Reference dependent prices in bargaining: An experimental examination of precise first offers

Evidence from psychology and marketing suggests that those who make a “precise” first offer in bargaining get a better deal than those who make a “round” first offer. We report on a series of experiments designed to test for and improve our understanding of the “precise first offer” (PFO) effect in bargaining and whether it likely reflects rational optimizing or equilibrium behavior. Our experiment varies whether decisions are incentivized and whether the PFO effect can emerge as an equilibrium of a cheap-talk signaling game. We find evidence of a PFO effect when subjects read a vignette and make unincentivized individual decisions. When monetary incentives are added to the vignette, we still find the PFO effect, but it is not robust. In a bilateral bargaining situation with a cheap-talk equilibrium, we can not find the PFO effect, which is inconsistent with the equilibrium predictions. Moreover, the PFO effect reemerges in a setting in which initial offers are generated by a random device and thus provides a strong refutation of the signaling model. Our evidence suggests that optimizing and equilibrium accounts of the PFO effect are inadequate. Understanding initial offers as reference points, which subtly change perceptions about the kinds of acceptable counteroffers, provides a plausible account of a new finding on which prior explanations are silent: precise offers induce more precise counteroffers.     

Poverty Dynamics among Recent Immigrants to Canada1

This paper examines two issues: (1) poverty dynamics among successive cohorts of entering immigrants to Canada, and (2) whether rising educational attainment and increasing share in the “skilled” class since the early 1990s has resulted in improvements in poverty entry, exit, and chronic poverty. The entry to poverty is very high during the first year in Canada, but low in subsequent years. The dramatic move toward more labor‐market friendly characteristics of entering immigrants had only a very small effect on poverty outcomes, in part because the relative advantage of holding a degree diminished, and “skilled economic” class immigrants were more likely to enter poverty than their “family” class counterparts.     

On the relation between impulses to help and causes of neediness: An experimental study

A novel two-person “charity game”, related to the “Samaritan’s Dilemma” [Buchanan, J.M., 1975. The samaritan’s dilemma. In: Phelps, E.S. (Ed.), Altruism, Morality and Economic Theory. Russel Sage Foundation, New York, pp. 71–85], is used to experimentally investigate the relation between helpers’ behavior and poor recipients’ reaction to aid. We distinguish two treatments differing in whether the causes of neediness are verifiable or not. Helping behavior does not vary significantly between treatments, but is positively correlated with dictator giving, suggesting idiosyncratic attitudes to help. Needy subjects are unaffected by anticipated help, but react optimally to chance.     

MULTIPLE EQUILIBRIA AND DETERRENCE IN AIRLINE MARKETS

We use a longitudinal dataset from the U.S. airline industry to estimate three different models for entry games with very general forms of heterogeneity between U.S. carriers in airline markets: a simultaneous game with complete information and two sequential games with or without strategic entry deterrence. In a sequential game with entry deterrence, an incumbent decides whether to incur a cost to deter potential entrants. We show that the model with sequential games with strategic deterrence provides the best fit to the data. We conclude that the results reject the hypothesis of a static model and support the hypothesis of the existence of strategic entry deterrence. (JEL L1)     

Honesty or dishonesty of taxpayer communications in an enforcement regime

In many settings the true likelihood of capture when engaging in an illegal activity, such as tax evasion, is not well known to an individual. “Official” statements from the tax administration regarding enforcement effort provide some information. In addition, “informal”, or “unofficial”, communication among taxpayers can supplement these official announcements, but individuals do not know with certainty whether such unofficial information is honest (or accurate) versus dishonest (or inaccurate). We examine the truthfulness of an individual’s revelation of unofficial information to other individuals, along with the factors that affect any revelation, focusing on the intrinsic motivations for revelations. Our experimental design allows us to examine the type and the honesty of messages that an individual chooses to send to other individuals regarding their own audit outcome and their own compliance behavior. Our results indicate that most individuals send accurate messages about their own audit outcomes and their own compliance behaviors. Nevertheless, many individuals are also systematically dishonest about being audited; that is, we observe a significant tendency for individuals to claim that they were audited when they were not. We also observe a strong interaction between individuals’ audit outcomes and their compliance behaviors, so that individuals who engaged in tax evasion and who were audited were more truthful in their communications than those whose tax evasion went undetected.     

