Does consultation improve decision making?

This paper reports an experiment designed to test whether prior consultation within a group affects subsequent individual decision making in tasks where demonstrability of correct solutions is low. In our experiment subjects considered two paintings created by two different artists and were asked to guess which artist made each painting. We observed answers given by individuals under two treatments: in one, subjects were allowed the opportunity to consult with other participants before making their private decisions; in the other there was no such opportunity. Our primary findings are that subjects in the first treatment evaluate the opportunity to consult positively but they perform significantly worse and earn significantly less.Consultation; Decision making; Group decisions; Individual decisions

Aid allocation and aid effectiveness: An empirical analysis

The paper performs aid allocation analysis using OECD-DAC data covering 20 aid donors and 176 recipients over the period 1980-2003. We improve upon earlier work in this area by employing inter alia the variable ‘past outcome’ measuring aid effectiveness in order to link together aid allocation and aid effectiveness. In line with previous work, we also account for both altruistic and selfish donor motives in the empirical analysis. As expected, empirical results based on Tobit estimates of aid allocation for individual donors vary quite significantly among donors. We also test the robustness of our results by estimating individual regressions for the major donors over the period 1990-2003 in view of major events in the aid arena during that time that could potentially have an impact on the aid allocation process. Our results seem to be similar to those derived over the 1980-2003 period, thus implying that this was not the case. Overall, both altruistic and selfish donor motives seem to motivate aid allocation for most donors over the two periods under examination. However, when we further restrict our time dimension to the 1999-2003 period, some important policy changes with regard to selectivity seem to emerge for a small group of donor countries

Does consultation improve decision-making?

This paper reports an experiment designed to test whether prior consultation within a group affects subsequent individual decision-making in tasks where demonstrability of correct solutions is low. In our experiment, subjects considered two paintings created by two different artists and were asked to guess which artist made each painting. We observed answers given by individuals under two treatments: In one, subjects were allowed the opportunity to consult with other participants before making their private decisions; in the other, there was no such opportunity. Our primary findings are that subjects in the first treatment evaluate the opportunity to consult positively, but they perform significantly worse and earn significantly less

Does consultation improve decision-making?

This paper reports an experiment designed to test whether prior consultation within a group affects subsequent individual decision-making in tasks where demonstrability of correct solutions is low. In our experiment, subjects considered two paintings created by two different artists and were asked to guess which artist made each painting. We observed answers given by individuals under two treatments: In one, subjects were allowed the opportunity to consult with other participants before making their private decisions; in the other, there was no such opportunity. Our primary findings are that subjects in the first treatment evaluate the opportunity to consult positively, but they perform significantly worse and earn significantly less

Origins of the Sicilian Mafia: The Market for Lemons

Since its first appearance in the late 1800s, the origins of the Sicilian mafia have remained a largely unresolved mystery. Both institutional and historical explanations have been proposed in the literature through the years. In this paper, we develop an argument for a market structure-hypothesis, contending that mafia arose in towns where firms made unusually high profits due to imperfect competition. We identify the produc tion of citrus fruits as a sector with very high international demand as well as substantial fixed costs that acted as a barrier to entry in many places and secured high profits in others. We argue that the mafia arose out of the need to protect citrus production from predation by thieves. Using the original data from a parliamentary inquiry in 1881-86 on Sicilian towns, we show that mafia presence is strongly related to the production of orange and lemon. This result contrasts recent work that emphasizes the importance of land reforms and a broadening of property rights as the main reason for the emergence of mafia protection.

Should aid reward good outcomes? Optimal contracts in a repeated moral hazard model of foreign aid allocation

We consider in this paper a repeated moral hazard model where a donor, characterized both by altruistic and non altruistic motives, finances a three periods poverty eradication project. In order to model the significant problems that donors face in the actual implementation of aid programs, we assume that the elites of the recipient country, who play an important role in carrying out the project, have an incentive to divert resources from the intended use. We show that optimal aid contracts should be conditional on the previous results of the project. We distinguish however between strong conditionality where contracts are specified on the basis of the performance of the project in all periods and weak conditionality where contracts have, instead, short memory. In this case a recipient that experienced a negative performance will receive less aid in the following period, but will bear no further consequences in the future. If a donor assigns a lot of weight to the welfare of the recipient country compared to the cost of giving aid and the incentive of the elite to divert resources, an optimal aid allocation policy always implies a positive level of aid even if the project had a negative outcome in the previous period. In the opposite case, optimal contracts imply no aid after a negative performance of the projec

"Good Donors or Good Recipients? A Repeated Moral Hazard Model of Aid Allocation,"

We propose a repeated moral hazard model with full commitment and limited punishment to study the problem of aid allocation in environments characterized by asymmetric information. The donor (principal) finances a three-period development program and the elite of the recipient country (agent), involved in the realization of the project, can affect the final output through adequate policies. The donor has the goal to help the poor of the recipient country, but she may also be conditioned by non altruistic motives. We show that when the moral hazard problem is relevant, under a wide set of parameter values, optimal aid contracts should be conditional on the previous result of the project. We distinguish between weak conditionality, which means that aid depends only on the previous performance of the project and strong conditionality, which means that aid depends on the whole history of the project. Unconditional aid may be an optimal contractual arrangement for the donor if the moral hazard issue is not very important or if the donor gives aid merely for strategic or economic reasons. An entirely altruistic donor will never provide unconditional aid. On the other hand, if she has a strong desire to help the recipient she should never deny aid to it