Timothy Salmon - Academia.edu (original) (raw)
Papers by Timothy Salmon
This study examines bidder preferences between alternative auction institutions. In particular we... more This study examines bidder preferences between alternative auction institutions. In particular we seek to experimentally characterize the degree to which bidders prefer an ascending auction over a sealed bid auction. We find very strong ceteris paribus preferences for the ascending institution with bidders choosing it overwhelmingly often when entry prices for the two auctions are the same. When the entry prices of the two auctions differ, many subjects can be shown to be willing to pay far more to enter the ascending auction than is explainable by their risk attitudes when accounting for their expectations about the risk preferences of their opponents.
Regional Science and Urban Economics, 2021
Journal of Economic Behavior & Organization, 2019
Abstract There has been substantial prior field research on how the incidence of criminal behavio... more Abstract There has been substantial prior field research on how the incidence of criminal behavior responds to changes in the probability of punishment. The results of this research are at best mixed in regards to its conformance to the predictions of standard expected utility theory. One possible cause for these mixed results is that punishment probabilities in the field are typically unknown making the choice environment one of ambiguity rather than uncertainty. The presence of this ambiguity could in part explain some of these conflicting results. As a step towards investigating this link, we conduct an experiment framed as being on tax compliance intended to try to understand how individuals respond to ambiguous punishment probabilities and in particular to how they respond to shifts in ambiguous versus known probabilities. We find that when probabilities are known and shift, the standard model works well to explain the response. When the probabilities are ambiguous and shift, the behavioral response is minimal. We also use these experiments as a means of testing whether ambiguity aversion might be present in sufficient degree to be exploitable in how enforcement procedures are advertised to increase their effectiveness at minimal cost. We find at best weak evidence in favor of ambiguity aversion and thus little support for the notion that enforcement regimes could take advantage of ambiguity aversion.
Southern Economic Journal, 2016
We explore the behavior of losers of promotion tournaments after the tournament is concluded. We ... more We explore the behavior of losers of promotion tournaments after the tournament is concluded. We do so through the use of an experiment in which we vary the design of the promotion tournament to determine how tournament design a¤ects post tournament e¤ort. We provide a theoretical model demonstrating two possible e¤ects from the tournaments which are strategic sabotage and the possibility that a worker becomes discouraged by the tournament outcome. We examine behavior after the tournament and …nd evidence suggesting that bad tournament design can lead to workers being discouraged. This discouragement e¤ect is strong for low ability workers but not for high ability workers. On the other hand we do …nd evidence that some high ability workers engage in strategic sabotage but the incidence does not vary with the design of the promotion tournament.
SSRN Electronic Journal, 2015
A growing number of studies use "real"e¤ort designs for laboratory experiments where subjects eng... more A growing number of studies use "real"e¤ort designs for laboratory experiments where subjects engage in an actual task as a form of e¤ort provision. The commonly argued reason for using real e¤ort is that it is more generalizable and …eld relevant than using stylized e¤ort where subjects simply choose some level of costly e¤ort. We …nd little support for these claims. Moreover, we revisit past real e¤ort designs and note that a common thread is that they lack any cost of e¤ort. To make this point clear, we …rst provide a theoretical characterization of the nature of e¤ort costs to provide a better understanding of how to model them in the lab. We then conduct two experiments with the aim of testing whether there are di¤erences in behavior between real and stylized designs. In both tests we …nd that there are no di¤erences though we also discuss situations in which that might not be the case. We also design and test a module for implementing proper e¤ort costs in a real e¤ort experiment which could be added on to almost any real e¤ort design which should help overcome some of the shortcomings we demonstrate with standard real e¤ort experiments.
Analysis and Alternatives
Analysis and Alternatives
Vita. U.M.I. no. 9927162. Thesis (Ph. D.)--Johns Hopkins University, 1999. Includes bibliographic... more Vita. U.M.I. no. 9927162. Thesis (Ph. D.)--Johns Hopkins University, 1999. Includes bibliographical references (leaves 183-187). Microfilm.
SSRN Electronic Journal, 2014
We experimentally investigate the extent to which social observability of one's actions and the p... more We experimentally investigate the extent to which social observability of one's actions and the possibility of social non-monetary judgment affect the decision to engage in rule breaking behavior. We consider three rule breaking scenarios-theft, bribery and embezzlement-in the absence of any formal enforcement mechanism. By involving a student sample characterized by cultural heterogeneity due to immigration of ancestors to the US, we are able to investigate whether the effectiveness of informal social enforcement mechanisms is conditional on the cultural background of the decision-maker. A total of 52 countries are represented in our sample, ranging from Low Rule of Law countries such as Liberia and Nigeria to High Rule of Law countries such as Sweden and Norway. Our data provide evidence that people with different cultural backgrounds do respond differently to increased social observability of their actions. In particular, while subjects that identify culturally with a High Rule of Law country respond to social obervability and judgment by lowering their propensities to engage in rule breaking, subjects that identify with Low Rule of Law countries do not. Our findings suggest that development policies that rely purely on social judgment to enforce behavior may not work with Low Rule of Law populations.
