Jubo Yan Kent Messer University of Delaware Jordan Suter Oberlin College
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Transcript of Jubo Yan Kent Messer University of Delaware Jordan Suter Oberlin College
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Jubo YanKent Messer
University of Delaware
Jordan SuterOberlin College
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Externality - environmental, public health, and other social problems
Not from the direct actions of malign individuals
Arise indirectly from benign people’s self-interested behavior
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Standard Economic Theory -- a bleak assessment of outcome given voluntary behaviors
Behavioral Economics -- the context may be an effective tool to reduce the pervasiveness of negative externalities.
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Contributing to a public good
Incurring a negative externality on the other group-members
MPCR=1/2=0.5
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Public good problem can be improved or even overcome in a laboratory setting
Introducing a variety of real world contexts to the decision setting
◦ Voting: A confidential majority vote between two options (Group Account & Private Lottery)
◦ Cheap Talk: An open discussion with group members up to ten minutes
◦ Status Quo: Money is initially allocated in the Group Account
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Individual Account: Return Rate 1
Group Account: Return Rate 1.5
MPCR=1.5/7=0.214
1.5 1.5
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No Status Quo without Voting and Cheap TalkNo Status Quo without Voting and Cheap Talk
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Status Quo without Voting and Cheap TalkStatus Quo without Voting and Cheap Talk
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No Status Quo with Voting and Cheap TalkNo Status Quo with Voting and Cheap Talk
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Status Quo with Voting and Cheap TalkStatus Quo with Voting and Cheap Talk
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Group size: 7
Number of rounds: 20 (predetermined but not announced)
Account A: No externality; Return rate 1.5
Account B: Externality; Return rate 2.5 with Externality
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Status Quo: Money initially allocated in Account A
Subjects are given one dollar at the beginning of each round (in Account A or in Account B)
MPCR=1.5/7=0.2141.5 1.5
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1.52.5 1.5
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Cheap Talk and Voting together can eliminate the negative externality problem on some level
The Contribution Rate is lower than Messer et all 2007 according to the conclusion in Andreoni 1995
EXPECTATIONEXPECTATION
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No Status Quo without Voting and Cheap TalkNo Status Quo without Voting and Cheap Talk
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Status Quo without Voting and Cheap TalkStatus Quo without Voting and Cheap Talk
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No Status Quo with Voting and Cheap TalkNo Status Quo with Voting and Cheap Talk
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Status Quo with Voting and Cheap TalkStatus Quo with Voting and Cheap Talk
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Positive vs. Negative (No Status Quo)Positive vs. Negative (No Status Quo)
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Positive vs. Negative (Status Quo)Positive vs. Negative (Status Quo)
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Positive vs. Negative (No Status Quo with V&C)Positive vs. Negative (No Status Quo with V&C)
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Positive vs. Negative (Status Quo with V&C)Positive vs. Negative (Status Quo with V&C)
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Voting and Cheap Talk can largely eliminate the externality problem
The effect of Status Quo is different with V&C and without V&C which also requires future works
The difference between the positive and negative frameworks diminishes from round to round without Voting and Cheap Talk
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Thank you!
Any Questions or comments?
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