Mark Pingle

Modes of economizing behavior: Experimental evidence

Abstract In addition to more or less elaborate, explicity rational procedures, economic choices in reality are frequently made by trial and error, imitation, following an authority, habit, thoughtless impulse, and hunch. Presenting results from a number of experiments that explicity incorporate decision cost, this paper explores the extent to which these alternative decision making modes can lead to ‘optimal’ choices.

Imitation versus rationality: An experimental perspective on decision making

Abstract Rather than comparing alternatives before making a choice, decision makers often simply imitate the choices made by others. Imitation may be advantageous when comparing alternatives is relatively costly. However, if everyone strictly imitates, then improvements in choice cannot occur. This article presents the results of an experiment designed to examine the use of imitation as an alternative to rationality and extent to which imitation can complement rationality in the search for economic efficiency.

Costly optimization: an experiment

Abstract An experimental technique is developed and used to examine how human subjects make choices when optimization is costly. The total cost of making a choice is defined to include two parts: (1) the direct cost of making the decision, and (2) the indirect cost of making a choice that is not best among the available alternatives. The total cost of choice for subjects in the experimental economy ranged from 15 to 42 percent of the economys resources. The hypothesis that agents are rational on average was strongly rejected, while the hypothesis that agents are rational in the long run fared better.

Submitting to authority: Its effect on decision-making

Abstract Decision-makers often make choices in situations where an authority (e.g., a parent, a boss, a tradition) has prescribed a choice. Submitting to an authoritys prescription is advantageous in that any decision costs associated with comparing alternative choices can be avoided. However, the authoritys prescription may be far from optimal, meaning a decision-maker may also be motivated to deviate from the prescription. In an experimental setting, this paper examines how the decision-making process and the quality of decisions are affected by changes in the quality of the authoritys prescribed choice, changes in the level of punishment for disobedience, and changes in the decision-making environment.

Kidnap insurance and its impact on kidnapping outcomes

In the developing world, kidnapping is relatively common, and a market for kidnap insurance has arisen in response. We provide a model that allows us to analyze how kidnap insurance will affect the interaction between the kidnapper and the victim’s family when both are self-interested and have complete knowledge. We find that a market for kidnap insurance can be supported because it benefits a risk averse family, as long as the introduction of insurance does not increase the risk of kidnapping too much. Families should fully insure if purchasing insurance does not increase the probability of kidnapping, and partially insure otherwise. Kidnapping insurance allows families to redeem hostages from kidnappers who are more willing to kill, which will reduce the number of kidnapping fatalities as long as the insurance does not increase the risk of kidnapping too much.

Introducing Dynamic Analysis Using Malthus's Principle of Population

Abstract Dynamic models are increasingly used in economics, especially in macroeconomics. However, the skills required for constructing and analyzing dynamic models are advanced relative to those required for static models. Consequently, dynamic models are difficult to introduce into courses where the technical skills of students are modest or substantially varied. The author illustrates that, because it is inherently dynamic, Malthuss Principle of Population provides a natural context for introducing dynamic analysis. Moreover, the context is useful for reviewing many mathematical tools and theoretical constructs often used in economics.

The effect of decision costs on the formation of market-making intermediaries: a pilot experiment

An economy is presented where trade is beneficial but not assumed. If trade is to occur, it must arise endogenously as either barter or mediated trade. The role decision costs play in the development of trade is explicitly recognized. The theoretical model is examined in an experimental setting by imbedding it in a computer trading game. The data obtained from the experiments are used to examine the impact of decision costs on the development of trade and on the welfare of subjects in the experimental economy.

To Believe or Not Believe… or Not Decide: A Decision-Theoretic Model of Agnosticism

Using decision theory, we construct a stylized theory of agnosticism, defined as choosing not to choose a religion. The theory indicates agnosticism can be supported as a rational choice if (a) adopting agnosticism provides in-life benefits relative to perceived religions, (b) the perceived payoff for agnosticism after death is not too much less than for any perceived religion, (c) no religion has a high perceived likelihood of truth, (d) the probability of death is neither too high nor too low, or (e) it is less costly to switch from agnosticism to a given religion than from one religion to another. Switching costs make the relative attractiveness of agnosticism dependent upon the perceived likelihood of receiving an informative signal about the truth of any perceived religion. Ironically, the lack of information that makes religious choice uncertain and difficult may contribute to decisiveness.

Examining the impact of relative standing using an ultimatum bargaining game experiment

This paper presents the results of an experiment designed to examine the extent to which a decision-makers relative standing affects bargaining behaviour. In each session, 14 participants played a series of one-shot ultimatum bargaining games. In one treatment, the participants were made aware of only their own cumulative outcome rank as they started each new game, while in a second treatment both their own rank and the rank of their bargaining partner was known. The results indicate relative standing does affect bargaining behaviour, particularly when the decision-maker knows both his own rank and the rank of the bargaining partner. A primary finding is that the provision of relative standing information can enhance well-being because it promotes the formation of mutually beneficial bargaining agreements.

Evolution Of Worker-Employer Networks And Behaviors Under Alternative Non-Employment Benefits: An Agent-Based Computational Study

This study uses an agent-based computational experiments to examine the effects of a non-employment payment on network formation and work-site behaviors among workers and employers participating in a sequential employment game with incomplete contracts. Findings are compared with those obtained for a parallel labor market experiment conducted with human subjects. Related work can be accessed at: http://www2.econ.iastate.edu/tesfatsi/tnghome.htm