Timothy W. Shields | Chapman University (original) (raw)
Papers by Timothy W. Shields
Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be s... more Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be simultaneously active in the mind and in conflict with one another when individuals face choice dilemmas in trust-based economic interactions. Recalibrational theory helps us identify the adaptive design features shared among subsets of superordinate emotion programs. According to this design logic and the computation of adaptive problem features produced by Trust games, we predict the activation of emotions after Trust games. While this study successfully predicts reports of twenty distinct emotional states, further studies are needed to demonstrate ultimate recalibrational functions of emotions. Classifications: 1985). Food sharing among ache foragers: Tests of explanatory hypotheses. Current Anthropology, 26 :223-246. Keltner D, Buswell BN (1997): Embarrassment: Its distinct form and appeasement functions.
We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking... more We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking contest for a fixed prize. Before conflict arises, both agents may agree to allocate the prize by coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. Laboratory experiments confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
SSRN Electronic Journal
Many economic interactions are characterized by “all or nothing” action spaces that may limit a d... more Many economic interactions are characterized by “all or nothing” action spaces that may limit a demonstrable index of trust and, therefore, the propensity to reciprocate. In two experimental trust games, the action space governing investments was manipulated to examine the effects on investments and reciprocity. In the continuous game the investor could invest any amount between 0and0 and 0and10, while in the binary game the investor could invest either 0or0 or 0or10. In both games, the trustee received the tripled investment and then could return any amount back to the investor. Investors invested significantly more in the binary game than in the continuous game. However, higher investments in the binary game did not lead to more reciprocity. To the contrary, conditional on investment of $10, on average trustees returned significantly less in the binary game than in the continuous game.
We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking... more We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking contest for a fixed prize. Before conflict arises, both agents may agree to allocate the prize by coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. Laboratory experiments confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
Motivated by research reporting positive price reactions to adoption of performance-based compens... more Motivated by research reporting positive price reactions to adoption of performance-based compensation plans, we study price reactions to compensation contracting in experimental markets. The design allows us to manipulate variables separately to examine the effect of adverse selection (sorting) and moral hazard (incentives) on equity prices. We find that managers select contracts based on their private information, and that information is conveyed to the market by the choice of compensation contract and is reflected in price. Additionally, we find that managers do not always exert costly effort in spite of favorable incentives to do so (shirking). As a result, the market is skeptical of incentive benefits. Thus, while we find evidence of overbidding in some treatments, we find that market prices are consistent with private information revelation but undervalue incentive benefits.
We investigated the behavior of information providers (underwriters) and users (investors) in a c... more We investigated the behavior of information providers (underwriters) and users (investors) in a controlled laboratory experiment where underwriters had incentives to deceive and investors had incentives to avoid deception. The results of our experiment showed that there was a significant proportion of both deceptive and non-deceptive underwrites. Despite the presence of deceptive underwriters, investors were receptive to underwriters' reports, gleaning information content, albeit overly optimistic. Within our sample, deception by underwrites and reception by investors were payoff maximizing strategies. Moreover, participants exhibiting behavior free from projection bias (in that they sent deceptive reports to investors but at the same time were receptive to reports of underwriters) earned the highest payoffs. These results call into question the characterization of duped investors being irrational.
Commitment problems are inherent to non-binding conflict resolution mechanisms, since an unsatisf... more Commitment problems are inherent to non-binding conflict resolution mechanisms, since an unsatisfied party can ignore the resolution and initiate conflict. We provide experimental evidence suggesting that even in the absence of binding contractual agreements individuals often avoid conflict by committing to the outcome of a conflict resolution mechanism. Commitment problems are mitigated to a greater extent for groups that opt-in to the conflict resolution mechanism, but only when opting-in is costly. Although conflict rates are higher when opting-in is costly than when it is free or exogenously imposed, commitment problems are greatly reduced among those groups who choose to opt-in.
