Microeconomic theory, Experimental Economics, Political Economy, Industrial Organization

Accepted and Published Papers:

At-will Relationships: How an Option to Walk Away Affects Cooperation and Efficiency

(with Hong Wu).

Games and Economic Behavior, March 2017, 102: p.487-507 .

We theoretically and experimentally examine the effects from adding a simple, empirically relevant action to a repeated partnership, the option to walk away. Manipulating both the value of the outside option, and its relative distribution among the partners, we examine the behavior of human subjects in a repeated prisoners' dilemma. In particular, we examine the degree of cooperation and the form of punishments used. Our findings indicate that cooperation rates are broadly unaffected by the value of the common outside option, but that the selection of supporting punishments - in-relationship defections or walking-away - are dictated by individual rationality. In contrast to the symmetric results, when outside options for partners are asymmetric we find stark selection effects over cooperation, with the potential for very high and very low efficiency, dependent on the precise division rule.

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InstructionsSummary Handout

A Proposal to Organize and Promote Replications

(with Lucas Coffman, Muriel Niederle)

American Economic Review (Papers and Proceedings), May 2017, 107(5), pp.41-45

We make a two-pronged proposal to (i) strengthen the incentivizes for replication work and (ii) better organize and draw attention to the replications that are conducted. First we propose that top journals publish short "replication reports." These reports could summarize novel work replicating an existing high-impact paper, or they could highlight a replication result embedded in a wider-scope published paper.  Second, we suggest incentivizing replications with the currency of our profession: citations.  Enforcing a norm of citing replication work alongside the original would provide incentives for replications to both authors and journals.

Assessing the Rate of Replication in Economics

(with James Berry,Lucas Coffman, Rania Gihleb, Douglas Hanley)

American Economic Review (Papers and Proceedings), May 2017, 107(5), pp. 27-31

We assess the rate of replication for empirical papers in the 2010 American Economic Review. Across seventy empirical papers, we find that 29 percent have one or more citation that partially replicates the original result. While only a minority of papers has a published replication, a majority (sixty percent) have either a replication, robustness test or an extension. Surveying authors within the literature we find substantial uncertainty over the number of extant replications.

Clearinghouses for Two-Sided Matching: An Experimental Study

(with Federico Echenique, Leeat Yariv)

Quantitative Economics, July 2016, 7(2): p.449-82 (open access)

We experimentally study the Gale and Shapley (1962) mechanism, utilized in a wide set of applications, most prominently the National Resident Matching Program (NRMP). Several insights come out of our analysis: First, only 48% of our observed outcomes are stable. Among those, a large majority culminates at the receivers-optimal stable matching. Second, receivers rarely truncate their true preferences; it is the proposers who do not make offers in order of their preference, frequently skipping potential partners. Third, market characteristics affect behavior: both the cardinal representation and core size influence whether laboratory outcomes arestable. We conclude by using our controlled results to shed light on a number of stylized facts we derive from new NRMP survey and outcome data, and to explain the small cores previously documented for the NRMP.

Communication With Multiple Senders: An Experiment

Quantitative Economics, March 2016, 7(1): p.1-36 (open access), (lead article)

(with Emanuel Vespa).

We implement multi-sender cheap talk in the laboratory. While full-information transmission is not theoretically feasible in the standard one-sender one-dimension model, in this setting with more senders and dimensions, full revelation is generically a robust equilibrium outcome. Our experimental results indicate that fully revealing outcomes are selected in particular settings, but that partial-information transmission is the norm. We uncover a number of behavioral patterns: Senders follow exaggeration strategies, qualitatively similar to those predicted by a special case for the fully revealing equilibrium. Receivers on the other hand follow differing heuristics depending on the senders' biases, which are not always sequentially rational. When full revelation is observed it is largely due to the intersection of the receiver heuristics with the equilibrium response.

Additional details:

Supplementary Material to QE version

Working Paper (September 2011) , additional results on treatments with non-full-rank bias matrices will be reported in an (in preparation) companion paper: Competition and Communication: An Experiment.. Link to journal page is here.

A Field Study on Matching with Network externalities

American Economic Review, August 2012, 102(5): p.1773-1804 (lead article)

(with Mariagiovanna Baccara, Ayse Imrohoroglu, Leeat Yariv.)

