CONSUMPTION, WEALTH, AND FINITE HORIZONS: TESTS OF RICARDIAN EQUIVALENCE

We find strongly non-Ricardian results when we re-estimate Evans's [1988] model using a better approximation of the market value of wealth. We also examine the long-run properties of the data and find results consistent with our regression evidence when we allow for declining labor income as modeled by Gali (1990]. Our findings in support of non-Ricardian behavior by consumers stand in sharp contrast to those of both Evans and Gali.     

IS RICARDIAN EQUIVALENCE A GOOD APPROXIMATION?

Ricardian equivalence may be a good approximation even if all households have finite horizons, many households have short horizons, and an appreciable fraction of wage income is received by liquidity-constrained households. The approximation is likely to be better, the more imperfect annuity markets are.     

SCARCITY AND RICARDIAN RENTS FOR CRUDE OIL*

This paper estimates scarcity rent/user cost and Ricardian rent for crude oil in Oklahoma. A model of firm behavior is proposed incorporating both development and production decisions considering crude oil as a nonrenewable natural resource. Profit maximization conditions derived from the model are applied to take into account cost differentials associated with oil found at varying depths. It is shown that oil with the highest cost is the marginal unit and it is the marginal output that determines Ricardian rent. Time series data is used to estimate equations derived from the necessary conditions. It is found that scarcity rent is a significant proportion of the price of crude oil and has increased in the past decade.     

CONSUMERS ARE NOT RICARDIAN: EVIDENCE FROM NINETEEN COUNTRIES

I develop a model which nests both Ricardian equivalence and an alternative non-Ricardian theory. The alternative is a stochastic variant of Blanchard's [1985] model, and its empirical implications are derived. I then test Ricardian equivalence against this alternative using data from nineteen countries. Ricardian equivalence is resoundingly rejected. Moreover, the estimated deviation from Ricardian equivalence is roughly what one would expect if households faced perfect insurance markets and did no have altruistic bequest motives. For many purposes, however, the estimated deviation from Ricardian equivalence has no practical import.     

DIRECT TESTS OF INDIVIDUAL PREFERENCES FOR EFFICIENCY AND EQUITY

Departures from “economic man” behavior in many games in which fairness is a salient characteristic are now well documented in the experimental economics literature. These data have inspired the development of models of social preferences that assume agents have preferences for equity and efficiency as well as their own material payoffs. Empirical failure of the economic man model comes from experiments that provide direct tests of its distinguishing characteristic: indifference to the payoffs of others. This paper reports an experiment that subjects popular social preferences models to the same type of empirical challenge. We report direct tests of the distinguishing characteristics of these models: preference for allocations that have higher efficiency and greater equity. (JEL A12, A13, B49, C70, C91, D63)     

AN EXPERIMENTAL INVESTIGATION OF RESEARCH TOURNAMENTS

Research tournaments are predicted to encourage R&D. Recent theoretical developments in research tournaments are grounded in search theory. Although the economic intuition behind tournaments is straightforward, computing equilibrium strategies is complex. The participants compute a stopping rule based on the number of participants, the prize and the cost of research. It is an empirical question whether agents will behave as predicted or will employ simple "rule of thumb" strategies such as taking a predetermined number of draws. This paper reports the results of a series of laboratory experiments designed to test the predictions of the search model of tournaments. ( JEL C9, D8)     

EXPERIMENTAL COMPARISONS OF AUCTIONS UNDER SINGLE-AND MULTI-UNIT DEMAND

An English clock auction and a sealed-bid auction with lowest accepted-bid pricing are studied in a controlled laboratory setting. Buyers bid for either a single unit or two units of the good. The sealed-bid auction generates more revenue than the English clock auction in both cases. The revenue from the English clock auction is lower in the two-unit demand environment than in the single-unit demand environment, due to strategic demand reduction on the part of bidders. (JEL C92, D44)     

AN EXPERIMENTAL STUDY OF KIN AND ETHNIC FAVORITISM

Ethnic and kinship ties have long been viewed as potential catalysts for favoritism, and hence corruption. In experiments conducted in three countries, we recruit siblings, coethnics and strangers and vary the relationship(s) between the players of a game to observe how kin and ethnic ties influence the willingness of two players to benefit one another at the expense of a third party. We see universal sibling favoritism, but ethnic favoritism, and favoritism toward other in-group members (friends) varies. We argue this may be driven in part by kinship institutions, since favoritism is more common in societies with denser kin networks. ( JEL D9, C9, D73, J12)     

ON FRUITFUL AND FUTILE TESTS OF THE RELATIONSHIP BETWEEN SEARCH AND PRICE DISPERSION

We exploit cross‐sectional and temporal differences in search intensity in order to examine the relationship between search costs and price dispersion using a hand‐collected panel data set from Jerusalem's Shuk Mahane Yehuda outdoor market. We present empirical evidence that price dispersion increases with the cost of search using several different measures of price dispersion; however, our interpretation of this finding is sensitive to the search proxy in question. We also address several acute difficulties facing empiricists seeking to test theoretical price‐dispersion models in which consumers are heterogeneous in their search behavior. (JEL L11, L13)     

THE EXTERNAL VALIDITY OF EXPERIMENTAL ECONOMICS TECHNIQUES: ANALYSIS OF DEMAND BEHAVIOR

This paper examines the parallelism which exists between demand behavior determined from the sale of a private good in an actual "real world" field setting and in a laboratory auction setting. The demand behavior observed in the two settings is significantly the same leading to the corroboration of the thesis that there is often correspondence between laboratory and real world behavior.     

