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A Caltech Library Repository Feedhttp://www.rssboard.org/rss-specificationpython-feedgenenWed, 07 Aug 2024 18:12:11 -0700Committee Decisions under Majority Rule: Dynamic Theories and Experimental Results
https://resolver.caltech.edu/CaltechAUTHORS:20140304-163855249
DOI: 10.7907/ykk52-wdw67
<p>[Introduction] For committees operating under majority rule and certain other reasonably well-defined conditions, the Majority Rule Equilibrium (MRE) is a very good predictor of the committee's choice (Berl et al., 1976; Florina and Plott, 1978; Isaac and Plott, 1978). The dynamics of the committee decision process which underlie this outcome have never been adequately explained. This might not be so serious a problem if an accessible MRE tended to exist for most possible configurations of committee members' preferences. However, the MRE usually does not exist (Rubenstein, 1979) and, furthermore, generalizations of the MRE are the subject of considerable theoretical speculation.</p>https://resolver.caltech.edu/CaltechAUTHORS:20140304-163855249Costly offers and the equilibration properties of the multiple unit double auction under conditions of unpredictable shifts of demand and supply
https://resolver.caltech.edu/CaltechAUTHORS:20140324-113643105
DOI: 10.7907/fnhzb-n0e58
<p>The paper reports on the behavior of markets in which a transactions cost is imposed in the form of a tax on bids and asks that are tendered in the market. That is, in the markets studied communication with the other side of the market was costly. The markets were nonstationary in the sense that market demand and market supply shifted unpredictably each period and the markets were organized by the computerized Multiple Unit Double Auction. The results are as follow. (1) A market equilibration process is observed across the periods of nonstationary markets. (2) The imposition of the cost on offers did not negate the tendency toward market equilibration but the price discovery process was "incomplete" relative to the free offer case. (3) Price equilibration with the offer cost was slower and efficiencies were reduced.</p>https://resolver.caltech.edu/CaltechAUTHORS:20140324-113643105Basic Principles of Asset Pricing Theory: Evidence from Large-scale Experimental Financial Markets
https://authors.library.caltech.edu/records/eqsbn-kbz89
DOI: 10.7907/eqsbn-kbz89
We report on two sets of large-scale financial markets experiments that were designed to test the central proposition of modern asset pricing theory, namely, that risk premia are solely determined by covariance with aggregate risk. We analyze the pricing within the framework suggested by two theoretical models, namely, the (general) Arrow and Debreu's complete-markets model, and the (more specific) Sharpe-Lintner-Mossin Capital Asset Pricing Model (CAPM). Completeness of the asset payoff structure justifies the former; the small (albeit non-negligible) risks justifies the latter. We observe swift convergence towards price patterns predicted in the Arrow and Debreu and CAPM models. This observation is significant, because subjects always lack the information to deliberately set asset prices using either model. In the first set of experiments, however, equilibration is not always robust, with markets temporarily veering away. We conjecture that this reflects our failure to control subject' beliefs about the temporal independence of the payouts. Confirming this conjecture, the anomaly disappears in a second set of experiments, where states were drawn without replacement. We formally test whether CAPM and Arrowâ€“Debreu equilibrium can be used to predict price movements in our experiments and confirm the hypothesis. When multiplying the subject payout tenfold (in real terms), to US $ 500 on average for a 3-h experiment, the results are unaltered, except for an increase in the recorded risk premia.https://authors.library.caltech.edu/records/eqsbn-kbz89Behavioral Game Theory: Thinking, Learning and Teaching
https://resolver.caltech.edu/CaltechAUTHORS:20110204-094426039
DOI: 10.2139/ssrn.295585
<p>This paper describes a parametric approach to weakening rationality assumptions in game theory to fit empirical data better. The central features of game theory are: The concept of a game (players, strategies, information, timing, outcomes); strategic thinking; mutual consistency of beliefs and strategies; and strategic foresight and Bayesian updating of unobserved "types" in repeated games. This paper describes a general four-parameter behavioral approach which relaxes the mutual consistency and foresight properties, while retaining much of the structure and hence the precision of game theory. One parameter measures the number of steps of iterated thinking that the average player does. This "thinking steps" model generates predictions about one-shot games and provides initial conditions for a theory of learning in repeated games. The learning theory adds one parameter (to measure response sensitivity) and adjusts learning parameters for environmental change (e.g., old experience is rapidly decayed when other players' moves are changing). It predicts behavior in new games more accurately than comparable models like fictitious play and reinforcement learning. The teaching theory assumes some fraction of players realize the impact of their current choices on future behavior of other players who learn, but does not impose equilibrium or updating assumptions as in standard approaches. The thinking-learning-teaching model is fit to many experimental data sets (a total of several thousand observations) including entry, mixed-equilibrium, "beauty contest", coordination, matrix games, and repeated trust games with incomplete information.</p>https://resolver.caltech.edu/CaltechAUTHORS:20110204-094426039Organizing for Collective Action: Olson Revisited
https://authors.library.caltech.edu/records/k04xn-z8w46
DOI: 10.7907/k04xn-z8w46
<p>We study a standard collective action problem in which successful achievement of a group interest requires costly participation by some fraction of its members. How should we model the internal organization of these groups when there is asymmetric information about the preferences of their members? How effective should we expect it to be as we increase the group's size n? We model it as an optimal honest and obedient communication mechanism and we show that for large n it can be implemented with a very simple mechanism that we call the Voluntary Based Organization. Two new results emerge from this analysis. Independently of the assumptions on the underlying technology, the limit probability of success in the best honest and obedient mechanism is the same as in an unorganized group, a result that is not generally true if obedience is omitted. An optimal organization, however, provides a key advantage: when the probability of success converges to zero, it does so at a much slower rate than in an unorganized group. Because of this, significant probabilities of success are achievable with simple honest and obedient organizations even in very large groups.</p>https://authors.library.caltech.edu/records/k04xn-z8w46Veto Players and Policy Entrepreneurship
https://resolver.caltech.edu/CaltechAUTHORS:20190430-083315475
DOI: 10.7907/crfqw-8k260
<p>We analyze the effects of veto players when the set of available policies isn't exogenously fixed, but rather is determined by policy developers who work to craft new high-quality proposals. If veto players are moderate then there is active competition between policy developers on both sides of the political spectrum. However, more extreme veto players induce asymmetric activity, as one side disengages from policy development. With highly-extreme veto players, policy development ceases and gridlock results. We also analyze effects on centrists' utility. Moderate veto players dampen productive policy development and extreme ones eliminate it entirely, either of which is bad for centrists. But some effects are surprisingly positive. In particular, somewhat-extreme veto players can induce policy developers who dislike the status quo to craft moderate, high-quality proposals. Our model accounts for changing patterns of policymaking in the U.S. Senate and predicts that if polarization continues centrists will become increasingly inclined to eliminate the filibuster.</p>https://resolver.caltech.edu/CaltechAUTHORS:20190430-083315475