Anufriev, M & Tuinstra, J 2013, 'The Impact of Short-Selling Constraints on Financial Market Stability in a Heterogeneous Agents Model', Journal of Economic Dynamics and Control, vol. 37, no. 8, pp. 1523-1543.
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Recent turmoil on global financial markets has led to a discussion on which policy measures should or could be taken to stabilize financial markets. One such a measure that resurfaced is the imposition of short-selling constraints. It is conjectured that these short-selling constraints reduce speculative trading and thereby have the potential to stabilize volatile financial markets. The purpose of the current paper is to investigate this conjecture in a standard asset pricing model with heterogeneous beliefs. We model short-selling constraints by imposing trading costs for selling an asset short. We find that the local stability properties of the fundamental rational expectations equilibrium do not change when trading costs for short-selling are introduced. However, when the asset is overvalued, costs on short-selling increase mispricing and price volatility.
Anufriev, M, Arifovic, J, Ledyard, J & Panchenko, V 2013, 'Efficiency of continuous double auctions under individual evolutionary learning with full or limited information', JOURNAL OF EVOLUTIONARY ECONOMICS, vol. 23, no. 3, pp. 539-573.
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In this paper we explore how specific aspects of market transparency and agentsï½ behavior affect the efficiency of the market outcome. In particular, we are interested whether learning behavior with and without information about actions of other participants improves market efficiency. We consider a simple market for a homogeneous good populated by buyers and sellers. The valuations of the buyers and the costs of the sellers are given exogenously. Agents are involved in consecutive trading sessions, which are organized as a continuous double auction with order book. Using Individual Evolutionary Learning agents submit price bids and offers, trying to learn the most profitable strategy by looking at their realized and counterfactual or ï½foregoneï½ payoffs. We find that learning outcomes heavily depend on information treatments. Under full information about actions of others, agentsï½ orders tend to be similar, while under limited information agents tend to submit their valuations/costs. This behavioral outcome results in higher price volatility for the latter treatment. We also find that learning improves allocative efficiency when compared to outcomes with Zero-Intelligent traders.
Anufriev, M, Assenza, T, Hommes, C & Massaro, D 2013, 'INTEREST RATE RULES AND MACROECONOMIC STABILITY UNDER HETEROGENEOUS EXPECTATIONS', MACROECONOMIC DYNAMICS, vol. 17, no. 8, pp. 1574-1604.
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The recent macroeconomic literature stresses the importance of managing heterogeneous expectations in the formulation of monetary policy. We use a simple frictionless dynamic stochastic general equilibrium (DSGE) model to investigate in?ation dynamics under alternative interest rate rules when agents have heterogeneous expectations, and update their beliefs based on past performance, as in Brock and Hommes [Econometrica 65(5), 1059ï½1095 (1997)]. The stabilizing effect of different monetary policies depends on the ecology of forecasting rules (i.e., the composition of the set of predictors), on agentsï½ sensitivity to differences in forecasting performance, and on how aggressively the monetary authority sets the nominal interest rate in response to in?ation. In particular, if the monetary authority responds only weakly to in?ation, a cumulative process with rising in?ation is likely. On the other hand, a Taylor interest rate rule that sets the interest rate more than point for point in response to in?ation stabilizes in?ation dynamics, but does not always lead the system to converge to the rational expectations equilibrium, as multiple equilibria may persist
Anufriev, M, Hommes, CH & Philipse, RHS 2013, 'Evolutionary selection of expectations in positive and negative feedback markets', JOURNAL OF EVOLUTIONARY ECONOMICS, vol. 23, no. 3, pp. 663-688.
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An economic environment is a feedback system, where the dynamics of aggregate variables depend on individual expectations and vice versa. The type of feedback mechanism is crucial for the aggregate outcome. Experiments with human subjects (Heemeijer et al., J Econ Dyn Control 33:1052-1072, 2009) have shown that price converges to the fundamental level in a negative feedback environment but fails to do so under positive feedback. We present an explanation of these experimental results by means of a model of evolutionary switching between heuristics. Active heuristics are chosen endogenously, on the basis of their past performance. Under negative feedback an adaptive heuristic dominates explaining fast price convergence, whereas under positive feedback a trend-following heuristic dominates resulting in persistent price deviations and oscillations.
