Department of Economics

Abstract

Monogamy is ethnographically peculiar as an ethical ideal and emerged in the Early Middle Ages as a form of sexual repression imposed by the Church and employed by secular authorities to decompose powerful elite lineages. In its continued modern form, the independent and isolated monogamous household has been advanced as socially optimal by economists and as essential to civilization by anthropologists.   Although marriage, as a rightful claim on the sexuality of a woman, is a nearly universal institution, recent legislation and judicial opinion in both Europe and the United States have abrogated this basic marital right with the new crime of “marital rape”, thereby undermining the essential and defining characteristic of marriage. It is argued herein that these changes reflect the loss of relevance and significance of the domestic household to contemporary systems of capital accumulation; and it is in this new context that same-sex marriage becomes feasible.

Recent evidence suggests that agents may base their forecasts for macroeconomic variables mainly on their personal life experiences. We connect this behavior to the concept of constant-gain learning (CGL) in macroeconomics. Our approach incorporates both heterogeneity in the life cycle via the perpetual youth model and learning from experience (LfE) into a linear expectations model where agents are born and die with some probability every period. For LfE, agents employ a decreasing-gain learning (DGL) model using data only from their own lifetimes. While agents are using DGL individually, we show that in the aggregate, expectations follow an approach related to CGL, where the gain is now tied to the probabilities of birth and death. We provide a precise characterization of the relationship between CGL and our model of perpetual youth learning (PYL) and show that PYL can well approximate CGL while pinning down the gain parameter with demographic data. Calibrating the model to U.S. demographics leads to gain parameters similar to those found in the literature. Further, variation in birth and death rates across countries and time periods can help explain the empirical time-variation in gains. Finally, we show that our approach is robust to alternative ways of modeling individual agent learning.

Credit default swaps (CDS) played an important role in the financial crisis of 2008 leading to calls for regulation. Here, we seek to understand the impact of a CDS regulation that restricts the possibility to hold naked CDS. We use a controlled laboratory experiment analyzing CDS pricing in a bond market subject to default risk. Our results show that the regulation achieves the goal of increasing the use of CDS for hedging purposes while reducing the use of CDS for speculation. This success does not come at the expense of lower initial public offering (IPO) prices for the bonds or worse pricing of bonds or CDS in the secondary market.

We report on a laboratory experiment testing the predictions of the Diamond–Mortensen–Pissarides (DMP) search-and-matching model, which is a workhorse, decentralized model of unemployment and the labor market. We focus on the job vacancy posting problem that firms face in the DMP model. We explore the model's comparative statics predictions concerning variations in the separation rate, the vacancy posting cost, and the firm's surplus earned per employee. Across all treatments, we find strong evidence for an inverse relationship between vacancies and unemployment, consistent with the Beveridge curve. We also find that the results of our various comparative statics exercises are in-line with the predictions of the theory.

The overall objective for HyperXite 9 was to design and build a more robust, and reliable pod, capable of proving the feasibility of a high-speed transportation system. We are working to improve a linear induction motor as the pod's propulsion system. We are also designing and implementing a thermal cooling system to actively dissipate the heat generated by this propulsion system. Our team is comprised of the following 7 subteams: Static Structures, Braking & Pneumatics, Dynamic Structures, Propulsion, Power Systems, Control Systems, and Outreach.

We provide some theory and experimental evidence on contests with entry fees. In our setup, players must simultaneously decide whether or not to pay a fee to enter a contest and the amount they wish to bid should they choose to enter the contest. In a general n-bidder game, we show that the addition of contest entry fees increases the contest designer’s expected revenue and that there is a unique revenue maximizing entry fee. In an experimental test of this theory we vary both the entry fee and the number of bidders. We find over-bidding for all entry fees and bidder group sizes, n. We also find under-participation in the contest for low entry fees and over-participation for higher entry fees. In the case of 3 bidders, the revenue maximizing entry fee for the contest designer is found to be significantly greater than the theoretically optimal entry fee. We offer some possible explanations for these departures from theoretical predictions.

Stock splits and reverse splits often result in short-term abnormal returns even though such split events do not change any fundamental factors affecting the valuation of a firm's stock. In this paper we report an experiment designed to better understand market reactions to stock splits and reverse splits. In one treatment, two assets have increasing fundamental values, and one asset is subject to a 2-for-1 share split while the other asset is not. In a second treatment, the fundamental values of both assets are decreasing, and one asset is subject to a 1-for-2 reverse split while the other asset is not. We find that in both cases, share prices do not fully adjust to changes in fundamental values per share following a split announcement. We provide evidence that the incomplete adjustment of share prices to splits or reverse splits can be attributed to heterogeneity in traders' cognitive abilities.