Timothy N. Cason

Purdue University, ウェストラファイエット, Indiana, United States

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Publications (116)143.54 Total impact

  • Timothy N. Cason · Robertas Zubrickas
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    ABSTRACT: The provision point mechanism as a method of funding threshold public goods is extended with refund bonuses. Each contributor not only has his contribution refunded in the case of insufficient contributions but also receives a refund bonus proportional to his proposed contribution. As long as the refund bonus pool does not exceed the net value of the public good, in equilibrium the public good is always provided and refund bonuses are never distributed. In this paper, we empirically investigate this extension of the provision point mechanism in a laboratory experiment by testing its properties on allocative and distributive efficiency, equilibrium coordination, and invariance to information distribution. Individuals respond to the incentives induced by refund bonuses as predicted, but systematic deviations exist that are consistent with quantal response equilibrium. Since this simple mechanism has considerable practical potential especially in crowdfunding, these promising initial results call for further experimental work.
    No preview · Article · Nov 2015 · Games and Economic Behavior
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    Timothy N Cason · Frans P. de Vries
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    DESCRIPTION: This study employs a laboratory experiment to assess the performance of tradable permit markets on dynamic efficiency arising from cost-reducing investment. The permit allocation rule is the main treatment variable, with permits being fully auctioned or grandfathered. The experimental results show significant investment under both allocation rules in the presence of ex ante uncertainty over the actual investment outcome. However, auctioning permits generally provides stronger incentives to invest in R&D, leading to greater dynamic efficiency compared to grandfathering.
    Full-text · Research · Sep 2015
  • Timothy N. Cason · Anya Samek
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    ABSTRACT: We report a laboratory experiment that investigates the impact of passive participation on bubble formation in asset markets with inexperienced and experienced traders. Some treatments employ pre-market training in which each participant is ‘matched’ with a trader from a different prior market and observes all trading details but does not directly participate in trading. We find that passive participation, similar to direct experience, significantly reduces mispricing in subsequent markets. This finding suggests that observation of prices is a key mechanism through which experience mitigates bubbles. We also vary whether transaction prices are displayed in a column of text or in a graphical display, and find that among inexperienced and once-experienced traders, markets with the tabular display result in bubbles that are greater in amplitude relative to markets with the graphical display.
    No preview · Article · Sep 2015
  • Timothy N. Cason · Vai-Lam Mui
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    ABSTRACT: This paper reports an experiment to evaluate the effectiveness of repeated interactions in deterring leaders from using divide-and-conquer strategies to extract surplus from their subordinates, when every decision-maker involved is a group instead of an individual. We find that both the resistance rate by subordinates and the divide-and-conquer transgression rate by leaders are the same in the group and individual repeated coordinated resistance games. Similar to the individual game, adding communication to the group game can help deter opportunistic behavior by the leaders even in the presence of repetition.
    No preview · Article · Mar 2015
  • Timothy N. Cason · Charles R. Plott
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    ABSTRACT: This study explores the tension between the standard economic theory of preference and nonstandard theories of preference that are motivated by an underlying theory of framing. A simple experiment fails to measure a known preference. The divergence of the measured preference from the known preference reflects a mistake, arising from some subjects’ misconception of the game form. We conclude that choice data should not be granted an unqualified interpretation of preference revelation. Mistakes in choices obscured by a possible error at the foundation of the theory of framing can masquerade as having been produced by nonstandard preferences.
    No preview · Article · Dec 2014 · Journal of Political Economy
  • Timothy N. Cason · Vai-Lam Mui
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    ABSTRACT: This paper presents a laboratory experiment to investigate how social motivations and free-form communication (Rich Communication) can facilitate coordinated resistance against divide-and-conquer transgressions. In our experiment, a leader first decides whether to extract surplus from a victim and shares it with a beneficiary. We find that the successful joint resistance rate increases almost four-fold (from 15 to 58%) when moving from more restrictive communication treatments to Rich Communication. We also find that the significant impacts of Rich Communication are driven more by the responders' ability to send free-form messages rather than the multiple and iterative opportunities to indicate intentions.
    No preview · Article · Oct 2014 · European Journal of Political Economy
  • Timothy N. Cason · Lata Gangadharan
