Electroencephalographic topography measures of experienced utility

Economic theory distinguishes two concepts of utility: decision utility, objectively quantifiable by choices, and experienced utility, referring to the satisfaction by an obtainment. To date, experienced utility is typically measured with subjective ratings. This study intended to quantify experienced utility by global levels of neuronal activity. Neuronal activity was measured by means of electroencephalographic (EEG) responses to gain and omission of graded monetary rewards at the level of the EEG topography in human subjects. A novel analysis approach allowed approximating psychophysiological value functions for the experienced utility of monetary rewards. In addition, we identified the time windows of the event-related potentials (ERP) and the respective intracortical sources, in which variations in neuronal activity were significantly related to the value or valence of outcomes. Results indicate that value functions of experienced utility and regret disproportionally increase with monetary value, and thus contradict the compressing value functions of decision utility. The temporal pattern of outcome evaluation suggests an initial (∼250 ms) coarse evaluation regarding the valence, concurrent with a finer-grained evaluation of the value of gained rewards, whereas the evaluation of the value of omitted rewards emerges later. We hypothesize that this temporal double dissociation is explained by reward prediction errors. Finally, a late, yet unreported, reward-sensitive ERP topography (∼500 ms) was identified. The sources of these topographical covariations are estimated in the ventromedial prefrontal cortex, the medial frontal gyrus, the anterior and posterior cingulate cortex and the hippocampus/amygdala. The results provide important new evidence regarding “how,” “when,” and “where” the brain evaluates outcomes with different hedonic impact.

Egalitarianism under Earmark Constraints

Agents with single-peaked preferences share a resource coming from different suppliers; each agent is connected to only a subset of suppliers. Examples include workload balancing, sharing earmarked funds, and rationing utilities after a storm. Unlike in the one supplier model, in a Pareto optimal allocation agents who get more than their peak from underdemanded suppliers, coexist with agents who get less from overdemanded suppliers. Our Egalitarian solution is the Lorenz dominant Pareto optimal allocation. It treats agents with equal demands as equally as the connectivity constraints allow. Together, Strategyproofness, Pareto Optimality, and Equal Treatment of Equals, characterize our solution.

Monopsony Power, Pay Structure and Training

Although interest in monopsonistic influences on labor market outcomes has revived in recent years, only a few empirical studies provide direct evidence on this topic. In this article, the authors analyze the effect of monopsony power on pay structure, using a direct measure of labor market thinness. The authors find evidence of monopsony power, as firms facing fewer local competitors offer lower wages to skilled labor and trainees, but not to unskilled labor. The findings have important implications for the economic theory of training, as most recent models assume monopsonistic pay-setting for skilled labor, but not for trainees.

The Determinants of Personal Income Tax Progressivity Around the Globe

This paper utilizes a novel database collected by the authors to document features of the progressivity of personal income tax systems across 209 countries for the years 1980-2009. We measure progressivity in several ways. First, we associate it with the increase in effective average (marginal) tax rates between a wage of zero and ten times the average wage in a country. Second, we consider the curvature of the tax schedule expressed as the difference between the effective average (marginal) tax schedule from a wage of zero to ten times the average wage and a linear average tax schedule and, alternatively, the diference between the effective average (marginal) tax schedule from the minimum positive taxable income, to ten times the average wage as opposed to a linear average tax schedule. Moreover, the paper assesses patterns regarding the conditional correlation of country-specifc tax progressivity measures with a host of economic and political country-specific characteristics and find the labor supply elasticity and the income replacement rates for the unemployed to be key determinants of progressivity around the globe, in line with economic theory.

Indicating Commitment: The Notion of dépense in the Study of Ritual and Religion

By analysing two cases from the recent history of Vaishnavism (a temple festival in Vrindavan; the development of the International Society for Krishna Consciousness, or ISKCON), this paper shows that the notion of dépenseas developed by Marcel Mauss, Robert Hertz and Georges Bataille can be applied as an analytical tool in the study of rituals and religion as an indicator of religious commitment. At the same time it is possible to show that, by constructing a kind of macro-economic theory that includes religious behaviour, recent theories of religious economics are part of, and reproduce, a modern discourse of rationality that rules out, rather than understands, forms of irrationality such as unproductive expenditure (dépense).

Using negotiated budgets for planning and performance evaluation: An experimental study : an experimental study

Budgets are often simultaneously used for the conflicting purposes of planning and performance evaluation. While economic theory suggests that firms should use separate budgets for conflicting purposes this contrasts with existing evidence that firms rarely do so. We address two open questions related to these observations in an experiment. Specifically, we investigate how a planning task that is in conflict with the performance evaluation task affects behavior in budget negotiations and their outcomes. Additionally, we analyze whether a single budget can be effectively used for both purposes compared to two separate budgets. We develop theory to predict that adding a planning task that is in conflict with the superior’s performance evaluation task increases the subordinate’s cooperation in and after the negotiation of a performance evaluation budget. Moreover, we predict that subordinate cooperation increases even more when the superior is restricted to use a single budget for both purposes. Our results broadly support our hypotheses. Specifically, we find that when budgets are used for both planning and performance evaluation, this increases the subordinate’s budget proposals during the negotiation and his performance after the negotiation. These effects tend to be even larger when the superior is restricted to a single budget rather than separate budgets for planning and performance evaluation, particularly with respect to subordinate performance. In our experimental setting, the benefits of increased subordinate cooperation even more than offset the loss in flexibility from the superior’s restriction to a single budget. The results of this study add to the understanding of the interdependencies of conflicting budgeting purposes and contribute to explain why firms often use a single budget for multiple purposes.