Department of Economics

2005-2006 Seminar Series

Unless otherwise indicated, all seminars take place from 4:00 – 5:30PM in the McIntosh Center on the third floor of University Hall.

Oct 17, 2005	Lesley Chiou Assistant Professor Department of Economics Occidental College	“Empirical Analysis of Retail Competition: Spatial Differentiation at Walmart, Amazon.com, and Their Competitors” Abstract
Nov 28, 2005	Michael Steinberger Assistant Professor Department of Economics, Pomona College	“Educational Sorting and the Return to College: 1979-1999” Abstract
Dec 5, 2005	Seda Ertac Ph.D. Candidate University of California, Los Angeles	“Social Comparisons and Optimal Information Revelation: Theory and Experiments” Abstract
Jan 30, 2006	Guillaume Vandenbroucke, Assistant Professor, Department of Economics, University of Southern California	"A Model of the Trends in Hours” Abstract
Feb 27, 2006	Paul Zak, Professor and Chair, Department of Economics, Claremont Graduate University, Director of the Center for Neuroeconomic Studies	“The Neuroeconomics of Trust” Abstract
Mar 27, 2006	Darren Filson, Department of Economics, Claremont Graduate University	“Coming Soon to a Theater Near You? A Proposal for Improving Movie Exhibition Contracts” Abstract
April 3, 2006 UNH 1857	Geert Demuijnck, University of Wisconsin-Madison and Université Catholique de Lille	“Fair compensation. An empirical study of luck egalitarian justice and responsibility” Abstract. Note change in location: UNH 1857
Apr 24, 2006	Jacob Goeree, Professor of Economics, Division of the Humanities and Social Sciences, California Institute of Technology	“Self-Correcting Information Cascades,” by Jacob K. Goeree, Thomas R. Palfrey, Brian W. Rogers, and Richard D. McKelvey Abstract.

Vitae and Abstracts:

LESLEY CHIOU did her graduate studies at the Massachusetts Institute of Technology and her undergraduate studies at the University of California, Berkeley. Prof. Chiou’s fields of interest are Industrial Organization and Applied Econometrics. Her research focuses on competition in the retail sector and the application of simulation methods in estimation.

“Empirical Analysis of Retail Competition: Spatial Differentiation at Walmart, Amazon.com, and Their Competitors”

This paper quantifies the degree of competition and spatial differentiation across different retail channels by exploiting a unique dataset that describes a consumer’s choice of store, product of purchase, item price, and demographics. For each household, I collect information on the location and distance of nearby stores. Then I estimate a consumer’s choice of retailer in the sales market for DVDs among online, mass merchant, electronics, video specialty, and music stores. Using a discrete choice model, I allow for unobserved heterogeneity in preferences for store types and disutility of travel. A consumer’s traveling cost varies by income, and substitution occurs proportionately more among stores of the same type. Conditional on price and distance, the average consumer still prefers Wal-Mart over most other stores. In addition, consumers’ shopping patterns across store types vary significantly by gender, education, and the presence of children.

MICHAEL STEINBERGER did his graduate studies at the Massachusetts Institute of Technology and his undergraduate studies at the University of California, Berkeley. Prof. Steinberger’s fields of interest are Labor Economics, Macroeconomics and Political Economy. His other research has looks at Bankruptcy; College Entrance and Graduation; Gender and Racial Pay Differentials; Income Inequality and Wage Dispersion; Local Government Taxation and Expenditures; Poverty and Altruism, and Returns to Education.

“Educational Sorting and the Return to College: 1979-1999”

SEDA ERTAC is a Ph.D. Candidate in Economics at UCLA whose specialty is experimental economics.

“Social Comparisons and Optimal Information Revelation: Theory and Experiments”

This paper analyzes the optimal revelation of interim relative performance information, when agents are imperfectly informed about their abilities. In the presence of correlated shocks to performance across agents, performance comparisons with other agents provide useful information, and Bayesian agents update their beliefs about their ability using others’ performances as well as their own. I show that for a given own performance level, an agent's belief in his ability decreases in the other agent’s performance. Beliefs about ability, in turn, affect the motivation to exert effort and hence subsequent performance. Given this, I analyze, for different assumptions on the principal's payoff function and the nature of the compensation scheme, whether or not a principal would like to allow interim performance comparisons between the agents. I show that the optimal information revelation policy depends on (1) the degree of substitutability of the agents’ performances in the principal's payoff function (2) the amount of discretion the principal has in manipulating contracts. When contracts are exogenous, it may be optimal to withhold social comparisons if agents' performances are strongly complementary. When the principal can choose not only the information policy but also the compensation scheme, however, revealing all information becomes optimal. I find that the main predictions of the informational theory of social comparisons are qualitatively upheld in experimental data.

Guillaume Vandenbroucke received his Ph.D. in economics from the University of Rochester. His research involves macroeconomics and economic history, and his recent publications include an article in the American Economic Review.

