Sheryl B. Ball

Analysis of Public Goods Experiments Using Dynamic Panel Regression Models

Laboratory experiments on the provision of public goods follow subjects over time as they interact in a small group. In every period subjects allocate a fixed endowment between a private good and a group good that yields a return to all group members. These experiments produce data sets that are rich in dynamics, as subjects respond not only to the parameters of the experiment, but also to previous allocation decisions made by themselves and others in their group. Individual data from these experiments are largely unanalyzed; most early studies test only for differences in averages across treatments. These data provide an unexploited opportunity to understand how an individual’s behavior evolves over time in response to feedback about the behavior of others. A better understanding of the dynamics of behavior in these games has the potential to lead to the design of institutions that improve the efficiency of the private provision of public goods. We reanalyze data from two earlier studies and find economically and statistically significant dynamic interactions among subjects. In particular, subjects respond much more dramatically when they observe that their recent contributions have been above, rather than below, the average for the remainder of the group. We also conclude that previous statistical analysis has substantially underestimated the magnitude of treatment effects. Finally, we cast doubt on the notion that random rematching of subjects can induce statistical or strategic independence across decision periods.

Pareto Optimality in Negotiation: A Classroom Exercise for Achieving Active Learning

Abstract An active learning exercise in which students negotiate an agreement in a real estate transaction is described. There are three issues in dispute: sales price, move-in date, and which of the sellers belongings they will leave for the new owners. Because the issues vary in importance to the two negotiators, agreements in which students “split the difference” on all three issues are not efficient. This exercise facilitates discussion of Pareto efficiency in business courses at introductory or intermediate levels. It is also useful as an introduction to bargaining, integrative agreements in negotiation, information, Nash equilibrium, and positive sum games.

Using technology to facilitate active learning in economics through experiments

Classroom experiments are becoming increasingly popular as active-learning exercises for courses in economics. There are many situations where technology is needed to facilitate the effective use of classroom experiments. This article examines how computers and wireless handheld devices are being used to enhance the flexibility of classroom experiments and expand their usability to larger classes. Evidence on learning gains from the use of computer-assisted experiments in the classroom is also reported.

Basic macroeconomic options for Bangladesh: A numerical analysis

We analyze a variety of macroeconomic policy issues confronting Bangladesh. We develop an intertemporal general equilibrium model and simulate it using Bangladesh parameters. Our estimated model generates reasonably accurate replicas of historical reality. We impose a reduction in current government expenditure. The simulated changes indicate a small improvement for the economy; caused by the expenditure reduction. Our next experiment analyzes the impact of a reduction in capital inflows. Our final exercise implements a devaluation. We conclude that there are positive benefits from fiscal austerity, and a moderate devaluation. Also, reduced capital inflows would have a severe impact on Bangladesh.

The Betrayal Aversion Elicitation Task: An Individual Level Betrayal Aversion Measure

Research on betrayal aversion shows that individuals’ response to risk depends not only on probabilities and payoffs, but also on whether the risk includes a betrayal of trust. While previous studies focus on measuring aggregate levels of betrayal aversion, the connection between an individual’s own betrayal aversion and other individually varying factors, including risk preferences, are currently unexplored. This paper develops a new task to elicit an individual’s level of betrayal aversion that can then be compared to individual characteristics. We demonstrate the feasibility of our new task and show that our aggregate individual results are consistent with previous studies. We then use this classification to ask whether betrayal aversion is correlated with risk aversion. While we find risk aversion and betrayal aversion have no significant relationship, we do observe that risk aversion is correlated with non-social risk preferences, but not the social, betrayal related, risk component of the new task.

Anxiety, Risk Preferences, Betrayal Aversion, and the Growth of Interpersonal Trust

Anxiety is often associated with poor economic outcomes, including earning 13% to 18% less than non-anxious peers. On the other hand, few studies explore how anxiety affects an individual’s economic behavior. In part, this is due to a limited focus of clinical research on the impact of psychopathology, more generally, on economic choice. It is also due to the perceived conceptual overlap of anxiety with risk aversion and betrayal aversion, well-known behavioral economic characteristics. Our laboratory experiments disentangle these factors and show that anxiety has an independent effect on decision-making and merits separate theoretical modeling and experimental treatment and investigation. More specifically, we find that anxiety and betrayal aversion independently inhibit the growth of economic trust while greater risk tolerance is associated with an overall increased level of trust. Our findings suggest that anxiety diminishes the ability to adapt in changing social economic environments such as workplaces. In addition, the behavioral regularities that we find provide the foundation for future theoretical modeling.

‘Nudging’ Risky Decision-Making: The Causal Influence of Information Order

Recent studies have suggested a correlation between information acquisition and value maximization in risky decision-making. We show that changing how information is acquired can “nudge” agents into riskier decisions, suggesting that choice architecture influences observed risky decisions.