VTechWorks Repository :: Browsing by Author "Smith, Alexander Charles"

Browsing by Author "Smith, Alexander Charles"

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The Behavioral and Neural Bases of Social Economic Decision-Making
Li, Zhuncheng (Virginia Tech, 2019-04-22)
Social economic decision-making considers the well-being and emotions of others. Unlike traditional economics which routinely assumes that individuals care only about their own outcomes, behavioral economics and neuroeconomics offer research strategies which help us explore our social motivations. This dissertation consists of three essays studying the underlying behavioral and neural mechanisms of individuals' social economic decision-making. The analyses focus on investigating experimentally how humans make decisions in three distinct social economic environments. Chapter 2 examines how individuals react to hold-up when explicit promises are available. Hold-up happens when two parties can form an incomplete contract to cooperate, but the agreement may fall apart due to concerns about the other party gaining bargaining power. We propose that a belief-dependent frustration anger model can explain behavior about investment, cooperation, and costly punishment in a hold-up environment. We show experimentally that communication improves cooperation and increases efficiency. Promises lead to cooperation, and broken promises lead to costly punishment. Chapter 3 explores threats' deterrence effect and credibility in an ultimatum bargaining environment where two parties can both benefit over trade but have a conflict of interests. We show that a belief-dependent frustration anger model captures the relationship among messages, beliefs, and behavior. Our design permits the observation of communicated threats, credibility, and deterrence. As we hypothesize, messages convey intention to punish the opponents (threats) changes players' expectations, that first movers are largely deterred by the threats and second movers' threats are credible. Threats lead to deterrence and greater propensity for costly punishment. Chapter 4 investigates the neural basis of individuals' charity donation behavior in a modified dictator game. The right temporoparietal junction (rTPJ) has been associated with social decision-making, but the exact neural mechanism of charitable giving remains unknown. In our experiment, participants allocate money between themselves and a charity in a graphical revealed preference task, that measures both parameterized other-regarding preferences and economic rationality (Monotonicity, WARP, and GARP). We find evidence for a causal role of the rTPJ in determining fairness preferences and economic rationality.
The Context-Dependence of the Process of Risky Choice
Alsharawy, Abdelaziz Mohammed (Virginia Tech, 2021-08-17)
The evaluation of risk is a fundamental aspect of decision-making and influences important outcomes, such as in the domain of financial and health behavior. In many economic applications, risk attitudes are assumed to be inherently stable. Nonetheless, behavioral tasks that elicit risk preferences have shown temporal inconsistencies. The instability of risk preferences can be attributed to several factors such as the way information is presented (framing effects), personal past experiences, and experienced emotions. We conduct four studies in this dissertation to shed light on the state dependency of risk attitudes and on the decision process of risky choice. Chapter 2 examines, using a laboratory experiment, how high stakes in risky choices influence physiological arousal, as measured via skin conductance, pulse rate and pupil size, and attention, as measured via gaze bias and saccades. We link the changes in arousal and attention accompanying high stakes to changes in risk aversion. Moreover, we develop and test a Sequential Sampling Model (SSM), the arousal-modulated Attentional Drift Diffusion Model (aADDM), linking reaction time and choice while allowing attention and its interaction with arousal to modulate the evaluation process of risky alternatives. High stakes caused changes in attention toward the safe option's attributes, heightened physiological arousal, and increased risk aversion. Results from the aADDM, demonstrate that the values of the high attributes are discounted when participants attend to the low attributes, with arousal amplifying this process further. Chapter 3, using a laboratory experiment, investigates how incentives and emotional experiences influence the adaptation process across high and low volatility contexts in risky choice. Due to the brain's computational capacity limitations, perception is optimized to detect differences within a narrow range of stimuli. We show that this adaptation process is itself context-dependent, with stronger incentives, heightened arousal, or more unpleasant feelings increasing payoff responsivity under high volatility. Chapter 4, using survey data, focuses on fear responses during the COVID-19 pandemic and risk perception of the health- and financial-related consequences of the crisis. We show that women report higher fear of the COVID-19 pandemic compared to men, modulating the gender differences in preventative health behaviors. Women also perceive the health risks of COVID-19, and not financial risks, to be greater than men. Chapter 5, using vignette experiments, demonstrates that betrayal aversion, or hesitancy regarding the risk of being betrayed in an environment involving trust, is an important preference construct in the decision to become vaccinated and is not accounted for by widely used vaccine hesitancy measures. We show that people are significantly less willing to get vaccinated when the associated risk involved the vaccine actively contributing to the cause of death. We also find that betrayal aversion is amplified with an active role of government or scientists. Moreover, we test an exogenous intervention that increases willingness to vaccinate without mitigating betrayal aversion. JEL codes: D81, D83, D87, D91, I12, J16
Data Mining Twitter to Improve Automated Vehicle Safety
