The author systematically examines one of the important issues of information — establishing the market price. He introduces the concept of «search» — where a buyer wanting to get a better price, is forced to question sellers. The article deals with various aspects of finding the necessary information.

Economics of Information

This paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects’ homes. Using a question asking people about their willingness to take risks \"in general\", we find that gender, age, height, and parental background have an economically significant impact on willingness to take risks. The experiment confirms the behavioral validity of this measure, using paid lottery choices. Turning to other questions about risk attitudes in specific contexts, we find similar results on the determinants of risk attitudes, and also shed light on the deeper question of stability of risk attitudes across contexts. We conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks, occupational choice, and smoking. The question about risk taking in general generates the best all-round predictor of risky behavior.

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Individual Risk Attitudes: Measurement, Determinants and Behavioral Consequences

Economics Of Discrimination

This paper studies risk attitudes using a large representative survey and a complementary experiment conducted with a representative subject pool in subjects’ homes. Using a question asking people about their willingness to take risks “in general”, we find that gender, age, height, and parental background have an economically significant impacton willingness to take risks. The experiment confirms the behavioral validity of this measure, using paid lottery choices. Turning to other question about risk attitudes in specific contexts, we find similar results on the determinants of risk attitudes, and also shed light on the deeper question of stability of risk attitudes across contexts. We conduct a horse race of the ability of different measures to explain risky behaviors such as holdings stocks, occupational choice, and smoking. The question about risk taking in general generates the best all-around predictor of risky behavior

Neuroeconomics uses knowledge about brain mechanisms to inform economic analysis, and roots economics in biology. It opens up the "black box" of the brain, much as organizational economics adds detail to the theory of the firm. Neuroscientists use many tools— including brain imaging, behavior of patients with localized brain lesions, animal behavior, and recording single neuron activity. The key insight for economics is that the brain is composed of multiple systems which interact. Controlled systems ("executive function") interrupt automatic ones. Emotions and cognition both guide decisions. Just as prices and allocations emerge from the interaction of two processes—supply and demand— individual decisions can be modeled as the result of two (or more) processes interacting. Indeed, "dual-process" models of this sort are better rooted in neuroscientific fact, and more empirically accurate, than single-process models (such as utility-maximization). We discuss how brain evidence complicates standard assumptions about basic preference, to include homeostasis and other kinds of state-dependence. We also discuss applications to intertemporal choice, risk and decision making, and game theory. Intertemporal choice appears to be domain-specific and heavily influenced by emotion. The simplified s-d of quasi-hyperbolic discounting is supported by activation in distinct regions of limbic and cortical systems. In risky decision, imaging data tentatively support the idea that gains and losses are coded separately, and that ambiguity is distinct from risk, because it activates fear and discomfort regions. (Ironically, lesion patients who do not receive fear signals in prefrontal cortex are "rationally" neutral toward ambiguity.) Game theory studies show the effect of brain regions implicated in "theory of mind", correlates of strategic skill, and effects of hormones and other biological variables. Finally, economics can contribute to neuroscience because simple rational-choice models are useful for understanding highly-evolved behavior like motor actions that earn rewards, and Bayesian integration of sensorimotor information.

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Neuroeconomics: How Neuroscience Can Inform Economics

Politicians who care about the spoils of office may underprovide a public good because its benefits cannot be targeted to voters as easily as pork-barrel spending. We compare a winner-take-all system--where all the spoils go to the winner--to a proportional system--where the spoils of office are split among candidates proportionally to their share of the vote. In a winner-take-all system the public good is provided less often than in a proportional system when the public good is particularly desirable. We then consider the electoral college system and show that it is particularly subject to this inefficiency.