SSRN Electronic Journal, 2000
ABSTRACT We designed an experiment to study behavior in information transmission games where unde... more ABSTRACT We designed an experiment to study behavior in information transmission games where underwriters have economic incentives to deceive and investors have incentives to avoid deception. Theory predicts that investors should not be able to glean information from the underwriters’ reports, and thus investment decisions should be based solely on the investment’s fundamental risk. To test this prediction we elicited choices from risky gambles constructed to be mathematically equivalent to the information setting if the underwriters’ reports had no information content. Participants acted simultaneously as underwriters and investors in one-shot information transmission games. Our findings indicate that underwriters acted deceptively, while investors invested conditional on the underwriters’ reports. Moreover, investors invested significantly more often when the expected return from the investment was relatively high. We observed that investors both gleaned and gambled, and those who gleaned earned higher payoffs.
SSRN Electronic Journal, 2000
ABSTRACT We examine the role of higher order beliefs in asset markets where coordination between ... more ABSTRACT We examine the role of higher order beliefs in asset markets where coordination between a buyer and seller can lead to gains to trade. The scenarios are modeled such that trader’s strategies do not only depend upon their beliefs of underlying economic phenomena, but also upon the others’ beliefs regarding the beliefs of themselves. Under certain parameters the breakdown of coordination is predicted–even when both traders are certain the underlying phenomena dictates trade is advantageous. We demonstrate the equilibrium predictions can be constructed via a small number of iterated thought exercises. The experimental design allows us to control for various behavioral phenomena and examine subjects’ decisions across different accounting regimes as to tease out strategic uncertainty due solely to information asymmetry. In this setting we find evidence supporting higher order beliefs. An implication is that the lack of uniformity leads to lack of common knowledge of the beliefs of others, which in turn leads to the spreading of inefficient outcomes.
Journal of Economic Behavior & Organization, 2013
We examine subjects" behavior in sender-receiver games where there are gains from trade and align... more We examine subjects" behavior in sender-receiver games where there are gains from trade and alignment of interests in one of the two states. We elicit subjects" beliefs, risk and other-regarding preferences. Our design also allows us to examine the behavior of subjects in both roles, to determine whether the behavior in one role is the best response to the subject"s own behavior in the other role. The results of the experiment indicate that 60 percent of senders adopt deceptive strategies by sending favorable message when the true state of the nature is unfavorable. Nevertheless, 67 percent of receivers invest conditional upon a favorable message. The investing behavior of receivers cannot be explained by risk preferences or as a best response to subject"s own behavior in the sender"s role. However, it can be rationalized by accounting for elicited beliefs and other-regarding preferences. Finally, the honest behavior of some senders can be explained by other-regarding preferences. Thus we find liars do believe, and individuals who care about the payoffs of others tend to be honest.
Journal of Economic Behavior & Organization, 2014
Due to the high costs of conflict both in theory and practice, we examine and experimentally test... more Due to the high costs of conflict both in theory and practice, we examine and experimentally test the conditions under which conflict between asymmetric agents can be resolved. We model conflict as a two-agent rent-seeking contest for an indivisible prize. Before conflict arises, both agents may agree to allocate the prize by fair coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. The results of the experiment confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
Journal of Behavioral and Experimental Economics, 2014
Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be s... more Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be simultaneously active in the mind and in conflict with one another when individuals face choice dilemmas in trust-based economic interactions. Recalibrational theory helps us identify the adaptive design features shared among subsets of superordinate emotion programs. According to this design logic and the computation of adaptive problem features produced by Trust games, we predict the activation of emotions after Trust games. While this study successfully predicts reports of twenty distinct emotional states, further studies are needed to demonstrate ultimate recalibrational functions of emotions. Classifications: 1985). Food sharing among ache foragers: Tests of explanatory hypotheses. Current Anthropology, 26 :223-246. Keltner D, Buswell BN (1997): Embarrassment: Its distinct form and appeasement functions.
