Marek Pycia, Kyle Woodward, Pay-as-bid: selling divisible goods, In: SSRN, No. 2417512, 2016. (Working Paper)
Pay-as-bid is the most popular auction format for selling treasury securities. We prove the uniqueness of pure-strategy Bayesian-Nash equilibria in pay-as-bid auctions where symmetrically-informed bidders face uncertain supply, and we establish a tight sufficient condition for the existence of this equilibrium. Equilibrium bids have a convenient separable representation: the bid for any unit is a weighted average of marginal values for larger quantities. With optimal supply and reserve price, the pay-as-bid auction is revenue-equivalent to the uniform-price auction. |
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Qingmin Liu, Marek Pycia, Ordinal efficiency, fairness, and incentives in large markets, In: SSRN, No. 1872713, 2016. (Working Paper)
Efficiency and symmetric treatment of agents are the primary goals of resource allocation in environments without transfers. Focusing on ordinal mechanisms in which no small group of agents can substantially change the allocations of others, we show that all asymptotically efficient, symmetric, and asymptotically strategy-proof mechanisms lead to the same allocations in large markets. In particular, many mechanisms - both well-known and newly developed - are allocationally equivalent. This equivalence is consistent with prior empirical findings that different mechanisms lead to similar allocations in school choice. We also show that uniform randomizations over deterministic efficient mechanisms are asymptotically efficient. |
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Marek Pycia, Swaps on networks, In: SSRN, No. 2735524, 2016. (Working Paper)
A group of agents exchange discrete resources on a network without recourse to monetary transfers. Allowing for an arbitrary network structure, we show that there is a unique core outcome in the exchange problem. This unique outcome may be implemented via a natural extension of Gale’s Top Trading Cycle mechanism, which is shown to be the unique mechanism that is individually strategy-proof, Pareto efficient, and individually rational. |
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Marek Pycia, M Bumin Yenmez, Matching with externalities, In: SSRN, No. DP13994, 2019. (Working Paper)
We incorporate externalities into the stable matching theory of two-sided markets. Extending the classical substitutes condition to allow for externalities, we establish that stable matchings exist when agent choices satisfy substitutability. Furthermore, we show that substitutability is a necessary condition for the existence of a stable matching in a maximal-domain sense and provide a characterization of substitutable choice functions. In addition, we establish novel comparative statics on externalities and show that the standard insights of matching theory, like the existence of side-optimal stable matchings and the deferred acceptance algorithm, remain valid despite the presence of externalities even though the standard fixed-point techniques do not apply. |
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Peter Chen, Michael Egesdal, Marek Pycia, M Bumin Yenmez, Quantile stable mechanisms, In: SSRN, No. 2526505, 2015. (Working Paper)
We construct quantile stable mechanisms, show that they are distinct in sufficiently large markets, and analyze how they can be manipulated by market participants. As a step to showing that quantile stable mechanisms are well defined, we show that median and quantile stable matchings exist when contracts are strong substitutes and satisfy the law of aggregate demand. This last result is of independent interest as experiments show that agents who match in a decentralized way tend to coordinate on the median stable matching when it exists. |
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Marek Pycia, The cost of ordinality, In: SSRN, No. 2460511, 2014. (Working Paper)
School districts and other institutions allocating objects without the use of transfers tend to rely on mechanisms that only elicit agents’ ordinal preferences. The present note shows that the welfare loss imposed by only eliciting ordinal preferences can be arbitrarily large. |
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Marek Pycia, M Utku Ünver, Marek G Pycia, Trading cycles for school choice, In: SSRN, No. 1899344, 2011. (Working Paper)
In this note we study the allocation and exchange of discrete resources in environments in which monetary transfers are not allowed. We allow each discrete resource to be represented by several copies, extend onto this environment the trading cycles mechanisms of Pycia and Ünver [2009], and show that the extended mechanisms are Pareto efficient and strategy-proof. In particular, we construct the counterpart of Pápai [2000] hiererachical exchange mechanisms for environments with copies. |
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Carlos Alos-Ferrer, Jaume García-Segarra, Alexander Ritschel, The Big Robber Game, In: Working paper series / Department of Economics, No. 291, 2018. (Working Paper)
