Equity-Efficiency Optimizing Resource Allocation: The Role of Time Preferences in a Repeated Irrigation Game

We study repeated water allocation decisions among small scale irrigation users in Tanzania. In a treatment replicating water scarcity conditions, convexities in production make that substantial efficiency gains can be obtained by deviating from equal sharing, leading to an equity–efficiency trade-off. In a repeated game setting, it becomes possible to reconcile efficiency with equity by rotating the person who receives the largest share, but such a strategy requires a longer run perspective. Correlating experimental data from an irrigation game with individual time preference data, we find that less patient irrigators are less likely to use a rotation strategy

Accumulation is late and brief in preferential choice

Preferential choices are often explained using models within the evidence accumulation framework: value drives the drift rate at which evidence is accumulated until a threshold is reached and an option is chosen. Although rarely stated explicitly, almost all such models assume that decision makers have knowledge at the onset of the choice of all available attributes and options. In reality however, choice information is viewed piece-by-piece, and is often not completely acquired until late in the choice, if at all. Across four eye-tracking experiments, we show that whether the information was acquired early or late is irrelevant in predicting choice: all that matters is whether or not it was acquired at all. Models with potential alternative assumptions were posited and tested, such as 1) accumulation of instantaneously available information or 2) running estimates as information is acquired. These provided poor fits to the data. We are forced to conclude that participants either are clairvoyant, accumulating using information before they have looked at it, or delay accumulating evidence until very late in the choice, so late that the majority of choice time is not time in which evidence is accumulated. Thus, although the evidence accumulation framework may still be useful in measurement models, it cannot account for the details of the processes involved in decision making

The Impact of Simple Institutions in Experimental Economies with Poverty Traps

We introduce an experimental approach to study the effect of institutions on economic growth. In each period, agents produce and trade output in a market, and allocate it to consumption and investment. Productivity is higher if total capital stock is above a threshold. The threshold externality generates two steady states – a suboptimal poverty trap and an optimal steady state. In a baseline treatment, the economies converge to the poverty trap. However, the ability to make public announcements or to vote on competing and binding policies, increases output, welfare and capital stock. Combining these two simple institutions guarantees that the economies escape the poverty trap

Removing financial incentives demotivates the brain

Social scientists and many biologists are all preoccupied in different ways with the nature and effects of the ways incentives influence behavior. One type of incentive is clearly intrinsic; it originates within a person and is often linked to exploratory behavior, hedonic pleasure from self-determined mastery, and desire to satisfy curiosity for its own sake (1). Another type of incentive is extrinsic; typically, it is designed and administered by an outside person or authority, is precise, and is usually financial, tied to fame, or has some other kind of monetizable status. Because of its various natures, intrinsic motivation is difficult to measure and observe. An adventurous step is to measure brain activity during conditions of apparent intrinsic and extrinsic motivation. Murayama et al. (2) do exactly this. Their results are striking evidence for a phenomenon often noted in social psychology—namely, extrinsic incentives (e.g., pay) can undermine intrinsic incentives (e.g., fun)

Developments in data for economic research

0info:eu-repo/semantics/publishe

Neural signatures of strategic types in a two-person bargaining game

The management and manipulation of our own social image in the minds of others requires difficult and poorly understood computations. One computation useful in social image management is strategic deception: our ability and willingness to manipulate other people's beliefs about ourselves for gain. We used an interpersonal bargaining game to probe the capacity of players to manage their partner's beliefs about them. This probe parsed the group of subjects into three behavioral types according to their revealed level of strategic deception; these types were also distinguished by neural data measured during the game. The most deceptive subjects emitted behavioral signals that mimicked a more benign behavioral type, and their brains showed differential activation in right dorsolateral prefrontal cortex and left Brodmann area 10 at the time of this deception. In addition, strategic types showed a significant correlation between activation in the right temporoparietal junction and expected payoff that was absent in the other groups. The neurobehavioral types identified by the game raise the possibility of identifying quantitative biomarkers for the capacity to manipulate and maintain a social image in another person's mind

Criticality and finite size effects in a simple realistic model of stock market

We discuss a simple model based on the Minority Game which reproduces the main stylized facts of anomalous fluctuations in finance. We present the analytic solution of the model in the thermodynamic limit and show that stylized facts arise only close to a line of critical points with non-trivial properties. By a simple argument, we show that, in Minority Games, the emergence of critical fluctuations close to the phase transition is governed by the interplay between the signal to noise ratio and the system size. These results provide a clear and consistent picture of financial markets as critical systems.Comment: 4 pages, 4 figure

Accumulation is late and brief in preferential choice

Preferential choices are often explained using models within the evidence accumulation framework: value drives the drift rate at which evidence is accumulated until a threshold is reached and an option is chosen. Although rarely stated explicitly, almost all such models assume that decision makers have knowledge at the onset of the choice of all available attributes and options. In reality however, choice information is viewed piece-by-piece, and is often not completely acquired until late in the choice, if at all. Across four eye-tracking experiments, we show that whether the information was acquired early or late is irrelevant in predicting choice: all that matters is whether or not it was acquired at all. Models with potential alternative assumptions were posited and tested, such as 1) accumulation of instantaneously available information or 2) running estimates as information is acquired. These provided poor fits to the data. We are forced to conclude that participants either are clairvoyant, accumulating using information before they have looked at it, or delay accumulating evidence until very late in the choice, so late that the majority of choice time is not time in which evidence is accumulated. Thus, although the evidence accumulation framework may still be useful in measurement models, it cannot account for the details of the processes involved in decision making

Can Observers Predict Trustworthiness?

We investigate whether experimental subjects can predict behavior in a prisoner's dilemma played on a TV show. Subjects report probabilistic beliefs that a player cooperates, before and after the players communicate. Subjects correctly predict that women and players who make a voluntary promise are more likely to cooperate. They are able to distinguish truth from lies when a player is asked about her intentions by the host. Subjects are to some extent able to predict behavior; their beliefs are 7~percentage points higher for cooperators than for defectors. We also study their Bayesian updating. Beliefs do not satisfy the martingale property and display mean reversion