Date of Award

Fall 12-15-2010

Degree Type

Dissertation

Degree Name

Doctor of Philosophy (PhD)

Department

Economics

First Advisor

James C. Cox

Second Advisor

Jane G. Gravelle

Third Advisor

Jorge Martinez-Vazquez

Fourth Advisor

Vjollca Sadiraj

Abstract

The chapters of this dissertation examine efficiency failures in three areas of applied microeconomics: experimental economics, public finance, and game theory. In each case, we look at ways to resolve these failures to promote the public good. The first chapter, “An Experimental Test of the Pigovian Hypothesis,” looks at two different policies designed to reduce congestion in a common-pool resource (CPR). We present an experiment with training and a simplified decision task and find that subject behavior converges to the Nash prediction over a number of periods. A Pigovian subsidy effectively moves subject behavior to the pre-subsidy social optimum. Finally, we find a significant but non-persistent effect of information provision in moving subjects toward the social optimum. The second chapter, “Apples to Apples to Oranges,” looks at efficiency and equity failures across states resulting from public expenditure. This chapter introduces an extension of the Representative Expenditure System that uses regression methods and both state and metropolitan statistical area (MSA) level data, allowing for comparability of input costs, service requirements, and levels of need. The regression-based results are robust across state- and MSA-level formulations, although state-level approaches overestimate need for larger, less populous states. All regression-based results diverge from previous workload-based approaches. The third chapter, “Evading Nash Traps in Two-Player Simultaneous Games,” looks at efficiency failures in two-player simultaneous games. This chapter presents two new concepts: “détente” and “no-initiative,” in which players consider their own strategies and other-best-responses. We discuss their efficiency and descriptive properties across a set of simultaneous games.

Included in

Economics Commons

Share

COinS