Anufriev, M & Panchenko, V 2015, 'Connecting the Dots: Econometric Methods for Uncovering Networks with an Application to the Australian Financial Institutions', Journal of Banking and Finance, vol. 61, no. Supp 2, pp. S241-S255.
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© 2015 Elsevier B.V. This paper connects variance-covariance estimation methods, Gaussian graphical models, and the growing literature on economic and financial networks. We construct the network using the concept of partial correlations which captures direct linear dependence between any two entities, conditional on dependence between all other entities. We relate the centrality measures of this network to shock propagation. The methodology is applied to construct the perceived network of publicly traded Australian banks and their connections to domestic economic sectors and international markets. We find strong links between the big four Australian banks, real estate and other sectors of the economy, and determine which entities play a central role in transmitting and absorbing the shocks.
Anufriev, M, Hommes, CH & Makarewicz, T 2015, 'Simple Forecasting Heuristics that Make Us Smart: Evidence from Different Market Experiments', Journal of the European Economic Association, vol. 17, no. 5, pp. 1538-1584.
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© 2019 The Author(s). In this paper we address the question of how individuals form expectations and invent, reinforce, and update their forecasting rules in a complex world. We do so by fitting a novel, parsimonious, and empirically validated genetic algorithm learning model with explicit heterogeneity in expectations to a set of laboratory experiments. Agents use simple linear first order price forecasting rules, adapting them to the complex evolving market environment with a Genetic Algorithm optimization procedure. The novelties are: (1) a parsimonious experimental foundation of individual forecasting behavior; (2) explanation of individual and aggregate behavior in three different experimental settings, (3) improved one-and 50-period ahead forecasting of experiments, and (4) characterization of the mean, median, and empirical distribution of forecasting heuristics. The median of the distribution of GA forecasting heuristics can be used in designing or validating simple Heuristic Switching Models.
Baddeley, M 2015, 'Herding, social influences and behavioural bias in scientific research', EMBO reports, vol. 16, no. 8, pp. 902-905.
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Cadsby, CB, Du, N, Wang, R & Zhang, J 2015, 'Goodwill Can Hurt: a Theoretical and Experimental Investigation ofReturn Policies in Auctions', GAMES AND ECONOMIC BEHAVIOR, vol. 99, pp. 224-238.
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Will generous return policies in auctions benefit bidders? We investigate this issue using second-price common-value auctions. Theoretically, we find that the bidding equilibrium is unique unless returns are free, in which case there exist multiple equilibria with different implications for sellers. Moreover, more generous return policies hurt bidders by eroding consumer surplus through higher bids. In the experiment, bids increase and bidders? earnings decrease with more generous return policies as predicted. With free returns, many bidders bid above the highest possible value, subsequently returning the item regardless of value. Though consistent with equilibrium behavior, this is not optimal for sellers.
Cason, T, Sheremeta, R & Zhang, J 2015, 'Asymmetric and Endogenous Within-Group Communication in Competitive Coordination Games', Experimental Economics, vol. 20, no. 4, pp. 946-972.
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Within-group communication in competitive coordination games has been shown to increase competition between groups and lower efficiency. This study further explores potentially harmful effects of communication, by addressing the questions of (i) asymmetric communication and (ii) the endogenous emergence of communication. Our theoretical analysis provides testable hypotheses regarding the effect of communication on competitive behavior and efficiency. We test these predictions using a laboratory experiment. The experiment shows that although asymmetric communication is not as harmful as symmetric communication, it leads to more aggressive competition and lower efficiency relative to the case when neither group can communicate. Moreover, groups vote to endogenously open communication channels even though this leads to lower payoffs and efficiency.
Chow, YL, Hafalir, IE & Yavas, A 2015, 'Auction versus Negotiated Sale: Evidence from Real Estate Sales', Real Estate Economics, vol. 43, no. 2, pp. 432-470.
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We offer a theoretical and empirical comparison of auctions and negotiated sales. We first build a simple model to show that auctions generate a higher relative price than negotiated sales when demand for the asset is strong, when the asset is more homogeneous and when the asset attracts buyers with higher valuations. Using data from property sales in Singapore, we find support for our theoretical predictions. In addition, we find that auctions do not necessarily generate a higher price premium for foreclosed properties than for nonforeclosed properties.
Collins, J, Baer, B & Weber, EJ 2015, 'Sexual selection, conspicuous consumption and economic growth', Journal of Bioeconomics, vol. 17, no. 2, pp. 189-206.
