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LABORATORY STUDIES IN THE ECONOMICS OF INFORMATION
by
Manuel Castro
A Dissertation Presented to the
FACULTY OF THE USC GRADUATE SCHOOL
UNIVERSITY OF SOUTHERN CALIFORNIA
In Partial Fulfillment of the
Requirements for the Degree
DOCTOR OF PHILOSOPHY
(ECONOMICS)
August 2011
Copyright 2011 Manuel Castro
Object Description
| Title | Laboratory studies in the economics of information |
| Author | Castro, Manuel |
| Author email | manuelcastropinho@gmail.com;castrolo@usc.edu |
| Degree | Doctor of Philosophy |
| Document type | Dissertation |
| Degree program | Economics |
| School | College of Letters, Arts And Sciences |
| Date defended/completed | 2011-05-16 |
| Date submitted | 2011-06-16 |
| Date approved | 2011-06-16 |
| Restricted until | 2011-06-16 |
| Date published | 2011-06-16 |
| Advisor (committee chair) | Carrillo, Juan D. |
| Advisor (committee member) |
Brocas, Isabelle Alonso, Ricardo |
| Abstract | This dissertation consists of three laboratory studies in the economics of information. The first chapter entitled “Delegation in Teams” analyzes, both in theory and in the laboratory, the effects of delegation of authority to set contracts on team production. Two specifications are considered: in one the organizer sets the contracts of the team members (no delegation), and in the other the organizer selects one of the team members to set the contracts (delegation). Afterward, team members engage in a standard joint production activity. The chapter shows that when the team is productive- i.e. the combined cost of effort of both team members is small- the organizer should delegate authority to the member with the highest cost of effort, and both players exert effort; when the team is unproductive the organizer should delegate authority to the member with the lowest cost of effort, and only this player exerts effort. With no delegation, when the team is productive, the organizer splits the revenue between the team members in a way that both players have incentives to exert effort; when the team is unproductive, the organizer gives the whole revenue to the player with the lowest cost of effort, and this player solely exerts effort. In the laboratory, subjects cooperate more under no delegation than under delegation. Also subjects are more likely to exert effort when they set the contracts and less likely when the other team member sets the contracts. Estimation of the Inequality Aversion, Quantal Response Equilibrium and Cognitive Hierarchy models reveals that each model captures different aspects of the behavior of subjects. ❧ ❧ In the second chapter, entitled “The Nature of Information in a First-Price Common Value Auction” (joint with Isabelle Brocas and Juan Carrillo), we study in the lab- oratory a series of first-price sealed bid auctions of a common value good. Bidders face three types of information: private information, public information and common uncertainty. Auctions are characterized by the relative size of these three information elements. According to Nash Equilibrium theory, bids can be decomposed into two additive parts. For the private information, bidders should shade their bid. For the common uncertainty and public information, bidders should compete a` la Bertrand and bid the expected and realized values respectively. We find that only half of the subjects takes into account the different types of information; for these subjects, the departures from equilibrium predictions occur not only with respect to private information but with respect to public information and common uncertainty as well. A cluster analysis shows that there is heterogeneous behavior regarding the bidding strategies. Estimation of the Cognitive Hierarchy and Cursed Equilibrium models reveals that each model captures some important aspects of the behavior of subjects. However, the disparity of the estimated parameters as we vary the relative size of the three types of information suggests that their predictive power is limited. ❧ ❧ In the third chapter, entitled “The Nature of Information in a Second-Price Common Value Auction” (joint with Isabelle Brocas and Juan Carrillo), we study in the laboratory a set of second-price sealed bid auctions of a common value good, with two bidders with the same amount of information. Bidders face common uncertainty, private and public information, and the auctions are characterized by the relative size of these three types of information. According to Nash Equilibrium theory, bidders should bid twice the value of the private information, and the value of public information or the expected value of common uncertainty enter additively in the bidding function. We find that subjects do not treat private and public information in a different fashion and they react less to these types of information than what theory predicts. However, as the amount of total information increases subjects increase their reaction to private information. We also find that subjects consistently overbid in all auctions, even when there is no private information. The Cursed Equilibrium and the Cognitive Hierarchy models consistently predict that the subjects are fully cursed in all auctions with private information. Having said that, none of the models can explain overbidding in the absence of private information. ❧ |
| Keyword | experimental economics; economics of information; behavioral models |
| Language | English |
| Part of collection | University of Southern California dissertations and theses |
| Publisher (of the original version) | University of Southern California |
| Place of publication (of the original version) | Los Angeles, California |
| Publisher (of the digital version) | University of Southern California. Libraries |
| Provenance | Electronically uploaded by the author |
| Type | texts |
| Legacy record ID | usctheses-m |
| Contributing entity | University of Southern California |
| Rights | Castro, Manuel |
| Physical access | The author retains rights to his/her dissertation, thesis or other graduate work according to U.S. copyright law. Electronic access is being provided by the USC Libraries in agreement with the author, as the original true and official version of the work, but does not grant the reader permission to use the work if the desired use is covered by copyright. It is the author, as rights holder, who must provide use permission if such use is covered by copyright. The original signature page accompanying the original submission of the work to the USC Libraries is retained by the USC Libraries and a copy of it may be obtained by authorized requesters contacting the repository e-mail address given. |
| Repository name | University of Southern California Digital Library |
| Repository address | USC Digital Library, University of Southern California, University Park Campus MC 7002, 106 University Village, Los Angeles, California 90089-7002, USA |
| Repository email | cisadmin@lib.usc.edu |
| Archival file | uscthesesreloadpub_Volume71/etd-CastroManu-29.pdf |
Description
| Title | Page 1 |
| Contributing entity | University of Southern California |
| Repository email | cisadmin@lib.usc.edu |
| Full text | LABORATORY STUDIES IN THE ECONOMICS OF INFORMATION by Manuel Castro A Dissertation Presented to the FACULTY OF THE USC GRADUATE SCHOOL UNIVERSITY OF SOUTHERN CALIFORNIA In Partial Fulfillment of the Requirements for the Degree DOCTOR OF PHILOSOPHY (ECONOMICS) August 2011 Copyright 2011 Manuel Castro |