McDonald, Anthony D.; Huang, Bert; Wei, Ran; Alambeigi, Hananeh; Arachie, Chidubem; Smith, Alexander Charles; Jefferson, Jacelyn (SAFE-D: Safety Through Disruption National University Transportation Center, 2021-02)
Automated vehicle (AV) technologies may significantly improve driving safety, but only if they are widely adopted and used appropriately. Adoption and appropriate use are influenced by user expectations, which are increasingly being driven by social media. In the context of AVs, prior studies have observed that major news events such as crashes and technology announcements influence user responses to AVs; however, the exact impact and dynamics of this influence are not well understood. The goals of this project were to develop a novel search method to identify AV-relevant user comments on Twitter, mine these tweets to understand the influence of crashes and news events on user sentiment about AVs, and finally translate these findings into a set of guidelines for reporting about AV crashes. In service of these goals, we developed a novel semi-supervised constrained-level learning machine search approach to identify relevant tweets and demonstrated that it outperformed alternative methods. We used the relevant tweets identified to develop a topic model of AV events which illustrated that crashes, fault and safety, and technology companies were the most discussed topics following major events. While the sentiment among these topics was mostly neutral, tweets about crashes and fault and safety were negatively biased. We combined these findings with a series of interviews with Public Information Officers to develop a set of five basic guidelines for AV communication. These guidelines should aid proper public calibration and subsequent acceptance and use of AVs.
The Economics of Cryptocurrencies
Yang, Zichao (Virginia Tech, 2021-04-26)
This paper has four chapters. The first chapter serves as an introduction. The second chapter studies the transaction fees in the bitcoin system. The transaction fees and transaction volume in the bitcoin system increase whenever the network is congested and results from a simple VAR show that it is indeed the case. To account for the empirical findings, we build a model where users and miners together determine the transaction fee and transaction volume endogenously. Even though the fluctuating transaction fee mechanism in bitcoin introduces the extra cost of uncertainty to users, a back-of-envelope calculation shows that the cost of using the bitcoin network for transactions is still smaller than the cost of using the current conventional payment system with a fix transaction fee rate. The second chapter studies the time-varying price dispersion among different bitcoin exchanges. We identify the sources of price dispersion using a standard time-varying vector autoregression model with stochastic volatility. The results show that shocks to transaction fees and bitcoin price growth explain on average 20%, and sometimes more than 60%, of the variation of price dispersion. The third chapter studies the relationship between connections and returns in the bitcoin investor network. Using transaction data from the bitcoin blockchain, we reach three conclusions. First, on average, the annualized returns of connected addresses in the network are 20.75% above those of their unconnected peers. Second, returns also differ among those connected addresses. By dividing the connected ad- dresses into ten deciles based on their centrality, we find that addresses in the two most-connected deciles earn higher returns than the other connected addresses. Third, eigenvector centrality is more related than degree centrality to higher returns, implying that quality of connections matters.
Essays on Applied Game Theory and Public Economics
Yang, Tsung-Han (Virginia Tech, 2018-05-01)
The first chapter presents a theoretical model of electoral competition where two parties can increase campaign contributions by choosing policies benefiting a significant interest group. However, such decision will shrink their hardcore vote base where voters are well informed about the policy. The parties can then allocate the funds between campaigning and personal wealth. Different from the core voters, independent voters can be attracted by advertisements funded by campaign spending. Using a multi-stage extensive form game, I investigate how electoral competition interacts with diversions and policy distortions. My result shows that a higher level of electoral competition helps mitigate policy distortions but prompts the parties to divert more funds. Perfectly informed signal senders need to communicate their true type (productivity or ability) which is often private information to potential receivers. While tests are commonly used as measures of applicants' productivity, the accuracy of them has been questioned. Beginning with the framework of a two-type labor market signaling game, the second chapter investigates how tests of limited reliability affect the nature of equilibria in signaling games with asymmetric information. Our results show that, if a test is inaccurate and costly, only pooling PBE exists given certain conditions. Different forms of test inaccuracy may allow a separating PBE to exist. We also study the case of three types and find different PBEs. The central issue of siting noxious facilities is that the host community absorbs potential costs, while all others can share the benefits without paying as much. The third chapter presents a modified Clarke mechanism to facilitate the siting decision, taking into account all residents' strategies. Suppose that the social planner is able to reasonably estimate the possible costs, depending on the host location, to each resident created by the facility. Our proposed Clarke mechanism is characterized by strategy-proofness and yields an efficient siting outcome. The issue of budget imbalance is mitigated when the compensation scheme is fully funded with the tax revenue based on the benefits. We then use a simple example to show that a weighted version of the Clarke mechanism may yield a different outcome.