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    ABSTRACT: This paper presents an experimental study of two mechanisms for managing common pool resources. Decentralized peer punishment (swords) has been shown to increase cooperation in related social dilemmas, but only with linear private benefits and costs of public goods provision. We investigate the effectiveness of this mechanism for a more realistic nonlinear public goods environment, in isolation and in combination with nonbinding communication and informal agreements (covenants). The results show that swords do not increase cooperation or yield from the public resource, regardless of whether covenants are also possible. Covenants are significantly more effective in solving the social dilemma, and importantly peer punishment is unnecessary if communication is possible.
    No preview · Article · Jan 2014 · Journal of Theoretical Politics
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    Timothy N. Cason · Lata Gangadharan
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    ABSTRACT: Many social dilemmas exhibit nonlinearities and equilibrium outcomes in the interior of the choice space. This paper reports a laboratory experiment studying whether peer punishment promotes socially efficient behavior in such environments, which have been ignored in most experimental studies of peer punishment. It compares the effectiveness of peer punishment in a linear public good game to the effectiveness of this decentralized enforcement mechanism in two nonlinear social dilemma games: a piecewise linear public good game and a common pool resource game. While peer punishment improves cooperation in these new environments, the impact of punishment is weaker and takes longer to be effective. This appears to be due to the greater complexity of the nonlinear settings, which makes socially optimal choices more difficult to identify.
    Preview · Article · Jan 2014 · Experimental Economics
  • Timothy N. Cason · Sau-Him Paul Lau · Vai-Lam Mui
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    ABSTRACT: History-dependent strategies are often used to support cooperation in repeated game models. Using the indefinitely repeated common-pool resource assignment game and a perfect stranger experimental design, this paper reports novel evidence that players who have successfully used an efficiency-enhancing turn-taking strategy will teach other players in subsequent supergames to adopt this strategy. We find that subjects engage in turn taking frequently in both the Low Conflict and the High Conflict treatments. Prior experience with turn taking significantly increases turn taking in both treatments. Moreover, successful turn taking often involves fast learning, and individuals with turn taking experience are more likely to be teachers than inexperienced individuals. The comparative statics results show that teaching in such an environment also responds to incentives, since teaching is empirically more frequent in the Low Conflict treatment with higher benefits and lower costs.
    No preview · Article · Oct 2013 · Economic Theory
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    Timothy N. Cason · Lata Gangadharan
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    ABSTRACT: Firms often cooperate explicitly in certain dimensions, such as research joint ventures, while competing in other markets. Cooperation in research and development can allow firms to internalize the external benefits of knowledge creation and increase the returns from R&D expenditures. Such cooperation may spill over to facilitate collusion in other markets, however, leading to losses in welfare and efficiency. This paper uses a laboratory experiment to examine if sellers successfully coordinate to fund a joint research project to reduce their costs, and how this collaboration affects pricing and efficiency in their market. The motivating example context is research collaborations to reduce costs of abating greenhouse gas emissions, and the potential impact on an emissions permit market. The experiment includes control treatments with separate R&D cooperation and markets. Our results show that although subjects usually cooperate when given an opportunity, cooperative actions are less common when they also compete in the market. This suggests that market competition can spill over to hinder cooperation. Communication between individuals improves cooperation in all environments, particularly when the market is present. Nevertheless, the data indicate little support for market collusion. This weak evidence for behavioural spillovers suggests that policy makers could promote R&D collaborations and still expect robust market competition.
    Full-text · Article · Jul 2013 · Economic Inquiry
  • Timothy N. Cason · Lata Gangadharan
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    ABSTRACT: This paper presents an experimental study of two mechanisms that influence incentives to reduce ambient pollution levels. In the formal mechanism individuals face a penalty if the group generates total pollution that exceeds a specified target, whereas in the informal mechanism individuals can choose to incur costs to punish each other after observing their group members' emissions. We examine the effectiveness of these mechanisms, in isolation and in combination. The results suggest that the formal targeting mechanism is significantly more effective than informal peer punishment in reducing pollution and increasing efficiency. Peer punishment however improves the performance of the formal mechanism.
    No preview · Article · May 2013 · Journal of Environmental Economics and Management
  • Timothy N. Cason · Shakun D. Mago
