Risk aversion and incentive effects

Holt, Charles A., and Susan K. Laury. “Risk aversion and incentive effects." American economic review 92.5 (2002): 1644-1655. [PDF] ucsd.edu; [PDF] alaska.edu;

see also

Harrison (2005) 對上一篇的挑戰: Risk aversion and incentive effects: Comment (2005,  AER)][PDF] ucsd.edu;[本站PDF]

以及 Holt 的回應 : Risk Aversion and Incentive Effects: New Data without Order Effects (2005,  AER)

 

==Noted by yinung==

procedures:

decision task 1. 先答完10題，事後從中「隨機」選出一題來玩，並依結果付 payment。再問是否進行 decision task 2

decision task 2. 假的 20x 報酬，但和 decision task 1 相同 (high-hypothetical ONLY treatment)

decision task 3. 真的 20x 報酬，但和 decision task 1 相同 (high-hypothetical Real Only treatment)

decision task 4. 和 decision task 1 相同，用來驗證「原來在 task 1 的風險偏好是否因 wealth effects 改變」

low-payoff treatmen

high-hypothetical treatmen

• 即使是 Holt, 在 AER 發表時，仍然要引用 Kahnenman and Tversky 的辯論 (引在最下方)
• Incentive Effects? 什麼動機
  measured as the number of safe lottery choices in each treatment (p.1653)
• safe (lottery) choices 安全選項（見下圖）：
  指前4個選 Option
  

 

引文

控制 wealth effects: 要進行第2個 high-payment 實驗時，要先放棄第1個實驗得到的錢。
To control for wealth effects between the high and low real-payoff treatments, subjects were required to give up what they had earned in the first low-payoff task in order to participate in the high-payoff decision.

==Harrison et al. 對本篇的 procedures 概述==

The subjects in the HL design were given sequences of three or four tasks, as shown in Table 1. Task #1 involved choices over lotteries with a baseline level of prizes, which we will refer to as the “1X scale.” Task #2 involved hypothetical choices over prizes with a scaled-up level of prizes, either 20X, 50X, or 90X. Task #3 repeated task #2, but with choices that involved real payoffs. Task #4 was a return to the baseline task with real 1X prizes. In some sessions, subjects were not given task #2 or task #3.1。(yinung: 呵… 這比Holt 寫得還簡要清楚)

==Kahnenman and Tversky==

The implication, that low laboratory incentives may be somewhat unrealistic and therefore not useful in measuring attitudes toward “real-world" risks, is echoed by Daniel Kahneman and Amos Tversky (1979, p. 265), who suggest an alternative:

Experimental studies typically involve contrived gambles for small stakes, and a large number of repetitions of very similar problems. These features of laboratory gambling complicate the interpretation of the results and restrict their generality. By default, the method of hypothetical choices emerges as the simplest procedure by which a large number of theoretical questions can be investigated. The use of the method relies on the assumption that people often know how they would behave in actual situations of choice, and on the further assumption that the subjects have no special reason to disguise (掩飾) their true preferences. （在實驗中，受試者沒有特別理由要掩飾他們的真實偏好）

 

On monopolistic licensing strategies under asymmetric information

Schmitz, Patrick W. “On monopolistic licensing strategies under asymmetric information." Journal of Economic Theory 106.1 (2002): 177-189.uni-muenchen.de 提供的 [PDF]

Abstract

Consider a research lab that owns a patent on a new technology but cannot develop a marketable final product based on the new technology. There are two downstream firms that might successfully develop the new product. If the downstream firms’ benefits from being the sole supplier of the new product are private information, the research lab will sometimes sell two licenses, even though under complete information it would have sold one exclusive license. This is in contrast to the standard result that a monopolist will sometimes serve fewer, but never more buyers when there is private information. Journal of Economic Literature Classification Numbers: L12, D45, D82

Keywords

• licenses;
• innovation;
• monopoly;
• private information

Webgames and Strategic Behavior: Recipes for Interactive Learning

Holt, C. “Webgames and Strategic Behavior: Recipes for Interactive Learning." Unpublished Manuscript (2002).  psu.edu 提供的 [PDF]    

==notes by yinung==

這是一本電子書PDF, Charles A. Holt 寫的, 不知道在網路上還會放多久, 有興趣的快去下載…

Patent Licensing: The Inside Story

Kamien, Morton I., and Yair Tauman. “Patent licensing: the inside story." The Manchester School 70.1 (2002): 7-15. link to Wiley;

==original abstract==

In this paper we compare and contrast the most profitable modes of licensing a cost-reducing invention by an inventor who is an industry incumbent with one who is not. We find that an industry incumbent favors licensing by means of a royalty per unit of output to which the new technology is applied while an outsider prefers to auction off a fixed number of licences outright. Our analysis also suggests that an outside inventor finds it most profitable to target greater cost-reducing inventions to monopolistic industries while an incumbent inventor favors competitive industries.