Anufriev, M, Kopanyi, D & Tuinstra, J 2013, 'Learning cycles in Bertrand competition with differentiated commodities and competing learning rules', JOURNAL OF ECONOMIC DYNAMICS & CONTROL, vol. 37, no. 12, pp. 2562-2581.
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This paper stresses the importance of heterogeneity in learning. We consider a Bertrand oligopoly with firms using either least squares learning or gradient learning for determining the price. We demonstrate that convergence properties of the rules are strongly affected by heterogeneity. In particular, gradient learning may become unstable as the number of gradient learners increases. Endogenous choice between the learning rules may induce cyclical switching. Stable gradient learning gives higher average profit than least squares learning, making firms switch to gradient learning. This can destabilize gradient learning which, because of decreasing profits, makes firms switch back to least squares learning.
Baddeley, M 2013, 'Herding, social influence and expert opinion', Journal of Economic Methodology, vol. 20, no. 1, pp. 35-44.
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This paper analyzes the impact of social influences on opinion formation among academics and other experts. Some social influences are valuable - for example, replicating results is a valuable aspect of scientific research and if a hypothesis has genuinely been verified across a range of different studies, then that may be because it is more probable. In uncertain situations, however, people employ heuristics and rules of thumb to guide their interpretation of events, and this can create problems of cognitive bias, including group biases when beliefs tend to coincide with the prior opinions of others, thus creating herding and path dependency. This tendency to follow others may be magnified by other social influences including reputation-building and conformity preference. Insights about herding and social influence are used to build a model of relative rewards to consensus versus contrarianism. This paper concludes with an analysis of implications and policies designed to moderate the negative herding externalities. © 2013 Copyright Taylor and Francis Group, LLC.
Bajada, C & Trayler, R 2013, 'Interdisciplinary business education: curriculum through collaboration', Education + Training, vol. 55, no. 4/5, pp. 385-402.
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PurposeA modern business graduate is expected to have strong disciplinary skills as well as the soft skills of communication and team work. However today's business graduate needs to be more than the traditional “I‐shaped” graduate of the past and more of the “T‐shaped” graduate employers are looking for. Many undergraduate business degrees profess to offer integration of the curriculum but on investigation this occurs mainly through a capstone subject at the end of the degree. Today's business graduates need a more integrated approach to their learning. This paper aims to outline the transformation of a traditional business curriculum to one that is inter‐disciplinary, outlining the necessary steps and conditions including the most challenging – faculty buy in.Design/methodology/approachThe review of the Bachelor of Business degree at University of Technology Sydney (UTS) provided an opportunity to explore the option to embrace an integrated curriculum. The authors outline how the review was shaped, the need for change and the approaches to interdisciplinary business education, and an approach to designing an interdisciplinary curriculum. They also provide two case studies.FindingsApproaches to developing an integrative curriculum can take many forms, but the most effective is one that is embedded throughout an entire degree program. This must start with a cornerstone subject to set the road map for the student's study. This subject needs to demonstrate how each discipline interrelates and how at the end of the degree through a capstone subject, this knowledge is again brought together to deal with more complex issues using the more sophisticated tools studied throughout the degree. There als...
Chen, C & Zhang, J 2013, 'Green Product Design With Engineering Tradeoffs Under Technology Efficient Frontiers: Analytical Results and Empirical Tests', IEEE Transactions on Engineering Management, vol. 60, no. 2, pp. 340-352.
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To implement green product design, many companies today utilize the product-line strategy to develop environment-friendly products for customers with different willingness-to-pay for the environmental attributes of a product. One major challenge in designing green products is how to deal with the engineering tradeoff between the traditional and environmental attributes along the technology efficient frontier. In this paper, we conceptualize the technology efficient frontier in green product design, and perform theoretical and empirical analyses on the design decisions under different functional forms of efficient frontiers. We develop an analytical framework for identifying the optimal designs under general forms of efficient frontiers, and propose a novel use of trigonometric functions to analyze the design decisions under the linear, concave, and convex efficient frontiers. Additionally, we analyze the average environmental qualities under different efficient frontiers and show that switching between different product-line strategies allows a firm to achieve higher average environmental quality as an alternative to pushing the efficient frontier outward through technology advancement. Moreover, we conduct empirical tests to demonstrate how to empirically identify an efficient frontier and estimate key model parameters. Our analytical results provide new insights for decision makers to manage and regulate green product design with engineering tradeoffs.
