Economics Research Projects

Paper Abstracts

 

1.  Scheduling with Package Auctions.  Kan Takeuchi, John C. Lin, Yan Chen, and Thomas Finholt.  Experimental Economics, 2011.

 

In this paper, we evaluate the performance of three package auction mechanisms to allocate goods that have complementary values.  The three mechanisms are Knapsack, generalized Vickrey-Clark-Groves (VCG), and Resource Allocation Design (RAD).  Knapsack and VCG are one-shot mechanisms where bidders can only submit their bids once, whereas RAD is an iterative mechanism where bids are submitted over several rounds before a final allocation is made.  Knapsack allows only ordered preferences to be expressed, but not the intensity of the preferences, whereas VCG and RAD both allow bidders to express the intensity of their preferences. We found that if the goal of the mechanism designer is to maximize efficiency, both the VCG and the RAD mechanisms perform equally well. If the goal of the mechanism designer is to maximize the number of users access to the equipment, Knapsack is the preferred mechanism.

 

 

2.  Contests for Status: An Experimental Study.  John C. Lin.  January 2012.

 We evaluate the predictions of a theory of contest in the laboratory.  The research question is given a fixed amount of prize money, how can we best partition it to encourage the highest level of total group effort.  A theory of contests developed by Moldovanu et al. (2007) predicts that the optimal structure of prizes depend on the distribution of the ability factors of the contestants. Roughly speaking, if the contestants’ ability factors are distributed uniformly, then it is better to combine the prize money into one grand prize.  However, if a few contestants have high ability factors but the rest have low ability factors, then it is better to have as many prizes as there are contestants. In our laboratory study, we found that the first prediction holds but the second one does not.  This is because when people are unsure of the optimal strategy, they tend to exert more effort.

  

3.  Motivating User Contribution Through Competition:  Amazon.com’s ranking system for product reviewers, an Empirical Study.  John C. Lin.  January 2012. 

This is an empirical study evaluating the effectiveness of social information in encouraging people to contribute product reviews on Amazon.com.  One way that Amazon recognizes the contribution of the product reviewers, who do not receive financial compensation from Amazon, is to rank the product reviewers on leaderboards.  We look at the two leaderboards  (“Classic” and “New”) that were available from February 2010 to June 2010 on Amazon’s website.  The Classic leaderboard weights the culmulative contribution of the product reviewers more heavily, where as the New leaderboard weights the usefulness and the recency of the reviews more heavily.

 

The main research question is if the leaderboards affect the reviewer’s review writing behavior.  We found that reviewers respond to the New ranking system.  Under the New ranking system, we found that reviewers respond to the review-writing behavior of their higher and lower ranked neighbors.  This makes sense because under the New ranking system, reviewers are more likely to improve or lose their current ranking because this ranking system weights recent activities more than the Classic ranking system.

 

4.  Incentivizing Information Aggregation in Group Decision-Making.  Lian Jian and John Lin.  October 2012.

Groups can potentially pool information from individuals to make better informed decisions than any individual can alone. Unfortunately, problems such as information herding and majority influence can often prevent groups from fully realizing their potential advantages. Prior research in psychology has investigated factors that influence group information pooling, such as communication medium and status of group members. However, the effect of monetary incentives was under-studied.

We study the effect of performance-based monetary incentives on the quality of group decisions, by focusing on situations in which group members' prior knowledge is distributed in a way such that the majority prefers a suboptimal decision alternative whereas a minority who has superior information prefers the optimal alternative. We compare two experimental conditions:  flat (each group member receives a flat fee) versus incentivized (each group member is rewarded based on how close his/her group's decision is to the optimal alternative). We hypothesize that in incentivized groups,  minority members will share more information, and  majority members will be more likely influenced by minority members' opinion. Both processes should lead to higher quality decisions by incentivized groups than by flat groups.

Preliminary results indicate that even with performance-based compensation, it is still hard for groups to effectively aggregate information from minority members. We are currently content-analyzing the transcribed group discussions to examine whether more information is shared by minority members in incentivized groups, and whether the majority members changed their private opinions after group discussion.

 

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