Jason Shachat

Trust, the Internet, and the digital divide

The Internet is expected to have a positive impact on economic growth, and its adoption rate will determine the extent of this impact. In this paper, we examine how differences in willingness to trust influence Internet adoption rates across countries. We show that trust has a statistically significant influence on levels of Internet penetration across countries. We also show that success in increasing Internet adoption rates through policies to promote trust will depend on a countrys current level of trust, such that differences in trust may produce a digital divide among nations. Since low-trust countries tend to be of low or middle income, this digital divide between countries may translate into a developmental divide.

Hide and seek in Arizona

Laboratory subjects repeatedly played one of two variations of a simple two-person zero-sum game of “hide and seek”. Three puzzling departures from the prescriptions of equilibrium theory are found in the data: an asymmetry related to the player’s role in the game; an asymmetry across the game variations; and positive serial correlation in subjects’ play. Possible explanations for these departures are considered.

Do we detect and exploit mixed strategy play by opponents

Abstract.We conducted an experiment in which each subject repeatedly played a game with a unique Nash equilibrium in mixed strategies against some computer-implemented mixed strategy. The results indicate subjects are successful at detecting and exploiting deviations from Nash equilibrium. However, there is heterogeneity in subject behavior and performance. We present a one variable model of dynamic random belief formation which rationalizes observed heterogeneity and other features of the data.

Procuring Commodities: First-Price Sealed-Bid or English Auctions?

We use laboratory experiments to examine the relative performance of the English auction (EA) and the first-price sealed-bid auction (FPA) when procuring a commodity. The mean and variance of prices are lower in the FPA than in the EA. Bids and prices in the EA agree with game-theoretic predictions, but they do not agree in the FPA. To resolve these deviations found in the FPA, we introduce a mixture model with three bidding rules: constant absolute markup, constant percentage markup, and strategic best response. A dynamic specification in which bidders can switch strategies as they gain experience is estimated as a hidden Markov model. Initially, about three quarters of the subjects are strategic bidders, but over time, the number of strategic bidders falls to below 65%. There is a corresponding growth in those who use the constant absolute markup rule.

An experimental study of the effect of intergroup contact on attitudes in urban China

A large body of literature attests to the growing social divide between urban residents and rural–urban migrants in China’s cities. This study uses a randomised experiment to test the effect of intergroup contact on attitudes between a group of urban adolescents and a group of rural–urban migrant adolescents. Results showed that intergroup contact in the form of a fun and cooperative puzzle task significantly reduced negative attitudes toward the other group. Implications for desegregated schooling and their broader societal implications in China are discussed.

Informational Price Cascades and Non-Aggregation of Asymmetric Information in Experimental Asset Markets

We report on experimental markets for a contingent claim asset that eight subjects traded for nine periods before the state was revealed. There is an informative binary signal that arrives after each of the first eight trading rounds. In our baseline treatment the realization of the signal is public information, and in another treatment, market participants are randomly sequenced and receive the signal as private information. In the latter case, we observe zero information aggregation and prices lock in on home grown norms, which we call informational price cascades. We test the fragility of the price cascades in two further treatments. First, we break the monopoly on each signal by revealing it to two subjects, and then we increase that number to four. It is only when we inform four participants, or one-half of the market, that cascades fail to form and information starts to aggregate in the market.

The Hayek Hypothesis and Long Run Competitive Equilibrium: An Experimental Investigation

We report on an experiment investigating whether the Hayak Hypothesis (Smith, 1982) extends to the long run setting. We consider two environments; one with a common production technology having a U-shaped long run average cost curve and a single competitive equilibrium, and another with a common constant returns to scale technology having a constant long run average cost curve and multiple competitive equilibria. While there is convergence in both environments to the long run equilibrium, it takes longer and is less robust than usually observed in the short run setting. We show that price formation is adaptive and quickly converges to realized short run equilibrium, but long run investment decisions exhibit very limited rationality. We present and estimate an investment choice model that shows that only minimal rationality, coupled with repeated decisions, is enough to achieve high long run allocative eciency when markets use continuous double auctions. JEL classication: C92; D02

Auctioning the Right to Play Ultimatum Games and the Impact on Equilibrium Selection

We auction scarce rights to play the Proposer and Responder positions in ultimatum games. As a control treatment, we randomly allocate these rights and charge exogenous participation fees. These participation fee sequences match the auction price sequence from a session of the original treatment. With endogenous selection via auctions, we find that play converges to a session-specific Nash equilibrium, and auction prices emerge supporting this equilibrium by the principle of forward induction. With random assignment, we find play also converges to a session-specific Nash equilibrium as predicted by the principle of loss avoidance. While Nash equilibria with low offers are observed, the subgame perfect Nash equilibrium never is.

Improving intergroup relations through actual and imagined contact : field experiments with Malawian shopkeepers and Chinese migrants.

We examine the ability of intergroup contact to ameliorate intergroup relationships in an entrepreneurial and developing world context. We provide a decision model of how an entrepreneur chooses to invest time to extend their professional network. The model accommodates two distinct channels and generates alternative predictions based on which is activated by intergroup contact. One is the knowledge of the necessary time investment to forge a network connection with a member of another group, and the second is the preference-driven disutility of that time spent with that individual. We employ randomized experiments to test whether actual and imagined contact effectively reduces prejudice between indigenous Malawian shopkeepers and their Chinese migrant counterparts and test the stability of these changes over time. Actual contact produced differing results. Local Malawians’ attitude toward Chinese migrants did not improve, but their willingness to spend time with them did. In contrast, actual contact led to improvement in the Chinese migrants’ attitude toward local Malawians but did not increase their willingness to spend time with them. Imagined contact had no impact on Malawians’ attitude toward or willingness to spend time with Chinese migrants. These results are consistent with contact activating informational channels more so than preference ones.

Experiments on Learning, Methods and Voting

Publishers copyright statement: This is the accepted version of the following article: Noussair, C. N. and Shachat, J. (2014), Experiments on Learning, Methods and Voting. Paci c Economic Review, 19 (3): 255 259, which has been published in nal form at http://dx.doi.org/10.1111/1468-0106.12064. This article may be used for non-commercial purposes in accordance With Wiley Terms and Conditions for self-archiving.