Chiarella, C & Di Guilmi, C 2013, 'Monetary Policy and Debt Deflation: Some Computational Experiments', Macroeconomic Dynamics, vol. 21, no. 1, pp. 214-242.
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© Cambridge University Press 2016. The paper presents an agent-based model to study the possible effects of different fiscal and monetary policies in the context of debt deflation. We introduce a modified Taylor rule that includes the financial position of firms as a target. Monte Carlo simulations provide a representation of the complex feedback effects generated by the interaction among the different transmission channels of monetary policy. The model also reproduces the evidence of low inflation during stock market booms and shows how it can lead to overinvestment and destabilize the system. The paper also investigates the possible reasons behind this stylized fact by testing different behavioral rules for the central bank. We find that, in a context of sticky prices and volatile expectations, endogenous credit creation can be identified as the main source of the divergent dynamics of prices in the real and financial sectors.
Cleave, BL, Nikiforakis, N & Slonim, R 2013, 'Is there selection bias in laboratory experiments? The case of social and risk preferences', Experimental Economics, vol. 16, no. 3, pp. 372-382.
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Delavande, A, Hurd, MD, Martorell, P & Langa, KM 2013, 'Dementia and out‐of‐pocket spending on health care services', Alzheimer's & Dementia, vol. 9, no. 1, pp. 19-29.
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BackgroundHigh levels of out‐of‐pocket (OOP) spending for health care may lead patients to forego needed services and medications as well as hamper their ability to pay for other essential goods. Because it leads to disability and the loss of independence, dementia may put patients and their families at risk for high OOP spending, especially for long‐term care services.MethodsWe used data from the Aging, Demographics, and Memory Study, a nationally representative subsample (n = 743) of the Health and Retirement Study, to determine whether individuals with dementia had higher self‐reported OOP spending compared with those with cognitive impairment without dementia and those with normal cognitive function. We also examined the relationship between dementia and utilization of dental care and prescription medications—two types of health care that are frequently paid for OOP. Multivariate and logistic regression models were used to adjust for the influence of potential confounders.ResultsAfter controlling for demographics and comorbidities, those with dementia had more than three times the yearly OOP spending compared with those with normal cognition ($8216 for those with dementia vs. $2570 for those with normal cognition, P < .01). Higher OOP spending for those with dementia was mainly driven by greater expenditures on nursing home care (P < .01). Dementia was not associated with the likelihood of visiting the dentist (P = .76) or foregoing prescription medications owing to cost (P = .34).ConclusionsDementia is associated with high levels of OOP spending but not with the use of dental care or foregoing prescription me...
Essen, MV & Wooders, J 2013, 'Blind Stealing: Experience and Expertise in a Mixed-Strategy Poker Experiment', Games and Economic Behavior, vol. 91, pp. 186-206.
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We explore the role of experience in mixed-strategy games by comparing, for a stylized version of Texas Hold-em, the behavior of experts, who have extensive experience playing poker online, to the behavior of novices. We find significant differences. The initial frequencies with which players bet and call are closer to equilibrium for experts than novices. And, while the betting and calling frequencies of both types of subjects exhibit too much heterogeneity to be consistent with equilibrium play, the frequencies of experts exhibit less heterogeneity. We find evidence that the style of online play transfers from the field to the lab.
Garbarino, E, Slonim, R & Wang, C 2013, 'The multidimensional effects of a small gift: Evidence from a natural field experiment', Economics Letters, vol. 120, no. 1, pp. 83-86.
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Hafalir, IE, Yenmez, MB & Yildirim, MA 2013, 'Effective affirmative action in school choice', Theoretical Economics, vol. 8, no. 2, pp. 325-363.
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The prevalent affirmative action policy in school choice limits the number of admitted majority students to give minority students higher chances to attend their desired schools. There have been numerous efforts to reconcile affirmative action policies with celebrated matching mechanisms such as the deferred acceptance and top trading cycles algorithms. Nevertheless, it is theoretically shown that under these algorithms, the policy based on majority quotas may be detrimental to minorities. Using simulations we find that this is a more common phenomenon rather than a peculiarity-up to 25% of minorities and 55% of majorities can be worse off. To circumvent the inefficiency caused by majority quotas, we offer a different interpretation of the affirmative action policies based on minority reserves. With minority reserves, schools give higher priority to minority students up to the point that the minorities fill the reserves. We compare the welfare effects of these policies. The deferred acceptance algorithm with minority reserves Pareto dominates the one with majority quotas. Our simulations, which allows for correlations between student preferences and school priorities, indicate that minorities are on average better off with minority reserves while adverse effects on majorities are mitigated.