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    ABSTRACT: This article reports a duopoly experiment in which sellers compete to sell to a potentially patient buyer. Each period sellers simultaneously post prices and the buyer costlessly observes either one or both prices. The buyer can then either accept an observed price or reject all offers. Following a rejection, sellers may have an opportunity to post prices again in another round. We study how the duopolists' pricing behavior responds to changes in the likelihood of the buyer observing multiple prices, γ, and the probability of continuing to another round, δ. The unique stationary equilibrium features mixed strategies. Consistent with the equilibrium, observed prices are decreasing in γ and δ. Contrary to the equilibrium, however, buyers sometimes reject profitable price offers, and average prices are lower than predicted when only one round of offers is possible and higher than predicted in the multiple‐round game.
    No preview · Article · Apr 2013 · Economic Inquiry
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    Timothy N. Cason · Charles R. Plott
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    ABSTRACT: This study reports a simple experiment using induced-value items to assess the accuracy of the Becker, DeGroot, Marschak (BDM) method (1964 Behavioral Science) for measuring preferences. Although the BDM mechanism is incentive compatible the data indicate that it can be empirically unreliable due to subject misconceptions about the game form. Subject choices appear to reflect preferences constructed through framing processes, but further analysis reveals types of misconceptions through specific patterns of behavior. The data are more consistent with a hypothesis that the choices represent mistakes, such as a misconception that the BDM is a first-price auction mechanism. This highlights that preferences should be considered as distinct from choices unless misconceptions are eliminated. Neglecting misconceptions and related mistakes can lead the theory of framing and the theory of revealed preference to result in incorrect interpretations of data. The paper is focused on an interpretation of data from a simple version of the BDM rather than techniques for improving the BDM. As discussed in the paper, a theoretical controversy clouds a discussion of BDM improvements and does not have a clear resolution at this time. We hope that the facts and analysis here will provide a foundation for such a discussion. .
    Full-text · Article · Sep 2012 · SSRN Electronic Journal
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    Timothy N. Cason · Roman M. Sheremeta · Jingjing Zhang
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    ABSTRACT: Costless pre-play communication has been found to effectively facilitate coordination and enhance efficiency in games with Pareto-ranked equilibria. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. Allowing intra-group communication leads to more aggressive competition and greater coordination than control treatments without any communication. On the other hand, allowing inter-group communication leads to less destructive competition. As a result, intra-group communication decreases while inter-group communication increases payoffs. Our experiment thus provides evidence that communication can either reduce or increase efficiency in competitive coordination games depending on different communication boundaries. This contrasts sharply with experimental findings from public goods and other coordination games, where communication always enhances efficiency and often leads to socially optimal outcomes.
    Full-text · Article · Sep 2012 · Games and Economic Behavior
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    Roman M Sheremeta · William A Masters · Timothy N Cason
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    ABSTRACT: This study provides a unified framework to compare three canonical forms of competition: winner-take-all contests won by the best performer, winner-take-all lotteries where probability of success is proportional to performance, and proportional-prize contests in which rewards are shared in proportion to performance. Performance is affected by random noise, reflecting imperfect information. We derive equilibria and observe outcomes from each contest in a laboratory experiment. Equilibrium and observed efforts are highest in winner-take-all contests. Lotteries and proportional-prize contests have the same Nash equilibrium, but empirically, lotteries induce contestants to choose higher efforts and receive lower, more unequal payoffs. This result may explain why contest designers who seek only to elicit effort offer lump-sum prizes, even though contestants would be better off with proportional rewards.
    Full-text · Article · Apr 2012 · SSRN Electronic Journal
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    Daniel Friedman · Timothy N Cason · Ed Hopkins
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    ABSTRACT: We report laboratory experiments that use new, visually oriented software to explore the dynamics of 3×3 games with intransitive best responses. Each moment, each player is matched against the entire population, here 8 human subjects. A “heat map” offers instantaneous feedback on current profit opportunities. In the continuous slow adjustment treatment, we see distinct cycles in the population mix. The cycle amplitude, frequency and direction are consistent with the standard learning models. Cycles are more erratic and higher frequency in the instantaneous adjustment treatment. Control treatments (using simultaneous matching in discrete time) replicate previous results that exhibit weak or no cycles. Average play is approximated fairly well by Nash equilibrium, and an alternative point prediction, “TASP” (Time Average of the Shapley Polygon), captures some regularities that Nash equilibrium misses.
    Full-text · Article · Jan 2012 · Review of Economic Studies
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    David F. Perkis · Timothy N. Cason · Wallace E. Tyner
