Accounting undergraduate Honors theses: Essays in pro-social behavior

This dissertation examines individuals’ actions to improve social outcomes when unrecoverable investments are necessary. Situations involving non-pecuniary and pecuniary investments are considered. In the former, the prerequisite of real effort - a non-pecuniary, unrecoverable investment - is examined when said effort determines an individual’s ability to procure their preferred social outcome.
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Accounting undergraduate Honors theses: Essays in pro-social behaviorUniversity of Arkansas, FayettevilleScholarWorks@UARKTheses and Dissertations8-2014Essays in Pro-social BehaviorJoshua R. FosterUniversity of Arkansas, FayettevilleFollow this and additional works at: http://scholarworks.uark.edu/etd Part of the Behavioral Economics CommonsRecommended CitationFoster, Joshua R., Essays in Pro-social Behavior (2014). Theses and Dissertations. 2228.http://scholarworks.uark.edu/etd/2228This Dissertation is brought to you for free and open access by ScholarWorks@UARK. It has been accepted for inclusion in Theses and Dissertations byan authorized administrator of ScholarWorks@UARK. For more information, please contact scholar@uark.edu, ccmiddle@uark.edu.Essays in Pro-social Behavior Essays in Pro-social Behavior A dissertation submitted in partial fulfillment of the requirements for the degree of Doctor of Philosophy in Economics by Joshua Foster Bentley University Bachelor of Science in Economics, 2009 August 2014 University of Arkansas This dissertation is approved for recommendation to the Graduate Council.Professor Cary DeckDissertation DirectorProfessor Amy Farmer Professor Jeffrey CarpenterCommittee Member Ex Officio MemberProfessor Salar JahediCommittee Member ABSTRACTThis dissertation examines individuals’ actions to improve social outcomes when unrecoverableinvestments are necessary. Situations involving non-pecuniary and pecuniary investments areconsidered. In the former, the prerequisite of real effort - a non-pecuniary, unrecoverableinvestment - is examined when said effort determines an individual’s ability to procure theirpreferred social outcome. Theoretical predictions over an individual’s effort provision are basedon their revealed preferences for the social distribution of wealth according to the general axiomof revealed preference (GARP). Laboratory experiments reveal that individuals’ effort provisionsdo not support the assumption of stable preferences (transitivity) of wealth distribution.Specifically, individuals who reveal a preference for egalitarian outcomes do not exert enoughreal effort toward said outcomes when all of the wealth can be distributed directly to them. In thelatter, pecuniary situation, auction formats that require all bidders to pay their bid (i.e., all-payauctions) are studied as a way of funding public goods, specifically in the context of charityauctions. An innovative theoretical variation of the war of attrition is designed. This variationrequires bidders to make unrecoverable upfront investments in the auction in order toparticipate, and the amount of one’s investment dictates how much one can potentially bid in theauction. In addition, an empirical analysis of this theoretical variation is provided via laboratoryexperiments. These experiments seek to highlight the bidder-specific and mechanism-specificcharacteristics that may lead to greater success in charitable fund-raising. The results suggestthat auction mechanisms with an incremental bidding design outperform mechanisms with alump-sum bidding design. ACKNOWLEDGMENTSForemost, I would like to express my deepest appreciation to my advisor, Cary Deck, who hasguided and supported me in establishing my academic career. I would also like to thank mycommittee members, Amy Farmer, Jeffrey Carpenter and Salar Jahedi for the time they spentassisting me improve this dissertation. This is the only part of my dissertation on which I couldnot solicit their feedback, and I am confident that it has suffered as a result.I would also like to thank the economics department and the Walton College, respectively. I willforever be grateful for the eagerness from the economics faculty to assist in my academicdevelopment, particularly that which I’ve received from Bill Curington, Andrea Civelli, JavierReyes, Fabio Mendez and Andy Horowitz. I would like to thank Susan Yell for her tremendousadministrative support and warm smile, both of which helped me through my final year.Finally, I would like to thank my best friend, Shannon Lee Rawski, for her enduring love andsupport - you are my constant. DEDICATIONTo my parents, the greatest teachers I have ever had. TABLE OF CONTENTS1 Chapter 1: Putting Social Preferences to Work 1 1.1 A Model of Effort Provision . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4 1.2 Experiment Design . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 1.2.1 The Dictator Games and the Effort Task . . . . . . . . . . . . . . . . . . . . . . 9 1.3 Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.3.1 Dictator Game . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 1.3.2 Effort Task . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 1.4 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 252 Chapter 2: Wars of Attrition with Unrecoverable Upfront Investments 27 2.1 Literature Review . . . . . . . ...