Combinatorial Clock Auctions: Price Direction and Performance

This paper addresses three concerns with ascending price Combinatorial Clock Auc- tions (APCA); price guidance toward e ciency relevant packages, computational bur- den, and susceptibility to collusive bidding. We propose a descending price Combi- natorial Clock Auction (DPCA) with a newly devised pricing strategy to alleviate all of these concerns. Mimicking bidding behavior of human subjects found in previous laboratory experiments, agent-based simulations of a DPCA show improvements in ef- ciency resulting from better price guidance and a reduction in computational burden when compared to an APCA

Firing Threats: Incentive Effects and Impression Management

We study the effect of firing threats in a virtual workplace that reproduces features of existing organizations. We show that organizations in which bosses can fire up to one third of their workforce produce twice as much as organizations for which firing is not possible. Firing threats sharply decrease on-the-job leisure. Nevertheless, organizations endowed with firing threats underperformed those using individual incentives. In the presence of firing threats, employees engage in impression management activities to be seen as hard-working individuals in line with our model. Finally, production levels dropped substantially when the threat of being fired was removed, whereas on-the-job leisure surged

MECHANISMS FOR ADDRESSING THIRD-PARTY IMPACTS RESULTING FROM VOLUNTARY WATER TRANSFERS

This research uses laboratory experiments to test alternative water market institutions designed to protect third-party interests. The institutions tested include taxing mechanisms that raise revenue to compensate affected third-parties, and a free market in which third-parties actively participate. We also discuss the likely implications of a command-and-control approach in which there are fixed limits on the volume of water that may be exported from a region. The results indicate that there are some important trade-offs in selecting a policy option. Although theoretically optimal, active third-party participation in the market is likely to result in free-riding that may erode some or all of the efficiency gains, and may introduce volatility into the market. Fixed limits on water exports are likely to result in a more stable market, but the constraints on exports will result in lower levels of social welfare. Taxing transfers and compensating third-parties offers a promising balance of efficiency, equity and market stability.Resource /Energy Economics and Policy,

An Experimental Investigation of Health Insurance Policy and Behavior

We introduce a new experimental approach to measuring the effects of health insurance policy alternatives on behavior and health outcomes over the life course. Cash-motivated subjects are placed in a virtual environment where they earn income and allocate it across multi-period lives. We compare behavior across age, income and insurance plans—one priced according to an individual’s expected cost and the other uniformly priced through employer-implemented cost sharing. We find that 1) subjects in the employer-implemented plan purchased insurance at higher rates; 2) the employer-based plan reduced differences due to income and age; 3) subjects in the actuarial plan engaged in more health-promoting behaviors, but still below optimal levels, and did save at the level required, so did realize the full benefits of the plan. Subjects had more difficulty optimizing choices in the Actuarial treatment, because it required more long term planning and evaluating benefits that compounded over time. Contrary, to model predictions, the actuarial priced insurance plan did not increase utility relative to the employer-based plan

An Investigation of Health Insurance Policy and Behavior in a Virtual Environment

We introduce a new experimental approach to measuring the effects of health insurance policy alternatives on behavior and health outcomes over the life course. In a virtual environment with multi-period lives, subjects earn virtual income and allocate spending, to maximize utility, which is converted into cash payment. We compare behavior across age, income and insurance plans—one priced according to an individual’s expected cost and the other uniformly priced through employer-implemented cost sharing. We find that 1) subjects in the employer-implemented plan purchased insurance at higher rates; 2) the employer-based plan reduced differences due to income and age; 3) subjects in the actuarial plan engaged in more health-promoting behaviors, but still below optimal levels, and did save at the level required, so did realize the full benefits of the plan. Subjects had more difficulty optimizing choices in the Actuarial treatment, because it required more long term planning and evaluating benefits that compounded over time. Contrary, to model predictions, the actuarial priced insurance plan did not increase utility relative to the employer-based plan

Resource Adequacy: Should Regulators Worry?

Regulators have proposed various institutional alternatives to secure network resource adequacy and reasonably priced electric power for consumers. These alternatives prompt many difficult questions: Does the development of Demand Response reduce the need for new capacity? How effectively can a government-mandated Capacity Market foster efficient investment? How does centralized generator commitment (with revenue guarantees) compare to a system in which Generators voluntarily commit themselves with no revenue guarantees? If exclusive distribution contracts were replaced by unregulated retail competition, what would be the effects on investment and market prices? We use laboratory experiments to address these questions

Multiple openings and competitiveness of forward markets: experimental evidence

We test the competition enhancing effect of selling forward in experimental Cournot duopoly and quadropoly with multiple forward markets. We find that having two forward periods yields competitive outcomes and that the results are very close to the predicted theoretical results for both quantity setting duopolies and quadropolies. Our experiments lend strong support to the hypothesis that forward markets are competition enhancing. We then test a new market that allows for endogenously determined indefinitely many forward periods that only close when sellers coordinate on selling a zero amount in a forward market. We find that the outcomes under an endogenous close rule are also very competitive. These results hold for both duopolies and quadropolies

Are Under- and Over-Reaction the Same Matter? A Price Inertia Based Account

Theories on under- and over-reaction in asset prices fall into three types: (1) they are respectively driven by different psychological factors; (2) they are driven by different types of investors; and (3) they reflect un-modeled risk. We design an asset market where information arrives sequentially over time and is revealed asymmetrically to investors. None of the three hypotheses is supported by our data: (1) Investors do not respond differently to public information and private information, and they do not behave in ways that are claimed by multiple psychological models; (2) no groups of investors are identified to drive under- or over-reaction in particular; (3) price deviation from expected payoff cannot be justified by risk metrics. We find that prices react insufficiently to news surprises, possibly because of cautious conservatism on the part of investors and under-reacting drifts outnumber overreacting reversals substantially. Contrary to common beliefs, we find that over-reaction is caused by slow adjustment of prices to surprises, similar to the cause of under-reaction. It is the degree of price inertia that drives the relative frequencies of under- and over-reaction. We propose a simple price inertia theory of under- and over-reaction: when information arrives sequentially over time, the market is characterized by a slow convergence toward intrinsic value; when news surprises are of the same signs, prices falls behind newly updated intrinsic values, manifesting under-reacting drifts; when news surprises change signs, prices again do not adjust quick enough to catch up with the new intrinsic values, manifesting a temporal pattern of overreacting reversals