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Author: Daniel Emmanuel Fragiadakis
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This dissertation discusses that, as market designers and experimental economists, we must be willing to accept that individuals may not play complicated equilibrium strategies. This departure from classical game theory predictions leaves us with a dilemma as market designers. One approach could be to make optimal play in matching algorithms as easy as possible by constructing strategyproof mechanisms, where individuals have dominant strategies of truthfully stating their preferences. We develop novel strategyproof algorithms in the first chapter of this dissertation that can be used in markets seeking to meet distributional goals. Many prominent markets in the field that would benefit from our mechanisms are currently inefficiently using strategyproof algorithms (presumably because they value such a strong incentive property); our contribution is to preserve strategyproofness but improve efficiency. In the second chapter of the dissertation, we show that efficiency can be improved even further if we are willing to sacrifice strategyproofness. Venturing into manipulable (non-strategyproof) algorithms can be risky, however. In manipulable mechanisms, individuals may state their preferences in ways that ultimately make themselves (and others) worse off in comparison to their outcomes in strategyproof algorithms. Whether or not we should even consider manipulable algorithms is a big question in market design. The second chapter in this dissertation finds that subjects actually fare better on average when we move away from strategyproofness. The welfare-improving algorithms we study discuss in the second chapter lead many individuals to manipulate their preferences in the same ways, suggesting that the mechanisms' specific designs stimulate non-random non-equilibrium behavior. As market designers, we can use these systematic deviations from equilibrium to develop algorithms that are best suited for the types of agents in the population. In particular, as market designers we should start thinking about creating algorithms for agents who play according to well-documented behavioral game theory models, such as the level-k model that explains many subjects' actions in the third chapter of this dissertation. Altogether, there is much additional theoretical and experimental work that needs to be done to fully understand (1) the way subjects behave in strategic settings and (2) which mechanisms will lead to the highest realized levels of agent welfare in practice. Fortunately, making progress on either of these questions will simultaneously advance our position on solving the other. It seems there is much potential for future work to make valuable contributions to what may ultimately become known as ``behavioral market design.''.
Author: Daniel Emmanuel Fragiadakis
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This dissertation discusses that, as market designers and experimental economists, we must be willing to accept that individuals may not play complicated equilibrium strategies. This departure from classical game theory predictions leaves us with a dilemma as market designers. One approach could be to make optimal play in matching algorithms as easy as possible by constructing strategyproof mechanisms, where individuals have dominant strategies of truthfully stating their preferences. We develop novel strategyproof algorithms in the first chapter of this dissertation that can be used in markets seeking to meet distributional goals. Many prominent markets in the field that would benefit from our mechanisms are currently inefficiently using strategyproof algorithms (presumably because they value such a strong incentive property); our contribution is to preserve strategyproofness but improve efficiency. In the second chapter of the dissertation, we show that efficiency can be improved even further if we are willing to sacrifice strategyproofness. Venturing into manipulable (non-strategyproof) algorithms can be risky, however. In manipulable mechanisms, individuals may state their preferences in ways that ultimately make themselves (and others) worse off in comparison to their outcomes in strategyproof algorithms. Whether or not we should even consider manipulable algorithms is a big question in market design. The second chapter in this dissertation finds that subjects actually fare better on average when we move away from strategyproofness. The welfare-improving algorithms we study discuss in the second chapter lead many individuals to manipulate their preferences in the same ways, suggesting that the mechanisms' specific designs stimulate non-random non-equilibrium behavior. As market designers, we can use these systematic deviations from equilibrium to develop algorithms that are best suited for the types of agents in the population. In particular, as market designers we should start thinking about creating algorithms for agents who play according to well-documented behavioral game theory models, such as the level-k model that explains many subjects' actions in the third chapter of this dissertation. Altogether, there is much additional theoretical and experimental work that needs to be done to fully understand (1) the way subjects behave in strategic settings and (2) which mechanisms will lead to the highest realized levels of agent welfare in practice. Fortunately, making progress on either of these questions will simultaneously advance our position on solving the other. It seems there is much potential for future work to make valuable contributions to what may ultimately become known as ``behavioral market design.''.
