Economics - Research Publications

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    Replication: Belief elicitation with quadratic and binarized scoring rules
    Erkal, N ; Gangadharan, L ; Koh, BH (Elsevier, 2020-12-01)
    Researchers increasingly elicit beliefs to understand the underlying motivations of decision makers. Two commonly used methods are the quadratic scoring rule (QSR) and the binarized scoring rule (BSR). Hossain and Okui (2013) use a within-subject design to evaluate the performance of these two methods in an environment where subjects report probabilistic beliefs over binary outcomes with objective probabilities. In a near replication of their study, we show that their results continue to hold with a between-subject design. This is an important validation of the BSR given that researchers typically implement only one method to elicit beliefs. In favor of the BSR, reported beliefs are less accurate under the QSR than the BSR. Consistent with theoretical predictions, risk-averse subjects distort their reported beliefs under the QSR.
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    Leadership selection: Can changing the default break the glass ceiling?
    Erkal, N ; Gangadharan, L ; Xiao, E (ELSEVIER SCIENCE INC, 2022-04)
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    Do women receive less blame than men? Attribution of outcomes in a prosocial setting
    Erkal, N ; Gangadharan, L ; Koh, BH (ELSEVIER, 2023-06)
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    By chance or by choice? Biased attribution of others' outcomes when social preferences matter
    Erkal, N ; Gangadharan, L ; Koh, BH (SPRINGER, 2022-04)
    UNLABELLED: Decision makers in positions of power often make unobserved choices under risk and uncertainty. In many cases, they face a trade-off between maximizing their own payoff and those of other individuals. What inferences are made in such instances about their choices when only outcomes are observable? We conduct two experiments that investigate whether outcomes are attributed to luck or choices. Decision makers choose between two investment options, where the more costly option has a higher chance of delivering a good outcome (that is, a higher payoff) for the group. We show that attribution biases exist in the evaluation of good outcomes. On average, good outcomes of decision makers are attributed more to luck as compared to bad outcomes. This asymmetry implies that decision makers get too little credit for their successes. The biases are exhibited by those individuals who make or would make the less prosocial choice for the group as decision makers, suggesting that a consensus effect may be shaping both the belief formation and updating processes. SUPPLEMENTARY INFORMATION: The online version contains supplementary material available at 10.1007/s10683-021-09731-w.
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    Welfare Receipt and the Intergenerational Transmission of Work-Welfare Norms
    Barón, JD ; Cobb-Clark, DA ; Erkal, N (Wiley, 2015)
    This article investigates the role of welfare receipt in shaping norms regarding work and welfare using unique Australian data from the Youth in Focus Project. We begin by incorporating welfare into a theoretical model of the transmission of work-welfare norms across generations. Consistent with the predictions of this model, we find evidence that youths' attitudes toward work and welfare may be influenced by socialization within their families. Young people are more likely to oppose generous social benefits and to believe that social inequality stems from individual characteristics if (i) their mothers support these views; (ii) their mothers were employed while they were growing up; and (iii) their families never received welfare. Finally, youths' work-welfare norms appear to be unrelated to their neighbors' welfare receipt suggesting that socialization occurs primarily within families rather than within neighborhoods.
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    Aggregative games and oligopoly theory: short‐run and long‐run analysis
    Anderson, S ; Erkal, N ; PICCININ, D (Wiley, 2020-06-18)
    We compile an IO toolkit for aggregative games and use inclusive best reply functions to deliver oligopoly comparative statics and ranking of firms' actions and profits. Aggregative games apply to additively separable direct and indirect preferences, as well as generalized quadratic forms. The aggregative game structure delivers immediate consumer welfare results if demand functions have the IIA property. We close the model with a monopolistically competitive fringe to show strong neutrality properties for long-run equilibria. These properties underscore a unifying principle in the literature on merger analysis, privatization, Stackelberg leadership, and cost shocks.
