ESA North American Experimental Economics Conference in Tucson, AZ at the Westward Look Resort (November 2012)
I am generally interested in the following fields of economics: Environmental Economics, Industrial Organization, Game Theory, Mechanism Design, Experimental Economics and Behavioral Economics
More narrowly, I am currently focused on two areas: environmental labelling regulations and eco-certification (e.g. I am working on a paper regarding unregulated food labels) and mechanism design for auctions and tournaments. Several abstracts are provided below.
“Willingness to Pay for Goods with Unregulated and Potentially Misleading Labels: The Case of ‘Natural’-Labelled Groceries”
with Christian Vossler
Abstract: Food labeling has been widely studied, especially in the context of consumer willingness to pay for features that are considered healthy, such as organic content. In this study, we provide insight to the demand effects for an unregulated phrase found on many labels: “natural”. A plethora of currently pending lawsuits regarding this phrase demonstrates that research is needed to better understand consumer misconceptions. In an experimental setting, we use an incentive-compatible approach to elicit the willingness to pay of grocery shoppers for “natural”-labelled food products, several of which contain genetically modified organisms (GMOs). We find, on average, that there is an overall null effect of the “natural” label. However, when the sample is segregated based on the belief that “natural” means GMO-free, there is a positive “natural” premium for those who hold the belief and a negative premium for those who do not hold the belief. Additionally, we find evidence of framing effects which suggest that between-subject analysis is more reliable for this type of research than within-subject analysis. Our results have implications in both the public policy and legal arenas.
“A Dynamic Markov Tournament Model of Task Assignment and Up-and-Down Competition for Status”
with Scott Gilpatric and Christian Vossler
Abstract: We develop a dynamic Markov model to capture the incentives in indefinitely-repeated tournaments in labor market settings where agents compete both to “move up” as well as to avoid a “move down”. Such settings naturally arise regardless of whether explicit performance incentives or an organizational hierarchy exist. We show that when monetary incentives are available the dynamic tournament approaches the first-best outcome, but we also allow for the possibility that the principal’s only available incentive mechanism is the assignment of undesirable tasks to agents who are out-of-favor. Inability to change salaries or demote workers is common for public organizations, such as government agencies and schools. For instance, a school principal may not be able to monetarily reward or sanction teachers based on performance, but typically has discretion within the labor contract to vary class assignments and resources such as teacher’s aides. We model agents as being either in or out of favor with the principal in any given period; those who are out of favor are assigned more undesirable tasks. The prize of the tournament is the difference between groups (in favor and out of favor) in the present value of the agent’s expected utility. We assume that agents’ effort cost of completing contractible tasks is such that these costs are minimized by assigning equally burdensome tasks to all agents. Therefore the principal can motivate non-contractible effort through differential task assignment, but this entails an efficiency cost. The model demonstrates that employers may seek flexibility to vary task assignments in labor contracts not only to adapt to changing circumstances, but also to enable them to motivate non-contractible effort when agents’ compensation in fixed.
“Multi-Good Demand in Bidder’s Choice Auctions”
with Michael K. Price and Jonathan Alevy
Abstract: Bidder’s choice (or “right-to-choose”) auctions are of particular interest to parties who wish to sell multiple similar goods. Economic theory has shown that, under risk aversion, this type of auction, where the high bidder wins the right to choose one good from among the available goods, results in higher revenue than traditional good-by-good auctions. Most theoretical and experimental work focuses on bidder’s choice auctions where bidders have value for only one of the available goods. This paper presents a field experiment and a lab experiment that allow for price revelation and multi-good demand, which are typically found in bidder’s choice auctions used for the sale of condos, antiques, customized telephone numbers and other groups of similar goods. We find that while revealing winning prices does not have a significant effect on revenue, multi-good demand mutes the theoretical revenue superiority the bidder’s choice mechanism. This is consistent with the notion that the perceived risk of losing one’s most preferred good is softened when there is a chance to win multiple goods. This result implies that bidder’s choice auctions are preferred in settings where each bidder is likely to strongly prefer one good over the others, though this need not be the same good for every bidder. Further, this work demonstrates the complementarities of the field and laboratory to answer questions which are not clearly resolved using only one setting.
“Optimal Retirement of Collectible Goods”
with Jens Schubert
Abstract: The literature on collectibles largely focuses on how to measure and interpret financial returns from investing in collectibles. Supply-side models, on the other hand, are surprisingly sparse; when should a manufacturer purposefully “retire” a good? Frequently, we see manufacturers choosing to discontinue items in their collection either permanently or for an unspecified period of time (a phenomena we call a “vault” scenario). In our model, we assume that a manufacturer faces a tradeoff when retiring a good: they experience increased demand for their complementary items, but incur the cost of developing a new item (to keep the collection size constant). A consumer’s value for a particular item depends on how many items he already owns in the collection. Further, consumers’ expectations of a collection’s future value go up if more items in that collection have been retired. Consequently, a consumer is willing to pay more for an item if it is part of a more “historic” collection. We derive conditions under which a collectibles manufacturer chooses to retire an item. In addition to the firm’s individual optimization problem, we also consider multiple collectibles manufacturers in competition to produce the most valuable collection.