Author: Eric Samuel Mayefsky
Publisher: Stanford University
ISBN:
Category :
Languages : en
Pages : 106
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Book Description
I explore fundamental behavioral aspects of several market design environments in a variety of projects using both theoretical models and laboratory experiments. I show that human tendencies can drastically shift potential outcomes away from those which would result if individuals were fully 'rational' and unbiased in decision problems similar to those found frequently in the field. I explore two common classes of centralized matching mechanisms--Deferred Acceptance and Priority--which have wildly different success rates in practice despite both being open to manipulation by agents who have incomplete information about the other participants in the match. For this reason, theory predicts both mechanisms in equilibrium will yield match outcomes which are unstable, meaning some agents will desire to renegotiate with one another after receiving their match assignments, and thus reduce participants' confidence in using the match. I provide laboratory evidence that out-of-equilibrium truth telling by agents is substantially more frequent in the Deferred Acceptance environment and thus Deferred Acceptance matches will generally be more stable in practice than matches using a Priority mechanism. This may explain why Deferred Acceptance mechanisms appear to be more viable in the field. I also explore two different models of decentralized two-sided matching environments where establishing scarce signaling methods can improve market outcomes. In a laboratory experiment, I show that allowing potential receiving job offers to send a single signal to their favorite potential employer before job offers are made increases overall match rates in the market, but is potentially damaging to the firms making offers when compared to the market without such a signal. Then, in a theoretical model where pre-offer communication takes the form of an interview process where workers have natural limits on the number of interviews in which they can participate, I show that in many cases firms can benefit themselves and the market as a whole by voluntarily restricting the number of interviews they offer to participate in. While not traditionally thought of as market design problems, voting mechanisms are fundamentally goods allocation problems as well and have many of the same issues as traditional markets do. I explore the effects of voter bias on outcomes in an otherwise standard voting model and find that even slight external pressure on individuals in a committee tasked with coming to a collective decision can destroy the ability of that committee to arrive at the correct result, even when individuals have good information about the best decision to make. Furthermore, the quality of the decision made by such a committee can actually degrade as the committee size increases, in contrast with the canonical Condorcet Jury Theorem which predicts that a committee's ability to choose the right outcome increases quickly as more members are added.
Author: Diego Pulido Lema
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
"This dissertation is composed of three chapters describing economic experiments designed to study various aspects of the way people make investment choices.The first chapter describes experimental evidence supporting the main theoretical predictions about the effect of non-tradable risk, in the form of future income, on investment choices. The paper has three main results. The first one is a positive correlation between the willingness to take financial risk and the level of expected non-tradable income. The second one is a negative correlation between the willingness to face portfolio risk and income risk. The third finding is that a positive association between non-tradable income and financial returns makes investors less willing to take risks. These experimental results match the theoretical predictions. The second chapter reports the results from an online economics experiment with heads of households that explores the link between a sample of survey questions on a know-your-client survey form and several lab experiments measuring risk preferences and loss aversion. The first finding is that the lab instruments measuring risk preferences significantly predict responses to the risk questions on the survey form. By contrast, an experimental task measuring loss aversion does not predict responses to the loss questions on the form. Indeed, if anything, the risk instruments also predict most of the loss questions. The third chapter reports the results of an on-line economics experiment that explores the connections between real-life and laboratory investment behavior. The first finding is that financial literacy and confidence, and not education, help to explain real-life financial decisions, while exactly the opposite is true of the laboratory investment decisions. On the other hand, we find that trust explains real-life investment decisions that are not made independently, as well as behavior in the investment game under ambiguity. Thus, in the experiment, trust is the sole common thread connecting real-life behavior with laboratory behavior. " --
Author: Roger Frantz
Publisher: Routledge
ISBN: 1135994161
Category : Business & Economics
Languages : en
Pages : 249
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Book Description
Economists working on behavioral economics have been awarded the Nobel Prize four times in recent years. This book explores this innovative area and in particular focuses on the work of Harvey Leibenstein, one of the pioneers of the discipline. The topics covered in the book include agency theory; dynamic efficiency; evolutionary economics; X-efficiency; the effect of emotions, specifically affect on decision-making; market pricing; experimental economics; human resource management; the Carnegie School, and intra-industry efficiency in less developed countries.
Author: Eric Samuel Mayefsky
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
I explore fundamental behavioral aspects of several market design environments in a variety of projects using both theoretical models and laboratory experiments. I show that human tendencies can drastically shift potential outcomes away from those which would result if individuals were fully 'rational' and unbiased in decision problems similar to those found frequently in the field. I explore two common classes of centralized matching mechanisms--Deferred Acceptance and Priority--which have wildly different success rates in practice despite both being open to manipulation by agents who have incomplete information about the other participants in the match. For this reason, theory predicts both mechanisms in equilibrium will yield match outcomes which are unstable, meaning some agents will desire to renegotiate with one another after receiving their match assignments, and thus reduce participants' confidence in using the match. I provide laboratory evidence that out-of-equilibrium truth telling by agents is substantially more frequent in the Deferred Acceptance environment and thus Deferred Acceptance matches will generally be more stable in practice than matches using a Priority mechanism. This may explain why Deferred Acceptance mechanisms appear to be more viable in the field. I also explore two different models of decentralized two-sided matching environments where establishing scarce signaling methods can improve market outcomes. In a laboratory experiment, I show that allowing potential receiving job offers to send a single signal to their favorite potential employer before job offers are made increases overall match rates in the market, but is potentially damaging to the firms making offers when compared to the market without such a signal. Then, in a theoretical model where pre-offer communication takes the form of an interview process where workers have natural limits on the number of interviews in which they can participate, I show that in many cases firms can benefit themselves and the market as a whole by voluntarily restricting the number of interviews they offer to participate in. While not traditionally thought of as market design problems, voting mechanisms are fundamentally goods allocation problems as well and have many of the same issues as traditional markets do. I explore the effects of voter bias on outcomes in an otherwise standard voting model and find that even slight external pressure on individuals in a committee tasked with coming to a collective decision can destroy the ability of that committee to arrive at the correct result, even when individuals have good information about the best decision to make. Furthermore, the quality of the decision made by such a committee can actually degrade as the committee size increases, in contrast with the canonical Condorcet Jury Theorem which predicts that a committee's ability to choose the right outcome increases quickly as more members are added.
