their dilemma and collude, this inflicts harm on the opposite market side. In our experiment, harm on outsiders significantly reduces conditional cooperation of insiders. We can exclude that this result is driven by inequity aversion, reciprocity or efficiency seeking. Only guilt aversion can rationalize our findings, with guilt being most pronounced if the active insiders not only inflict harm on the outsider, but increase their own payoff at the expense of the outsider.

/pdf/conditional-cooperation-with-negative-externalities-an-1lxg4g2hr0.pdf

Conditional Cooperation With Negative Externalities – An Experiment

Apparently, judges’ decisions are not motivated by maximizing profit. Two explanations compete: there are long-term monetary consequences; conscientious individuals self-select into the profession. In a lab experiment, we rule out both explanations. Nonetheless, authorities do a reliable job of overcoming a social dilemma. Calling the authorities public officials or judges strengthens the effect. This suggests that the effect is not driven by anger or sympathy with the victims but follows from the office motive: the desire to fulfill the expectations that come with an assigned task. We test three extensions: When given an opportunity to announce an explicit policy, judges become less sensitive to the objective degree of reproach and more sensitive to their personal social value orientation. If judges are elected or experienced, they react more intensely to norm violations. Experienced judges are more affected by their social value orientation.

/pdf/you-are-in-charge-experimentally-testing-the-motivating-3ry4gilkso.pdf

Lilia Zhurakhovska

Papers

When is the Risk of Cooperation Worth Taking? The Prisoner’s Dilemma as a Game of Multiple Motives

When is the Risk of Cooperation Worth Taking? The Prisoner’s Dilemma as a Game of Multiple Motives

Promoting Truthful Communication Through Ex-Post Disclosure

Conditional Cooperation With Negative Externalities – An Experiment

You Are in Charge: Experimentally Testing the Motivating Power of Holding a Judicial Office