»ESI Lecture Series, sponsored by IFREE
+-2014-2015 Lecture Guests
Abstract: We claim that the endowment effect rarely justifies legal intervention in private ordering. To our knowledge, we present the first theory to explain how institutions inhibit the endowment effect without altering people’s rights to their entitlements. The endowment effect is substantially caused by anticipated regret. We show that people experience regret only when they feel responsible for the decision and can mute regret by trading through institutions that let them share responsibility with others. As entitlement-holders typically transact through institutions, we expect most people to make unbiased trading decisions in real markets. We test two common institutions—agency and voting—that divide responsibility between multiple actors. Each caused most subjects to debias and trade in our study. We also show that people intentionally debias by employing institutions in order to share responsibility. Thus, when people can freely transact, private ordering generally overcomes the endowment effect.
Bio: Norma Z. Paige Professor of Law. Director, NYU Program on Corporate Compliance and Enforcement.
Jennifer Arlen is one of the leading scholars on corporate liability, specializing in corporate criminal liability and securities fraud. She also writes extensively on experimental law and economics. Arlen received her BA in economics from Harvard College (magna cum laude) and her JD (Order of the Coif) and PhD in economics (1992) from New York University. She is co-founder, past president, and a director of the Society of Empirical Legal Studies, served on the board of the American Law and Economics Association (1991-93, 2006-09), and is on the editorial board of the American Law and Economics Review. She co-edited EXPERIMENTAL LAW AND ECONOMICS (with Eric Talley) and has published articles in the RAND JOURNAL OF ECONOMICS, JOURNAL OF LAW ECONOMICS AND ORGANIZATION, JOURNAL OF LEGAL STUDIES, JOURNAL OF LAW AND ECONOMICS and numerous law reviews.
October 24, 2014, Devin Shanthikumar, Ph.D. - CEO Incentives and Product Innovation: Insights from Trademarks
Abstract: We introduce trademarks as a novel measure of product innovation and build a sample of over 112,000 USPTO trademark registrations by S&P 1500 firms. We find that new product trademarks are associated with more volatile stock returns, sales, and earnings, consistent with new trademarks being a useful measure of risky product innovation. To understand an important potential driver of product innovation, we examine the relation between the structure of CEO incentives and new trademarks. We find that the percentage of CEO pay in the form of stock options, and the convexity of CEO incentives with respect to stock price, are both strongly positively related to future new trademarks. Finally, we document a significantly positive relation between changes in stock option compensation around the implementation of the modified stock-option-compensation accounting standard SFAS 123(R), and subsequent changes in trademark creation. Overall, our results suggest that stock option compensation is a significant driver of product innovation.
Bio: Professor Devin Shanthikumar is an assistant professor at the University of California Irvine’s Paul Merage School of Business. Prior to joining Merage, Shanthikumar served on the faculty at the Harvard Business School (HBS). Her research focuses on the investing decisions of less sophisticated investors and the impact that these investors have on the market, the role of financial intermediaries such as analysts and the press, and the drivers and impact of product and marketing innovations at the firm level. Her research has been published in top journals, including Management Science, The Accounting Review, and The Journal of Financial Economics, and her Harvard Business School cases are used in accounting courses across the country.
October 31, 2014, Nathan Fong, Ph.D. - The Robustness of Anchoring Effects in Product Valuations
Abstract: The anchoring effect refers to the tendency for people’s numeric judgments to be influenced by an initially considered value. Ariely, Loewenstein, and Prelec (2003) showed that people’s willingness-to-pay (WTP) for market goods is influenced by numbers that should have no bearing on their valuations. Such instability in preferences arguably contradicts the choice theory underlying classical economic models. We evaluate the robustness of preference anchoring by reviewing and extending previous results.
If anchoring effects were to persist over time, it would support the view that valuations are arbitrary and preferences are "constructed." However, if revealed preferences converge to a set of "inherent preferences," it could be argued that preferences are only temporarily distorted by external anchors. We investigate whether the effects persist, and find that anchors affect WTP a week or even months later.
Another possibility is that anchoring distorts WTP judgments, but consumers can still make choices incorporating additional preference information. Also, consumers may find choosing to be a more natural task than evaluating WTP, rendering choice behavior less malleable. We investigate the effect of anchors on choice, and find that anchors cause preference reversals on simple choice tasks.
Bio: Nathan Fong is an Assistant Professor in the Department of Marketing and Supply Chain Management. He earned his B.S. in Mathematical and Computational Science from Stanford University, and his Ph.D. in Marketing from MIT’s Sloan School of Management. Nathan’s research evaluates causal marketing mix effects using field experiments and non-experimental methods. His recent work has looked at how personalization and targeted marketing communications affect online and mobile customer behavior. Nathan also studies the consumer decision making process, focusing on information search behavior and product valuation.