Theory and Decision, 2004
Evidence presented in Salmon (2001) indicates that typical tests to identify learning behavior in... more Evidence presented in Salmon (2001) indicates that typical tests to identify learning behavior in experiments involving normal form games possess little power to reject incorrect models. This paper begins by presenting results from an experiment designed to gather alternative data to overcome this problem. The results from these experiments indicate support for a "learning to learn" or rule learning hypothesis in which subjects change their decision rule over time. These results are then used to construct an adaptive learning model which is intended to mimic more accurately the behavior observed. The Þnal section of the paper presents results from a simple simulation based analysis comparing the performance of this adaptive learning model with that of several standard decision rules in reproducing the choice patterns observed in the experiment.
Journal of Economic Behavior & Organization, 2004
In this paper we develop a model of the behavior of bidders in simultaneous ascending auctions ba... more In this paper we develop a model of the behavior of bidders in simultaneous ascending auctions based on two principles: principle of surplus maximization and the principle of bid minimization. These principles lead to models of both price dynamics and equilibration, leading to disequilibrium structural equations that can be used for estimating bidder values. The intention behind the development of this methodology is to provide an auctioneer a method of extracting information during an auction about possible closing prices. We first benchmark the performance of the model with data from experimental auctions and then apply it to the U.K. UMTS or Third Generation Mobile auction.
Journal of Economic Behavior & Organization, 2013
Although the theory of optimal contracts and the principal agent model are now well established i... more Although the theory of optimal contracts and the principal agent model are now well established in the literature, empirical support for this theory has been mixed at best. We use economic experiments to test contract theory and assess the empirical relevance of two possible confounding factors that may explain why the theory has not received stronger empirical support. First, parameters of interest may be biased if agents self-select into projects with di¤ering risk pro…les based on risk preferences. Second, di¤ering levels of market power on either side of the market could play a confounding role. In general, we …nd support for classical contract theory augmented to accommodate market power and self-selection based on risk preferences. We also …nd evidence for a third confound in the form of the characteristics of agents not party to the transaction a¤ecting the terms of the contract.
Journal of Economic Behavior & Organization, 2014
We compare two widely used forms of compensation-e¢ ciency wages (EW) and deferred compensation (... more We compare two widely used forms of compensation-e¢ ciency wages (EW) and deferred compensation (DC)-with respect to their e¤ectiveness in providing e¤ort incentives. In addition, we test their predictions on the dynamic e¤ort provision patterns, and elicit individual preferences between the two forms of compensation. The theoretical predictions on e¤ort are generally well supported, although there is a tendency for over-provision of e¤ort with EW. In consequence, although the theoretical prediction that DC is more cost-e¤ective for obtaining a unit of e¤ort is supported in the data, the magnitude of the e¤ect is small. Eliciting preference between contracts, we …nd a marked preference for EW-much more than can be explained by risk aversion. Combined, the two e¤ects-e¤ort over-provision with EW and relative preference for EWlargely dissipate any advantage that DC may have in providing e¤ort incentives.
Econometrica, 2001
This paper evaluates the effectiveness of four econometric approaches intended to identify the le... more This paper evaluates the effectiveness of four econometric approaches intended to identify the learning rules being used by subjects in experiments with normal form games. This is done by simulating experimental data and then estimating the econometric models on the simulated data to determine if they can correctly identify the rule that was used to generate the data. The results show that all of the models examined possess difficulties in accurately distinguishing between the data generating processes.