We present a novel design measuring a correlate of social preferences in a high-stakes setting. In the Big Robber Game, a "robber" can obtain large personal gains by appropriating the gains of a large group of "victims" as seen in recent corporate scandals. We observed that more than half of all robbers take as much as possible. At the same time, participants displayed standard, prosocial behavior in the Dictator, Ultimatum, and Trust games. That is, prosocial behavior in the small is compatible with highly selfish actions in the large, and the essence of corporate scandals can be reproduced in the laboratory even with a standard student sample. We show that this apparent contradiction is actually consistent with received social-preference models. In agreement with this view, in the experiment more selfish robbers also behaved more selfishly in other games and in a donation question. We conclude that social preferences are compatible with rampant selfishness in high-impact decisions affecting a large group. |
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Carlos Alos-Ferrer, Johannes Buckenmaier, Cognitive sophistication and deliberation times, In: Working paper series / Department of Economics, No. 292, 2019. (Working Paper)
Differences in cognitive sophistication and effort are at the root of behavioral heterogeneity in economics. To explain this heterogeneity, behavioral models assume that certain choices indicate higher cognitive effort. A fundamental problem with this approach is that observing a choice does not reveal how the choice is made, and hence choice data is insufficient to establish the link between cognitive effort and behavior. We show that deliberation times provide the missing link, in the form of an individually-measurable correlate of cognitive effort. We present a model of heterogeneous cognitive depth, incorporating stylized facts from the psychophysical literature, which makes predictions on the relation between choices, cognitive effort, incentives, and deliberation times. We confirm the predicted relations experimentally in different kinds of games. However, we also show that imputing cognitive depth from choices alone can lead to erroneous conclusions when the features leading to iterative thinking are not salient. |
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Jan Feld, Nicolas Salamanca, Ulf Zölitz, Are professors worth it? The value-added and costs of tutorial instructors, In: Working paper series / Department of Economics, No. 293, 2018. (Working Paper)
A substantial share of university instruction happens in tutorial sessions—small group instruction given parallel to lectures. In this paper, we study whether instructors with a higher academic rank teach tutorials more effectively in a setting where students are randomly assigned to tutorial groups. We find this to be largely not the case. Academic rank is unrelated to students’ current and future performance and only weakly positively related to students’ course evaluations. Building on these results, we discuss different staffing scenarios that show that universities can substantially reduce costs by increasingly relying on lower-ranked instructors for tutorial teaching. |
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Anne Ardila Brenøe, Origins of gender norms: sibling gender composition and women's choice of occupation and partner, In: Working paper series / Department of Economics, No. 294, 2018. (Working Paper)
I examine how one central aspect of the childhood family environment—sibling gender composition—affects women's gender conformity, measured through their choice of occupation and partner. Using Danish administrative data, I causally estimate the effect of having a second-born brother relative to a sister for first-born women. The results show that women with a brother acquire more traditional gender norms with negative consequences for their labor earnings. I provide evidence of increased gender-specialized parenting in families with mixed-sex children, suggesting a stronger transmission of traditional gender norms. Finally, I find indications of persistent effects to the next generation of girls. |
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Johannes Buckenmaier, Eugen Dimant, Luigi Mittone, Effects of institutional history and leniency on collusive corruption and tax evasion, In: Working paper series / Department of Economics, No. 295, 2018. (Working Paper)
We investigate the effects of an institutional mechanism that incentivizes taxpayers to blow the whistle on collusive corruption and tax compliance. We explore this through a formal leniency program. In our experiment, we nest collusive corruption within a tax evasion framework. We not only study the effect of the presence of such a mechanism on behavior, but also the dynamic effect caused by the introduction and the removal of leniency. We find that in the presence of a leniency mechanism, subjects collude and accept bribes less often while paying more taxes, but there is no increase in bribe offers. Our results show that the introduction of the opportunity to blow the whistle decreases the collusion and bribe acceptance rate, and increases the collected tax yield. It also does not encourage bribe offers. In contrast, the removal of the institutional mechanism does not induce negative effects, suggesting a positive spillover effect of leniency that persists even after the mechanism has been removed. |
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Andreas Hefti, Julia Lareida, Competitive attention, Superstars and the Long Tail, In: Working paper series / Department of Economics, No. 383, 2021. (Working Paper)