December 5, 2014, Gabriel Rossman, Ph.D. - Obfuscatory Relational Work and Disreputable Exchange
Abstract: This article develops a model of how the structure of exchange can manage such disreputable exchanges as the commensuration of sacred for profane. Whereas existing research discusses the rhetorical reframing of exchange, I highlight structures that obfuscate whether an exchange is occurring and thereby mitigate exchange taboos. I identify three such exchange structures: bundling, brokerage, and gift exchange. Bundling uses cross-subsidization across multiple innocuous exchanges to synthesize a taboo exchange. Brokerage finds a third party to accept responsibility for exchange. Gift exchange delays reciprocity and reframes exchanges as expressions of friendship. All three strategies have alternative meanings and so provide plausible deniability to taboo commensuration. The article concludes by arguing that these sorts of exchange structures represent a synthesis of “nothing but” reductionism and “hostile worlds” moralism, rather than an alternative to them as Viviana Zelizer suggests.
Bio: Gabriel Rossman is an associate professor of sociology at the University of California-Los Angeles. His research interests include economic sociology and the entertainment industry. He recently published Climbing the Charts: What Radio Airplay Teaches Us About the Diffusion of Innovation. His two current research projects are the institutionalization of the gourmet food truck industry and how people negotiate taboos on economic exchange.
May 12, 2014, Don Ross, Ph.D - Psychological versus economic models of bounded rationality - Watch lecture
Dec. 06, 2013, Jack Stecher, Ph.D. -Description and Experience Based Decision Making: An Experimental and Structural Estimation Approach to the Decision-Experience Gap
Feb. 22, 2013 Jordi Brandts Bernad, Ph.D. - Let’s talk: How communication affects contract design.
Nov. 9, 2012 Uri Gneezy, Ph.D. - Incentives and Behavior Change
Sept. 28, 2012 Charles Thomas, Ph.D. - An Alternating-Offers Model of Multilateral Negotiations - Watch lecture
Aug. 31, 2012 Yan Chen, Ph.D. - Crowdsourcing with All-pay Auctions: a Field Experiment on Taskcn - Watch lecture
Apr. 20, 2012 Shawn Kantor, Ph.D. - Do Research Universities Generate Local Economic Growth? - Watch lecture
Feb. 24, 2012 John Tooby, Ph.D. - The Welfare Tradeoff Architecture, Cooperation, and Social Emotions - For further reading please see: Formidability and the logic of human anger and The architecture of human kin detection. - Watch lecture
Nov. 11, 2011 Mark M. Bykowsky, Ph.D. - A Market-based Approach to Establishing Licensing Rules: Licensed Versus Unlicensed Use of Spectrum Federal Communications Commission - please watch this video before lecture - Watch lecture
Oct. 21, 2011 Parker Ballinger, Ph.D. - Individual versus Social Learning: The Importance of Demonstrability - Watch lecture
Apr. 8, 2011 Kevin McCabe, Ph.D. – Experiments on the role of third parties on redistribution decisions. For further reading please see: Shared Experience and Third-Party Decisions: A Laboratory Result, Legitimacy in the lab – The separate and joint effects of earned roles and earned endowments in third-party redistribution, Whose money is it anyway? Ingroups and distributive behavior. - Watch lecture
Apr. 1, 2011 Michael Gurven, Ph.D. - Experimental investigation of fairness and altruism norms in small-scale societies - Further reading: Culture sometimes matters: Intra-cultural variation in pro-social behavior among Tsimane Amerindians and Collective Action in Action: Prosocial Behavior in and out of the Laboratory - Watch lecture
Feb. 18, 2011 Catherine Eckel, Ph.D. - Giving to Government: Voluntary Taxation in the Lab - Watch lecture
Feb. 4, 2011 Peter Boettke, Ph.D. - Polycentrism and Gargantua: Which Model Best Provides Public Education? - Watch lecture
Oct. 5, 2010 Andreas Wilke, Ph.D. - Past and Present Environments: The Evolution of Decision Making
May 7, 2010 Jim Gentle, Ph.D. - The Contribution of Jumps to the Volatility of Asset Prices - Watch lecture
Apr. 9, 2010 Gregory Waymire, Ph.D. - Can Trust Be Sustained in an Uncertain World When Individuals Have Machiavellian Intelligence? - Watch lecture
Feb. 5, 2010 Kevin McCabe, Ph.D. - Watch lecture
Dec. 2, 2009 Jeffrey Tollaksen, Ph.D. - New Ideas About the Nature of Time - Watch lecture
Nov. 13, 2009 Sarah F. Brosnan, Ph.D. - An Evolutionary Perspective on the Perception and Utilization of Property . Watch lecture
Oct. 9, 2009 Monica Smith, Ph.D. - A cognitive History of Material Objects: The Archaeology of Possession, Inheritance, and Value . Watch lecture
May 20, 2009 Gerd Gigerenzer Ph.D. - Homo Heuristicus: Why Biased Minds Make Better Inferences. Watch lecture
Mar. 20, 2009 John Ledyard Ph.D. – Individual Evolutionary Learning, Other-regarding Preferences, and the Voluntary Contributions Mechanism. Watch lecture
Nov. 7, 2008 Larry Iannaccone Ph.D. - Looking Backward: A Cross-National Study of Religious Trends. Watch lecture
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