Empirical essays on dynamic decision making
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This thesis is a collection of empirical and experimental studies on dynamic decision making. Chapter 1 studies the non-linear incentive of academics in economics departments of the U.K. high education institutions based on the data throughout the last four RAEs/REFs (i.e., RAE1996, RAE2001, RAE2008, REF2014). The time-discontinuity features of the RAEs/REFs and the constraints on job moving result in academics facing non-linear incentives. The data shows that in a harsh working environment with a periodical decline of the UK economics study, academic economists respond to such incentives by postponing the publication of their high-quality outputs to the beginning of the next assessment period, as expected. Chapter 2 presents an experiment designed to study how people play a two-person two-stage dynamic game with incomplete information and uncertainty and to study the effect of different elicitation methods on equilibrium and level-k play. The experimental data shows that around half of the subjects are strategic thinkers and level-k thinking dominates in strategic thinking. Furthermore, the comparison between the direct-response and the strategy method reveals that the latter method has a negative effect on players’ strategic thinking. Chapter 3 is an experimental study of the intertemporal consumption and saving behaviour of agents who have a finite lifecycle in an endowment economy in the presence of two different time profiles of taxes. A series of farsighted models (i.e., rational expectation and adaptive learning) and myopic models are introduced to explain players’ saving behaviour in the presence of a tax decrease in the middle of their lifecycle. In this setting, the data analysis shows that most of the subjects’ behaviours are consistent with the suggestions of myopic models.
Thesis, PhD Doctor of Philosophy
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