AN EXPERIMENTAL TEST OF THE PERSISTENCE OF GENDER‐BASED STEREOTYPES

This paper experimentally investigates the role of gender‐based stereotypes in the forecasting of risk attitudes. Subjects predict the gamble choice of target subjects in one of three treatments: (1) Visual—the predictor can only observe the target; (2) Information—the predictor has individuating information about the targets' response to two statements from a risk‐preference survey; and (3) Combined—the predictor both observes the targets and has the targets' two responses to the risk‐preference survey. Our results suggest that stereotypes play a considerable role in forming predictions about others' risk attitudes and that these stereotypes persist even when individuating information is available. (JEL C91, D8, J16)     

AN EXPERIMENTAL ANALYSIS OF DYNAMIC INCENTIVES TO SHARE KNOWLEDGE

Knowledge‐sharing arrangements are an important part of the innovation process as they help firms acquire technological capabilities, shorten development time, and spread risk and cost. A question central to the study of knowledge‐sharing arrangements is the impact of competition on cooperation. While cooperation has the benefit of avoiding duplication, it may have an adverse effect on the competitive advantage of a leading firm. Hence, firms face a difficult challenge during the innovation process while deciding which components of it, if any, to carry out in collaboration with other firms. This paper reports the results of controlled laboratory experiments which identify how the decision to form research joint ventures changes with both relative progress during the R&D process and the intensity of product market competition. The design is based on a modified version of Erkal and Minehart “Optimal Sharing Strategies in Dynamic Games of Research and Development.” Research Paper 1038, University of Melbourne, Department of Economics, 2008. The results indicate that if expected profits are such that the lagging firms always stay in the race, cooperation unravels as firms move forward in the discovery process and as monopoly profits become more attractive. These results are generally consistent with the theoretical predictions. (JEL C91, L24, O30, D81)     

THEORIES OF ETHNIC SOCIAL DISTANCE: COMPARATIVE EMPIRICAL TESTS FOR THREE DISTINCT ETHNIC GROUPS

Social science theories of ethnic division and antipathy are tested empirically using survey and zip code data for representative samples of whites, African Americans, and Mexican Americans in Texas. Ordered logistic regression tests estimate the effects of theoretically relevant variables on probabilities of racial and ethnic out-group social distance. Competing social science theories of ethnic and racial social distance are tested for multiple groups. Statistical support is found for group attachment/identity theories and realistic group conflict theories in explaining variance in out-group social closeness. The socioeconomic theory was not found to be an important predictor of out-group social closeness.     

WORKER ATTITUDES AND THE COST OF PRODUCTION: HYPOTHESIS TESTS IN AN EQUILIBRIUM MODEL

This paper extends the application of neoclassical production theory to include the effects of worker attitudes on productivity and cost of production, using data for the U.S. automobile industry. Behavioral indicators of worker attitudes are imbedded in a standard four-input translog cost function. The coefficients of the imbedded function are determined in estimation of the cost function simultaneously with its share equations. Hypotheses concerning the effects of worker attitudes on the cost function are tested, and the properties of the index of worker attitude that emerge from the estimation are examined.     

BEHAVIORAL FOUNDATIONS OF RECIPROCITY: EXPERIMENTAL ECONOMICS AND EVOLUTIONARY PSYCHOLOGY

Laboratory experiments have generally supported the theorem that, in classical property rights environments, noncooperative behavior in markets yields efficient social outcomes. Experiments, however, regularly fail to support the game theoretic prediction of noncooperative behavior in small-group strategic interaction and in large-group public good environments. In these two types of experiments subjects frequently achieve more efficient social outcomes–they collect more money from the experimenter–than noncooperative game theory predicts. Many subjects in these experiments exhibit reciprocity even in single-play games. Evolutionary psychologists hypothesize that humans have evolved mental algorithms for identifying and punishing cheaters in social exchange. ( JEL A11, A12, B41, C70, C72, C92)     

EXPERIMENTAL STUDIES OF CONSUMER DEMAND BEHAVIOR USING LABORATORY ANIMALS*

Using laboratory animals as subjects, two series of experimental studies of consumer demand behavior are reported. The experiments show that laboratory animals will change consumption patterns in response to changes in the budget set, consuming more of the lower priced commodities and less of the higher priced commodities. Large rotations in the budget line for essential commodities resulted in severe disruption of consumer behavior. The experiments demonstrate the feasibility of using non-human subjects in laboratory studies of economic behavior.