The role of personal involvement and responsibility in dictatorial allocations: A classroom experiment

Paper was revised on 2009-11-11.-- Published as article in: Rationality and Society (2009), 21(2), 1-24.

¿En qué idioma hablan las empresas? Proyecto de la asignatura de Introducción a la Contabilidad

Duración (en horas): Más de 50 horas. Nivel educativo: Grado

Optimal Correction for Guessing in Multiple-Choice Tests

Building on Item Response Theory we introduce students’ optimal behavior in multiple-choice tests. Our simulations indicate that the optimal penalty is relatively high, because although correction for guessing discriminates against risk-averse subjects, this effect is small compared with the measurement error that the penalty prevents. This result obtains when knowledge is binary or partial, under different normalizations of the score, when risk aversion is related to knowledge and when there is a pass-fail break point. We also find that the mean degree of difficulty should be close to the mean level of knowledge and that the variance of difficulty should be high.

Altruism with Social Roots: An Emerging Literature

Revised: 2007-01.-- Published as an article in: Revista Desarrollo y Sociedad (2006), Semestre II, pp. 245-260.

Altruism in the (Social) Network

This paper explores the role of social integration on altruistic behavior. To this aim, we develop a two-stage experimental protocol based on the classic Dictator Game. In the first stage, we ask a group of 77 undergraduate students in Economics to elicit their social network; in the second stage, each of them has to unilaterally decide over the division of a fixed amount of money to be shared with another anonymous member in the group. Our experimental design allows to control for other variables known to be relevant for altruistic behavior: framing and friendship/acquaintance relations. Consistently with previous research, we find that subjects favor their friends and that framing enhances altruistic behavior. Once we control for these effects, social integration (measured by betweenness, a standard centrality measure in network theory) has a positive effect on giving: the larger social isolation within the group, the more likely it is the emergence of selfish behavior. These results suggest that information on the network structure in which subjects are embedded is crucial to account for their behavior.

On the strategic equivalence of multiple-choice test scoring rules

A disadvantage of multiple-choice tests is that students have incentives to guess. To discourage guessing, it is common to use scoring rules that either penalize wrong answers or reward omissions. These scoring rules are considered equivalent in psychometrics, although experimental evidence has not always been consistent with this claim. We model students' decisions and show, first, that equivalence holds only under risk neutrality and, second, that the two rules can be modified so that they become equivalent even under risk aversion. This paper presents the results of a field experiment in which we analyze the decisions of subjects taking multiple-choice exams. The evidence suggests that differences between scoring rules are due to risk aversion as theory predicts. We also find that the number of omitted items depends on the scoring rule, knowledge, gender and other covariates.

A Supply Function Competition Model for the Spanish Wholesale Electricity Market

We model the Spanish wholesale market as a multiplant linear supply function competition model. According to the theory, the larger generators should have supply curves for each plant which are to the left of the supply curves of plants owned by smaller generators. We test this prediction for fuel plants using data from the Spanish Market Operator (OMEL) from May 2001 to December 2003. Our results indicate that the prediction of the model holds.

Do experimental subjects favor their friends?

Ideally we would like subjects of experiments to be perfect strangers so that the situation they face at the lab is not just part of a long run interaction. Unfortunately, it is not easy to reach those conditions and experimenters try to mitigate any effects from those out-of-the-lab relationships by, for instance, randomly matching subjects. However, even if this type of procedure is used, there is a positive probability that a subject may face a friend or an acquaintance. We find evidence that social proximity between subjects is irrelevant to experiment results in dictator games. Thus, although ideal conditions are not met, relations between subjects do not contaminate the results of experiments.

Union Formation and Bargaining Rules in the Labor Market

This paper analyzes union formation in a model of bargaining between a firm and several unions. We address two questions: first, the optimal configuration of unions (their number and size) and, second, the impact of the bargaining pattern (simultaneous or sequential). For workers, grouping into several unions works as a price discrimination device which, at the same time, decreases their market power. The analysis shows that optimal union configuration depends on the rules that regulate the bargaining process (monopoly union, Nash bargaining or right to manage).

Market Power in the Spanish Electricity Auction

Published as an article in: Journal of Regulatory Economics, 2010, vol. 37, issue 1, pages 42-69.

Endogenous Formation of Competing Partnership with Moral Hazard

Published as an article in: Games and Economic Behavior, 2003, vol. 44, issue 1, pages 183-194.

Resale in Auctions with Financial Constraints

This paper analyzes auctions where bidders face nancial constraints that may force them to resell part of the property of the good (or subcontract part of a project) at a resale market. First we show that the ine¢ cient speculative equilibria of second- price auctions (Garratt and Tröger, 2006) generalizes to situations with partial resale where only the high value bidder is nancially constrained. However, when all players face nancial constraints the ine¢ cient speculative equilibria disappear. Therefore, for auctioning big facilities or contracts where all bidders are nancially constrained and there is a resale market, the second price auction remains a simple and appropriate mechanism to achieve an e¢ cient allocation.

Consumer Expertise or Credit Risk? An empirical analysis of mortgage pricing

Loan mortgage interest rates are usually the result of a bank-customer negotiation process. Credit risk, consumer cross-buying potential, bundling, financial market competition and other features affecting the bargaining power of the parties could affect price. We argue that, since mortgage loan is a complex product, consumer expertise could be a relevant factor for mortgage pricing. Using data on mortgage loan prices for a sample of 1055 households for the year 2005 (Bank of Spain Survey of Household Finances, EFF-2005), and including credit risk, costs, potential capacity of the consumer to generate future business and bank competition variables, the regression results indicate that consumer expertise-related metrics are highly significant as predictors of mortgage loan prices. Other factors such as credit risk and consumer cross-buying potential do not have such a significant impact on mortgage prices. Our empirical results are affected by the credit conditions prior to the financial crisis and could shed some light on this issue.

Moral cleansing and moral licenses: experimental evidence

Research on moral cleansing and moral self-licensing has introduced dynamic considerations in the theory of moral behavior. Past bad actions trigger negative feelings that make people more likely to engage in future moral behavior to offset them. Symmetrically, past good deeds favor a positive self-perception that creates licensing effects, leading people to engage in behavior that is less likely to be moral. In short, a deviation from a “normal state of being” is balanced with a subsequent action that compensates the prior behavior. We model the decision of an individual trying to reach the optimal level of moral self-worth over time and show that under certain conditions the optimal sequence of actions follows a regular pattern which combines good and bad actions. We conduct an economic experiment where subjects play a sequence of giving decisions (dictator games) to explore this phenomenon. We find that donation in the previous period affects present decisions and the sign is negative: participants’ behavior in every round is negatively correlated to what they did in the past. Hence donations over time seem to be the result of a regular pattern of self-regulation: moral licensing (being selfish after altruist) and cleansing (altruistic after selfish).

Prosocial norms and degree heterogeneity in social networks

We provide empirical evidence to support the claims that social diversity promotes prosocial behavior. We elicit a real-life social network and its members’ adherence to a social norm, namely inequity aversion. The data reveal a positive relationship between subjects’ prosociality and several measures of centrality. This result is in line with the theoretical literature that relates the evolution of social norms to the structure of social interactions and argues that central individuals are crucial for the emergence of prosocial behavior.