Essays on Contest Theory Experiments and Revealed Time Preference Models
Zou, Yanyang (Virginia Tech, 2022-08-22)
In this series of essays, we study the influence of weight and group size in the sequential multi-battle contest with laboratory experiences (Chapter 2 and Chapter 3). We then develop an empirical method to model perceptual present and time inconsistency (Chapter 4). Chapter 2 examines how the weight and the ordered weights in battles affect the behavior in sequential multi-battle contests with an experiment. We find robustly that the weight of the current battle consistently influences contestants' efforts. Additionally, we discover the math-point-oriented behavior despite differences in history. In other words, the weight effect is expressed in two ways: influencing the effort of the current battle and transferring a contest to the next battle with a designated intensity. Chapter 3 explores the group size effect and how the contest success functions influence the group size effect in sequential multi-battle contests with an experiment. We capture the negative group size effect on the leaders' efforts, participation and dropout rates; contrarily, the positive effect on the non-leaders' efforts. Compared to the Tullock lottery, the all-pay auction intensifies the group size effect of the high effort in the initial battle. It also enlarges the observed group size effects of the effort gaps between the leaders and the non-leaders. Chapter 4 develops the quasi-hyperbolic discounting model into the general beta-delta model to parametrically detect and measure the inconsistency in revealed time preference. This method empirically classifies time preference into four categories, i.e., time consistent, present bias, future bias, and mixed inconsistent. Then we applied this method to the convex time budget data of seven experiments, including 3670 subjects. We discover empirical evidence supporting perceptual differences in the present-future threshold. Traditional present bias models may interpret the time preference imprecisely.
Experiential and Neurobiological Influences on Economic Preferences and Risky Decision Making
Zhang, Xiaomeng (Virginia Tech, 2020-07-16)
Economic preferences are fundamental to risky decision making and other economic decision- making. Unlike traditional economics, which routinely assumes that individuals are endowed with stable preferences and try to maximize the expected utility when facing risky decision-making problems, behavioral economics and neuroeconomics offer research strategies that help us explore the factors that influence economic preferences and risky decision-making process. This dissertation consists of three essays studying the underlying experiential influences on economic preferences and neurobiological effects on risky decision making. Chapter 2 examines whether experiences during adolescence have a long-term effect on economic preferences. Between 1966 and 1976, China's Sent-Down Movement required seventeen million urban teenagers to spend several years living and working in rural areas. The program had a number of goals for participants, including learning empathy for rural laborers and developing collectivist values. The sent-down movement can be regarded as a natural experiment, which allows us to investigate whether this government policy was successful in effecting a lasting change to economic preferences. Using a modified Global Preference Survey and employing a regression discontinuity design, we find that the experience of being Sent-Down significantly changed participants' risk preferences, other-regarding preferences, and attitudes toward government. Chapter 3 explores how the arousal system modulates attention and investment behavior. Experimental research shows that human decision making is shaped by emotions associated with an outcome's success or failure. Regret, for example, is a powerful predictor of future investment decisions in asset markets. Using a fictive learning model to capture regret, we examine changes in pupil diameter of participants performing a sequential investing task. By manipulating task uncertainty, we show that pupil dilation is positively correlated with both asset price variance and regret. In addition, pupil linked arousal is positively associated with the learning rate. We conclude that the pupil–linked arousal system helps regulate investment behavior in a dynamic market environment. Chapter 4 explores the complex process by which people make risky choices. While traditional models, like expected utility theory, model choice as the selection of the outcome with the highest probability-weighted value, research shows that in some environments these models do a poor job of describing behavior. This study explores the role of attention, pupil-linked arousal, and salience in risky choice. First, we replicate earlier findings that those choices are consistent with expected utility theory when the calculation is easy, however, as the calculation becomes harder, they make decisions by comparing unweighted payoffs and are attend to the salient option. Further, we find that pupil-linked arousal is associated with the level of cognitive effort needed to calculate expected utility. Finally, we show that arousal reflects cognitive effort associated with resisted selecting a more salient option.