We propose a model of competitive attention based on two key premises: i) People have limited information processing capacities and ii) consideration sets are formed according to relative salience. The equilibrium predictions we obtain can help to understand, and connect, diverse empirical phenomena, such as the Paradox of Choices, the Power Law dispersions of key market data (sales, profits, online clicks,...), the relation between advertising expenditures and market shares, the evolution of market inequality, or why evidence favoring a “Long Tail” effect is mixed at best. |
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Helga Fehr-Duda, Robin Schimmelpfennig, Wider die Zahlengläubigkeit : Sind Befragungsergebnisse eine gute Grundlage für wirtschaftspolitische Entscheidungen?, In: Working paper series / Department of Economics, No. 297, 2018. (Working Paper)
Befragungen von Konsumenten, Steuerzahlern und Wählern werden in Wirtschaft und Politik häufig als Entscheidungsgrundlage herangezogen. Die Ergebnisse dieser Befragungen können somit großen Einfluss auf politische Entscheidungen und damit auf den Alltag vieler Menschen haben. Befragungen sind besonders dann wichtig und notwendig, wenn noch keine entsprechenden Verhaltensdaten oder Erfahrungswerte vorliegen. Helga Fehr-Duda und Robin Schimmelpfennig gehen der Frage nach, ob Angaben zur Zahlungsbereitschaft, die in hypothetischen Entscheidungssituationen gemacht werden, glaubwürdig und zuverlässig genug sind, um als Grundlage für unternehmerische und wirtschaftspolitische Entscheidungen zu dienen. Die Autoren zeigen anhand zweier neuer Studien, dass Ergebnisse hypothetischer Befragungen, wie beispielsweise einer Stated preference Befragung, signifikant vom Kontext der Entscheidungssituation abhängen. Es ist daher nicht möglich, allgemeine kontextunabhängige Aussagen zum Ausmaß der möglichen Fehleinschätzung von Zahlungsbereitschaften zu treffen. Die Autoren empfehlen, wann immer möglich Labor- oder Feldexperimente im relevanten Kontext mit realen monetären Anreizen durchzuführen. In jenen Fällen, in denen hypothetische Befragungen die einzige Möglichkeit der Datengewinnung darstellen, ist es unabdingbar, das Befragungsdesign möglichst anreizverträglich, realitätsnah und dem Anwendungskontext angemessen zu gestalten. Auftraggeber sollten auf die Einhaltung dieser Grundsätze bestehen, um möglichst valide Befragungsergebnisse zu erhalten. |
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Sebastian Klaus Dörr, Collateral, reallocation, and aggregate productivity: evidence from the U.S. housing boom, In: SSRN, No. 3184162, 2018. (Working Paper)
This paper shows that rising real estate prices reduce industry productivity, because they lead to a reallocation of capital and labor towards inefficient firms. I establish that the rise in real estate value during the US housing boom relaxes firms’ financial constraints. Companies borrow additional funds to invest, hire labor, and increase output. However, firms holding real estate are significantly less productive than non-holders. Rising real estate prices thus reallocate capital and labor towards inefficient firms. This has significant negative consequences for aggregate industry productivity. I find that industries with stronger growth in real estate value see a significant reduction in total factor productivity growth. A 10 % increase in real estate value lowers TFP growth by 0.62 %. The negative effect is driven by misallocation. To shed light on the role of financial sector, I show that banks with superior information about borrowers are better at identifying productive borrowers and supply less credit to unproductive firms when collateral values rise. My results provide direct evidence that financial frictions drive misallocation and suggest a channel for reallocation’s falling contribution to growth in recent years. |
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Adrian Bruhin, Ernst Fehr, Daniel Schunk, The many faces of human sociality: uncovering the distribution and stability of social preferences, In: Working paper series / Department of Economics, No. 298, 2018. (Working Paper)
There is vast heterogeneity in the human willingness to weigh others’ interests in decision making. This heterogeneity concerns the motivational intricacies as well as the strength of other-regarding behaviors, and raises the question how one can parsimoniously model and characterize heterogeneity across several dimensions of social preferences while still being able to predict behavior over time and across situations. We tackle this task with an experiment and a structural model of preferences that allows us to simultaneously estimate outcome-based and reciprocity-based social preferences. We find that nonselfish preferences are the rule rather than the exception. Neither at the level of the representative agent nor when we allow for several preference types do purely selfish types emerge in our sample. Instead, three temporally stable and qualitatively different other-regarding types emerge endogenously, i.e., without pre-specifying assumptions about the characteristics of types. When ahead, all three types value others’ payoffs significantly more than when behind. The first type, which we denote as strongly altruistic type, is characterized by a relatively large weight on others’ payoffs – even when behind – and moderate levels of reciprocity. The second type, denoted as moderately altruistic type, also puts positive weight on others’ payoff, yet at a considerable lower level, and displays no positive reciprocity, while the third type is behindness averse, i.e., puts a large negative weight on others’ payoffs when behind and behaves selfishly otherwise. We also find that there is an unambiguous and temporally stable assignment of individuals to types. In addition, we show that individual-specific estimates of preferences offer only very modest improvements in out-of-sample predictions compared to our three-type model. Thus, a parsimonious model with only three types captures the bulk of the information about subjects’ social preferences. |
