ON THE PREFERENCES OF PRINCIPALS AND AGENTS

One of the reasons why market economies are able to thrive is that they exploit the willingness of entrepreneurs to take risks that laborers might prefer to avoid. Markets work because they remunerate good judgment and punish mistakes. Indeed, modern contract theory is based on the assumption that principals are less risk averse than agents. We investigate if the risk preferences of entrepreneurs are different from those of laborers by implementing experiments with a random sample of the population in a fast‐growing, small‐manufacturing, economic cluster. As assumed by theory, we find that entrepreneurs are more likely to take risks than hired managers. These results are robust to the inclusion of a series of controls. This lends support to the idea that risk preferences is an important determinant of selection into occupations. Finally, our lotteries are good predictors of financial decisions, thus giving support to the external validity of our risk measures and experimental methods (JEL C93, D81, D86).     

VOTERS' INTERMEDIATION ENVIRONMENTS IN THE 1988 PRESIDENTIAL CONTEST

Considerable information about a presidential election campaigncomes to voters through such intermediaries as personal networksand the mass media. This article examines the operation of theseintermediaries in the 1988 Ohio presidential campaign by focusingon exposure to them and the perceived partisan content of theirmessages—and how these key features of intermediationrelate to various voter characteristics. People are most disposedto discuss politics with like-minded relatives and friends,but discussions with co-workers provide an opportunity for politicallydissonant messages to intrude. This political discussion ismodulated by political attentiveness rather than personal orpartisan characteristics. Media exposure is high and also isrelated most to political attentiveness, although age is animportant determinant as well. Surprisingly, the media werecommonly perceived as balanced and neutral in the presidentialrace or, where committed, as supporting the candidate the respondentopposed. Because of this, only a third of the respondents foundthemselves in an overall intermediation environment that wasconcordant with their own preferences. Considerably more werein environments containing some discordant views, which couldchallenge their partisan dispositions.     

THE COMPOSITION OF GOVERNMENT EXPENDITURE: ECONOMIC CONDITIONS AND PREFERENCES

This paper examines the question of why the composition of government expenditure differs among democratic countries and to what extent it may be explained by differences in economic conditions or preferences. A simple overlapping generations model, which allows for a range of relevant factors, is constructed to examine the division of expenditure on public goods and a transfer payment under majority voting. The model yields a closed‐form solution for the majority choice of the expenditure ratio. An empirical examination suggests that income inequalities play a minor role while different preferences for public goods reflecting cultural differences across countries may play an important role in accounting for the substantial variations in expenditure patterns. (JEL D72, H41, H53, H11)     

THE VALUE OF THE VOTE: A MODEL AND TEST OF THE EFFECTS OF TURNOUT ON DISTRIBUTIVE POLICY

This article demonstrates important effects of voter participation. A model shows why, for some types of distributive policy, incumbents are more likely to be reelected if high-turnout regions receive more funds than do low-turnout regions. The model predicts, therefore, greater allocations to high-turnout regions. This prediction is tested with county-level data from the New Deal's Federal Emergency Relief Administration (FERA). The estimates suggest that by voting rather than not voting, an individual increased by about $30 the expected FERA allocation for the individual's county. The size of the estimated effect differs across states. ( JEL D72, N42)     

MANIPULATING VOTING PROCEDURES

A voting procedure can be manipulated if, by misrepresenting his preferences, some individual can secure an outcome which he prefers to the outcome he gets when he is honest.
This is an expository paper on the theory of voting manipulation. Section I is an historical sketch of the contributions of Condorcet, de Borda, Arrow, and others. Section II provides a set of examples of manipulation: of plurality voting, of majority voting, of exhaustive voting, of the single transferable vote procedure, and of approval voting. It also contains an example of a nonmanipulable random voting scheme. Section HI provides a simple proof of the Gibbard-Satterthwaite manipulation theorem.     

HISTORY DEPENDENCE AND THE FORMATION OF SOCIAL PREFERENCES: AN EXPERIMENTAL STUDY

We study the minimal contributing set (MCS) game, a three‐person sequential step‐level public goods game. The behavior of critical third players changes with experience in this game even though they face no strategic or payoff uncertainty. We explore why these changes occur by manipulating subjects' experience in the first half of the experiment. The treatments give subjects very different initial experiences, but all treatments move subjects' choices toward experienced subjects' play in the control sessions. Long‐run play is indistinguishable across treatments. Our results are more consistent with the “discovered preferences” hypothesis ( Plott 1996 ) than either the “constructed preference” or “reference point” hypotheses. (JEL H41, C72, C92)     

EXCHANGE RATE SYSTEMS AND INVESTOR PREFERENCES

This paper investigates whether or not floating exchange rates add an undesirable level of risk to international investment positions. For investors holding currencies, we find that fixed exchange rates are preferred to floating exchange rates, which supports the often-argued case that floating exchange rates do excessively increase the riskiness of investment. However, in the more realistic case of investors holding foreign securities, we find that floating exchange rates are preferred to fixed exchange rates; that is, we find that floating exchange rates have not added an undesirable level of risk to international investment positions.     