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    ABSTRACT: Tradable emissions permits have been implemented to control pollution levels in various markets around the world and represent a major component of legislative efforts to control greenhouse gas (GHG) emissions in the United States. Because permits are supplied for a fixed level of pollution, allowing the market for permits to determine the price, there is a desire for price control mechanisms which would protect firms otherwise susceptible to price spikes caused by fluctuations in the demand for pollution abatement. We test permit markets in an experimental laboratory setting to determine the effectiveness of several price control mechanisms. Evidence suggests that both permit supply adjustments and traditional price ceilings (hard ceilings) effectively limit elevated prices in this setting. In contrast, reserve auctions (associated with soft ceiling designs) do not consistently control prices, especially when a minimum reserve permit price is applied. Furthermore, the grandfathering of permits allows permit sellers to realize significant welfare gains at the expense of buyers under a soft ceiling policy. Of the two ceiling options, our results point towards a hard ceiling as the preferred mechanism for controlling short term price increases.
    Preview · Article · Jan 2012 · Environmental and Resource Economics
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    ABSTRACT: The paper presents a complete information model of bidding in second price sealed-bid and ascending-bid (English) auctions, in which potential buyers know the unit valuation of other bidders and may spitefully prefer that their rivals earn a lower surplus. Bidders with spiteful preferences should overbid in equilibrium when they know their rival has a higher value than their own, and bidders with a higher value underbid to reciprocate the spiteful overbidding of the lower value bidders. The model also predicts different bidding behavior in second price as compared to ascending-bid auctions. The paper also presents experimental evidence broadly consistent with the model. In the complete information environment, lower value bidders overbid more than higher value bidders, and they overbid more frequently in the second price auction than in the ascending price auction. Overall, the lower value bidder submits bids that exceed value about half the time. These patterns are not found in the incomplete information environment, consistent with the model.
    Full-text · Article · Dec 2011 · Games
  • Leigh Raymond · Timothy N. Cason
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    ABSTRACT: Early emissions trading programs have obtained a very high rate of compliance, in part by using continuous emissions monitors (CEMs) that automatically record emissions data on a 24‐hour basis. As they expand into a wider range of pollutants and sources, however, such policies will have to rely on less automated forms of self‐reporting. This article asks if improved “affirmative motivations” for compliance based on perceptions of a policy's fairness could reduce the likelihood of underreporting, thereby lowering verification costs without unduly jeopardizing environmental integrity. Using a computerized laboratory emissions trading market, we find that many subjects reported emissions honestly in situations where dishonest reporting would have been more profitable, as well as a statistically significant association of affirmative motivations based on perceptions of a policy's fairness with honest reporting. These results suggest that designing an emissions trading program to increase its perceived fairness among users has the potential to increase honest emissions reporting and reduce monitoring costs.
    No preview · Article · Nov 2011 · Policy Studies Journal
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    Timothy N. Cason · Daniel Friedman
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    ABSTRACT: This paper compares the performance of four different trading institutions in laboratory markets. Two institutions, the continuous double auction and the single call market, are commonly employed on organized exchanges. Two other "hybrid" institutions, the uniform price double auction and multiple call market, link the other institutions in different dimensions. The laboratory environment features four buyers and four sellers who receive random values and costs in each period and who have a one-unit trading capacity. Therefore, each period provides an observation of price formation and exchange in a thin market environment. We find that trading efficiency is lowest in the institutions that permit only one transaction opportunity each period, primarily due to insufficient trading volume. However, the institutions that permit a single trading opportunity force all traders to transact at a uniform price, which tends to generate prices that more accurately reflect underlying market conditions.
    Full-text · Article · Oct 2011

Publication Stats

4k Citations
143.54 Total Impact Points

Institutions

  • 2000-2014
    • Purdue University
      • Department of Economics
      ウェストラファイエット, Indiana, United States
    • Cabinet Office Economic and Social Research Institute
      Edo, Tōkyō, Japan
  • 1991-2011
    • University of Southern California
      • Department of Economics
      Los Angeles, California, United States
  • 2003
    • University of Melbourne
      • Department of Economics
      Melbourne, Victoria, Australia
  • 2002
    • University of California, Santa Cruz
      • Department of Economics
      Santa Cruz, California, United States
  • 1995
    • Vanderbilt University
      • Owen Graduate School of Management
      Нашвилл, Michigan, United States
  • 1990
    • University of California, Berkeley
      Berkeley, California, United States