We study the effects of network externalities on a unique matching protocol for faculty in a large U.S. professional school to offices in a new building. We collected institutional, web, and survey data on faculty's attributes and choices. We first identify the different layers of the social network: institutional affiliation, coauthorships, and friendships. We demonstrate and quantify the effects of network externalities on choices and outcomes. Furthermore, we disentangle the different layers of the social network and quantify their relative impact. Finally, we assess the matching protocol from a welfare perspective. Our study suggests the importance and feasibility of accounting for network externalities in general assignment problems and evaluates a set of techniques that can be employed to this end.

Additional details:

Working PaperWeb Appendices

A game theoretic approach to multimodal communication

Behavioral Ecology and Sociobiology, 2013, 69(9), p.1399-1415

(with Mark Dean, and James Higham.)

Over the last few decades the animal communication community has become increasingly aware that much communication occurs using multiple signals in multiple modalities. The majority of this work has been empirical, with less theoretical work on the advantages conferred by such communication. In the present paper we ask: Why should animals communicate with multiple signals in multiple modalities? To tackle this question we use game theoretic techniques, and highlight developments in the economic signaling literature that might offer insight into biological problems. We start by establishing a signaling game, and investigate signal honesty under two prevailing paradigms of honest communication--costly signaling and cheap talk. In both paradigms, without further constraint, it is simple to show that anything that can be achieved with multiple signals can be achieved with one. We go on to investigate different sets of possible constraints that may make multiple signals and multimodal signals in particular more likely to evolve. We suggest that constraints on cost functions and bandwidths, orthogonal noise across modalities, strategically distinct modes, multiple qualities, multiple signalers, and multiple audiences, all provide biologically plausible scenarios that theoretically favor multiple and multimodal signaling.

The Slider Task: An Example of Restricted Inference on Incentive Effects

(with Felipe Araujo, Erin Carbone, Lynn Connell-Price, Marli Dunietz, Ania Jaroszewicz, Rachel Landsman, Diego Lamé, Lise Vesterlund and Stephanie Wang)

Paper (April 2016), Journal of Economic Science Association, 2016, 2(1), p.1-12 (lead article).

Real-effort experiments are frequently used when examining a response to incentives. For a real-effort task to be well suited for such an exercise its measureable output must be sufficiently elastic over the incentives considered. The popular slider task in Gill and Prowse (2012) has been characterized as satisfying this requirement, and the task is increasingly used to investigate the response to incentives. However, a between-subject examination of the slider task's response to incentives has not been conducted. We provide such an examination with three different piece-rate incentives: half a cent, two cents, and eight cents per slider completed. We find only a small increase in performance: despite a 1,500 percent increase in the incentives, output only increases by 5 percent. With such an inelastic response we caution that for typical experimental sample sizes and incentives the slider task is unlikely to demonstrate a meaningful and statistically significant performance response.

Working Papers:

Experimenting with Equilibrium Selection in Dynamic Games

(with Emanuel Vespa)

Paper (June 2017), third round at Quantitative Economics

Many economic applications, across an array of fields, use dynamic games to study strategic interactions that are changing through time. While these games generically have large sets of possible equilibria, Markov perfection (MPE) is commonly assumed in applied work. Our paper experimentally examines selection across a number of simple dynamic games. Starting from a two-state modification of the most-studied static environment - the infinitely repeated PD game - we characterize the response to broad qualitative changes to the game. Subjects in our experiments show an affinity for conditional cooperation, adjusting their behavior not only in response to the state but also the recent history. More-efficient history-dependent play is the norm in many treatments, though the frequency of MPE-like play can be predicted with an easy-to-compute selection index.

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Instructions and Screenshots

Constrained Centralized Assignment: A Field Study of the UEFA Champions League

(with Marta Boczon)

Preliminary Draft (June 2018)

We analyze the tournament matching procedures in the UEFA Champions League. Focusing in on the Round of 16 match, we show how the competition's association restrictions distort the resulting match process, even for unconstrained teams. Empirically, we map out who are the winners and losers from the current procedure and how the constraints affect later stages of the competition. From a market design point of view, we show the following: (i) Given the constraints there are no mechanisms for the application that offer substantial improvement. (ii) However, the constraints can be slacked a little to produce substantially less distortion. (iii) The procedure used represents a simple, proven way of publicly randomizing a constrained assignment.

Quality Versus Quantity in Information Transmission: Theory and Experimental Evidence

(with Jonathan Lafky)

Paper (January 2018), revise and resubmit at Economiq Inquiry

Information sharing has become increasingly important in helping consumers make better, more informed choices over competing products. Our project uses a novel theoretical framework and laboratory experiments to analyze three simple, commonly used incentive schemes against an unincentivized baseline. Each incentive scheme has qualitatively different theoretical predictions for behavior and efficiency, while our laboratory experiments examine the degree to which these differences manifest themselves, and the best-cast theory's robustness to human behavior. Our findings indicate the possibility for substantial efficiency gains by introducing incentives that reward information sharing, even where those incentives drive a wedge between those sending and those receiving information.