Author: Nicolas Jacquemet
Publisher: Cambridge University Press
ISBN: 1108660495
Category : Business & Economics
Languages : en
Pages : 475
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Book Description
Over the past two decades, experimental economics has moved from a fringe activity to become a standard tool for empirical research. With experimental economics now regarded as part of the basic tool-kit for applied economics, this book demonstrates how controlled experiments can be a useful in providing evidence relevant to economic research. Professors Jacquemet and L'Haridon take the standard model in applied econometrics as a basis to the methodology of controlled experiments. Methodological discussions are illustrated with standard experimental results. This book provides future experimental practitioners with the means to construct experiments that fit their research question, and new comers with an understanding of the strengths and weaknesses of controlled experiments. Graduate students and academic researchers working in the field of experimental economics will be able to learn how to undertake, understand and criticise empirical research based on lab experiments, and refer to specific experiments, results or designs completed with case study applications.
Author: Siqi Pan
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 112
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Book Description
This dissertation focuses on the design and implementation of matching markets where transfers are not available, such as college admissions, school choice, and certain labor markets. The results contribute to the literature from both a theoretical and a behavioral perspective, and may have policy implications for the design of some real-life matching markets. Chapter 1, “Exploding Offers and Unraveling in Two-Sided Matching Markets,” studies the unraveling problem prevalent in many two-sided matching markets that occurs when transactions become inefficiently early. In a two-period decentralized model, I examine whether the use of exploding offers can affect agents' early moving incentives. The results show that when the culture of the market allows firms to make exploding offers, unraveling is more likely to occur, leading to a less socially desirable matching outcome. A market with an excess supply of labor is less vulnerable to the presence of exploding offers; yet the conclusion is ambiguous for a market with a greater degree of uncertainty in early stages, which depends on the specific information structure. While a policy banning exploding offers tends to be supported by high quality firms and workers, it can be opposed by those of lower quality. This explains the prevalence of exploding offers in practice. Chapter 2, “Constrained School Choice and Information Acquisition,” investigates a common practice of many school choice programs in the field, where the length of students' submitted preference lists are constrained. In an environment where students have incomplete information about others’ preferences, I theoretically study the effect of such a constraint under both a Deferred Acceptance mechanism (DA) and a Boston mechanism (BOS). The result shows that ex-ante stability can only be ensured under an unconstrained DA, but not under a constrained DA, an unconstrained BOS, or a constrained BOS. In a lab experiment, I find that the constraint also affects students’ information acquisition behavior. Specifically, when faced with a constraint, students tend to acquire less wasteful information and distribute more efforts to acquire relevant information under DA; such an effect is not significant under BOS. Overall, the constraint has a negative effect on efficiency and stability under both mechanisms. Chapter 3, “Targeted Advertising on Competing Platforms,” is jointly written with Huanxing Yang. We investigate targeted advertising in two-sided markets. Each of the two competing platforms has single-homing consumers on one side and multi-homing advertising firms on the other. We focus on how asymmetry in platforms’ targeting abilities translates into asymmetric equilibrium outcomes, and how changes in targeting ability affect the price and volume of ads, consumer welfare, and advertising firms' profits. We also compare social incentives and equilibrium incentives in investing in targeting ability. Chapter 4, “The Instability of Matching with Overconfident Agents: Laboratory and Field Investigations,” focuses on centralized college admissions markets where students are evaluated and allocated based on their performance on a standardized exam. A single exam’s measurement error causes the exam-based priorities to deviate from colleges' aptitude-based preferences: a student who underperforms in one exam may lose her placement at a preferred college to someone with a lower aptitude. The previous literature proposes a solution of combining a Boston algorithm with pre-exam preference submission. Under the assumption that students have perfect knowledge of their relative aptitudes before taking the exam, the suggested mechanism intends to trigger a self-sorting process, with students of higher (lower) aptitudes targeting more (less) preferred colleges. However, in a laboratory experiment, I find that such a self-sorting process is skewed by overconfidence, which leads to a welfare loss larger than the purported benefits. Moreover, the mechanism introduces unfairness by rewarding overconfidence and punishing underconfidence, thus serving as a gender penalty for women. I also analyze field data from Chinese high schools; the results suggest similar conclusions as in the lab.