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    Monetary and Non-Monetary Incentives in Real-effort Tournaments
    Erkal, N ; Gangadharan, L ; Koh, BH (Elsevier, 2018-01-01)
    Results from laboratory experiments using real-effort tasks provide mixed evidence on the relationship between monetary incentives and effort provision. To examine this issue, we design three experiments where subjects participate in two-player real-effort tournaments with two prizes. Experiment 1 shows that subjects exert high effort even if there are no monetary incentives, suggesting that non-monetary incentives are contributing to their effort choices. Moreover, increasing monetary incentives does not result in higher effort provision. Experiment 2 shows that the impact of non-monetary incentives can be reduced by providing subjects with the option of leaving the laboratory early, using an incentivized timeout button, or working on an incentivized alternative activity. Experiment 3 revisits the relationship between monetary incentives and effort provision using the insights from Experiment 2. Using a design with an incentivized alternative activity, we show that participants increase effort in response to monetary incentives. Taken together, the findings from the three experiments suggest that results from real-effort tasks require a careful evaluation and interpretation of the motivations underlying the observed performance.
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    Cooperative R&D under uncertainty with free entry
    Erkal, N. ; Piccinin, D. ( 2007-08)
    In the last few decades, the effects of cooperative R&D arrangements on innovation andwelfare have played an important role in policy making. The goal of this paper is to analyzethe effects of cooperative R&D arrangements in a model with a stochastic R&D process andoutput spillovers. Our main innovation is to allow for free entry in both the R&D race andthe product market. To determine the desirability of cooperation in R&D environments,we compare three different ways of organizing R&D activities: R&D competition, R&Dcartels, and RJV cartels. In contrast with the literature, we assume that cooperative R&Darrangements do not have to include all of the firms in the industry. We show that sharingof research outcomes is a necessary condition for the profitability of cooperative R&Darrangements with free entry. The profitability of RJV cartels depends on their size. Theimpact of cooperative R&D arrangements on the aggregate level of innovation depends onwhether there are participants in the R&D race who are a part of the cooperative R&Darrangement. If some outsiders choose to participate in the R&D race, the aggregate rate ofinnovation remains unaffected by the formation of a cooperative R&D arrangement. Otherwise,it increases. R&D cartels may be welfare-improving in cases when they cause theaggregate rate of innovation to increase. In such cases, it may be desirable to subsidizethem. Since sharing of R&D outcomes affects the equilibrium number of firms in the productmarket after the R&D race, the consumer welfare effects of RJV cartels are sensitiveto the specification of consumer preferences. Subsidies may be desirable in cases of largerRJVs since they are the ones which are less likely to be profitable.
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    Horizontal mergers with free entryin differentiated oligopolies
    ERKAL, NISVAN ; Piccinin, Daniel ( 2006-10)
    Antitrust authorities view the possibility of entry as a key determinant of whether a proposedmerger will be harmful to society. This paper examines the effects of horizontalmergers in models of non-localized, differentiated Bertrand oligopoly that allow for freeentry. The analysis of the long run effects of mergers in differentiated products marketsraises issues that are significantly different from those in the short run or in homogeneousproducts markets due to the introduction of new varieties. Our analysis reveals that determiningthe properties of consumer preferences is crucial to the antitrust analysis of mergersin differentiated products markets. Specifically, we show that if the demand system satisfiesthe Independence from Irrelevant Alternatives (IIA) property and if the number of firms istreated as a continuous variable, mergers in differentiated products markets have no longrun effect on consumer welfare. Moreover, in this case, marginal cost savings are to a largeextent irrelevant to the consumer welfare effects of mergers. If the number of firms is treatedas a discrete variable, fixed or marginal cost savings are a necessary condition for mergersto have zero or positive effect on consumer welfare. Using the example of linear demand,we show that if the demand system does not satisfy the IIA property, mergers in differentiatedproducts markets can harm consumer welfare in long run equilibrium. Moreover, theamount of harm increases with consumers’ taste for variety.