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The provision of public goods under alternative electoral incentives

A new rationale is presented for why an elite may want to expand the franchise even in the absence of threats to the established order. Expanding the franchise can turn politicians away from particularistic politics based on ad personam redistribution within the elite and foster competition based on programs with diffuse benefits. If these programs are valuable, a majority of the elite votes in favor of an extension of the franchise despite the absence of a threat from the disenfranchised. We argue that the evolution of public spending and of political competition in nineteenth century Britain is consistent with our model. I. INTRODUCTION At the beginning of the nineteenth century, in most countries, narrow elites had a disproportionate influence on public affairs. Even in England, where parliament was an influential institution, suffrage was mostly the privilege of the wealthy, and some members of parliament were elected in boroughs with as few as 100 voters, while cities such as Manchester did not have any representative. A century later, most western countries had universal male suffrage, with female suffrage to arrive shortly thereafter. What brought about this “democratic revolution?” In many cases, the elites were forced out of power after violent revolutions. However, there are important examples, such as England, where democratization took the form of gradual extensions of the suffrage, and these were accompanied by little overt violence. “It is the peculiar pride of England that [the record of social and political reform] is to be found on the statute book, not in the annals of revolution” [Cheyney 1931, p. vii]. Such peaceful democratizations are difficult to rationalize within the benchmark political-economic models. In those models, extending the franchise dilutes the elite’s power to influence policy and results

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Why did the Elites Extend the Suffrage? Democracy and the Scope of Government, with an Application to Britain's “Age of Reform”

Taller workers receive a wage premium. Net of differences in family background, the disparity is similar in magnitude to the race and gender gaps. We exploit variation in an individual’s height over time to explore how height affects wages. Controlling for teen height essentially eliminates the effect of adult height on wages for white men. The teen height premium is not explained by differences in resources or endowments. The teen height premium is partially mediated through participation in high school sports and clubs. We estimate the monetary benefits of a medical treatment for children that increases height.

/pdf/the-effect-of-adolescent-experience-on-labor-market-outcomes-23rincsao5.pdf

The Effect of Adolescent Experience on Labor Market Outcomes: The Case of Height

African- American motorist in the United States are much more likely than white motorists to have their car searched by police checking for illegal drugs and other contraband. The courts are faced with the task of deciding on the basis of traffic-search data whether police behavior reflects a rackial bias. We discuss why a simple test for racial bias commonly applied by the courts is inadequate and develop a model of law enforcement that suggests an alternative test. The model assumes a population with two racial types who also differ along other dimensions relevant to criminal behavior. Using the model, we construct a test for whether racial disparities in motor vehicle searches reflect racial prejudice, or instead are consistent with the behavior of non-prejudiced police maximizing drug interdiction. The test is valid even when the set of characteristics observed by the police is only partially observable by the econometrician. We apply the test to traffic-search data from Maryland and find the observed black-white disparities in search rates to be consistent with the hypothesis of no racial prejudice. Finally, we present a simple analysis of the tradeoff between efficiency of drug interdiction and racial fairness in policing. We show that in some circumstances there is no trade-off; constraining the police to be color-blind may achieve greater efficiency in drug interdiction.

Racial Bias in Motor Vehicle Searches: Theory and Evidence

Police checking for illegal drugs are much more likely to search the vehicles of African‐American motorists than those of white motorists. This paper develops a model of police and motorist behavior that suggests an empirical test for distinguishing whether this disparity is due to racial prejudice or to the police’s objective to maximize arrests. When applied to vehicle search data from Maryland, our test results are consistent with the hypothesis of no racial prejudice against African‐American motorists. However, if police have utility only for searches yielding large drug finds, then our analysis would suggest bias against white drivers. The model’s prediction regarding nonrace characteristics is also largely supported by the data.

/pdf/racial-bias-in-motor-vehicle-searches-theory-and-evidence-5ed0yk6z4t.pdf

Nicola Persico

Papers

The provision of public goods under alternative electoral incentives

Why did the Elites Extend the Suffrage? Democracy and the Scope of Government, with an Application to Britain's “Age of Reform”

The Effect of Adolescent Experience on Labor Market Outcomes: The Case of Height

Racial Bias in Motor Vehicle Searches: Theory and Evidence

Racial Bias in Motor Vehicle Searches: Theory and Evidence