Browsing by Author "Ambrus, A"

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    A Delegation-Based Theory of Expertise
    (Economic Research Initiatives at Duke (ERID), 2015-09-17) Ambrus, A; Baranovskyi, V; Kolb, A
    We investigate competition in a delegation framework, with a coarsely informed principal. Two imperfectly informed and biased experts simultaneously propose action choices. A principal with a diffuse prior, and only being able to ordinally compare the two proposals, has to choose one of them. The selected expert might receive a bonus payment. We show that having a second expert benefits the principal, even if the two experts have the same biases and the bonus of the winner is zero. In contrast with other models of expertise, in our setting the principal prefers experts with equal rather than opposite biases. Increasing the bonus brings experts closer to truthful reporting, but this only benefits the principal up to a threshold level, with further increases in the bonus strictly decreasing her payoffs. A methodological contribution of our paper is characterizing restrictions on the set of strategies which allows a formal generalization of ex ante expected payoffs to games with diffuse prior.
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    Commitment-Flexibility Trade-Off and Withdrawal Penalties
    (Economic Research Initiatives at Duke (ERID), 2012-03-01) Ambrus, A; Egorov, G
    Withdrawal penalties are common features of time deposit contracts offered by commercial banks, as well as individual retirement accounts and employer-sponsored plans. Moreover, there is a significant amount of early withdrawals from these accounts, despite the associated penalties, and empirical evidence shows that liquidity shocks of depositors are a major driving force of this. Using the consumption-savings model proposed by Amador, Werning and Angeletos in their 2006 Econometrica paper (henceforth AWA), in which individuals face the trade-off between flexibility and commitment, we show that withdrawal penalties can be part of the optimal contract, despite involving money-burning from an ex ante perspective. For the case of two states (which we interpret as “normal times” and a “negative liquidity shock”), we provide a full characterization of the optimal contract, and show that within the parameter region where the first best is unattainable, the likelihood that withdrawal penalties are part of the optimal contract is decreasing in the probability of a negative liquidity shock, increasing in the severity of the shock, and it is nonmonotonic in the magnitude of present bias. We also show that contracts with the same qualitative feature (withdrawal penalties for high types) arise in continuous state spaces, too. Our conclusions differ from AWA because the analysis in the latter implicitly assumes that the optimal contract is interior (the amount withdrawn from the savings account is strictly positive in each period in every state). We show that for any utility function consistent with their framework there is an open set of parameter values for which the optimal contract is a corner solution, inducing money burning in some states.
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    Delegation and Nonmonetary Incentives
    (Economic Research Initiatives at Duke (ERID), 2015-12-04) Ambrus, A; Egorov, G
    In many contracting settings, actions costly to one party but with no direct benefits to the other (money-burning) may be part of the explicit or implicit contract. A leading example is bureaucratic procedures in an employer-employee relationship. We study a model of delegation with an informed agent, where the principal may impose money-burning on the agent as a function of the agent’s choice of action, and show that money-burning may be part of the optimal contract. This result holds even if action-contingent monetary transfers are possible, as long as transfers from the principal to the agent are bounded from below (as in limited liability or minimal wage requirements). In fact, the optimal contract can involve a combination of both efficient monetary incentives and inefficient nonmonetary incentives through money burning. Our model delivers some results novel to the delegation literature. First, money-burning is more likely if the principal is more sensitive to the choice of action than the agent. This is consistent with the perception that there is more bureaucratization in large organizations. Second, money-burning is more likely if the agent’s limited liability constraint is tighter relative to his participation constraint. This implies that a higher minimum wage distorts employment contracts towards using socially wasteful nonmonetary incentives, leading to a Pareto inferior outcome as the agent is still held down to his reservation value through increased money burning.
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    Democratic Punishment in Public Good Games with Perfect and Imperfect Observability
    (Economic Research Initiatives at Duke (ERID), 2015-08-26) Ambrus, A; Greiner, B
    In the context of repeated public good contribution games, we experimentally investigate the impact of democratic punishment, when members of a group decide by majority voting whether to inflict punishment on another member, relative to individual peer-to-peer punishment. Democratic punishment leads to more cooperation and higher average payoffs, both under perfect and imperfect monitoring of contributions, primarily by curbing anti-social punishment and thereby establishing a closer connection between a member’s contribution decision and whether subsequently being punished by others. We also find that participating in a democratic punishment procedure makes even non-contributors’ punishment intentions more pro-social.