Research in Experimental Economics, 2006
Traditional auction theory assumes that bidders possess values defined solely on the auctioned ob... more Traditional auction theory assumes that bidders possess values defined solely on the auctioned object. There may, however, be cases in which bidders possess preferences over the revenue achieved by the auctioneer. We present here a comprehensive framework of price preference valuations, unifying several phenomenon ranging from preference for charitable giving to shill bidding. We compare expected efficiency and revenue of first and second price auctions for some specific cases of key interest. We also incorporate heterogeneous bidder preferences and examine the effects of mis-specified beliefs and show that both are crucial for understanding these situations. JEL Codes: D44, D64
Why do some voters support income redistribution while others do not? One obvious answer might be... more Why do some voters support income redistribution while others do not? One obvious answer might be that some benefit while others do not, but such a simple answer is difficult to square with voting patterns. This issue is complicated by the fact that public assistance programs usually have two inextricably entangled effects on society: they equalize wealth, but they also cushion people against the effects of random catastrophic events like natural disasters and serious illnesses. Thus they provide both income maintenance to the poor and social insurance benefits to all economic classes. Each effect appeals to a particular notion of fairness, and each effect also has a distinct impact on voters' self-interest. We conduct a laboratory experiment to determine how differences in the environment can alter subjects' preferences for income redistribution and whether individuals' responses to the environment are related to their self-expressed political ideology. We find that more liberal subjects are more willing than conservatives to support redistribution when there is a moderate chance of random, catastrophic income loss. When the chance of loss is low, or very high, both liberal and conservative subjects follow self interest and are not guided by ideology. Our findings support the hypothesis that ideology is associated with a person's willingness to use redistribution to reduce income inequality that is caused by luck, but it is not related to preferences for inequality that are not related to luck.
Many prior experiments have shown that individuals will sacri�ce their own well-being to bene�t o... more Many prior experiments have shown that individuals will sacri�ce their own well-being to bene�t others in a variety of situations. This behavior can be easily explained if people possess a preference for fairness or an aversion to inequality. These preferences might also explain the existence of macroeconomic,redistributive income taxation programs. This paper presents an experiment designed to test the
Second chance offers in on-line marketplaces involve a seller conducting an auction for one unit ... more Second chance offers in on-line marketplaces involve a seller conducting an auction for one unit of a good and then using the information gained during the auction to bargain privately with a losing bidder, offering a take-it-or- leave-it price for another unit. This is an intriguing idea of how one might combine auctions with a bargaining mechanism that could have extensive applications beyond the on-line marketplaces where they are currently found. We seek to theoretically and experimentally investigate the nature of this practice. We first characterize the equilibrium bidding behavior in a two-stage game of a second price auction followed by an ultimatum game played by the seller and the price-setting bidder. Because the losing bidder wishes to hide his true value from the seller, value revelation is no longer an equilibrium in the second price auction, and the only equilibria that exist involve mixed strategies. We then conduct a controlled experiment to examine the revenue gene...
This study examines bidder preferences between alternative auction institutions. In particular we... more This study examines bidder preferences between alternative auction institutions. In particular we seek to experimentally characterize the degree to which bidders prefer an ascending auction over a sealed bid auction. We find very strong ceteris paribus preferences for the ascending institution with bidders choosing it overwhelmingly often when entry prices for the two auctions are the same. When the entry prices of the two auctions differ, many subjects can be shown to be willing to pay far more to enter the ascending auction than is explainable by their risk attitudes when accounting for their expectations about the risk preferences of their opponents.
Regional Science and Urban Economics, 2021
Journal of Economic Behavior & Organization, 2019
Abstract There has been substantial prior field research on how the incidence of criminal behavio... more Abstract There has been substantial prior field research on how the incidence of criminal behavior responds to changes in the probability of punishment. The results of this research are at best mixed in regards to its conformance to the predictions of standard expected utility theory. One possible cause for these mixed results is that punishment probabilities in the field are typically unknown making the choice environment one of ambiguity rather than uncertainty. The presence of this ambiguity could in part explain some of these conflicting results. As a step towards investigating this link, we conduct an experiment framed as being on tax compliance intended to try to understand how individuals respond to ambiguous punishment probabilities and in particular to how they respond to shifts in ambiguous versus known probabilities. We find that when probabilities are known and shift, the standard model works well to explain the response. When the probabilities are ambiguous and shift, the behavioral response is minimal. We also use these experiments as a means of testing whether ambiguity aversion might be present in sufficient degree to be exploitable in how enforcement procedures are advertised to increase their effectiveness at minimal cost. We find at best weak evidence in favor of ambiguity aversion and thus little support for the notion that enforcement regimes could take advantage of ambiguity aversion.
Southern Economic Journal, 2016
We explore the behavior of losers of promotion tournaments after the tournament is concluded. We ... more We explore the behavior of losers of promotion tournaments after the tournament is concluded. We do so through the use of an experiment in which we vary the design of the promotion tournament to determine how tournament design a¤ects post tournament e¤ort. We provide a theoretical model demonstrating two possible e¤ects from the tournaments which are strategic sabotage and the possibility that a worker becomes discouraged by the tournament outcome. We examine behavior after the tournament and …nd evidence suggesting that bad tournament design can lead to workers being discouraged. This discouragement e¤ect is strong for low ability workers but not for high ability workers. On the other hand we do …nd evidence that some high ability workers engage in strategic sabotage but the incidence does not vary with the design of the promotion tournament.