APPLICATIONS BARRIER TO ENTRY AND EXCLUSIVE VERTICAL CONTRACTS IN PLATFORM MARKETS

Our study extends the empirical literature on whether vertical restraints are anticompetitive. We focus on exclusive contracting in platform markets, which feature indirect network effects and thus are susceptible to an applications barrier to entry. Exclusive contracts in vertical relationships between the platform provider and software supplier can heighten entry barriers. We test these theories in the home video game market. We find that indirect network effects from software on hardware demand are present, and that exclusivity takes market share from rivals, but only when most games are nonexclusive. The marginal exclusive game contributes virtually nothing to console demand. Thus, allowing exclusive vertical contracts in platform markets need not lead to domination by one system protected by a hedge of complementary software. Our investigation suggests that bargaining power enjoyed by the best software providers and the skewed distribution of game revenue prevents the foreclosure of rivals through exclusive contracting. (JEL L42, L63, D12)     

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)     

Motivational crowding out effects in charitable giving: Experimental evidence

This paper tests motivational crowding out in the domain of charitable giving. A novelty is that our experiment isolates alternative explanations for the decline of giving, such as strategic considerations of decision-makers. Moreover, preference elicitation allows us to focus on the reaction of donors characterized by different degrees of intrinsic motivation. In the charitable-giving setting subjects donate money to the German “Red Cross” in two consecutive donations. The first dictator game is modified, i.e., donors face with equal probability an ex post reimbursement or a subsequent payment. The second game is a standard dictator game. We find that after an ex post change in the price of giving of the first donation, substantially more donors with a high degree of intrinsic motivation decrease donations than subjects with a low degree of intrinsic motivation and donors who did not experience a price effect. In a replication study we find support for these results for subjects who have previously participated in at least one economic experiment.     

What “likes” have got to do with it: Exposure to peers' alcohol-related posts and perceptions of injunctive drinking norms

Objective: Examine 1) whether observed social reinforcements (i.e., “likes”) received by peers' alcohol-related social media posts are related to first-year college students' perceptions of peer approval for risky drinking behaviors; and 2) whether associations are moderated by students' alcohol use status. Participants: First-year university students (N = 296) completed an online survey in September, 2014. Method: Participants reported their own alcohol use, friends' alcohol use, perceptions of the typical student's approval for risky drinking, and ranked 10 types of social media posts in terms of the relative numbers of “likes” received when posted by peers. Results: Observed social reinforcement (i.e., “likes”) for peers' alcohol-related posts predicted perceptions of peer approval for risky drinking behaviors among non-drinking students, but not drinking students. Conclusions: For first-year college students who have not yet initiated drinking, observing peers' alcohol-related posts to receive abundant “likes” may increase perceptions of peer approval for risky drinking.     

Incomplete information and incentives to free ride

We study private provision of a continuous public good in an incomplete information repeated game. The analysis generates the following predictions in the form of Perfect Bayesian equilibria. When the discount factor is low, the game played by increasingly optimistic players may collapse into a war of attrition: delay may occur and one player may bear the burden of providing the public good while the other free rides forever. On the other hand, if the discount factor is high, or low but prior beliefs are “pessimistic”, the inclusion of incomplete information has no impact on the pattern of contributions.     

It’s not only for the money: an analysis of adolescent versus adult entry into street prostitution

Numerous studies examine the causal factors of entrance into prostitution and find economic marginalization, substance addiction, and interpersonal networks are common reasons women enter the trade. However, we know less about the role that age of onset plays in shaping female pathways into prostitution. Here, we build from insights into previous research by analyzing not only entry pathways but also how age categories are linked to time spent in the trade and whether the length of time in prostitution exacts a greater “toll” on women. Drawing from the feminist and age of onset literatures, we analyze 40 in-depth interviews with female street prostitutes from five U.S. cities. Our results underscore the importance of age as an organizing feature of women’s pathways into prostitution and the potential associated consequences of working in this trade.     