Hurd, MD, Martorell, P, Delavande, A, Mullen, KJ & Langa, KM 2013, 'Monetary Costs of Dementia in the United States', New England Journal of Medicine, vol. 368, no. 14, pp. 1326-1334.
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Iajya, V, Lacetera, N, Macis, M & Slonim, R 2013, 'The effects of information, social and financial incentives on voluntary undirected blood donations: Evidence from a field experiment in Argentina', Social Science & Medicine, vol. 98, pp. 214-223.
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Johar, M, Jones, G, Keane, MP, Savage, E & Stavrunova, O 2013, 'Discrimination in a universal health system: Explaining socioeconomic waiting time gaps', JOURNAL OF HEALTH ECONOMICS, vol. 32, no. 1, pp. 181-194.
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One of the core goals of a universal health care system is to eliminate discrimination on the basis of socioeconomic status. We test for discrimination using patient waiting times for non-emergency treatment in public hospitals. Waiting time should reflect patients' clinical need with priority given to more urgent cases. Using data from Australia, we find evidence of prioritisation of the most socioeconomically advantaged patients at all quantiles of the waiting time distribution. These patients also benefit from variation in supply endowments. These results challenge the universal health system's core principle of equitable treatment. © 2012 Elsevier B.V.
Lacetera, N, Macis, M & Slonim, R 2013, 'Economic Rewards to Motivate Blood Donations', Science, vol. 340, no. 6135, pp. 927-928.
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Field-based evidence suggests that guidelines against economic rewards to motivate blood donors should be reconsidered.
Lacetera, N, Macis, M & Slonim, R 2013, 'In Defense of WHO's Blood Donation Policy—Response', Science, vol. 342, no. 6159, pp. 692-692.
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Lacetera, N, Macis, M & Slonim, R 2013, 'The value of incentives in blood donation--response.', Science, vol. 341, no. 6142, p. 129.
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Sheremeta, R & Zhang, J 2013, 'Three-Player Trust Game with Insider Communication', Economic Inquiry, vol. 52, no. 2, pp. 576-591.
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We examine behavior in a three-player trust game in which the first player may invest in the second and the second may invest in the third. Any amount sent from one player to the next is tripled. The third player decides the final allocation among three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. Allowing insider communication between the second and the third players increases cooperation between these two. Interestingly, there is an external effect of insider communication: the first player who is outside communication sends 54% more and receives 289% more than in the baseline treatment. As a result, insider communication increases efficiency from 44% to 68%.
Siminski, P 2013, 'Employment Effects of Army Service and Veterans' Compensation: Evidence from the Australian Vietnam-Era Conscription Lotteries', Review of Economics and Statistics, vol. 95, no. 1, pp. 87-97.
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Exploiting Australia's National Service lotteries of 1965 to 1972, I estimate the effect of army service on employment outcomes. Population data from military personnel records, tax returns, veterans' compensation records, and the Census facilitate a rich and precise analysis, identified by 53,000 complying conscripts. The estimated employment effect is −12 percentage points (95% CI: −13, −11) overall, −37 for those who served in Vietnam and 0 for those who served only in Australia. It emerged in the 1990s, mirrored by veterans' disability pension effects. These results contrast with those for the United States, possibly reflecting employment disincentives associated with Australia's veterans' compensation system. © 2013 The President and Fellows of Harvard College and the Massachusetts Institute of Technology.
Siminski, P, Ville, S & Paull, A 2013, 'Does the Military Train Men to be Violent Criminals? New Evidence from Australia’s Conscription Lotteries', Journal of Population Economics, vol. 29, no. 1, pp. 197-218.