Gender stereotypes and gender-discriminant behaviors have been shown to have strong and undesirab... more Gender stereotypes and gender-discriminant behaviors have been shown to have strong and undesirable organizational, managerial, and economic effects. We examine the relationship between sexism and accounting practices, and the effect of contextual feedback using laboratory experiments. Sexist stereotypes and contextual feedback may affect the likelihood of financial misstatements and audits when auditors and issuers are of known gender. To investigate these aspects of sexism at zero acquaintance and after contextual feedback, we presented males and females with incentivized belief elicitation tasks about anticipated interaction behaviors and then a series of strategic-communication game decisions in same, other, and unknown gender interactions. Feedback about belief accuracy, actual behaviors, and earnings was only given after completing a full set of belief elicitations and interactions. At zero acquaintance, both genders stereotyped the other gender's behavior propensities as relatively different than their own gender's. Both genders' stereotyped male and female targets similarly, and while both genders discriminated based on target gender, males' and females' behavior was similar. Consistent with a statistical discrimination account of sexism, stereotypes and game behaviors were adjusted after contextual feedback to more accurately reflect and predict others' behaviors. While biosocial and evolutionary perspectives may help explain why undesirable sexism is prevalent, our results suggest that by providing contextual information and incentives in reporting and auditing settings, we can motivate sexists to moderate their stereotypes and linked behaviors.
SSRN Electronic Journal, 2000
In the absence of enforceable contracts, many economic and personal interactions rely on trust an... more In the absence of enforceable contracts, many economic and personal interactions rely on trust and reciprocity. Research shows that although this reliance often works well, sometimes it breaks down. Simple rules mandating minimum standards on reciprocation prevent the most egregious trust violations, but may also undermine behavior that would have otherwise produced higher overall economic welfare. We test the efficacy of exogenously imposed minimum return rules using experimental trust games. We find that rules fail to increase trust and trustworthiness. Thus low minimum standards significantly decrease economic welfare. Although sufficiently restrictive rules restore welfare, trust and trustworthy behavior never returns.
Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be s... more Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be simultaneously active in the mind and in conflict with one another when individuals face choice dilemmas in trust-based economic interactions. Recalibrational theory helps us identify the adaptive design features shared among subsets of superordinate emotion programs. According to this design logic and the computation of adaptive problem features produced by Trust games, we predict the activation of emotions after Trust games. While this study successfully predicts reports of twenty distinct emotional states, further studies are needed to demonstrate ultimate recalibrational functions of emotions. Classifications: 1985). Food sharing among ache foragers: Tests of explanatory hypotheses. Current Anthropology, 26 :223-246. Keltner D, Buswell BN (1997): Embarrassment: Its distinct form and appeasement functions.
We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking... more We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking contest for a fixed prize. Before conflict arises, both agents may agree to allocate the prize by coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. Laboratory experiments confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
SSRN Electronic Journal
Many economic interactions are characterized by “all or nothing” action spaces that may limit a d... more Many economic interactions are characterized by “all or nothing” action spaces that may limit a demonstrable index of trust and, therefore, the propensity to reciprocate. In two experimental trust games, the action space governing investments was manipulated to examine the effects on investments and reciprocity. In the continuous game the investor could invest any amount between 0and0 and 0and10, while in the binary game the investor could invest either 0or0 or 0or10. In both games, the trustee received the tripled investment and then could return any amount back to the investor. Investors invested significantly more in the binary game than in the continuous game. However, higher investments in the binary game did not lead to more reciprocity. To the contrary, conditional on investment of $10, on average trustees returned significantly less in the binary game than in the continuous game.
We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking... more We examine conflict resolution via a random device. We model conflict as a two-agent rent-seeking contest for a fixed prize. Before conflict arises, both agents may agree to allocate the prize by coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. Laboratory experiments confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
Motivated by research reporting positive price reactions to adoption of performance-based compens... more Motivated by research reporting positive price reactions to adoption of performance-based compensation plans, we study price reactions to compensation contracting in experimental markets. The design allows us to manipulate variables separately to examine the effect of adverse selection (sorting) and moral hazard (incentives) on equity prices. We find that managers select contracts based on their private information, and that information is conveyed to the market by the choice of compensation contract and is reflected in price. Additionally, we find that managers do not always exert costly effort in spite of favorable incentives to do so (shirking). As a result, the market is skeptical of incentive benefits. Thus, while we find evidence of overbidding in some treatments, we find that market prices are consistent with private information revelation but undervalue incentive benefits.