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    Either or both competition: A "two-sided" theory of advertising with overlapping viewerships
    (American Economic Journal: Microeconomics, 2016-01-01) Ambrus, A; Calvano, E; Reisinger, M
    In media markets, consumers spread their attention to several outlets, increasingly so as consumption migrates online. The traditional framework for competition among media outlets rules out this behavior by assumption. We propose a new model that allows consumers to choose multiple outlets and use it to study the effects on advertising levels and the impact of entry and mergers. We identify novel forces which reflect outlets' incentives to control the composition of their customer base. We link consumer preferences and advertising technologies to market outcomes. The model can explain several empirical regularities that are difficult to reconcile with existing models.
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    Gradual Bidding in Ebay-Like Auctions
    (Economic Research Initiatives at Duke (ERID), 2013-09-05) Ambrus, A; Ishii, Y; Burns, J
    This paper shows that in online auctions like eBay, if bidders can only place bids at random times, then many di fferent equilibria arise besides truthful bidding, despite the option to leave proxy bids. These equilibria can involve gradual bidding, periods of inactivity, and waiting to start bidding towards the end of the auction - bidding behaviors common on eBay. Bidders in such equilibria implicitly collude to keep the increase of the winning price slow over the duration of the auction. In a common value environment, we characterize a class of equilibria that include the one in which bidding at any price is maximally delayed, and all bids minimally increment the price. The seller's revenue can be a small fraction of what could be obtained at a sealed-bid second-price auction, and in the worst equilibrium it is decreasing in the value of the object. With many bidders, we show that this equilibrium has the feature that bidders are passive until near the end of the auction, and then they start bidding incrementally.
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    How Individual Preferences Get Aggregated in Groups - An Experimental Study
    (Economic Research Initiatives at Duke (ERID), 2013-09-19) Ambrus, A; Greiner, B; Pathak, PA
    This paper experimentally investigates how individual preferences, through unrestricted deliberation, get aggregated into a group decision in two contexts: reciprocating gifts, and choosing between lotteries. In both contexts we find that median group members have a significant impact on the group decision, but particular other members also have some influence. Non-median members closer to the median tend to have more influence than other members. By investigating the same individual’s influence in different groups, we find evidence for relative position in the group having a direct effect on influence. We do not find evidence that group choice exhibits a shift in a particular direction that is independent of member preferences and caused by the group decision context itself. We also find that group deliberation not only involves bargaining and compromise, but it also involves persuasion: preferences tend to shift towards the choice of the individual’s previous group, especially for those with extreme individual preferences.
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    On Asynchronicity of Moves and Coordination
    (Economic Research Initiatives at Duke (ERID), 2015-03-23) Ambrus, A; Ishii, Y
    This paper shows that asynchronicity of moves can lead to a unique prediction in coordination games, in an infinite-horizon setting, under certain conditions on off-equilibrium payoffs. In two-player games we derive necessary and sufficient conditions for play ultimately being absorbed in the Pareto dominant Nash equilibrium of the stage game, for every Markov perfect equilibrium. For players patient enough, the condition is that the Pareto dominant Nash equilibrium is also risk dominant, but for lower levels of patience the condition departs from simple risk-dominance. For general n-player symmetric games with patient players, we show that a necessary and sufficient condition for the Pareto dominant Nash equilibrium to be the unique limit outcome in all symmetric Markov perfect equilibrium is a particular generalization of risk-dominance for more than two players. We provide extensions to the unique selection results to all subgame perfect Nash equilibria, and to coordination games in which different players prefer different Nash equilibria of the stage game.
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    Rationalizing Choice with Multi-Self Models
    (Economic Research Initiatives at Duke (ERID), 2012-05-01) Ambrus, A; Rozen, K
    This paper studies a class of multi-self decision-making models proposed in economics, psychology, and marketing. In this class, choices arise from the set-dependent aggregation of a collection of utility functions, where the aggregation procedure satisfies some simple properties. We propose a method for characterizing the extent of irrationality in a choice behavior, and use this measure to provide a lower bound on the set of choice behaviors that can be rationalized with n utility functions. Under an additional assumption (scale-invariance), we show that generically at most five "reasons" are needed for every "mistake."