SSRN Electronic Journal, 2015
A growing number of studies use "real"e¤ort designs for laboratory experiments where subjects eng... more A growing number of studies use "real"e¤ort designs for laboratory experiments where subjects engage in an actual task as a form of e¤ort provision. The commonly argued reason for using real e¤ort is that it is more generalizable and …eld relevant than using stylized e¤ort where subjects simply choose some level of costly e¤ort. We …nd little support for these claims. Moreover, we revisit past real e¤ort designs and note that a common thread is that they lack any cost of e¤ort. To make this point clear, we …rst provide a theoretical characterization of the nature of e¤ort costs to provide a better understanding of how to model them in the lab. We then conduct two experiments with the aim of testing whether there are di¤erences in behavior between real and stylized designs. In both tests we …nd that there are no di¤erences though we also discuss situations in which that might not be the case. We also design and test a module for implementing proper e¤ort costs in a real e¤ort experiment which could be added on to almost any real e¤ort design which should help overcome some of the shortcomings we demonstrate with standard real e¤ort experiments.
Analysis and Alternatives
Analysis and Alternatives
Vita. U.M.I. no. 9927162. Thesis (Ph. D.)--Johns Hopkins University, 1999. Includes bibliographic... more Vita. U.M.I. no. 9927162. Thesis (Ph. D.)--Johns Hopkins University, 1999. Includes bibliographical references (leaves 183-187). Microfilm.
SSRN Electronic Journal, 2014
We experimentally investigate the extent to which social observability of one's actions and the p... more We experimentally investigate the extent to which social observability of one's actions and the possibility of social non-monetary judgment affect the decision to engage in rule breaking behavior. We consider three rule breaking scenarios-theft, bribery and embezzlement-in the absence of any formal enforcement mechanism. By involving a student sample characterized by cultural heterogeneity due to immigration of ancestors to the US, we are able to investigate whether the effectiveness of informal social enforcement mechanisms is conditional on the cultural background of the decision-maker. A total of 52 countries are represented in our sample, ranging from Low Rule of Law countries such as Liberia and Nigeria to High Rule of Law countries such as Sweden and Norway. Our data provide evidence that people with different cultural backgrounds do respond differently to increased social observability of their actions. In particular, while subjects that identify culturally with a High Rule of Law country respond to social obervability and judgment by lowering their propensities to engage in rule breaking, subjects that identify with Low Rule of Law countries do not. Our findings suggest that development policies that rely purely on social judgment to enforce behavior may not work with Low Rule of Law populations.
Theory and Decision, 2004
Evidence presented in Salmon (2001) indicates that typical tests to identify learning behavior in... more Evidence presented in Salmon (2001) indicates that typical tests to identify learning behavior in experiments involving normal form games possess little power to reject incorrect models. This paper begins by presenting results from an experiment designed to gather alternative data to overcome this problem. The results from these experiments indicate support for a "learning to learn" or rule learning hypothesis in which subjects change their decision rule over time. These results are then used to construct an adaptive learning model which is intended to mimic more accurately the behavior observed. The Þnal section of the paper presents results from a simple simulation based analysis comparing the performance of this adaptive learning model with that of several standard decision rules in reproducing the choice patterns observed in the experiment.
Journal of Economic Behavior & Organization, 2004
In this paper we develop a model of the behavior of bidders in simultaneous ascending auctions ba... more In this paper we develop a model of the behavior of bidders in simultaneous ascending auctions based on two principles: principle of surplus maximization and the principle of bid minimization. These principles lead to models of both price dynamics and equilibration, leading to disequilibrium structural equations that can be used for estimating bidder values. The intention behind the development of this methodology is to provide an auctioneer a method of extracting information during an auction about possible closing prices. We first benchmark the performance of the model with data from experimental auctions and then apply it to the U.K. UMTS or Third Generation Mobile auction.
Journal of Economic Behavior & Organization, 2013
Although the theory of optimal contracts and the principal agent model are now well established i... more Although the theory of optimal contracts and the principal agent model are now well established in the literature, empirical support for this theory has been mixed at best. We use economic experiments to test contract theory and assess the empirical relevance of two possible confounding factors that may explain why the theory has not received stronger empirical support. First, parameters of interest may be biased if agents self-select into projects with di¤ering risk pro…les based on risk preferences. Second, di¤ering levels of market power on either side of the market could play a confounding role. In general, we …nd support for classical contract theory augmented to accommodate market power and self-selection based on risk preferences. We also …nd evidence for a third confound in the form of the characteristics of agents not party to the transaction a¤ecting the terms of the contract.