We investigated the behavior of information providers (underwriters) and users (investors) in a c... more We investigated the behavior of information providers (underwriters) and users (investors) in a controlled laboratory experiment where underwriters had incentives to deceive and investors had incentives to avoid deception. The results of our experiment showed that there was a significant proportion of both deceptive and non-deceptive underwrites. Despite the presence of deceptive underwriters, investors were receptive to underwriters' reports, gleaning information content, albeit overly optimistic. Within our sample, deception by underwrites and reception by investors were payoff maximizing strategies. Moreover, participants exhibiting behavior free from projection bias (in that they sent deceptive reports to investors but at the same time were receptive to reports of underwriters) earned the highest payoffs. These results call into question the characterization of duped investors being irrational.
Commitment problems are inherent to non-binding conflict resolution mechanisms, since an unsatisf... more Commitment problems are inherent to non-binding conflict resolution mechanisms, since an unsatisfied party can ignore the resolution and initiate conflict. We provide experimental evidence suggesting that even in the absence of binding contractual agreements individuals often avoid conflict by committing to the outcome of a conflict resolution mechanism. Commitment problems are mitigated to a greater extent for groups that opt-in to the conflict resolution mechanism, but only when opting-in is costly. Although conflict rates are higher when opting-in is costly than when it is free or exogenously imposed, commitment problems are greatly reduced among those groups who choose to opt-in.
SSRN Electronic Journal, 2000
ABSTRACT We designed an experiment to study behavior in information transmission games where unde... more ABSTRACT We designed an experiment to study behavior in information transmission games where underwriters have economic incentives to deceive and investors have incentives to avoid deception. Theory predicts that investors should not be able to glean information from the underwriters’ reports, and thus investment decisions should be based solely on the investment’s fundamental risk. To test this prediction we elicited choices from risky gambles constructed to be mathematically equivalent to the information setting if the underwriters’ reports had no information content. Participants acted simultaneously as underwriters and investors in one-shot information transmission games. Our findings indicate that underwriters acted deceptively, while investors invested conditional on the underwriters’ reports. Moreover, investors invested significantly more often when the expected return from the investment was relatively high. We observed that investors both gleaned and gambled, and those who gleaned earned higher payoffs.
SSRN Electronic Journal, 2000
ABSTRACT We examine the role of higher order beliefs in asset markets where coordination between ... more ABSTRACT We examine the role of higher order beliefs in asset markets where coordination between a buyer and seller can lead to gains to trade. The scenarios are modeled such that trader’s strategies do not only depend upon their beliefs of underlying economic phenomena, but also upon the others’ beliefs regarding the beliefs of themselves. Under certain parameters the breakdown of coordination is predicted–even when both traders are certain the underlying phenomena dictates trade is advantageous. We demonstrate the equilibrium predictions can be constructed via a small number of iterated thought exercises. The experimental design allows us to control for various behavioral phenomena and examine subjects’ decisions across different accounting regimes as to tease out strategic uncertainty due solely to information asymmetry. In this setting we find evidence supporting higher order beliefs. An implication is that the lack of uniformity leads to lack of common knowledge of the beliefs of others, which in turn leads to the spreading of inefficient outcomes.