Author: Nicholas Bardsley
Publisher: Princeton University Press
ISBN: 0691204055
Category : Business & Economics
Languages : en
Pages : 384
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Book Description
Since the 1980s, there has been explosive growth in the use of experimental methods in economics, leading to exciting developments in economic theory and policy. Despite this, the status of experimental economics remains controversial. In Experimental Economics, the authors draw on their experience and expertise in experimental economics, economic theory, the methodology of economics, philosophy of science, and the econometrics of experimental data to offer a balanced and integrated look at the nature and reliability of claims based on experimental research. The authors explore the history of experiments in economics, provide examples of different types of experiments, and show that the growing use of experimental methods is transforming economics into a genuinely empirical science. They explain that progress is being held back by an uncritical acceptance of folk wisdom regarding how experiments should be conducted, a failure to acknowledge that different objectives call for different approaches to experimental design, and a misplaced assumption that principles of good practice in theoretical modeling can be transferred directly to experimental design. Experimental Economics debates how such limitations might be overcome, and will interest practicing experimental economists, nonexperimental economists wanting to interpret experimental research, and philosophers of science concerned with the status of knowledge claims in economics.
Author: Nicolas Jacquemet
Publisher: Cambridge University Press
ISBN: 1107060273
Category : Business & Economics
Languages : en
Pages : 475
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Book Description
Over the past two decades, experimental economics has moved from a fringe activity to become a standard tool for empirical research. With experimental economics now regarded as part of the basic tool-kit for applied economics, this book demonstrates how controlled experiments can be a useful in providing evidence relevant to economic research. Professors Jacquemet and L'Haridon take the standard model in applied econometrics as a basis to the methodology of controlled experiments. Methodological discussions are illustrated with standard experimental results. This book provides future experimental practitioners with the means to construct experiments that fit their research question, and new comers with an understanding of the strengths and weaknesses of controlled experiments. Graduate students and academic researchers working in the field of experimental economics will be able to learn how to undertake, understand and criticise empirical research based on lab experiments, and refer to specific experiments, results or designs completed with case study applications.
Author: Shengwu Li
Publisher:
ISBN:
Category :
Languages : en
Pages :
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Book Description
This dissertation consists of three essays in theoretical and behavioral economics. They all concern decision-making in complex environments. The first chapter is entitled Obviously Strategy-Proof Mechanisms. It is generally held that some strategy-proof mechanisms are easy for non-experts to understand, and others are difficult to understand. However, this distinction is not captured by standard game theory. In this chapter, I define obviously dominant strategies. Whether a strategy is obviously dominant depends (just) on the extensive game form. I characterize this definition in two ways: Obviously dominant strategies are exactly those strategies that a cognitively limited agent can recognize as dominant. Obviously strategy-proof (OSP) mechanisms are those that can be run by a social planner with only partial commitment power. For an environment with one-dimensional types and transfers, I characterize the OSP mechanisms and the OSP-implementable allocation rules. I test and corroborate the theory with a laboratory experiment. The second chapter is entitled Context Effects as Explained by Foraging Theory, and is coauthored with Neil Yu. This chapter reconciles two seemingly competing explanations of context-dependent choice, one invoking psychological mechanisms, and the other Bayesian learning. We prove that standard context effects are features of the optimal solution to a general dynamic stochastic resource- acquisition problem. The model has two key ingredients: inter-temporal substitution and learning about the environment. Interpreted as a description of animal foraging behavior, it explains why context effects might be adaptive in nature. Interpreted as a description of consumer choice problems, it suggests that context effects might result from rational inference. A simple experiment shows that the latter interpretation sometimes holds. The third chapter is entitled Thickness and Information in Dynamic Matching Markets, and is coauthored with Mohammad Akbarpour and Shayan Oveis Gharan. We introduce a simple model of dynamic matching in networked markets, where agents arrive and depart stochastically, and the composition of the trade network depends endogenously on the matching algorithm. We show that if the planner can identify agents who are about to depart, then waiting to thicken the market is highly valuable, and if the planner cannot identify such agents, then matching agents greedily is close to optimal. We characterize the optimal waiting time (in a restricted class of mechanisms) as a function of waiting costs and network sparsity. The planner's decision problem in our model involves a combinatorially complex state space. However, we show that simple local algorithms that choose the right time to match agents, but do not exploit the global network structure, can perform close to complex optimal algorithms. Finally, we consider a setting where agents have private information about their departure times, and design a continuous-time dynamic mechanism to elicit this information.
