NON‐MONETARY INCENTIVES AND OPPORTUNISTIC BEHAVIOR: EVIDENCE FROM A LABORATORY PUBLIC GOOD GAME

This study reports data from a laboratory experiment that investigates the incentive effect of three distinct social communication schemes on free‐riding behavior. We use performance‐based approval and disapproval ratings and a linear public good game to address the above issues. The treatments vary in terms of subjects' opportunities to anonymously assign (1) only the approval ratings to other group members, (2) only the disapproval ratings to other group members, and (3) either the approval or the disapproval ratings to other group members (but not both to the same group member), after they play a standard linear public good game. Despite the Nash prediction of zero individual contribution in all three treatments, the data show that the disapproval points generate significantly higher contribution than the approval points. The treatment in which subjects could communicate either the approval or the disapproval points produces the highest level of contribution. We discuss the implications that these findings may have for efficient design of organizations. (JEL D03, H41, C72, C92)     

DO STATES FREE RIDE IN ANTITRUST ENFORCEMENT?

Recent research has documented a substantial role in antitrust enforcement by U.S. states. While many of the cases litigated involve small local firms, a nontrivial portion encompasses multiple‐state issues. Some previous literature has investigated whether states engage in free‐riding behavior in environmental regulation, and whether governments free ride on private decisions in provision of public goods. In this paper, we analyze a sample of antitrust cases involving cross‐state impacts (from the Multi‐State Antitrust Database, provided by the National Association of Attorneys General) and explain the determinants of free riding (which we define as participating in a case, but not as a lead plaintiff). (JEL L40, H41, H77)     

Stereotypes versus experience: Indexing regional identity in Bolivian Valley Spanish

Stereotypes of highland and lowland identity categories in the Santa Cruz valleys of Bolivia are linked to phonetic variation in the Spanish discourse marker pues. Highlanders are believed to say [pwes] or [ps] while lowlanders are believed to say [pweh] or [pwe]. However, these beliefs erase two types of differences. First, they erase a distinction among highlanders. While highlanders from the Potosí‐Oruro area pronounce pues as they are believed to, highlanders from Cochabamba do not. Secondly, these beliefs erase intra‐speaker variation. Highlanders sometimes use the lowland variants of pues, and vice versa. When people use atypical pronunciations, they invoke an indexical field linked to the group associated with that variant. This indexical field references stereotypical ideas about groups even when they are inaccurate. Specifically, highland variants index ‘pushy’ or ‘aggressive’ stances, which are associated with people from Cochabamba, even though people from Cochabamba do not use highland variants of pues.     

DO RENT‐SEEKING GROUPS ANNOUNCE THEIR SHARING RULES?

We study collective rent seeking between two groups in which each group has the option of releasing or not its sharing‐rule information. First, we show that the case where both groups release their sharing‐rule information never occurs in equilibrium; when the players are unevenly matched, one group releases its sharing‐rule information and the other does not. Then, we select the Pareto‐superior equilibrium when the players are unevenly matched. We show that, in this selected equilibrium, the underdog releases its sharing‐rule information, and the favorite does not; thus, the underdog becomes the leader, and the favorite the follower (JEL D72).     

RANK‐ORDER COMPETITION IN THE VOLUNTARY PROVISION OF IMPURE PUBLIC GOODS

Publicly provided goods often create differential payoffs due to timely or spatial distances of group members. We design and test a provision mechanism which utilizes rank competition to mitigate free‐riding in impure public goods. In our Rank‐Order Voluntary Contribution Mechanism (Rank‐Order‐VCM) group members compete via observable contributions for a larger share of the public good; high contributors receive preferential access (a larger share), while low contributors receive restricted access (a lower share). In a laboratory experiment, Rank‐Order‐VCM elicits median contributions equal to the full endowment throughout the finitely played games with constant groups. In the control treatment, with randomly assigned ranks, the contributions are significantly lower and decline over time. We thus provide evidence of rank competition, in situations where discriminatory access to public goods is possible, being efficiency enhancing. (JEL C91, H41)     

QUALITY DIFFERENCES,THIRD‐DEGREE PRICE DISCRIMINATION,AND WELFARE

We propose a model with two markets to analyze the welfare implications of price discrimination with quality differences. In each market a local firm that operates in that market only competes against a global firm that operates in both markets. Local firms produce higher‐quality goods than the global firm. If the quality levels of the local firms' products are the same, price discrimination is never welfare‐decreasing. If they differ, discrimination is welfare‐increasing if quantity increases. Because of a positive allocation effect of price discrimination, there are parameter values such that welfare increases while total output decreases with price discrimination. (JEL D43, D60)     