Are N+1 heads better than one? The case of mutual fund managers*

Prather, L.J., Middleton, K.L., 2002. Are N+1 heads better than one? The case of mutual fund managers. Journal of Economic Behaviour and Organization 47, 103–120. DOI.

Abstract

Recent studies find that mutual funds exhibit differential and persistent performance which is frequently attributed to superior managerial decision making. We extend the literature by examining the impact of the fund’s management structure on performance outcomes. Specifically, we examine directly whether superior outcomes, in terms of risk-adjusted returns, may be explained by behavioral decision making theory that asserts that teams make better decisions than individuals. Empirical results are consistent with the classical decision making theory and the efficient market hypothesis.

Vernon L. Smith (弗農·史密斯)

引自:維基百科

弗農·洛馬克斯·史密斯（Vernon Lomax Smith，1927年1月1日－，加利福尼亞查普曼大學法學院和商學院教授、喬治·梅森大學多學科研究中心經濟學研究學者、莫卡托斯中心成員、亞利桑那大學教授、查普曼大學 (Chapman University) 教授。

他是2002年諾貝爾經濟學獎獲得者，獲獎原因是「開創了一系列實驗法，為通過實驗室實驗進行可靠的經濟學研究確定了標準」。大學在加州理工學院主修電子物理，於1952獲堪薩斯大學經濟學碩士，1955年得哈佛大學經濟博士。

Vernon Lomax Smith (born January 1, 1927) is professor of economics at Chapman University’s Argyros School of Business and Economics and School of Law in Orange, California, a research scholar at George Mason University Interdisciplinary Center for Economic Science, and a Fellow of the Mercatus Center, all in Arlington, Virginia. Smith shared the 2002 Nobel Memorial Prize in Economic Sciences with Daniel Kahneman. He is the founder and president of the International Foundation for Research in Experimental Economics and a Senior Fellow at the Cato Institute in Washington D.C.. In 2004 Smith was honored with an honorary doctoral degree^[1] at Universidad Francisco Marroquín, the institution that named the Vernon Smith Center for Experimental Economics Research after him.^[2]

諾貝爾得獎講稿: Constructivist and Ecological Rationality in Economics (PDF)

Managing Dynamic Competition

Tracy R. Lewis and Huseyin Yildirim (2002) “Managing Dynamic Competition." The American Economic Review, Vol. 92, No. 4 (Sep., 2002) (pp. 779-797). (In JSTOR: Page Scan PDF Summary)

notes by yinung

聽過一種說法: 大廠在向供應商採購時, 會故意隔幾年向另向一個競爭廠下大量訂單, 以讓這些廠商形成具有經濟規模的競爭者… 這一篇看起來好像在講這個故事

Original abstract

In many important high-technology markets, including software development, data processing, communications, aeronautics, and defense, suppliers learn through experience how to provide better service at lower cost. This paper examines how a buyer designs dynamic competition among rival suppliers to exploit learning economies while minimizing the costs of becoming locked in to one producer. Strategies for controlling dynamic competition include the handicapping of more efficient suppliers in procurement competitions, the protection and allocation of intellectual property, and the sharing of information among rival suppliers.

References

• Bergemann, Dirk and Valimaki, Juuso. “Learn- ing and Strategic Pricing." Econometrica, September 1996, 64(5), pp. 1125-5.
• Cabral, Luis M. B. and Riordan, Michael H. “The Learning Curve, Market Dominance, and Predatory Pricing." Econometrica, September 1994, 62(5), pp. 1115-40.
• Demski, Joel S.; Sappington, David E. M. and Spiller, Pablo T. “Managing Supplier Switch- ing." RAND Journal of Economics, Spring 1987, 18(1), pp. 77-97.
• Gruber, Harald. “Learning by Doing and Spillovers: Further Evidence for the Semi- conductor Industry." Review of Industrial Organization, December 1998, 13(6), pp. 697-711.
• Keller, Godfrey and Rady, Sven. “Optimal Ex- perimentation in a Changing Environment." Review of Economic Studies, July 1999, 66(3), pp. 475-507.
• Laffont, Jean J. and Tirole, Jean. “Auctioning Incentive Contracts." Journal of nolitical Economy, October 1987, 95(5), pp. 921-37.
• Laffont, Jean J. and Tirole, Jean. “Repeated Actions of Incentive Con- tracts, Investment, and Bidding Parity with an Application to Takeovers." RAND Journal of Economics, Winter 1988, 19(4), pp. 516- 37.
• Lewis, Tracy R. “Preemption, Divestiture, and Forward Contracting in a Market Dominated by a Single Firm." American Economic Review, December 1983, 73(5), pp. 1092-1101.
• McAfee, Preston R. and McMillan John. “Com- petition for Agency Contracts." RAND Jour- nal of Economics, Summer 1987, 18(2), pp. 296-307.
• Nye, William W. “Firm-Specific Learning by Doing in Semiconductor Production: Some Evidence from the 1986 Trade Agreement." Review of Industrial Organization, June 1996, 11(3), pp. 383-94.
• Spence, Michael A. “The Learning Curve and Competition." Bell Journal of Economics, Spring 1981, 12(1), pp. 49-70.
• Stobaugh, Robert B. and Townsend, Patrick L. “Price Forecasting and Strategic Planning: The Case of Petrochemicals." Journal of Marketing Research, 1975, 12, pp. 19-29.