Focal stimulation of the temporoparietal junction improves rationality in prosocial decision‑making
Li, Flora; Ball, Sheryl B.; Zhang, Xiaomeng; Smith, Alexander Charles (Nature Research, 2020)
We tested the hypothesis that modulation of neurocomputational inputs to value-based decisionmaking affects the rationality of economic choices. The brain’s right temporoparietal junction (rTPJ) has been functionally associated with both social behavior and with domain-general information processing and attention. To identify the causal function of rTPJ in prosocial decisions, we administered focal high definition transcranial direct current stimulation (HD-tDCS) while participants allocated money between themselves and a charity in a modified dictator game. Anodal stimulation led to improved rationality as well as increased charitable giving and egalitarianism, resulting in more consistent and efficient choices and increased sensitivity to the price of giving. These results are consistent with the theory that anodal stimulation of the rTPJ increases the precision of value computations in social decision-making. Our results demonstrate that theories of rTPJ function should account for the multifaceted role of the rTPJ in the representation of social inputs into value-based decisions.
Frustration and Anger in Games
Battigalli, Pierpaolo; Dufwenberg, Martin; Smith, Alexander Charles (Virginia Tech, 2015-08-24)
Frustration, anger, and aggression have important consequences for economic and social behavior, concerning for example monopoly pricing, contracting, bargaining, traffic safety, violence, and politics. Drawing on insights from psychology, we develop a formal approach to exploring how frustration and anger, via blame and aggression, shape interaction and outcomes in economic settings.
Gender Differences in Fear and Risk Perception During the COVID-19 Pandemic
Alsharawy, Abdelaziz Mohammed; Spoon, Ross; Smith, Alexander Charles; Ball, Sheryl B. (Frontiers, 2021-08)
The COVID-19 pandemic has led many people to suffer from emotional distress. Previous studies suggest that women process and express affective experiences, such as fear, with a greater intensity compared to men. We administered an online survey to a sample of participants in the United States that measures fear of COVID-19, perceptions about health and financial risks, and preventative measures taken. Despite the empirical fact that men are more likely to experience adverse health consequences from COVID-19, women report greater fear and more negative expectations about health-related consequences of COVID-19 than men. However, women are more optimistic than men regarding the financial consequences of the pandemic. Women also report more negative emotional experiences generally during the pandemic, particularly in situations where other people or the government take actions that make matters worse. Though women report taking more preventative measures than men in response to the pandemic, gender differences in behavior are reduced after controlling for fear. These results shed light on how differences in emotional experiences of the pandemic may inform policy interventions.