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    Social Investments, Informal Risk Sharing, and Inequality
    (Economic Research Initiatives at Duke (ERID), 2015-03-16) Ambrus, A; Chandrasekhar, A; Elliott, M
    This paper studies the formation of risk-sharing networks through costly social investments. First, individuals invest in relationships to form a network. Next, neighboring agents negotiate risk-sharing arrangements, in a generalized version of the model in Stole and Zwiebel (1996). This results in the social surplus being allocated according to the Myerson value. In particular, more centrally connected individuals receive higher shares. We fi nd a novel trade-off between efficiency and equality. The most stable efficient network, which minimizes incentives to overinvest, also generates the most inequality. When individuals are split into groups and relationships across groups are more costly but incomes across groups are less correlated, there is never underinvestment into social connections within group, but underinvestment across groups is possible. More central agents have better incentives to form across-group links, reaffirming the efficiency inequality trade-off. Evidence from 75 Indian village networks is congruent with our model.
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    Supplement to 'Compensated Discount Functions: An Experiment on the Influence of Expected Income on Time Preferences'
    (Economic Research Initiatives at Duke (ERID) Working Paper, 2015-03-01) Ambrus, A; Asgeirsdottir, TL; Noor, J; Sándor, L
    This Supplementary Appendix contains the English translations of the experimental questionnaire, survey questions, and instructions that were used in our experimental sessions on June 9th and 10th of 2010. For the original Icelandic language documents, please contact the authors. The paper 'Compensated Discount Functions - An Experiment on Integrating Rewards with Expected Income' to which this Supplement applies is available at the following URL: http://ssrn.com/abstract=2446602
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    Supplementary Appendix to 'A Delegation-Based Theory of Expertise'
    (Economic Research Initiatives at Duke (ERID), 2015-09-17) Ambrus, A; Baranovskyi, V; Kolb, A
    This supplement provides welfare results not contained in the main text and a proof of Lemma A.1. For small bonuses, a mixed equilibrium exists if and only if a downward equilibrium exists; if so, it is unique. For large bonuses, we find a unique candidate for mixed equilibrium and show that mixed and upward equilibria cannot co-exist. Also, we give an example for equal biases, where this candidate is indeed a mixed equilibrium. However, when biases are different enough and the bonus is high, a mixed equilibrium does not exist. Though a general analytical comparison is infeasible, we show that mixed equilibria are inferior to upward equilibrium or simple delegation in various special cases.
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    Supplementary Appendix to 'Delegation and Nonmonetary Incentives'
    (Economic Research Initiatives at Duke (ERID), 2015-12-04) Ambrus, A; Egorov, G
    Supplementary Appendix to "Delegation and Nonmonetary Incentives."
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    Testing an Informational Theory of Legislation: Evidence from the U.S. House of Representatives
    (Economic Research Initiatives at Duke (ERID), 2012-10-09) Ambrus, A; You, H; Sandor, L
    Using data on roll calls from the U.S. House of Representatives, this paper finds empirical support for informational theories of legislative decision-making. Consistent with the theoretical prediction, the bias of the committee a bill gets assigned to is strongly positively associated with the bias of its sponsor, and unbiased sponsors in expectation get assigned to roughly unbiased committees. Moreover, we find a negative relationship between the sponsor's absolute bias and the probability that the legislation is processed by closed rule. Despite these empirical regularities, there is a large variation in the data, suggesting that considerations other than informational efficiency are also important in committee appointments and procedural rule selection. As far as we know, our paper is the first one that provides quantitative empirical support for a theory of cheap talk versus delegation, in any setting.
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    Testing an Informational Theory of Legislation: Evidence from the U.S. House of Representatives: Supplementary Appendix
    (Economic Research Initiatives at Duke (ERID), 2012-10-09) Ambrus, A; Sandor, L; You, H
    Supplementary Appendix to Testing an Informational Theory of Legislation: Evidence from the U.S. House of Representatives.
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    The Case for Nil Votes: Voter Behavior Under Asymmetric Information in Compulsory and Voluntary Voting Systems
    (Economic Research Initiatives at Duke (ERID), 2015-12-02) Ambrus, A; Greiner, B; Sastro, A
    We experimentally study the impact of adding an explicit nil vote option to the ballot in both compulsory and voluntary voting settings. We investigate this issue in an informational voting setting, in which some voters are uninformed and face the swing voter’s curse, implying that they can only affect the expected election outcome adversely. We generate predictions using a simple model of strategic voting in which some voters receive a psychological benefit (along the lines of Riker and Ordeshook (1968)) from choosing an action that they consider a legitimate participation in the election. We test our model in a double-blind pen-and-paper laboratory experiment, and find that the main comparative predictions of the model hold in the data, particularly strongly for compulsory voting. In particular, both under compulsory and voluntary voting, introducing a nil vote option reduces the number of uninformed voters casting a vote for a candidate, increasing voters’ expected welfare. Additionally, it eradicates strategic invalid votes under compulsory voting.