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Measuring Tastes for Equity and Aggregate Wealth Behind the Veil of Ignorance & Simple Bets to Elicit Private Signals

  • Series
    PhD Lunch Seminars
  • Speaker(s)
    Yan Xu, Erasmus University Rotterdam
  • Field
    Behavioral Economics
  • Location
    Erasmus University, Polak Building, Room 1-20
  • Date and time

    December 03, 2019
    13:00 - 14:00

Title: Measuring tastes for equity and aggregate wealth behind the veil of ignorance (with Jan Heufer and Jason Shachat)

Abstract: We propose an instrument to measure individuals’ social preferences regarding equity and efficiency behind a veil of ignorance. We pair portfolio and wealth distribution choice problems which have a common budget set. For a given bundle, the distribution over an individual’s wealth is the same for both problems. The portfolio choice serves as a benchmark to evaluate whether the wealth distribution choice exhibits equity or efficiency preferring tastes. We report experiments using a within-subject design testing the veracity of this instrument. We find clusters of equity preferring, efficiency preferring, and socially agnostic individuals through reduced form, revealed preference, and structural estimation analyses. Moreover, we find that individuals’ preferences for equity and efficiency behind the veil of ignorance are not correlated with their risk preferences.

Title: Simple bets to elicit private signals (with Aurelien Baillon)

Abstract: This paper introduces two simple betting mechanisms, Top-Flop and Threshold betting, to elicit unverifiable information from crowds. Both mechanisms offer agents bets on the scores of two items, one about which they have a private signal and the other one about which they do not. For instance, in Top-Flop betting, agents bet on or against a movie they just watched having a higher score than another, random movie. Alternatively, in Threshold betting, agents bet which movie will exceed a threshold score. We characterize conditions for the chosen bet to reveal agents’ private signal (e.g. their truthful assessment of the movie). We further establish microfoundations of the scores in a game setting, in which the scores underlying the bets are endogenously determined by the actions of other agents. In the game setting, we relax standard assumptions of the literature such as common prior and homogeneous and risk-neutral agents, and we still obtain that bet choices reveal private signals.