The Interactive Effect of Policies and Preferences on Decision Making
Dwibedi, Esha (Virginia Tech, 2022-08-30)
Economic preferences are crucial in decision making. While some preferences remain stable, changes in economic preferences have been linked to institutional and policy changes. We conduct three studies to explore the ways in which decision making might be impacted by economic preferences and underlying or changing policies. Our studies span the domains of preventative healthcare, strategic interactions, and education. Chapter 2 examines the relationship between cooperative decision making and changes in societal level institutions through a meta-meta analysis, incorporating experimental data from various previously conducted meta-analyses. We study the relationship between country or region level policy changes, as measured by economic freedom indices to experimental measures of prosocial and selfish behavior. Our results indicate a relationship between macro-level institutional changes and measures of co-operative behavior that varies based on the starting levels of economic freedom variables. This establishes a relationship between macro policies and individual behavior that suggests that governments should consider the consequences of policies on individual decision making. Chapter 3, using vignette experiments, explores how emotion reappraisal messaging interventions affect betrayal aversion and vaccine hesitancy. The measure of betrayal aversion in our study involves hesitancy in risking being betrayed in situations involving trust related to vaccines. We find that betrayal aversion is prevalent in about a third of our study participants and that two of our messaging interventions substantially reduce betrayal aversion involving vaccination decisions. Our results suggests a targeted messaging strategy for addressing a recently discovered new component of vaccine hesitancy, an important current topic in preventative healthcare. Chapter 4, introduces an active learning intervention in the form of a field experiment involving a health intervention nudge and explores its impact on class engagement and education outcomes of students. In addition, we look at the impact of the nudge on vaccination uptake among students. We find improved class engagement as well as improvement in test scores for students who had the opportunity and chose to participate in the nudge experiment. In addition, we find greater uptake of influenza vaccination, as targeted by the nudge treatment. Our results show that this effect is driven by men, with women having higher vaccination rates irrespective of the nudge treatment. JEL codes: C91, H1, 01, P5, I12, D91, A22, C93
Irrational exuberance and neural crash warning signals during endogenous experimental market bubbles
Smith, Alexander Charles; Lohrenz, Terry; King, Justin; Montague, P. Read; Camerer, Colin F. (NAS, 2014-07-22)
Groups of humans routinely misassign value to complex future events, especially in settings involving the exchange of resources. If properly structured, experimental markets can act as excellent probes of human group-level valuation mechanisms during pathological overvaluations—price bubbles. The connection between the behavioral and neural underpinnings of such phenomena has been absent, in part due to a lack of enabling technology. We used a multisubject functional MRI paradigm to measure neural activity in human subjects participating in experimental asset markets in which endogenous price bubbles formed and crashed. Although many ideas exist about how and why such bubbles may form and how to identify them, our experiment provided a window on the connection between neural responses and behavioral acts (buying and selling) that created the bubbles. We show that aggregate neural activity in the nucleus accumbens (NAcc) tracks the price bubble and that NAcc activity aggregated within a market predicts future price changes and crashes. Furthermore, the lowest-earning subjects express a stronger tendency to buy as a function of measured NAcc activity. Conversely, we report a signal in the anterior insular cortex in the highest earners that precedes the impending price peak, is associated with a higher propensity to sell in high earners, and that may represent a neural early warning signal in these subjects. Such markets could be a model system to understand neural and behavior mechanisms in other settings where emergent group-level activity exhibits mistaken belief or valuation.
Market Sentiments and the Housing Markets
Huang, Yao (Virginia Tech, 2020-04-03)
This paper has three chapters. In the first chapter, we develop a measure of housing sentiment for 24 cities in China by parsing through newspaper articles from 2006 to 2017.We find that the sentiment index has strong predictive power for future house prices even after controlling for past price changes and macroeconomic fundamentals. The index leads price movements by nearly 9 months, and it is highly correlated with other survey expectations measures that come with a significant time lag. In the second chapter, we show that short term house price movement is predictable by solely using newspaper and historical price change. In the last chapter, using the sentiment index constructed from newspaper, we got empirical results to show that some people are forward-looking when deciding default and a positive sentiment (anticipated house price appreciation) will lower the Z score of probability of default by 0.028.
Neural Activity Reveals Preferences Without Choices
Smith, Alexander Charles; Bernheim, B. Douglas; Camerer, Colin F.; Rangel, Antonio (American Economic Association, 2014-05)
We investigate the feasibility of inferring the choices people would make (if given the opportunity) based on their neural responses to the pertinent prospects when they are not engaged in actual decision making. The ability to make such inferences is of potential value when choice data are unavailable, or limited in ways that render standard methods of estimating choice mappings problematic. We formulate prediction models relating choices to “non-choice” neural responses and use them to predict out-of-sample choices for new items and for new groups of individuals. The predictions are sufficiently accurate to establish the feasibility of our approach.
Preference Construction and Decision-Making for Green Infrastructure: How Do Behavioral Interventions Influence Choice and Neurocognition?