LEADERSHIP BY EXAMPLE IN THE WEAK‐LINK GAME

We investigate the effects of leadership in a four‐player weak‐link game. A weak‐link game is a coordination game with multiple Pareto‐ranked Nash equilibria. Because the more efficient equilibria involve a degree of strategic uncertainty groups typically find it difficult to coordinate on more efficient equilibria. We wanted to see whether leadership by example, in the form of one player acting publicly before the rest of the group, could help groups do better. Our results suggest that leadership can increase efficiency but is far from being a guarantee of success. Specifically, in a significant number of groups we observed successful leadership and increased efficiency, but in most groups efficiency was low despite the efforts of leaders. We did not find any difference between voluntary leaders and leaders that are randomly assigned. (JEL C72, H41)     

Development of Three‐Dimensional Completion of Complex Objects

Three‐dimensional (3D) object completion, the ability to perceive the backs of objects seen from a single viewpoint, emerges at around 6 months of age. Yet, only relatively simple 3D objects have been used in assessing its development. This study examined infants’ 3D object completion when presented with more complex stimuli. Infants (N = 48) were habituated to an “L”‐shaped object shown from a limited viewpoint; then they were tested with volumetrically complete (solid) and incomplete (hollow) versions of the object. Four‐month‐olds and 6‐month‐old girls had no preference for either display. Six‐month‐old boys and both sexes at 9.5 months of age showed a novelty preference for the incomplete object. A control group (N = 48), only shown the test displays, had no spontaneous preference. Perceptual completion of complex 3D objects requires infants to integrate multiple, local object features and thus may tax their nascent attentional skills. Infants might use mental rotation to supplement performance, giving an advantage to young boys. Examining the development of perceptual completion of more complex 3D objects reveals distinct mechanisms for the acquisition and refinement of 3D object completion in infancy.     

EXPERTS AND THEIR RECORDS

A market where short‐lived customers interact with long‐lived experts is considered. Experts privately observe which treatment best serves a customer, but are free to choose more or less profitable treatments. Customers only observe records of experts' past actions. If experts are homogeneous there exists an equilibrium where experts always choose the customer's preferred treatment (play truthfully). Experts are incentivized with the promise of future business: new customers tend to choose experts who performed less profitable treatments in the past. If expert payoffs are private information, experts can never always be truthful. But sufficiently patient experts may be truthful almost always. (JEL C73, D82)     

EXTERNAL THREAT AND COLLECTIVE ACTION

This article studies how players allocate their endowed resources between productive and conflictual activities in the context of rivalry between two groups. We show that the suboptimality and exploitation propositions established by Olson (1965) do not necessarily apply when external threat is endogenized. We also illustrate that it does not always pay to take an offensive stance. When competing with an offensive group, it might be better for members of a defensive group to remain defensive. Furthermore, in the context of rivalry between two groups, free riding can actually benefit everyone in the system. (JEL D70 , D74 )     

RESEARCH UNIVERSITIES AND REGIONAL HIGH‐TECH FIRM START‐UP AND EXIT

If localized knowledge spillovers are present in the university setting, higher rates of both start‐up and/or survival would be observed in areas that are geographically proximate to the university. Using a detailed industry data set for Texas for 1999:3–2005:2, we analyze start‐up and exit rates for high‐tech firms. Based on a Poisson quasi‐maximum likelihood estimation, we find evidence that the level of R&D and proximity of a research institution positively affects the likelihood of technology start‐ups. However, using both the Cox proportional hazards model and Kaplan–Meier approach, our results suggest that geographic proximity to knowledge centers does not reduce hazard rates. (JEL R12, R53, O18)     

THE CHARITY OF THE EXTREMELY WEALTHY

In this article, we show that, compared to billionaires who have inherited their wealth, billionaires who have made their own wealth are more likely to sign the Giving Pledge and more likely to be in the Million Dollar Gifts list or the Philanthropy Top 50 list of big givers. If they give, self‐made billionaires also tend to donate more money. We explore several possible explanations for this correlation between the origin of billionaires' wealth and their charitable giving, and present evidence that suggests that self‐made billionaires tend to spend more money, both by giving money away and by buying expensive items. (JEL D03, H40)     

The Obligation to Volunteer as Fair Reciprocity? Welfare Recipients’ Perceptions of Giving Back to Society

Dutch citizens on welfare have to volunteer at Civil Society Organizations (CSOs) in return for their benefits. Through applying the ‘worlds of justification’ of Boltanski and Thévenot, this article aims to provide a better theoretical and empirical understanding of social justice of policies that obligate welfare clients to participate in CSOs. The analysis of 51 in-depth interviews with Dutch welfare recipients shows that respondents perceive these policies partly but not unilaterally as unfair. If respondents perceive welfare as ‘free money’ and if they are convinced that civic behavior demands interventions against free riding on welfare resources, ‘mandatory volunteering’ is considered as fair. Our main contribution is to the theoretical debate on recognition and redistribution by showing empirically how ‘othering’ plays an important role in determining when mandatory volunteering becomes a matter of redistribution or recognition.