RIESMAN'S CHARACTER TYPOLOGY AND MUSICAL PREFERENCES

Researchers analyzed YUM(!) Brand/Kentucky Fried Chicken's (KFC's) response to the People for the Ethical Treatment of Animals' (PETA's) KFC cruelty campaign in order to add a new component to the current organizational deviance literature related to how corporations defend themselves against attacks. KFC's reaction to PETA's attempts to label it deviant is a unique pattern of response we dub strategic interaction, in which each tactic used by PETA is met with a new and adaptive response by KFC. After an extensive campaign, PETA was still unable to succeed at changing KFC's policies. We attempt to explain PETA's lack of success in terms of superficial appeasement and appropriation. Superficial appeasement is a newly identified stalling tactic, which may provide organizations with the time they need to create a history of corporate responsibility in response to accusations of deviance. Appropriation involved KFC's co-optation of a joint panel that was intended to facilitate dialogue between the two organizations, but instead became almost entirely filled with panelists sympathetic to KFC's existing corporate policies, a technique that may facilitate other corporations attempting to defend themselves.     

ON THE SOCIAL DIMENSION OF TIME AND RISK PREFERENCES: AN EXPERIMENTAL STUDY

When explaining risk taking, intertemporal allocation, and distributing behavior, economists rely on risk, time, and other-regarding preferences but offer no guidance on how these three crucial aspects are interrelated. We report on an experiment exploring such interrelation. For this sake, we compare evaluations of several prospects, each of which allocates certain or risky and immediate or delayed payoffs to the actor and to another participant. We find that individuals are self-oriented as to social allocation of risk and delay and other-regarding with respect to expected payoffs . ( JEL C91, D63, D81)     

ASSIMILATION IN THE RISK PREFERENCES OF SPOUSES

We use correlations in the risk preferences of spouses as a testbed of whether preferences are socially transmitted, rather than being innate as traditionally assumed in economics. We obtain rich measurements of the risk preferences of cohabiting spouses in the rural Ethiopian highlands. This allows us to use correlation coefficients at the level of the couple in regression analysis. We find a strong correlation between the strength of the correlation in risk preferences within a couple and how long a couple has been married. This provides direct evidence for assimilation in the risk preference of spouses, and thus for social transmission of preferences. Assortative mating appears to be less important. (JEL C93, D03, D80, O12)     

A NOTE ON RISK AVERSION AND PREFERENCES

The relationship between Arrow-Pratt measures of risk aversion and the standard income and substitution effects in certainty problems is presented. Particular emphasis is placed on the relationship between curvature properties of indifference maps and properties of relative risk aversion. The results are applied to the demand for insurance and in models with asymmetric information.     

THE AMERICAN PUBLIC'S DEFENSE SPENDING PREFERENCES IN THE POST-COLD WAR ERA

The end of the Cold War and the dissolution of the Soviet Unionhave produced marked changes in the defense spending preferencesof politically informed Americans, but relatively little changeamong the 60 percent or so of the public least informed aboutpolitics. The overall level of defense spending preferred bywell-informed citizens is significantly lower than during theCold War and significantly less related to ideology and isolationism.Willingness to use force in the international arena remainsthe primary determinant of defense spending preferences amongboth well-informed and relatively uninformed citizens. Willingnessto use force is in turn primarily related to basic social andcultural values, including trust in people and symbolic patriotism.     

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)     

COMMITTEE ASSIGNMENTS, CONSTITUENT PREFERENCES, AND CAMPAIGN CONTRIBUTIONS

We model the behavior of a vote-maximizing legislator in order to predict interest group campaign contributions to incumbent politicians. We show that committee assignments and voter preferences affect the price a legislator requires to produce policies for any interest group. An econometric analysis of actual interest group contributions shows that these groups make significantly larger contributions to legislators on committees with jurisdiction over especially relevant policy issues and to incumbents with non-hostile constituencies. These results support our theory; interest groups act as if committees matter in the determination of policy and voters' interests constrain interest group behavior.     