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Costly Communication in Groups: Theory and an Experiment

Paper (February 2014), reject & resubmit at Games and Economic Behavior

I develop a novel model of group-based communication in which group members communicate with one another. Communication is costly in the sense that group members who choose to send or listen to messages incur costs. Equilibrium strategies have an intuitive characterization - those with the best information send, those with the worst information receive. Free-riding leads to less information exchange than is optimal, but a simple system of transfers and subsidies can correct this. Examining the model's predictions with an experiment I find that subjects over-communicate when costs are high, but fail to benefit from this as much as they should. Additionally, I find that listening costs are more harmful to welfare, in contrast with the theory which indicates sending costs.

Preference Reversals between One-Shot and Repeated Decisions: The Case of Regret

(with Alex Imas and Diego Lamé).

Paper (February, 2017), revise and resubmit at The Economic Journal

Under regret theory, decision-makers derive utility both from the outcome of their chosen action and the counterfactual. Evidence for anticipatory regret aversion has been found in one-shot settings, with "regret lotteries" that provide counterfactual information being valued higher than more-standard lotteries. These one-shot findings have motivated a literature that advocates the use of regret as a policy tool to boost incentives for behaviors such as exercise and drug adherence, often as recurrent decisions. However, differences in learning opportunities and the interaction between anticipated and realized regret make the consequences of regret in repeated settings far from clear. Through a series of controlled experiments, we replicate the one-shot result that regret lotteries have higher valuations than standard lotteries. In contrast, for sequential repeated decisions, the pattern reverses. For repeated decisions, regret lotteries are valued significantly less than standard lotteries, from the very first decision and onwards. Our results serve to highlight the issues that can arise when extrapolating behavioral effects from one-shot to repeated settings.

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Information Transmission under the Shadow of the Future: An Experiment

(with Emanuel Vespa).

Paper (December, 2017), under submission.

We experimentally examine how information transmission functions in an ongoing relationship. Where the one-shot cheap-talk literature documents substantial over-communication and preferences for honesty, in our repeated setting the outcomes are more consistent with uninformative babbling outcomes. This is particularly surprising as honest revelation is supportable as an equilibrium outcome in our repeated setting. We show that inefficient outcomes are driven by a coordination failure on how to distribute the gains from information sharing. However, when agents can coordinate, honest revelation arises conditional on an "information rent" being paid.

Paired-Uniform Scoring: Implementing a binarized scoring rule with non-mathematical language

(with Emanuel Vespa).

Paper (October, 2017)

We outline a mechanism for eliciting probabilities using two uniform random numbers that is equivalent to the binarized scoring rule (BSR). Though our implementation is simple to describe and has a non-mathematical explanation, it retains the desirable theoretical features of the BSR. Moreover, we show that a discretized version with evenly-spaced reporting intervals can be implemented in the field with no more equipment than a pair of dice.

The Times They are a-Changing: Dynamic Adverse Selection in the Laboratory

(with Felipe Araujo and Stephanie Wang).

Paper (April, 2018), under submission

Across a variety of contexts decision-makers exhibit a robust failure to understand the interaction of private information and strategy, with one prominent example being the winner's curse. Such failures have generally been observed in static settings, where participants fail to think through a future hypothetical. We use a laboratory experiment to examine a common-value matching environment where strategic thinking is entirely backward looking, and adverse selection is a dynamic, non-stationary process. Our results indicate the majority of subjects in our environment use a sub-optimal stationary response -- even after extended experience and feedback. In terms of learning, even stationary subjects learn to adjust their behavior in response to the adverse selection, though adjusting their unconditional response. In contrast the minority using non-stationary responses do so very quickly, reflecting an introspective rather than learned solution to the problem.

Work in Progress:

Laws of Large Numbers and Risk Preferences

(with Felipe Araujo and Alex Imas)

Dynamic Games and Teams

(with John Kagel and Emanuel Vespa)

Strategic Uncertainty in Dynamic Games

(with Emanuel Vespa)

Competition and Communication: An Experiment

(with Emanuel Vespa)

An Elicitation Horse Race (Where the Blinkered Horse Win by a Nose)

(with David Danz, Lise Vesterlund and my experimental class)

Paying it forward: An experiment on an experimental college financing

(with David Danz, David Huffman, Lise Vesterlund and Stephanie Wang)