     

ACCESS TO TECHNOLOGY AND THE TRANSFER FUNCTION OF COMMUNITY COLLEGES: EVIDENCE FROM A FIELD EXPERIMENT

Access to information may represent an important barrier to learning about and ultimately transferring to 4‐year colleges for low‐income community college students. This article explores the role that access to information technology, in particular, plays in enhancing, or possibly detracting from, the transfer function of the community college. Using data from the first‐ever field experiment randomly providing free computers to students, we examine the relationships between access to home computers and enrollment in transferable courses and actual transfers to 4‐year colleges. The results from the field experiment indicate that the treatment group of students receiving free computers has a 4.5 percentage point higher probability of taking transferable courses than the control group of students not receiving free computers. The evidence is less clear for the effects on actual transfers to 4‐year colleges and the probability of using a computer to search for college information (which possibly represents one of the mechanisms for positive effects). In both cases, point estimates are positive, but the confidence intervals are wide. Finally, power calculations indicate that sample sizes would have to be considerably larger to find statistically significant treatment effects and reasonably precise confidence intervals given the actual transfer rate point estimates. (JEL J24, O33, I23, I24)     

THREAT AND PUNISHMENT IN PUBLIC GOOD EXPERIMENTS

Experimental studies of social dilemmas have shown that while the existence of a sanctioning institution improves cooperation within groups, it also has a detrimental impact on group earnings in the short run. Could the introduction of pre‐play threats to punish have enough of a beneficial impact on cooperation, while not incurring the cost associated with actual punishment, so that they increase overall welfare? We report an experiment in which players can issue non‐binding threats to punish others based on their contribution levels to a public good. After observing others' actual contributions, they choose their actual punishment level. We find that threats increase the level of contributions significantly. Efficiency is improved, but only in the latter periods. However, the possibility of sanctioning differences between threatened and actual punishment leads to lower threats, cooperation, and welfare, restoring them to levels equal to or below the levels attained in the absence of threats. (JEL C92, H41, D63)     

Building Career PATHS (Postschool Achievement Through Higher Skills) for Young Women With Disabilities

The PATHS (Postschool Achievement Through Higher Skills) curriculum is designed to address the career development needs of young women with disabilities and other barriers. Participants (N = 110) in a pilot test of the curriculum showed increases in vocational self‐efficacy, social efficacy, and awareness of disability/gender issues related to career planning, whereas those in the comparison group did not make similar gains. Qualitative findings from focus groups (N = 68) revealed that PATHS participants improved in self‐confidence, self‐awareness, ability to identify strengths, knowledge of multiple career options, and the capacity to set goals and plan for future careers.     

COMPETITIVE BALANCE MEASURES IN SPORTS LEAGUES: THE EFFECTS OF VARIATION IN SEASON LENGTH

Appropriate measurement of competitive balance is central to the economic analysis of professional sports leagues. We examine the distributional properties of the ratio of standard deviations (RSD) of points percentages, the most widely used measure of competitive balance in the sports economics literature, in comparison with other standard‐deviation‐based measures. Simulation methods are used to evaluate the effects of changes in season length on the distributions of competitive balance measures for different distributions of the strengths of teams in a league. The popular RSD measure performs as expected only in cases of perfect balance; if there is imbalance in team strengths, its distribution is sensitive to changes in season length. It is therefore not recommended for comparisons of competitive balance for different sports leagues with different numbers of teams and/or games played. (JEL L83, D63, C63)     

SELECTION INTO AUCTIONS FOR RISKY AND AMBIGUOUS PROSPECTS

We study experimentally the selection into first‐price sealed‐bid auctions for a risky or an ambiguous prospect. Most subjects chose to submit a bid for the risky prospect, leading to thinner markets for the ambiguous prospect. Transaction prices for both prospects were equal although subjects expected the ambiguous markets to be smaller. Evidence of a positive correlation between risk and ambiguity aversion suggests that the ambiguous markets were populated by relatively risk tolerant bidders. A control experiment with selection in a simple choice task shows that subjects correctly anticipate the effects of selection on market size and risk attitudes. (JEL C91, D44, D81)     

TO DETER OR TO MODERATE? ALLIANCE FORMATION IN CONTESTS WITH INCOMPLETE INFORMATION

We consider two players' choice about the formation of an alliance ahead of conflict in a framework with incomplete information about the strength of the potential ally. When deciding on alliance formation, players anticipate the self‐selection of other players and the informational value of own and other players' choices. In the absence of these signaling effects, strong players have an incentive to stand alone, which leads to a separating equilibrium. This separating equilibrium can be destabilized by deception incentives if beliefs are updated on the basis of endogenous alliance formation choices. Weak players may find it attractive to appear strong in order to deter competitors from positive effort choices. Strong players may find it attractive to appear weak in order to give their competitors a false sense of security and then beat them with little effort. Moreover, appearing weak allows players to free‐ride when alliances are formed. (JEL D72, D74)