Iñigo Iturbe-Ormaetxe

Framing Effects in Public Goods: Prospect Theory and Experimental Evidence

This paper studies, both theoretically and experimentally, frame effects in the context of a public good game in which players have to make a costly contribution either i) to achieve or ii) not to lose a non excludable monetary prize. Our protocol leads to public good provision (not deterioration) only if a certain contribution level is achieved. Since both frames differ with respect to the reference point, we use Prospect Theory to derive testable predictions. In particular, Prospect Theory predicts more contribution in the second frame. Our evidence suggests that a) subjects? behavior is highly sensitive to frames and b) the theoretical prediction is confirmed except when the threshold is low. We also estimate the parameters which better suit our experimental evidence, partly confirming previous results in the literature.

Redistribution and Subsidies for Higher Education

The financing of higher education through public spending imposes a transfer of resources from taxpayers to the university students and their parents. We provide an explanation for this phenomenon. Those who attend higher education will earn more income in the future and will pay more taxes. People whose children do not attend higher education, however should agree to help pay the cost of such education, providing that the taxes are sufficiently high to ensure that there will be an adequate redistribution in favor of their own children at some time in the future.

On fair allocations and monetary compensations

SummaryIn this paper we study fair division problems with the special feature that there exists only one transferable good that everyone likes. This good will be used to compensate some individuals for their differences in other non-transferable resources (like talents or handicaps). In this context we test the traditional no-envy solution and we verify that: 1) its ethical content can be a matter of discussion, and 2) frequently it does not select a non-empty set of allocations. We propose an extension of this criterion that partially solves the existence problem while also retaining the main ethical properties of the preceding solution.

Redistribution and individual characteristics

Abstract. I study a model where personal income is a function of two different groups of individual characteristics, called “talent” and “effort” respectively. The distinction between these two groups is that society has taken the prior decision that the influence of traits from the first group needs to be moderated by any fair redistribution mechanism while differences in income due to traits from the second group must be preserved. I present two solutions that satisfy several intuitive properties of fairness and I use these properties to characterize both of them.

Myopic Loss Aversion under Ambiguity and Gender Effects

Experimental evidence suggests that the frequency with which individuals get feedback information on their investments has an effect on their risk-taking behavior. In particular, when they are given information sufficiently often, they take less risks compared with a situation in which they are informed less frequently. We find that this result still holds when subjects do not know the probabilities of the lotteries they are betting upon. We also detect significant gender effects, in that the frequency with which information is disclosed mostly affects male betting behavior, and that males become more risk-seeking after experiencing a loss.

A stable and consistent solution to distribution problems

Abstract We study two interesting properties of distribution problems. First, stability of solutions when the number of agents changes. Second, a consistency requirement when the number of goods changes. We use these properties to obtain a characterization of the leximin solution.