Contributions in Merlin

This paper reports on a two-task principal-agent experiment in which only one task is contractible. The principal can either offer a piece-rate contract or a (voluntary) bonus to the agent. Bonus contracts strongly outperform piece rate contracts. Many principals reward high efforts on both tasks with substantial bonuses. Agents anticipate this and provide high efforts on both tasks. In contrast, almost all agents with a piece rate contract focus on the first task and disregard the second.nPrincipals understand this and predominantly offer bonus contracts. This behavior contradicts the self-interest theory but is consistent with theories of fairness.

Empirical studies on the relationship between income and happiness commonly use standard ordered response models, the most well-known representatives being the ordered logit and the ordered probit. However, these models restrict the marginal probability effects by design, and therefore limit the analysis of distributional aspects of a change in income, that is, the study of whether the income effect depend on a person’s happiness. In this paper we pinpoint the shortcomings of standard models and propose two alternatives, namely generalized threshold and sequential models. With data of two waves of the German Socio-Economic Panel, 1984 and 1997, we show that the more general models yield different marginal probability effects than standard models.

We consider economies with additively separable utility functions and give conditions for the two-agents case under which the existencenof sunspot equilibria is equivalent to the occurrence of the transfer paradox.nThis equivalence enables us to show that sunspots cannot matter if the initial economy has a unique spot market equilibrium and there are only twoncommodities or if the economy has a unique equilibrium for all distributions of endowments induced by asset trade. For more than two agents the equivalence breaks and we give an example for sunspot equilibria even though theneconomy has a unique equilibrium for all distributions of endowments inducednby asset trade.

A global signaling game is a sender-receiver game in which the sender is only imperfectly informed about the receiver's preferences. The paper considers an economically relevant class of signaling games that possess more than one Perfect Bayesian equilibrium. For this class of games, it is shown that a Perfect Bayesian equilibrium is unaffected by a small perturbation of the information structure if and only if it is consistent with a criterion suggested by Cho and Kreps (1987). Moreover, the equilibrium in the global signaling game is essentially unique.

Recent advances in the econometric modelling of count data have often been based on the generalized method of moments (GMM). However, the two-step GMM procedure may perform poorly in small samples, and several empirical likelihood-based estimators have been suggested alternatively. In this paper I discuss empirical likelihood (EL) estimation for count data models with endogenous regressors. I carefully distinguish between parametric and semi-parametric methods and analyze the properties of the EL estimator by means of a Monte Carlo experiment. I apply the proposed method to estimate the effect of women’s schooling on fertility.

"The 1-shot alpha-beauty contest is a non-equilibrium strategic game under bounded rationality conditions, while equilibrium is approached if the game is played iteratively sufficientlynmany times. Experimental data of the 1-shot setting of the 0-equilibrium game show a common pattern: The spectrum of announced numbers is a superposition of a skew backgroundndistribution and a regime of extra ordinarily often chosen numbers. Our model is capable ofnquantitatively reproducing this observation in non-equilibrium as well as the convergence to-nwards equilibrium in the iterative setting. The approach is based on two basic assumptions:n1.) Players iteratively update their recent guesses in the sense of eductive reasoning and 2.)nPlayers estimate intervals rather than exact numbers to cope with incomplete knowledge innnon-equilibrium. The width of the interval is regarded as a measure for the confidence ofnthe players' respective guess. It is shown analytically that the sequence of guessed numbers approaches a (finite) limit within only very few iterations. Moreover, if all playersnhave infinite confidence in their respective guesses, the asymptotic Winning Number equalsnthe rational Nash equilibrium 0, while if players have only finite confidence in their recentnguess, the Winning Number in the 1-shot setting is strictly larger than 0. Our model is alsoncapable of quantitatively describing the ""path into equilibrium"". Convergence is shown tonbe polynomial in the number of rounds played. The predictions of our model are in goodnquantitative agreement with real data for various alpha-beauty contest games.n "

"Consider a society where all agents initially play fair"" and one agentninvents a cheating"" strategy such as doping in sports. Which factorsndetermine the success of the new cheating strategy? In order to studynthis question we consider an evolutionary game with heterogenous agentsnwho can either play fair or cheat. We model heterogeneity by assumingnthat the players are either high or low types. Three factors determinenthe imitation dynamics of the model: the location and the type of theninnovator, the distribution of types, and the information available to thenagents. In particular we *nd that the economy is more likely to end up inna state where all agents cheat if the innovator is of low type or when thenagents are maximally segregated."

This paper tests the effect of a matching mechanism on donations in a controlled fieldnexperiment. We match the donations of students at the University of Zurich who, each semester,nhave to decide whether they wish to contribute to two Social Funds. Our results support thenhypothesis that a matching mechanism increases contributions to a public good. However, theneffect depends on the extent to which the contributions are matched. Whereas a 25 percentnincrease of a donation does not increase the willingness to contribute, a 50 percent increase doesnhave an effect. In addition, people need to be socially inclined to react to the matchingnmechanism. The field experiment provides some evidence suggesting that the matchingnmechanism crowds-out the intrinsic motivation of giving.

We provide a framework for analyzing bilateral mergers when there is two-sided asymmetric information about firms’ types. We show that there is always a "no-merger" equilibrium where firms do not consent to a merger, irrespective of their type. There may also be a "cut-off" equilibrium if the expected merger returns satisfy a suitable single crossing condition, which will hold if a firm’s merger returns are "essentially monotone decreasing" in its type. Applying our analysis to the linear Cournot model, we show how the merger pattern depends on the cost effects of mergers, the extent of uncertainty, and the way profits are split. Specifically, we show how increasing uncertainty about competitor types may foster mergers as firms hope for strong rationalization effects.

"Economists long considered money illusion to be largelynirrelevant. Here we show, however, that money illusion has powerfulneffects on equilibrium selection. If we represent payoffs in nominal terms,nchoices converge to the Pareto inefficient equilibrium; however, if we liftnthe veil of money by representing payoffs in real terms, the Pareto efficientnequilibrium is selected. We also show that strategic uncertainty about thenother players’ behavior is key for the equilibrium selection effects ofnmoney illusion: even though money illusi on vanishes over time if subjectsnare given learning opportunities in the context of an individual optimizationnproblem, powerful and persistent effects of money illusion are found whennstrategic uncertainty prevails."