Is Poker a Game of Skill or Chance? A Quasi-Experimental Study

Due to intensive marketing and the rapid growth of online gambling, poker currently enjoys great popularity among large sections of the population. Although poker is legally a game of chance in most countries, some (particularly operators of private poker web sites) argue that it should be regarded as a game of skill or sport because the outcome of the game primarily depends on individual aptitude and skill. The available findings indicate that skill plays a meaningful role; however, serious methodological weaknesses and the absence of reliable information regarding the relative importance of chance and skill considerably limit the validity of extant research. Adopting a quasi-experimental approach, the present study examined the extent to which the influence of poker playing skill was more important than card distribution. Three average players and three experts sat down at a six-player table and played 60 computer-based hands of the poker variant “Texas Hold’em” for money. In each hand, one of the average players and one expert received (a) better-than-average cards (winner’s box), (b) average cards (neutral box) and (c) worse-than-average cards (loser’s box). The standardized manipulation of the card distribution controlled the factor of chance to determine differences in performance between the average and expert groups. Overall, 150 individuals participated in a “fixed-limit” game variant, and 150 individuals participated in a “no-limit” game variant. ANOVA results showed that experts did not outperform average players in terms of final cash balance. Rather, card distribution was the decisive factor for successful poker playing. However, expert players were better able to minimize losses when confronted with disadvantageous conditions (i.e., worse-than-average cards). No significant differences were observed between the game variants. Furthermore, supplementary analyses confirm differential game-related actions dependent on the card distribution, player status, and game variant. In conclusion, the study findings indicate that poker should be regarded as a game of chance, at least under certain basic conditions, and suggest new directions for further research.     

BECAUSE IT'S FREE POKER! A QUALITATIVE ANALYSIS OF FREE TEXAS HOLD'EM POKER TOURNAMENTS

The game of poker has dramatically increased in popularity in America over the past decade, and includes a new trend in poker in which tournaments are played with no monetary wagering. These “free” poker tournaments are the primary focus of this project. Our interest in these free poker tournaments was twofold: first, we wished to identify what would motivate a person to play poker when there is no profit motive; second, we wanted to learn how the social dynamics of the game itself may or may not change when monetary risk is not present. Through covert participant observation of free poker tournaments at four different locations we were able to discover three main motivations among the players: sharpening skills for later cash games, sociability, and gaining the status of a “regular player.” We also discovered that the tenor and tempo of the game tended to vary not as a function of the location, but rather because of the social class of the players. We offer several hypotheses to guide future research endeavors in this area.     

The need to import skilled personnel: factors favouring and hindering its international mobility

Skilled migration has become a major element of contemporary flows. It has developed in scale and variety since the 1930s and now takes many forms, including “brain drain”, professional transients, skilled permanent migrants and business transfers. Nevertheless, the data are poor, inconsistent and usually not differentiated by sex. The importance of policies, both national and regional, to control the movement of skilled migrants has escalated. Receiving countries have come increasingly to see the benefits from admitting skilled workers and have adjusted their permanent and/or temporary migration laws/policies to facilitate entry, usually on the proviso that it does not disadvantage their own workers by taking away their jobs. Another set of policy frameworks within which skilled migration is occurring is regional blocs. The experience of the European Union (EU) in promoting the flow of skilled labour, movement in this direction in the North American Free Trade Agreement (NAFTA), Mercosul, the Closer Economic Relations (CER) Agreement between Australia and New Zealand and the Asia Pacific Economic Cooperation (APEC) Forum are analysed. The article poses two sets of issues facing sending and receiving countries. For sending countries they are: whether to free up or tighten migration; whether to support temporary skilled flows; whether to introduce protective or preventive measures to stem skilled emigration; how to encourage the return of skilled nationals; and whether/how to pursue compensation from post-industrialized countries. For receiving countries they are: whether to encourage temporary or permanent skilled immigration; the level of entry to permit/promote; how to select/process skilled immigrants; whether/how to protect the jobs of locals; and how they ensure the successful labour market integration of skilled immigrants. The article argues that the neo-classical view that skilled migration leads to overall improvement in global development does not apply. “Brain waste” or “wasted skills” occur frequently, to the detriment of both individuals and nations. Improved data and constructive dialogue on skilled migration are needed. Within both regional and international contexts, countries have obligations and responsibilities towards each other which need to be taken seriously.     