Hu, Mo (Virginia Tech, 2021-11-30)
"Nature-based solutions", such as green stormwater infrastructure, take advantage of natural systems to tackle the increasing challenges facing the built environment. Green infrastructure is effective in reducing stormwater runoff for urban stormwater management using connected green space. Green infrastructure also delivers multiple benefits to the community (e.g., increased quality of life and public health) and environment (e.g., enhanced biodiversity, less energy use, and reduced urban heat island effect), which is adaptive to the changing climate. However, the pace and the scale of green infrastructure implementation are still not on track with the much-needed change in the urban built environment. Policy barriers, resources barriers, governance barriers, and cognitive barriers are limiting the practice. Cognitive barriers are cited as the most critical barrier because most of the barriers limiting green infrastructure stem from and are intensified by human cognition during the design and decision-making process for infrastructure. Stakeholders involved in the decision-making process for green infrastructure must weigh the perceived risks and benefits that green infrastructure provides. This dissertation aims to better understand how stakeholders perceive green infrastructure, how much they weigh risks and benefits, and test interventions to aid the decision-making process to promote more green infrastructure design. Both a stated preference survey with discrete choice modeling and two sets of experiments using neuroimaging to measure the change in neurocognition were used to explore preference construction and decision-making about green infrastructure. A sample of the public (N=946) across the U.S. participated in the survey and reported their perceptions of risk and benefit about green infrastructure. The result highlights that perceived higher risk of green infrastructure reduced people's preference for green infrastructure. In contrast, perceived higher benefit, age, education, and the use of a rating system to measure sustainability outcomes firstly contribute to people's preference construction for green infrastructure. Engineering students who were trained in stormwater infrastructure design (N=60) participated in a stormwater infrastructure design scenario. Change in students' neurocognition was measured when students made judgments and decisions between a green infrastructure design option and a conventional stormwater infrastructure design option. Two interventions, (1) telling students about a municipal resolution in support of green infrastructure and (2) priming students to think about sustainable design before evaluating design options, were tested to change perceptions about risk and benefit of stormwater design options. The results found that telling decision-makers about a green infrastructure resolution changed their neurocognition when processing perceived risk and reduced the perceived risk they associated with green infrastructure. The results also found that priming decision-makers to think about sustainable design with a rating system for sustainability significantly decreased their cognitive load when evaluating the benefits of green infrastructure and increased their stated benefits associated with green infrastructure. These findings demonstrate the effects of relatively simple choice modifications to promote more green infrastructure. The results provide insights for policy-makers, engineers, and other stakeholders involved in the early-phase decisions on effective practice to modify human choice when facing challenges with sustainable and resilient design.
Three Essays in Experimental Economics
Bradley, Austin Edward (Virginia Tech, 2024-06-21)
The experiments presented and analyzed in this dissertation concern two well-established phenomena in behavioral economics: that human decision makers hold biased beliefs about probability and that free-form communication between economic agents promotes cooperation far in excess of what standard theory predicts. First, Chapter 2 studies subjective probability, focusing on the well-established existence of both the Hot Hand and Gambler's Fallacies — the false expectation of positive and negative autocorrelation, respectively. Both biases are prevalent throughout a wide variety of real-world contexts; what causes a person to favor one over the other? We conduct an experiment in which we observe fully informed subjects switching between the Hot Hand and Gambler's Fallacies when predicting future outcomes of mathematically identical sequences. Subjects exhibit the Gambler's Fallacy when predicting single outcomes but favor the Hot Hand when asked explicitly to estimate probabilities. Connecting our results to existing theory suggests that very subtle changes in framing lead decision makers to employ substantially different approaches to form predictions. The remainder of this dissertation studies cheap talk communication between human subjects playing incentivised trust games. In Chapter 3, we study free-form communication using a dataset of over 1000 messages sent between participants in a laboratory Trust game. We employ Natural Language Processing to systematically generate meaningful partitions of the messages space which we can then examine with established regression approaches. Our investigation reveals features correlated with trust that have not previously been considered. Most notably, highly detailed, specific promises establish trust more effectively than other messages which signal the same intended action. Additionally, we observe that the most and least trusted messages in our dataset differ starkly in their quality. Highly trusted messages are longer, more detailed, and contain fewer grammatical errors whereas the least trusted messages tend to be brief and prone to errors. In Chapter 4, we examine whether the difference is message quality affects trust by acting as a signal of effort. We report the results of an experiment designed to test whether promises which require higher levels of effort result in greater trust from their recipients. We find that more costly promises lead recipients to trust more frequently. However, there is no corresponding, significant difference in the trustworthiness of their senders. Further, when asked their beliefs explicitly, recipients do not believe that higher cost promises are more likely to be trustworthy. This presents a potential challenge to our understanding of trust between economic decision makers. If effort increases trust without altering receivers' beliefs, receivers must be concerned with factors other than their own payoff maximization. We conclude by presenting a follow-up experiment where varying effort cost cannot convey the sender's intentions, however, the results are inconclusive.
