Date of Graduation

8-2014

Document Type

Dissertation

Degree Name

Doctor of Philosophy in Economics (PhD)

Degree Level

Graduate

Department

Economics

Advisor

Cary Deck

Committee Member

Amy Farmer

Second Committee Member

Jeffrey Carpenter

Third Committee Member

Salar Jahedi

Keywords

Behavioral Economics, Economics, Experimental Economics, Pro-social Behavior

Abstract

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. Theoretical predictions over an individual's effort provision are based on their revealed preferences for the social distribution of wealth according to the general axiom of revealed preference (GARP). Laboratory experiments reveal that individuals' effort provisions do not support the assumption of stable preferences (transitivity) of wealth distribution. Specifically, individuals who reveal a preference for egalitarian outcomes do not exert enough real effort toward said outcomes when all of the wealth can be distributed directly to them. In the latter, pecuniary situation, auction formats that require all bidders to pay their bid (i.e., all-pay auctions) are studied as a way of funding public goods, specifically in the context of charity auctions. An innovative theoretical variation of the war of attrition is designed. This variation requires bidders to make unrecoverable upfront investments in the auction in order to participate, and the amount of one's investment dictates how much one can potentially bid in the auction. In addition, an empirical analysis of this theoretical variation is provided via laboratory experiments. These experiments seek to highlight the bidder-specific and mechanism-specific characteristics that may lead to greater success in charitable fund-raising. The results suggest that auction mechanisms with an incremental bidding design outperform mechanisms with a lump-sum bidding design.

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