AFFIRMATIVE ACTION AND DYNAMICS OF WORK‐ETHIC PREFERENCES

This study examines the cultural‐transmission effects of compensatory‐discrimination affirmative action policies on work‐ethic preference dynamics for a population in a caste‐based segregated economy in which some high‐paid jobs are reserved for historically disadvantaged lower‐caste individuals. Cultural attitudes toward preferences for work‐loving and leisure‐loving traits evolve endogenously. The compensatory‐discrimination policies affect differently the preference dynamics for insiders (entitled to employment quota) and outsiders (not entitled to employment quota). Efficient and inefficient equilibria are possible, with larger or smaller proportions of individuals with a work ethic among the insider and outsider populations. The model shows that the commonly conceived conclusion that a job reservation policy benefits a disadvantaged group at the cost of efficiency and economic growth is not a necessary outcome. (JEL A12, C62, J71)     

GET OUT THE (COSTLY) VOTE: INSTITUTIONAL DESIGN FOR GREATER PARTICIPATION

We examine two commonly discussed institutions inducing turnout: abstention penalties (used in 32 countries) and lotteries rewarding one randomly chosen participant (as proposed on the 2006 Arizona ballot). We analyze a benchmark model in which voters vary in their information quality and participation is costly. We illustrate that both institutions can improve collective outcomes, though lotteries are a more effective instrument asymptotically. Experimentally, we provide strong evidence for selective participation: lab voters participate more when better informed or when institutionally induced. Lotteries fare better than fines, suggesting that they may be a useful alternative to commonly used compulsory voting schemes. (JEL C92, D72, D02)     

SOCIAL PREFERENCES AND TAX POLICY DESIGN: SOME EXPERIMENTAL EVIDENCE

This article reports the results of a set of experiments designed to examine whether a taste for fairness affects people's preferred tax structure. Using the Fehr and Schmidt model, we devise a simple test for the presence of social preferences in voting for alternative tax structures. The experimental results show that individuals demonstrate concern for their own payoff and inequality aversion in choosing between alternative tax structures. However, concern for redistribution decreases as the deadweight loss from progressive taxation increases. Our findings have important implications for tax policy design. ( JEL C92, D63, H21, H23)     

ELECTED REPRESENTATIVES, ONLINE SELF-PRESENTATION AND THE PERSONAL VOTE:Party, personality and webstyles in the United States and United Kingdom

This article examines the way politicians package themselves to their constituents via the Web. It looks at various aspects of online self-promotion by incumbent representatives in two advanced industrial democracies - the US and the UK. It seeks to ascertain the extent to which personal qualities are a key aspect of an elected representative's online persona, and any differences that exist between these democracies with different electoral cultures. It concludes by considering the findings of empirical research and what it reveals about the relationship between national electoral cultures and the politician's persona.     

RISK PREFERENCES AND EXPECTED UTILITY: EVIDENCE FROM LABOR SUPPLY DATA

This paper adds to the growing body of evidence that observed risk preferences are not consistent with expected‐utility theory. Using the link between labor supply decisions and utility as outlined by Chetty (“A Bound on Risk Aversion Using Labor Supply Elasticities.” The American Economic Review, 96(5), 2006, 1821–34), I compute the curvature of utility over wealth for 3,900 individuals in the 1996 Panel Study of Income Dynamics. I then compare this estimate to a measure of relative risk aversion based on the respondents' answers to hypothetical gambling questions and find virtually zero correlation. Finally, I investigate how the two measures and their correlations change by demographic groups and risky behavior. (JEL C81, D80, J22)     

SEX OF CHILDREN: A COMMUNITY ANALYSIS OF PREFERENCES AND PREDETERMINATION ATTITUDES

A self-administered questionnaire concerning child sex preferences and attitudes toward the exercise of pre- and post-conception sex predetermination was distributed and retrieved from an urbanized area sample of 209 adults aged 18 to 50. A modified (i.e., truncated) version of McClelland's (1979) "stopping rule" measure method was used to assess child sex preferences. It confirmed and extended findings from earlier research in that male first children, but sex-balanced completed families, were preferred by the respondents. The use of either pre- or post-conception techniques of sex predetermination was favored by only a minority of the respondents, a very small minority when by the postconception method. Finally, it was evident that child sex preferences did not have a significant influence upon fertility intentions or upon attitudes toward the personal exercise of sex predetermination by either method.