Journal of Economic Behavior & Organization, 2013
We examine subjects" behavior in sender-receiver games where there are gains from trade and align... more We examine subjects" behavior in sender-receiver games where there are gains from trade and alignment of interests in one of the two states. We elicit subjects" beliefs, risk and other-regarding preferences. Our design also allows us to examine the behavior of subjects in both roles, to determine whether the behavior in one role is the best response to the subject"s own behavior in the other role. The results of the experiment indicate that 60 percent of senders adopt deceptive strategies by sending favorable message when the true state of the nature is unfavorable. Nevertheless, 67 percent of receivers invest conditional upon a favorable message. The investing behavior of receivers cannot be explained by risk preferences or as a best response to subject"s own behavior in the sender"s role. However, it can be rationalized by accounting for elicited beliefs and other-regarding preferences. Finally, the honest behavior of some senders can be explained by other-regarding preferences. Thus we find liars do believe, and individuals who care about the payoffs of others tend to be honest.
Journal of Economic Behavior & Organization, 2014
Due to the high costs of conflict both in theory and practice, we examine and experimentally test... more Due to the high costs of conflict both in theory and practice, we examine and experimentally test the conditions under which conflict between asymmetric agents can be resolved. We model conflict as a two-agent rent-seeking contest for an indivisible prize. Before conflict arises, both agents may agree to allocate the prize by fair coin flip to avoid the costs of conflict. In equilibrium, risk-neutral agents with relatively symmetric conflict capabilities agree to resolve the conflict by randomization. However, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. The results of the experiment confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
Journal of Behavioral and Experimental Economics, 2014
Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be s... more Consistent with a modular view of the mind, both short-sighted and long-sighted programs may be simultaneously active in the mind and in conflict with one another when individuals face choice dilemmas in trust-based economic interactions. Recalibrational theory helps us identify the adaptive design features shared among subsets of superordinate emotion programs. According to this design logic and the computation of adaptive problem features produced by Trust games, we predict the activation of emotions after Trust games. While this study successfully predicts reports of twenty distinct emotional states, further studies are needed to demonstrate ultimate recalibrational functions of emotions. Classifications: 1985). Food sharing among ache foragers: Tests of explanatory hypotheses. Current Anthropology, 26 :223-246. Keltner D, Buswell BN (1997): Embarrassment: Its distinct form and appeasement functions.
Gender stereotypes and gender-discriminant behaviors have been shown to have strong and undesirab... more Gender stereotypes and gender-discriminant behaviors have been shown to have strong and undesirable organizational, managerial, and economic effects. We examine the relationship between sexism and accounting practices, and the effect of contextual feedback using laboratory experiments. Sexist stereotypes and contextual feedback may affect the likelihood of financial misstatements and audits when auditors and issuers are of known gender. To investigate these aspects of sexism at zero acquaintance and after contextual feedback, we presented males and females with incentivized belief elicitation tasks about anticipated interaction behaviors and then a series of strategic-communication game decisions in same, other, and unknown gender interactions. Feedback about belief accuracy, actual behaviors, and earnings was only given after completing a full set of belief elicitations and interactions. At zero acquaintance, both genders stereotyped the other gender's behavior propensities as relatively different than their own gender's. Both genders' stereotyped male and female targets similarly, and while both genders discriminated based on target gender, males' and females' behavior was similar. Consistent with a statistical discrimination account of sexism, stereotypes and game behaviors were adjusted after contextual feedback to more accurately reflect and predict others' behaviors. While biosocial and evolutionary perspectives may help explain why undesirable sexism is prevalent, our results suggest that by providing contextual information and incentives in reporting and auditing settings, we can motivate sexists to moderate their stereotypes and linked behaviors.
SSRN Electronic Journal, 2000
In the absence of enforceable contracts, many economic and personal interactions rely on trust an... more In the absence of enforceable contracts, many economic and personal interactions rely on trust and reciprocity. Research shows that although this reliance often works well, sometimes it breaks down. Simple rules mandating minimum standards on reciprocation prevent the most egregious trust violations, but may also undermine behavior that would have otherwise produced higher overall economic welfare. We test the efficacy of exogenously imposed minimum return rules using experimental trust games. We find that rules fail to increase trust and trustworthiness. Thus low minimum standards significantly decrease economic welfare. Although sufficiently restrictive rules restore welfare, trust and trustworthy behavior never returns.