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Björn Bartling, Vanessa Valero, Roberto A. Weber, Is social responsibility a normal good?, In: Working paper series / Department of Economics, No. 299, 2018. (Working Paper)
We investigate whether growth in consumer income causes an increased willingness to pay to mitigate negative externalities from consumption. Correlational field evidence suggests a positive relationship between income and social responsibility. To investigate a causal link, we conduct a laboratory market experiment in which firms and consumers can exchange products that differ in the degree to which they mitigate negative external impacts at the expense of higher production costs. Our treatments exogenously vary consumers’ incomes. Our experimental results reveal that growth in consumer income causes an increase in the share of socially responsible consumption in the laboratory. Such a causal relationship is significant from a policy perspective, as it implies that some negative external impacts of consumption activity can be mitigated as societies experience economic growth. |
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Patrick Lehnert, Curdin Pfister, Uschi Backes-Gellner, The Effect of an Education-driven Labor Supply Shock on Firms’ R&D Personnel, In: Swiss Leading House Working Paper Series, No. 141, 2017. (Working Paper)
This paper examines the effect of an R&D-specific labor supply shock produced by the establishment of tertiary vocational education institutions teaching and conducting applied R&D, the Universities of Applied Sciences, on the R&D personnel of private firms. We apply a difference-in-differences model, exploiting a quasi-natural experiment in the 1990s in Switzerland, the staggered establishment of these institutions. Using repeated cross-sectional data from the Swiss Earnings Structure Survey, we can precisely measure the R&D personnel of private firms, i.e., how much R&D personnel a firm employs and how much a firm spends on its R&D personnel in terms of wages. The education-driven labor supply shock has positive effects on both the percentage of R&D personnel and the wages paid to this personnel. Our assessments of effect heterogeneity suggest that these effects are driven by firms with 50 to 99 employees and firms in the manufacturing sector increasing their R&D personnel. |
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Jana Gross, Simone Balestra, Uschi Backes-Gellner, Does Class Size Affect Student 'Grit'? Evidence from a Randomised Experiment in Early Grades, In: Swiss Leading House "Economics of Education" Working Paper, No. 129, 2017. (Working Paper)
The increasing recognition of non-cognitive skills has led many researchers to investigate how educational practices enhance these skills. In this paper, we focus on the non-cognitive skill known as 'grit', and we study the relation between class size and grit in early grades. Using data from follow-up surveys of Project STAR, we show that fourth-grade pupils who experienced small classes during early grades are 0.12 standard deviations higher in grit than their peers in regular classes. Sub-sample analysis reveals that particularly boys and non-white pupils increase their grit in smaller classes. We also show that grit matters, because half of the effect of smaller classes on test scores entirely operates through grit. |
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Julien Senn, Jan Schmitz, Christian Zehnder, Leveraging social comparisons: the role of peer assignment policies, In: Working paper series / Department of Economics, No. 427, 2023. (Working Paper)
Using a large-scale real effort experiment, we explore whether and how different peer assignment mechanisms affect worker performance and stress. Letting individuals choose whom to compare to increases productivity to the same extent as a targeted exogenous matching policy designed to maximize motivational spillovers. These effects are significantly larger than those obtained through random assignment and their magnitude is comparable to the impact of monetary incentives that increase pay by about 10 percent. A downside of targeted peer assignment is that, unlike endogenous peer selection, it leads to a large increase in stress. Using a combination of choice data, text analysis and simulations, we show that the key advantage of letting workers choose whom to compare to is that it allows those workers who want to be motivated to compare to a motivating peer while also permitting those for whom social comparisons have little benefits or are too stressful to avoid them. Finally, we provide evidence that social comparisons yield stronger motivational effects than comparable non-social goals. |
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