IFREE-Sponsored Lecture Series at ESI

Alexander Brown, Ph.D.
Mar. 16th, 2012

Experimental Analysis of Envy-Free Auctions

"My research aim is to inform economic theory through rigorous empirical testing of both traditional and newly-developed economic theory. My primary focus is behavioral economics, an area of economics which augments traditional economic theory with psychological concepts most prevalent in human behavior. Generally I like to test the predictions of behavioral economics in a laboratory setting, but I have applied theories of behavioral economics--already found prevalent in laboratory settings--to real world phenomena. Alternatively, I use the laboratory to develop theory on my own, examining the implications of psychological effects on market decisions in the hope of creating new economic theory.

Consistent with the interests of the Economic Science Institute, my work is heavily involved with markets. My work either examines implications of behavioral economics to individual decisions or game-theoretic, interpersonal interactions in financial markets. In the latter case, I examine not just how components from behavioral economics influence market outcomes in ways not predicted by traditional theory, but also which type of market structures would best serve economic agents given these behavioral components."

Bio:
Alex Brown is an assistant professor at Texas A&M University, having joined there in Fall 2008. He received his B.S. at Ohio State in 2003, and PhD at Caltech in 2008. Alex has a wide variety of research interests including experimental economics, behavioral economics, game theory, behavioral finance and industrial organization. His published papers appear in AEJ: Microeconomimcs, Annals of Finance, Economic Inquiry, Marketing Letters, and the Quarterly Journal of Economics.

Abstract:
Economic concerns for equity have motivated game theorists to study envy-free mechanisms. Though not incentive compatible, these mechanisms implement in Nash equilibria efficient allocations at which no agent prefers the consumption of any other agent to their own. In experimental allocation decisions between two players, an envy-free first-price auction achieves similar efficiency and far greater no-envy than ultimatum bargaining. Both unsophisticated subject bidding and coordination failure are responsible for the departure from Nash equilibrium behavior in the envy-free auction, as bidding strategies vary greatly among subjects. Quantal response equilibrium and level- k models can explain most of this subjects bidding behavior.

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