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Delavande, A & Manski, CF 2015, 'Using elicited choice probabilities in hypothetical elections to study decisions to vote', Electoral Studies, vol. 38, pp. 28-37.
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© 2015 Elsevier Ltd. This paper demonstrates the feasibility and usefulness of survey research asking respondents to report voting probabilities in hypothetical election scenarios. Posing scenarios enriches the data available for studies of voting decisions, as a researcher can pose many more and varied scenarios than the elections that persons actually face. Multiple scenarios were presented to over 4000 participants in the American Life Panel (ALP). Each described a hypothetical presidential election, giving characteristics measuring candidate preference, closeness of the election, and the time cost of voting. Persons were asked the probability that they would vote in this election and were willing and able to respond. We analyzed the data through direct study of the variation of voting probabilities with election characteristics and through estimation of a random utility model of voting. Voting time and election closeness were notable determinants of decisions to vote, but not candidate preference. Most findings were corroborated through estimation of a model fit to ALP data on respondents' actual voting behavior in the 2012 election.
Delavande, A & Zafar, B 2015, 'Stereotypes and Madrassas: Experimental evidence from Pakistan', Journal of Economic Behavior & Organization, vol. 118, pp. 247-267.
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Guillen, P, Merrett, D & Slonim, R 2015, 'A New Solution for the Moral Hazard Problem in Team Production', Management Science, vol. 61, no. 7, pp. 1514-1530.
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We propose an intergroup competition scheme (ICS) to theoretically solve free riding in team production and provide experimental evidence from a voluntary contribution mechanism public goods game. The ICS includes an internal transfer payment from the lowest to highest contributing team proportional to the difference in group contributions. The ICS requires minimal information, makes the efficient contribution a dominant strategy, and is budget balanced. These features make the ICS ideally suited to solve the moral hazard problem in team production. Our experiment demonstrates that the ICS raises contributions to almost reach optimality with the appropriate parameters. We also show experimentally that the success of the ICS can be primarily attributed to the effect of higher returns and to the introduction of competition, and it is not due to the introduction of potential losses or information regarding other groups. Data, as supplemental material, are available at http://dx.doi.org/10.1287/mnsc.2014.1922 . This paper was accepted by Uri Gneezy, behavioral economics.
Hafalir, I & Miralles, A 2015, 'Welfare-maximizing assignment of agents to hierarchical positions', Journal of Mathematical Economics, vol. 61, pp. 253-270.
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Hafalir, IE & Yektaş, H 2015, 'Core deviation minimizing auctions', International Journal of Game Theory, vol. 44, no. 2, pp. 367-376.
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In a stylized environment with complementary products, we study a class of dominant strategy implementable direct mechanisms and focus on the objective of minimizing the expected surplus from core deviations. For this class of mechanisms, we formulate the core deviation minimization problem as a calculus of variations problem and numerically solve it for some interesting special cases. We then compare the core deviation surplus in the optimal auction (CDMA) to that in Vickrey-Clark-Groves mechanism (VCG) and core-selecting auctions (CSAs). We find that the expected surplus from core deviations can be significantly smaller in CDMA than that in both VCG and CSAs.
Johar, M, Maruyama, S & Nakamura, S 2015, 'Reciprocity in the Formation of Intergenerational Coresidence', Journal of Family and Economic Issues, vol. 36, no. 2, pp. 192-209.
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© 2014, Springer Science+Business Media New York. Children play a key role in supporting elderly parents, and the literature has consistently found reciprocity whereby parents compensate their children for providing care and attention. To understand how the mode of compensation is related to the characteristics of parents and children, we studied the determinants of transitions to parent–child coresidence in Japan. The results conformed to the hypothesis that the mode of reciprocity depends on the costs and benefits of coresidence for each family member. Parental assets and care needs were associated with coresidence. Additionally, transitions to coresidence with married parents were characterized by young, unmarried children and the presence of parental housing assets, whereas transitions to coresidence with widowed mothers were characterized by mothers’ non-housing assets.
Li, S, Xiao, J & Liu, Y 2015, 'The Price Evolution in China's Automobile Market', Journal of Economics & Management Strategy, vol. 24, no. 4, pp. 786-810.
