Papers by Timothy W. Shields
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SSRN Electronic Journal
Many economic interactions are characterized by “all or nothing” action spaces that may limit a d... more Many economic interactions are characterized by “all or nothing” action spaces that may limit a demonstrable index of trust and, therefore, the propensity to reciprocate. In two experimental trust games, the action space governing investments was manipulated to examine the effects on investments and reciprocity. In the continuous game the investor could invest any amount between $0 and $10, while in the binary game the investor could invest either $0 or $10. In both games, the trustee received the tripled investment and then could return any amount back to the investor. Investors invested significantly more in the binary game than in the continuous game. However, higher investments in the binary game did not lead to more reciprocity. To the contrary, conditional on investment of $10, on average trustees returned significantly less in the binary game than in the continuous game.
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SSRN Electronic Journal, 2000
ABSTRACT We designed an experiment to study behavior in information transmission games where unde... more ABSTRACT We designed an experiment to study behavior in information transmission games where underwriters have economic incentives to deceive and investors have incentives to avoid deception. Theory predicts that investors should not be able to glean information from the underwriters’ reports, and thus investment decisions should be based solely on the investment’s fundamental risk. To test this prediction we elicited choices from risky gambles constructed to be mathematically equivalent to the information setting if the underwriters’ reports had no information content. Participants acted simultaneously as underwriters and investors in one-shot information transmission games. Our findings indicate that underwriters acted deceptively, while investors invested conditional on the underwriters’ reports. Moreover, investors invested significantly more often when the expected return from the investment was relatively high. We observed that investors both gleaned and gambled, and those who gleaned earned higher payoffs.
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SSRN Electronic Journal, 2000
ABSTRACT We examine the role of higher order beliefs in asset markets where coordination between ... more ABSTRACT We examine the role of higher order beliefs in asset markets where coordination between a buyer and seller can lead to gains to trade. The scenarios are modeled such that trader’s strategies do not only depend upon their beliefs of underlying economic phenomena, but also upon the others’ beliefs regarding the beliefs of themselves. Under certain parameters the breakdown of coordination is predicted–even when both traders are certain the underlying phenomena dictates trade is advantageous. We demonstrate the equilibrium predictions can be constructed via a small number of iterated thought exercises. The experimental design allows us to control for various behavioral phenomena and examine subjects’ decisions across different accounting regimes as to tease out strategic uncertainty due solely to information asymmetry. In this setting we find evidence supporting higher order beliefs. An implication is that the lack of uniformity leads to lack of common knowledge of the beliefs of others, which in turn leads to the spreading of inefficient outcomes.
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Journal of Economic Behavior & Organization, 2013
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Journal of Economic Behavior & Organization, 2014
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Journal of Behavioral and Experimental Economics, 2014
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SSRN Electronic Journal, 2000
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Papers by Timothy W. Shields