“Explaining Public Good Provisions in Networks”, 2007, in progress

            ABSTRACT:

Bramoullé and Kranton (2007) model the production of a costly good non-excludable among individuals who are linked within a given social structure. Under this theoretical framework, equilibria characterization shows an asymmetry where some individuals contribute while others free ride. To test their results, we focus on two simple network structures - the star and the circle.  Our results show that equilibrium play is not observed in experiments with repeated one shot games setup. We conjecture that this discrepancy in theoretical and experimental results is attributable to the strategic uncertainty due to the existence of multiple equlibria. Towards resolving consequential coordination failures, we use the approach of Cooper, DeJong et al. (1989) of introducing a nonbinding communication pre-stage. We allow for three different communication mechanisms to test the effectiveness of pre-play communication. In contrast to earlier literature of experiments with communication, results show that one-way communication does not necessarily improve upon equilibrium play in this modified setup of Bramoullé and Kranton (2007). However, we show that they can be improved upon when allowing for communication among maximal independent sets in networks.

 

Keywords: Public Goods, Networks, Communication, Experiment

JEL Classifications: A13, B49, C92, D85, H41

“Endowment Effect: Another Explanation of Preference Reversals?”, 2006, working paper

            ABSTRACT:

This paper provides an experimental approach as to see whether preference reversal (PR) phenomenon is driven by the explanation of an endowment effect in accordance with the theory of Masatlioglu and Ok (2005). There are two basic questions that motivate this study: whether individuals would be willing to give up their endowment towards earning a sure amount of money determined according to their minimum selling prices. As opposed to the predictions that individuals should hold on to their endowments, results show that individuals most often disclaim their endowment in favor of another lottery and/or sure amount of money.