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The automobile market in China has seen unprecedented expansion during the past decade with rapid model turnover and dramatic price decline. This paper aims to document the evolution of price and investigate the sources of price decline, paying attention to both market structure and cost factors. We estimate a market equilibrium model with differentiated multiproduct oligopoly using market‐level sales data in China together with information from household surveys. Our counterfactual simulations show that (quality‐adjusted) vehicle prices have dropped by 33% from 2004 to 2009. The decrease in markup from intensified competition accounts for about one third of this change and the rest comes from cost reductions through learning by doing and other channels. In addition, our simulations show that the price decline would have been larger had it not been for the growth of household income during this period.
Maruyama, S 2015, 'The effect of coresidence on parental health in Japan', Journal of the Japanese and International Economies, vol. 35, pp. 1-22.
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© 2014 Elsevier Inc. The empirical evidence of the effect of intergenerational coresidence by elderly parents and their adult children on parental health remains inconclusive. This study provides a new estimate of the coresidence effect by addressing non-random selection and heterogeneity in the treatment effect. Examination of Japanese data reveals: (i) an insignificant, negative average coresidence effect; (ii) a significant, negative coresidence effect on the treated; and (iii) that parents with unmet care needs and limited resources, typically widowed, disabled mothers, are most likely to suffer from a significant, negative coresidence effect. The results support the theory that coresidence may worsen elderly parents' health because care burdens on their adult children create disincentives for the parents to invest in longevity. The significant heterogeneity in the coresidence effect suggests potential scope for a better-targeted long-term care program.
Maruyama, S & Nakamura, S 2015, 'The decline in BMI among Japanese women after World War II', Economics & Human Biology, vol. 18, pp. 125-138.
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Nikiforakis, N & Slonim, R 2015, 'Editors’ preface: introducing JESA', Journal of the Economic Science Association, vol. 1, no. 1, pp. 1-7.
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Nikiforakis, N & Slonim, R 2015, 'Editors’ preface: statistics, replications and null results', Journal of the Economic Science Association, vol. 1, no. 2, pp. 127-131.
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Patulny, R, Siminski, P & Mendolia, S 2015, 'The front line of social capital creation – A natural experiment in symbolic interaction', Social Science & Medicine, vol. 125, pp. 8-18.
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© 2014 Elsevier Ltd. This paper offers theoretical and empirical contributions to understanding the micro-sociological processes behind the creation of social capital. Theoretically, we argue that the emotional and shared experience of participating in symbolic interaction rituals may affect social capital in four different ways, via: (i) a 'citizenship' effect, connecting participants symbolically to the broader, civic society; (ii) a 'supportive' effect, bonding participants with each other; (iii) an exclusive 'tribal' effect, which crowds-out connections with other groups and the wider society; and (iv) an 'atomising' effect, whereby intense experiences create mental health problems that damage social capital. We illustrate this with a case study of Australian veterans of the Vietnam War. The randomness of the National Service conscription lotteries of that era translates into a high-quality natural experiment. We formulate several hypotheses about which of the four effects dominates for veterans who participated in the 'symbolic interaction' of training and deployment. We test these hypotheses using data from the 2006 Australian Census of Population and Housing, and the NSW 45 & Up Study.We found that war service reduced 'bonding' social capital, but increased 'bridging' social capital, and this is not explained completely by mental health problems. This suggests that while the combined 'tribal' and 'atomizing' effects of service outweigh the 'supportive' effects, the 'citizenship' effect is surprisingly robust. Although they feel unsupported and isolated, veterans are committed to their community and country. These paradoxical findings suggest that social capital is formed through symbolic interaction. The emotional and symbolic qualities of interaction rituals may formulate non-strategic (perhaps irrational) connections with society regardless of the status of one's personal support networks.
Wei, L & Xiao, J 2015, 'Are points like money? An empirical investigation of reward promotion effectiveness for multicategory retailers', Marketing Letters, vol. 26, no. 1, pp. 99-114.
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Point-based frequency reward programs are widely used by retailers as a sales promotion strategy. To promote a specific product category, retailers offer more favorable reward ratios so that members can earn extra points. This paper examines the impact of reward ratio variations on sales in a multicategory setting and compares the effectiveness of the reward and price promotion strategies. We estimate a multivariate probit model using scanner data of member purchases in four categories, grouped into two category pairs. We found that increasing the reward ratio in a category positively affected its choice probability and that the presence of rewards promotions also had positive impact on the choice probability of nonpromoted but closely related category within the same category pair. As forms of sales promotion, price discounts and reward promotions were shown to substitute for each other. We constructed and computed a measure, the rate of substitution, to quantify the effects of substitution. The financial implications of holding reward promotions are computed and discussed.
