College of Behavioral & Social Sciences
Permanent URI for this communityhttp://hdl.handle.net/1903/8
The collections in this community comprise faculty research works, as well as graduate theses and dissertations..
Browse
3 results
Search Results
Item Essays on Information and Non-Bayesian Beliefs(2024) Liu, Zhenxun; Filiz-Ozbay, Emel; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In this dissertation, I present a comprehensive discussion of a class of biases within the realm of probabilistic reasoning, namely confirmation bias (encompassing or closely related to commonly seen terms in the literature such as motivated reasoning and wishful thinking). The dissertation consists of three main chapters. In Chapter 1, I propose a new and improved belief updating model that can accommodate both motivated and unmotivated confirmation bias. The model improves upon existing models in its ability to explain data better, and its applicability to settings beyond binary-state spaces. I characterize the model with three intuitive axioms. In two extended applications, I show that the model establishes a link between confirmation bias and several well-known phenomena, such as the significance of first impressions, the polarization of beliefs, and the perseverance of inaccurate beliefs. In Chapter 2, I turn to the experimental elicitation of motivated and unmotivated confirmation bias. Previous experiments have provided evidence for motivated and unmotivated confirmation bias individually, but never discussed the possibility that the two can occur together in depth. This chapter presents one of the first experiments that examines both forms of confirmation bias together. Subjects were asked to update their beliefs regarding both politically contextualized questions and neutral questions. Subjects exhibited both motivated and unmotivated confirmation bias, but there was also significant heterogeneity among them. Notably, motivated confirmation bias is significantly stronger in later rounds of the experimental tasks, which may be correlated with the shorter response times in the later rounds. In Chapter 3, which is joint work with Emel Filiz-Ozbay, we discuss wishful thinking (motivated confirmation bias) within a major application. In a rational inattention setting where consumers acquire information on the good’s quality before making purchasing decisions, we examine the implications of the presence of consumers with wishful thinking. These biased consumers are unaware of their bias, and weigh any good news about the product quality more heavily than a Bayesian consumer. The firm, which aims to increase the volume of sales, can strategically constrain the accuracy of the information that consumers can acquire. We show that in the presence of biased consumers, a firm would find it profitable to constrain information acquisition unless the prior belief on the quality of the product is too low. We characterize the conditions under which the entry of a competitor firm can effectively alleviate this type of exploitation. Our findings shed light on the incentives of review platforms for bombarding wishful consumers with low quality product reviews and limit consumers’ ability to identify to reviews with informative contents.Item Essays in Behavioral Economics(2017) Tonguc, Ozlem; Ozbay, Erkut Y; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)This dissertation consists of three studies in behavioral and experimental economics. In the first chapter, I study how vote buying may occur in environments where promises cannot be enforced and investigate how different kinds of behavioral biases lead to the use of different types of payments (pre-voting transfers vs. promises of post-voting transfer). I provide a simple model of the vote buying exchange as a one-shot interaction of a buyer and a voter, where voting is costly and done in private, and the buyer may make offers with different payments types. I investigate the effects of three behavioral biases on buyer and voter behavior: inequity aversion, guilt aversion and voter reciprocity. Using a laboratory experiment, I present evidence that support the presence of all three behavioral biases. The second chapter is a joint work with Erkut Ozbay. We study the optimality of pre- and post-voting payments to buy votes in an environment where both the buyer and the voter are able to commit to their promises. Using a modified version of the model used in Chapter 1, we investigate the implications of different risk attitudes and inequity aversion on agent behavior. We test the predictions of different preferences using a lab experiment. Our results support the presence of inequity aversion in this environment. In the third chapter, I study whether and under what conditions a decision maker may decline a transfer made to her by another person. I identify the behavioral biases of inequity aversion, guilt aversion and reciprocity as possible explanations: an inequity averse decision maker may reject if the resulting allocation is very inequitable, while a guilt averse one may reject if she believes that she cannot fulfill the other person’s payoff expectations, and a reciprocal decision maker may reject if she believes the other person made the transfer with good intentions, but she cannot respond in kind. By modifying a widely used experimental two-player game introduced to study trust and reciprocity, I show that a decision maker takes the cost of reciprocating a transfer into consideration when deciding whether to accept, regardless of whether she is reciprocal, inequity averse, or guilt averse. However, the three biases have different implications for how the decision maker's belief about the other player’s material payoff expectations affect her behavior. Using a laboratory experiment, I confirm that both guilt aversion and reciprocity motives are present, and they are able to explain different aspects of the behavior.Item ESSAYS IN EXPERIMENTAL ECONOMICS WITH IMPLICATIONS FOR ECONOMIC DEVELOPMENT(2011) Douoguih, Kahwa C.; Cropper, Maureen; Ozbay, Erkut; Economics; Digital Repository at the University of Maryland; University of Maryland (College Park, Md.)In an exploration of the joint concerns of economic development, namely efficiency and equality, I employ experimental methods to consider several issues regarding entrepreneurship and regulation with particular applications in developing countries. Entrepreneurship programs in developing countries may not take hold in rural populations if people there tend to shy away from competitive and uncertain economic opportunities, thus contributing to the systematic underdevelopment of rural areas. In a field experiment conducted among potential entrepreneurs in rural and urban Ghana, we found that rural subjects were 20 percent less likely than their urban counterparts to select an all-or-nothing tournament compensation scheme over a piece rate wage to per- form a simple matching task. The difference between the rural and urban tournament choice was driven by subjects who believed their own performance was the best within their group; urban subjects were twice as likely as their rural counterparts to believe that they had scored in first place and were thus more likely to select the tournament compensation. To examine behavior in a tax setting, we develop a simple tax evasion model as a signaling game between a taxpayer and an auditor that includes a non-strategic, always compliant taxpayer. In addition to the taxpayer's income report to the auditor, he has the option to send a costly message, a donation to charity that may serve as an indirect signal to the auditor of the taxpayer's ethical type. In the case where the taxpayer has misreported his income and is audited, he must pay unpaid taxes and a penalty. We establish a Perfect Bayesian equilibrium where taxpayers will use the charitable donation to signal honesty, thereby reducing the probability of audit. Auditors will optimally audit reports without charity donations more frequently than those with donations. To test our theoretical predictions, we use a two-sided signaling experiment where the taxpayer voluntarily reports his income to determine his tax liability and can make an observable and verifiable charity donation. Our aggregate experimental results indicate players employ mixed strategies in line with theoretical predictions.