Journal of Economic Behavior & Organization, 2014
We compare two widely used forms of compensation-e¢ ciency wages (EW) and deferred compensation (... more We compare two widely used forms of compensation-e¢ ciency wages (EW) and deferred compensation (DC)-with respect to their e¤ectiveness in providing e¤ort incentives. In addition, we test their predictions on the dynamic e¤ort provision patterns, and elicit individual preferences between the two forms of compensation. The theoretical predictions on e¤ort are generally well supported, although there is a tendency for over-provision of e¤ort with EW. In consequence, although the theoretical prediction that DC is more cost-e¤ective for obtaining a unit of e¤ort is supported in the data, the magnitude of the e¤ect is small. Eliciting preference between contracts, we …nd a marked preference for EW-much more than can be explained by risk aversion. Combined, the two e¤ects-e¤ort over-provision with EW and relative preference for EWlargely dissipate any advantage that DC may have in providing e¤ort incentives.
Econometrica, 2001
This paper evaluates the effectiveness of four econometric approaches intended to identify the le... more This paper evaluates the effectiveness of four econometric approaches intended to identify the learning rules being used by subjects in experiments with normal form games. This is done by simulating experimental data and then estimating the econometric models on the simulated data to determine if they can correctly identify the rule that was used to generate the data. The results show that all of the models examined possess difficulties in accurately distinguishing between the data generating processes.
Research in Experimental Economics, 2006
Traditional auction theory assumes that bidders possess values defined solely on the auctioned ob... more Traditional auction theory assumes that bidders possess values defined solely on the auctioned object. There may, however, be cases in which bidders possess preferences over the revenue achieved by the auctioneer. We present here a comprehensive framework of price preference valuations, unifying several phenomenon ranging from preference for charitable giving to shill bidding. We compare expected efficiency and revenue of first and second price auctions for some specific cases of key interest. We also incorporate heterogeneous bidder preferences and examine the effects of mis-specified beliefs and show that both are crucial for understanding these situations. JEL Codes: D44, D64
Why do some voters support income redistribution while others do not? One obvious answer might be... more Why do some voters support income redistribution while others do not? One obvious answer might be that some benefit while others do not, but such a simple answer is difficult to square with voting patterns. This issue is complicated by the fact that public assistance programs usually have two inextricably entangled effects on society: they equalize wealth, but they also cushion people against the effects of random catastrophic events like natural disasters and serious illnesses. Thus they provide both income maintenance to the poor and social insurance benefits to all economic classes. Each effect appeals to a particular notion of fairness, and each effect also has a distinct impact on voters' self-interest. We conduct a laboratory experiment to determine how differences in the environment can alter subjects' preferences for income redistribution and whether individuals' responses to the environment are related to their self-expressed political ideology. We find that more liberal subjects are more willing than conservatives to support redistribution when there is a moderate chance of random, catastrophic income loss. When the chance of loss is low, or very high, both liberal and conservative subjects follow self interest and are not guided by ideology. Our findings support the hypothesis that ideology is associated with a person's willingness to use redistribution to reduce income inequality that is caused by luck, but it is not related to preferences for inequality that are not related to luck.
Many prior experiments have shown that individuals will sacri�ce their own well-being to bene�t o... more Many prior experiments have shown that individuals will sacri�ce their own well-being to bene�t others in a variety of situations. This behavior can be easily explained if people possess a preference for fairness or an aversion to inequality. These preferences might also explain the existence of macroeconomic,redistributive income taxation programs. This paper presents an experiment designed to test the
Second chance offers in on-line marketplaces involve a seller conducting an auction for one unit ... more Second chance offers in on-line marketplaces involve a seller conducting an auction for one unit of a good and then using the information gained during the auction to bargain privately with a losing bidder, offering a take-it-or- leave-it price for another unit. This is an intriguing idea of how one might combine auctions with a bargaining mechanism that could have extensive applications beyond the on-line marketplaces where they are currently found. We seek to theoretically and experimentally investigate the nature of this practice. We first characterize the equilibrium bidding behavior in a two-stage game of a second price auction followed by an ultimatum game played by the seller and the price-setting bidder. Because the losing bidder wishes to hide his true value from the seller, value revelation is no longer an equilibrium in the second price auction, and the only equilibria that exist involve mixed strategies. We then conduct a controlled experiment to examine the revenue gene...