Three Essays on Dynamic Contests
Cai, Yichuan (Virginia Tech, 2022-06-23)
This dissertation consists of three essays studying the theory of dynamic contest. This analysis mainly focuses on how the outcome and the optimal design in a dynamic contest varies on contest technology, heterogeneous players, contest architecture, and bias instruments. The first chapter outlines the dissertation by briefly discussing the motivations, methods, and main findings in the following chapters. Chapter 2 considers a situation in which two groups compete in a series of battles with complete information. Each group has multiple heterogeneous players. The group who first wins a predetermined number of battles wins a prize which is a public good for the winning group. A discriminatory state-dependent contest success function will be employed in each battle. We found that in the subgame perfect Nash equilibrium (equilibria), the lower valuation players can only exert effort in earlier battles, while the higher valuation players may exert effort throughout the entire series of battles. The typical discouragement effect in a multi-battle contest is mitigated when players compete as a group. We also provide two types of optimal contest designs that can fully resolve the free-rider problem in group contests. Chapter 3 investigates optimal contest design with multiple heterogeneous players. We allow the contest designer to have one or multiple/mixed objectives, which includes the following parts: the total effort; the winner's effort; the maximal effort; and the winning probability of the strongest player. We provide a one-size-fits-all contest design that is optimal given any objective function. In the optimal contest, the designer will have one of the weaker players exhaust the strongest in the contest with infinite battles. We obtain the required conditions on different contest frameworks (e.g., all-pay auctions and lottery contests) and bias instruments (e.g., head starts and multiplicative bias). This means the contest designer has multiple alternatives to design the optimal contest. The last chapter investigates a situation where two players compete in a series of sequential battles to win a prize. A player can obtain certain points by winning a single battle, and the available points may vary across the battles. The player who first obtains predetermined points wins the prize. We fully characterize the subgame perfect Nash equilibrium by describing the indifference continuation value interval. We found that when two players are symmetric, they only compete in the separating battle. In the general case, we found that winning a battle may not create any momentum when the weight of the battle is small. A small enough adjustment of a battle's weight will not change both players' incentive to win the battle. Increasing (or decreasing) a battle's weight weakly increases (or weakly decreases) both players' incentive to win.
Three Essays on the Evolution of the Determinants of Educational Attainment and its Consequences
Arafat, Md Yasin (Virginia Tech, 2019-02-07)
The dissertation focuses on the different determinants of education, their effects on the educational outcome, and the overall effect of education on the lifetime consequences. The first chapter focuses on the inequality of educational opportunity across different demographic factors. This chapter employs a broader set of social factors to provide fresh insights into the inequality situation in the USA relative to those of the extant literature. The chapter employs polynomial trends for the effects of social factors to identify long-term trends in the determinants of the differences in attainment of each of four achievements (high school graduation, some college, college graduation, and post-college work) across different endogenous social groups. Using the Panel Study of Income Dynamics (PSID) data for the years of 1968-2013, we show how inequality of educational opportunity and its determinants have evolved over the years. The chapter utilizes the machine-learning process and logistic regression model to identify inequality of opportunity. The second chapter examines the age demographic distribution of graduates across cohorts from 1940 until 1990. Using the PSID data, the paper explored the first and second moment of the age of graduating from high school and college across the US. To deal with the data deficiencies, a large part of the chapter dealt with data preparation. The chapter provides a unique method of extracting information on the graduating age of the individuals both from high school and from college. The results show a large dispersion across the full sample. The data truncated to a standard length, however, provides a much smaller dispersion and much smaller moments. The chapter concludes that as the time passes, people tend to attain education at a younger age. The third chapter investigates the trends of the contribution of different factors of income starting from 1910 cohort. Following Mincer (1974), a wave of papers studied how various factors contribute to the earnings of individuals. This paper contributes to that literature in three ways: (i) using the PSID data, it computes the actual working experience of the individuals, (ii) it studies the cohorts who were born in 1910 or afterwards, unlike the existing papers, and (iii) it adds two variables—technological progress and the occupation with which individuals start their careers—to an extended Mincerian equation. The results re-emphasize the importance of education in lifetime earnings. The results also show that while some of the determinants of income have become more important over the years, other factors have not changed much in importance.

Browsing by Author "Smith, Alexander Charles"

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