Browsing by Author "Krause, Kate"

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    Bargaining by Children
    (University of Oregon, Dept. of Economics, 2002-07-20) Liday, Steven G.; Harbaugh, William; Krause, Kate
    We study the development of bargaining behavior in children age seven through 18, using ultimatum and dictator games. We find that bargaining behavior changes substantially with age and that most of this change appears to be related to changes in preferences for fairness, rather than bargaining ability. Younger children make and accept smaller ultimatum proposals than do older children, Even young children are quite strategic in their behavior, making much smaller dictator than ultimatum proposals. Boys claim to be more aggressive bargainers than girls do, but they are not. Older girls make larger dictator proposals than older boys, but among younger children the proposals differ much more by height than by sex. We argue that the existence of systematic differences in bargaining behavior across age and sex supports the argument that culture is a determinant of economic behavior, and suggests that people acquire this culture during childhood. We argue that the height differences indicate that forces other than culture, in the usual sense of the word, are also important. Publisher Info
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    Economic Experiments That You Can Perform At Home On Your Children
    (University of Oregon, Dept. of Economics, 2001-06-01) Krause, Kate; Harbaugh, William
    This paper describes some simple economic experiments that can be done using children as subjects. We argue that by conducting experiments on children economists can gain insight into the origins of preferences, the development of bargaining behavior and rationality, and into the origins of "irrational" behavior in adults. Most of the experiments are exploratory, and the objective is as much to learn how to conduct economic experiments on children and suggest avenues for further research as to describe specific results. Preliminary results suggest that while children are very different from adults in some ways, such as their rate of time preference, they are very similar in others, such as their bargaining and altruistic behavior. We also find that children can make choices that generally satisfy the usual transitivity test for rationality, and that in some ways they may even be more rational than adults. The paper includes protocols which can be used to replicate the experiments.
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    Prospect Theory in Choice and Pricing Tasks
    (University of Oregon, Dept. of Economics, 2002-07-20) Harbaugh, William; Krause, Kate; Vesterlund, Lise
    The most distinctive prediction of prospect theory is the fourfold pattern (FFP) of risk attitudes. People are said to be (1) risk-seeking over low-probability gains, (2) risk-averse over low-probability losses, (3) risk-averse over high-probability gains, and (4) risk-seeking over high-probability losses. Using simple gambles over real payoffs, we conduct a direct test of this FFP prediction. We find that when pricing gambles subjects’ risk attitudes are consistent with the FFP. However, when they choose between the gamble and its expected value, their decisions are not distinguishable from random choice and are often the exact opposite of the prediction. These results hold both between and within subjects, and are robust even when we allow the subjects to simultaneously review and change their price and choice decisions.
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    Risk Attitudes of Children and Adults : Choices over Small and Large Probability Gains and Losses
    (2001-11-05) Harbaugh, William; Krause, Kate; Vesterlund, Lise
    In this paper we examine how risk attitudes change with age. We present participants from age 5 to 64 with choices between simple gambles and the expected value of the gambles. The gambles are over both gains and losses, and vary in the probability of the non-zero payoff. Surprisingly, we find that many participants are risk seeking when faced with high-probability prospects over gains and risk averse when faced with small-probability prospects. Over losses we find the exact opposite. Children’s choices are consistent with the underweighting of low-probability events and the overweighting of high-probability ones. This tendency diminishes with age, and on average adults appear to use the objective probability when evaluating risky prospects.
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    Trust in Children
    (University of Oregon, Dept. of Economics, 2002-03-22) Liday, Steven G.; Vesterlund, Lise; Harbaugh, William; Krause, Kate
    In this paper we study trust/reciprocity behavior in children ages eight to eighteen using an augmented version of Berg et al.â s (1995) trust game. This study is intended to inspect and reveal when certain aspects of trust behavior are formed in individuals. In addition, we examine the affect of certain characteristics in subjects that lead to higher levels of trusting behavior.