DO NONPROFIT AND GOVERNMENT NURSING HOMES ENTER UNPROFITABLE MARKETS?

Using data from markets in the rural United States, this study addresses whether nonprofit and government nursing facilities locate in markets that for-profit firms cannot profitably enter, thereby expanding access to nursing care to populations that would not otherwise be served. The results indicate that while nonprofit and for-profit nursing homes typically enter similar markets, government nursing homes are more likely to enter markets that have small populations generally and too few elderly residents to be profitable for for-profits. The results have implications for the efficient provision of access to long-term care for isolated populations and other underserved groups. (JEL L10, L20, I11)     

S’orienter dans les espaces sociaux en ligne. L’exemple d’un jeu

This study of the social space formed around Mountyhall, an online game, takes as starting point not the distinction between “real” and “virtual” but the concrete circulation of participants. Focus is placed on the “cosmopolitanism” of social webspaces and the alternation between connected/unconnected. Crossing this case study with an analysis of statistics and graphs leads to formulating the notion of “orientation principle” for explaining how participants themselves draw boundaries and label activities. Two “orientation principles” are analyzed: the first one about time in relation to the game and the other about the geography of this online social space.     

Student Perceptions of Inappropriate Parent Behavior on “Moms” and “Dads” Weekends

Undergraduate students reported whether they had ever seen or heard about mothers and fathers engaging in each of four behaviors during “moms” and “dads” weekends: drinking too much, dancing inappropriately, flirting with students, and kissing students. A substantial percentage of students reported observing and hearing about parents engaging in drinking, dancing, and flirting, with significantly higher percentages reported for mothers than fathers. Findings suggest the need to further examine parents' inappropriate behaviors, the motivations underlying them, and student responses to these behaviors during mothers' and fathers' weekends. The article concludes with implications for programming for family weekends on college campuses.     

The Definition and Treatment of Bulimarexia in College Women — A Pilot Study

Abstract

In this study of college women we defined “bulimarexia” as a cyclical eating disorder characterized by bingeing/purging behaviors and abnormally low self-esteem. Binge-ing was the presenting symptom rather than starvation, as is the case with primary anorexia-nervosa. A new experiential-behavioral approach adapted to a feminist perspective was utilized. Improvements in the experimental group on Body Cathexis scores and on a number of personality dimensions from Cattell's 16 PF questionnaire were found. Binge-ing behavior was eliminated or attenuated in 10 of 12 cases. However, follow-up testing revealed a tendency to drift back to pretest levels attitudinally, indicating that this syndrome is extremely persistent. Results underline the importance of socio-cultural factors in female role-definition and reinforce the view of bulimarexia as related to the struggle to achieve a “perfect” stereotyped female image in which women surrender most of their self-defining power to others.     

Optimal Betting in Casino Blackjack II: Back-Counting

The card counting technique known as ‘back-counting’ is treated analytically. The true count at which the back-counter should optimally enter the game is derived, based on maximising his effective yield. That entry count is found to be in the range of +2 to +3 for a typical 6-deck game, depending on the back-counter's risk profile. If he also adopts an ‘exit’ strategy (abandoning play at a table whose true count has dropped below a lower threshold) and optimises the entry and exit counts simultaneously, he can improve his performance slightly further; the optimal exit count is between ? 2 and ? 3. Because the risk of ruin is very low, he may in addition choose to bet more aggressively than he would if not back-counting—or, conversely, to ‘flat bet’. Criteria are examined for ‘departure’ (abandoning the observation of a table whose true count has yet to reach the entry threshold).     

What’s in a frame? Goal framing,trust and reciprocity

Economists often rely on the Berg et al. (1995) trust game, or variants thereof, to identify levels of trust and reciprocity, which are fundamental to discussions of social capital. But to what extent is behavior in this game sensitive to the way the instructions are framed? We use the Berg et al. trust game played for ten rounds with random re-matching to study this. We implement a number of variations in the way the game is presented to subjects. We show that levels of trust, reciprocity and returns to trust are significantly higher under “goal framing”, which highlights the conflict inherent in the game, between self-interest and maximizing social surplus. Furthermore, with such framing, trust measured via the experimental game exhibits significant positive correlation with trust measured via the Social Values Orientation questionnaire.