nep-mic New Economics Papers
on Microeconomics
Issue of 2015‒05‒16
six papers chosen by
Jing-Yuan Chiou
National Taipei University

  1. Stochastic Choice and Optimal Sequential Sampling By Drew Fudenberg; Philipp Strack; Tomasz Strzalecki
  2. Above a Swamp: A Theory of High-Quality Scientific Production By Bralind Kiri; Nicola Lacetera; Lorenzo Zirulia
  3. Asymmetric Sequential Search under Incomplete Information By Minchuk, Yizhaq; Sela, Aner
  4. Payment Evasion By Buehler, Stefan; Halbheer, Daniel; Lechner, Michael
  5. How Transparency Kills Information Aggregation: Theory and Experiment By Fehrler, Sebastian; Hughes, Niall
  6. Efficient voting with penalties By Kwiek, Maksymilian

  1. By: Drew Fudenberg; Philipp Strack; Tomasz Strzalecki
    Abstract: We model the joint distribution of choice probabilities and decision times in binary choice tasks as the solution to a problem of optimal sequential sampling, where the agent is uncertain of the utility of each action and pays a constant cost per unit time for gathering information. In the resulting optimal policy, the agent?s choices are more likely to be correct when the agent chooses to decide quickly, provided that the agent?s prior beliefs are correct. For this reason it better matches the observed correlation between decision time and choice probability than does the classical drift-diffusion model, where the agent is uncertain which of two actions is best but knows the utility difference between them.
    Date: 2015–05
  2. By: Bralind Kiri; Nicola Lacetera; Lorenzo Zirulia
    Abstract: Building on previous research to reinforce findings or point out limitations is essential for a healthy working of the scientific community because it allows science to self-correct and evolve, thus providing a more solid knowledge base to individuals, firms and societies. In this paper we propose a model to investigate the incentives of scientists to perform these activities of control and criticism when these activities, just like the production of high-quality research in the first place, are costly, and we study the strategic interaction among these incentives. We show that a certain fraction of low-quality scientific knowledge characterizes all the equilibria in the basic version of model. In fact, the absence of (detected) low-quality research in a field can be interpreted as the lack of verification activities and thus as a potential limitation to the reliability of that field. We also derive that facilitating incremental research and verification activities improves the expected quality of newly produced knowledge; this effect, however, is contrasted by the incentives to free ride on performing verification if many scientists are involved in it, and also might discourage scientists to undertake new research in the first place. Finally, the findings imply that softening overall incentives to publish does not enhance research quality, although it increases the fraction of low-quality papers that are identified. We also elaborate empirical predictions from the model and strategies to test them, and discuss the implications for firms and investors as they "scout" the scientific landscape.
    JEL: L31 O31
    Date: 2015–05
  3. By: Minchuk, Yizhaq; Sela, Aner
    Abstract: We study a two-stage sequential search model with two agents who compete for one job. The agents arrive sequentially, each one in a different stage. The agents' abilities are private information and they are derived from heterogeneous distribution functions. In each stage the designer chooses an ability threshold. If an agent has a higher ability than the ability threshold in the stage in which he arrives, he gets the job and the search is over. We analyze the equilibrium ability thresholds imposed by the designer who wishes to maximize the ability of the agent who gets the job minus the search cost. We also investigate the ratio of the equilibrium ability thresholds as well as the optimal allocation of agents in both stages according to the agents' distributions of abilities.
    Keywords: asymmetric information; sequential search
    JEL: D11 D82
    Date: 2015–05
  4. By: Buehler, Stefan; Halbheer, Daniel; Lechner, Michael
    Abstract: This paper models payment evasion as a source of profit by letting the firm choose the purchase price and the fine imposed on detected payment evaders. For a given price and fine, the consumers purchase, evade payment, or choose the outside option. We show that payment evasion leads to a form of second-degree price discrimination in which the purchase price exceeds the expected fine faced by payment evaders. We also show that higher fines do not necessarily reduce payment evasion. Using data on fare dodging on public transportation, we quantify expected fines and payment evasion.
    Keywords: Deterrence; Fine; Price Discrimination; Pricing
    JEL: L20 L30
    Date: 2015–05
  5. By: Fehrler, Sebastian (University of Konstanz); Hughes, Niall (University of Warwick)
    Abstract: We investigate the potential of transparency to influence committee decision-making. We present a model in which career concerned committee members receive private information of different type-dependent accuracy, deliberate and vote. We study three levels of transparency under which career concerns are predicted to affect behavior differently, and test the model's key predictions in a laboratory experiment. The model's predictions are largely borne out – transparency negatively affects information aggregation at the deliberation and voting stages, leading to sharply different committee error rates than under secrecy. This occurs despite subjects revealing more information under transparency than theory predicts.
    Keywords: committee decision-making, deliberation, transparency, career concerns, information aggregation, experiments, voting, strategic communication
    JEL: C92 D71 D83
    Date: 2015–04
  6. By: Kwiek, Maksymilian
    Abstract: Simple majority does not reflect the intensity of voters’ preferences. This paper presents an efficient collective choice mechanism when the choice is binary and the designer may use non-trasferable punishments to persuade agents to reveal their private information. The designer faces a dilemma – a punishment may induce a more correct choice, but its cost is socially wasteful. The efficient mechanism is a weighted majority. Weight of each individual is known ex ante and no punishments applied if preferences are relatively homogenous. Eliciting types through punishments in order to construct type-specific weights should occur if preference intensity is relatively heterogeneous, or if voters preferences represent a larger population.
    Date: 2014–01–01

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