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Combat is the most intense form of military service, but several aspects of the training experience, which explicitly prepares people for violent warfare, are hypothesized to link service to violent crime. UsingAustralia’s Vietnam-era conscription lotteries for identification and criminal court data from Australia’s three largest states, we seek to estimate the effect of army training on violent crime. Using variousspecifications, we find no evidence that military training causes violent crime, and our point estimates are always negative. In our preferred specification (using only non-deployed cohorts), we rule out with 95%confidence any positive violent crime effects larger than 3.6% relative to the mean.
Slonim, R, Wang, C, Garbarino, E & Merrett, D 2013, 'Opting-in: Participation bias in economic experiments', Journal of Economic Behavior & Organization, vol. 90, pp. 43-70.
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Zhang, J 2013, 'Revenue maximizing with return policy when buyers have uncertain valuations', International Journal of Industrial Organization, vol. 31, no. 5, pp. 452-461.
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This paper examines the optimal mechanism design problem when buyers have uncertain valuations. This uncertainty can only be resolved after the actual transactions take place and upon incurring significant post-purchase cost. We focus on two different settings regarding how the seller values a returned object (salvage value). We first study the case where the salvage value is exogenously determined. We find that the revenue maximizing mechanism is deterministic and “separable”. We illustrate that the optimal revenue can be implemented by a mechanism with a “no-questions-asked” return policy. In addition, we show that “linear return policies” are suboptimal when the hazard rates of initial estimates are monotone. We next examine the case where the salvage value is endogenously determined. We demonstrate that “separability” no longer holds and the “recall” of buyers is necessary in the optimal mechanism.
Zhang, J & Wang, R 2013, 'Optimal mechanism design with resale via bargaining', Journal of Economic Theory, vol. 148, no. 5, pp. 2096-2123.
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Anufriev, M & Tuinstra, J 2013, 'The impact of short-selling constraints on financial market stability in a heterogeneous agents model', Working Paper Series, Center for Nonlinear Dynamics in Economics and Finance.
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Working Paper Number: 10-03
Goldbaum, D 2013, 'Follow the Leader: Simulations on a Dynamic Social Network'.
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An agent based model is developed in which a social hierarchy of leaders and followers emerges from a uniform or random social
network. The formation of the social structure is driven by the desire to be an early adopter of a subsequently popular trend. The
environment is related to a majority game, but introduces the importance of the timing of adoption. The proposed environment is relevant
to a number of settings in which leadership and timing of decisions are important or being perceived as a trend setter is rewarded. The
leadership position can be selfreinforcing. For a professional critic, for example, a cult-of-personality can dictate popular tastes, such
as in art, food, and wine markets. A social hierarchy can also apply to the introduction of new products or ideas including academic
research and financial market analysts.
Goldbaum, D 2013, 'Follow the Leader: Simulations on a Dynamic Social Network'.
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This paper introduces a process of individual adjustment based on private local experiences and observation that allows for the emergence of a global social structure that is the equilibrium to the static follow-the-leader game of Goldbaum (2013). The setting rewards agents for being early adopters of popular products or trends. From simple, myopic, self-serving adjustment based on historic evidence by individuals emerges the the equilibrium social structure consisting of a single choice leader and a population of followers, which, in the static setting would require an unlikely degree of coordination to produce. Individual actions take place in a social context with individuals linked via one-way paths of observation. The strategy by which an agent chooses among the available options evolves over time. Different adjustment emergent processes contribute towards the understanding of the unfolding of events that generate the equilibrium structure.
Goldbaum, D 2013, 'Learning and Adaptation as a Source of Market Failure'.
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SydneyAgents Workshop
Goldbaum, D 2013, 'Learning and Adaptation as a Source of Market Failure'.
Johar, M, Jones, G, Keane, MP, Savage, E & Stavrunova, O 2013, 'The Demand for Private Health Insurance: Do Waiting Lists Matter?” – Revisited'.
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Besley, Hall and Preston (JPubEc, 1999) investigate how waiting for medical treatment inpublic hospitals influences the decision to buy private health insurance, which covers faster private treatment. They find sizable positive impacts which have subsequently been influential on waiting lists management policies. This paper re-examines this result, in particular the sensitivity to the use of waiting lists as a proxy for waiting times. It is found that waiting lists do not predict private health insurance demand, and that the impact of waiting time in motivating the purchase of insurance has been overstated.
Maruyama, S & Johar, M 2013, 'Do Siblings Free-Ride in 'Being There' for Parents?', WILEY, pp. 277-316.
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