Items Citing this Item

2 item(s) in JSTOR cite this item

See also: items that cite this item in Google Scholar

• Threat of Exit as a Source of Bargaining Power
  FabianBergès, ClaireChambolle,
   pp. 353-368

  Stable URL: http://www.jstor.org/stable/40724565
• Managing Switching Costs in Multiperiod Procurements with Strategic Buyers
  Tracy R. Lewis and Huseyin Yildirim
  International Economic Review

  Vol. 46, No. 4 (Nov., 2005) pp. 1233-1269

  Stable URL: http://www.jstor.org/stable/3663666

The timing of bids in internet auctions: Market design, bidder behavior, and artificial agents

A Ockenfels, AE Roth – AI Magazine, 2002 – aaai.org (創刊於 1980, SCI, ) 下載 [pdf]

Game theorists and market designers focus on the impact of the rules of the game on the behavior of the participants. Participants in internet markets can be human bidders bidding in person or artificial agents used by human bidders. Thus, the per- formance of market rules …

Google: 被引用 92 次 – 相關文章 – 全部共 22 個版本

Noted by Yi-Nung

In particular, we identify three distinct kinds of bidding wars: (1) with incremental bidders, (2) with like-minded late bidders, and (3) with uninformed bidders who look to others’ bids to determine the value of an item.

1. Bidding Late to Avoid Bidding Wars with Incremental Bidders

Last-minute bidding can be a best reply toincremental bidding.

Last-minute bids can be a best response to this kind of incremental bidding because bidding near the deadline of the auction would not give the incremental bidder sufficient time to respond to being outbid.

2. Bidding Late to Avoid Bidding Wars with Like-Minded Bidders
?? Like-Minded Bidders: 同樣想法的 bidders?

3.Bidding Late to Protect Information in Auctions with Interdependent Values
There are additional strategic reasons to bid late in auctions with interdependent values (common value auctions).

…the bids of others can carry valuable information about the item’s value that can provoke a bidder to increase his/her willingness to pay. This creates incentives to bid late because by bidding late, less informed bidders can incorporate into their bids the information they have gathered from the earlier bids of others, and experts can avoid giving information to others through their own early bids.

…the uninformed bidder should not bid unless the expert submitted a bid earlier and, thus, signaled that the coin is genuine.

…Such conditional bidding behavior of uninformed bidders creates, in turn, an incentive for experts to submit the bid for a genuine item very late to, as esnipe.com puts it, “prevent other bidders from cashing in on their expertise.”

Strategic versus Nonstrategic Hypotheses for Late Bidding

There are other, nonstrategic reasons for late bidding, including procrastination, use of search engines that make it easy to find auctions about to end, endowment effects, or management of bidding in multiple auctions in which similar objects might be offered.

However, regardless of the causes for incremental bidding, incremental bidders are likely to drive last-minute bidding.

Indeed, a substantial share of both, one-bid bidders (12 percent) and multiple bidders (16 percent), bid as late as in the last 10 minutes of the eBay auctions (Ockenfels and Roth 2001). However, the data also reveal that …one-bid bidders submit their bid later than incremental bidders.

Thus, many incremental bidders bid late, but one-bid bidders tend to bid even later.

…the data indicate that incremental bidding significantly diminishes with experience (as measured by the bidders’ feedback numbers), but last-minute bidding increases with experience.

…eBay would face a number of choices. One would be to recapture the sniping market by offering a sniping option on eBay itself…. Of course, if all bidders used this option, the auction would precisely be a sealed-bid auction. eBay, and sellers who list items for sale on eBay, might prefer not to encourage this development…