“The Long Run Trend in Hours: A Model”

During the 20th century the average number of hours worked per worker in the United States declined, and the distribution of hours across wage deciles narrowed. Coincidentally, the wage distribution narrowed and then widened again. The explanation proposed here is that (i) Home production of leisure services creates an incentive to work less on the market as wages increase and the price of leisure goods decrease; (ii) The development of education in the early 20th century explains the narrowing of the wage structure and, henceforth, of the distribution of hours.

PAUL ZAK is the founding director of the Center for Neuroeconomic Studies. He has co-authored three books on monetary policy and published widely in macroeconomics and political economy. More recently, he has published articles in the newly emerging field of neuroeconomics, which refers to the cognitive processes that underlie human behavior. His publications include articles in the Economic Journal and the Journal of Economic Behavior and Organization.

“The Neuroeconomics of Trust”

The traditional view in economics is that individuals respond to incentives, but absent strong incentives to the contrary selfishness prevails. Moreover, this “greed is good” approach is deemed “rational” behavior. Nevertheless, in daily interactions and in numerous laboratory studies, a high degree of cooperative behavior prevails—even among strangers. A possible explanation for the substantial amount of “irrational” behavior observed in markets (and elsewhere) is that humans are a highly social species and to an extent value what other humans think of them. This behavior can be termed trustworthiness—cooperating when someone places trust in us. I also analyze the cross-country evidence for environments that produce high or low trust.  A number of recent experiments from my lab have demonstrated that the neuroactive hormone oxytocin facilitates trust between strangers, and appears to induce trustworthiness. In rodents, oxytocin has been associated with maternal bonding, pro-social behaviors, and in some species long-term pair bonds, but prior to the work reviewed here, the behavioral effects of oxytocin in humans had not been studied. This presentation discusses the neurobiology of positive social behaviors and how these are facilitated by oxytocin.  My experiments show that positive social signals cause oxytocin to be released by the brain, producing an unconscious attachment to a stranger. I also discuss recent research that manipulates oxytocin levels, and functional brain imaging research on trust.

DARREN FILSON is an economist at Claremont Graduate University whose research has looked at movie contracts and models of political bargaining. His publications include articles in Economic Inquiry, the Journal of Economic Behavior and Organization, and the American Journal of Political Science.

“Coming Soon to a Theater Near You? A Proposal for Improving Movie Exhibition Contracts”

The paper analyzes the revenue-sharing rule in modern movie exhibition contracts (contracts between distributors and theaters) and proposes and analyzes an alternative revenue sharing rule to the ones currently in widespread use. We provide a detailed assessment of the pros and cons of the current sharing rules vs. our proposed rule and try to quantify the benefits and costs associated with switching to our proposed rule using detailed data on attendance in particular time slots, revenues, etc. It's an interesting, intuitive, fairly non-technical exercise in assessing how allocations of movies to screens and run lengths would likely change if we changed the exhibition contract, and what the consequences would be for distributor and exhibitor profits.

Geert Demuijnck is a philosopher and economist who works at the Centre de recherche en ethique economique, Universite catholique de Lille (France). His research focuses on social justice and social policy.

Fair compensation. An empirical study of luck egalitarian justice and responsibility

This paper presents some empirical findings about to judgments of justice. More particularly it examines to which extent the theoretical positions defended by so-called ‘luck egalitarians’ are echoed by widely shared moral intuitions. Luck egalitarians defend that equal respect implies that people should be compensated for the bad consequences of unfavorable circumstances, but should fully bear the consequences of their choices and other elements they can be held responsible for. The empirical investigation is based on the methodology of a questionnaire which makes use of so-called ‘vignettes’, that is questions that present hypothetical scenarios with their possible solutions which represent indirectly principles or axioms taken from the theoretical discussion.

Part of the paper focuses on compensation for disability, since disability typically neutralizes the responsibility issue. The rest discusses the way in which different factors are considered to be circumstances or elements of choice. Finally, the paper highlights some intercultural differences as well as remarkable convergences.

Jacob Goeree is game theorist and experimental economist who also directs the Social Science Experimental Laboratory at Caltech. He has published in the Journal of Political Economy, Econometrica, The Economic Journal, Games and Economic Behavior, the American Economic Review and the Journal of Economic Theory. He is Associate Editor of Games and Economic Behavior, Economic Theory, the Journal of Economic Theory, Experimental Economics and the Journal of Economic Behavior and Organization.

Self-Correcting Information Cascades, by Jacob K. Goeree, Thomas R. Palfrey, Brian W. Rogers, and Richard D. McKelvey.

We report experimental results from long sequences of decisions in environments that are theoretically prone to severe information cascades. Observed behavior is much different | information cascades are ephemeral. We study the implications of a model based on quantal response equilibrium, in which the observed cascade formation/collapse/formation cycles arise as equilibrium phenomena. Consecutive cascades may reverse states and usually such a reversal is self-correcting: the cascade switches to the correct state. We extend the model to allow for base rate neglect and strong evidence for over-weighting of private information. The estimated belief trajectories indicate fast and efficient learning dynamics.