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Working Paper
If at first you don't succeed: an experimental investigation of the impact of repetition options on corporate takeovers
This paper models, and experimentally simulates, the free-rider problem in a takeover when the raider has the option to ?resolicit,? that is, to make a new offer after an offer has been rejected. In theory, the option to resolicit, by lowering offer credibility, increases the dissipative losses associated with free riding. In practice, the outcomes of our experiment, while quite closely tracking theory in the effective absence of an option to resolicit, differed dramatically from theory when a significant probability of resolicitation was introduced: The option to resolicit reduced the costs ...
Working Paper
Immediate disclosure or secrecy? the release of information in experimental asset markets
The Federal Reserve has made significant changes in its predisposition to release information over time. This paper reports the results of experimental asset markets designed to investigate how the public disclosure of uncertain information affects market and individual outcomes. In one set of markets, no information is released at the beginning of each trading year. In two other sets, an imperfect pre-announcement of the state of nature is disclosed. The reliability of the pre-announcement (60 percent and 90 percent) varies across treatments. Halfway through each trading year, the state of ...
Working Paper
Corporate board composition, protocols, and voting behavior: experimental evidence
We model experimentally the governance of an institution. The optimal management of this institution depends on the information possessed by insiders. However, insiders, whose interests are not aligned with the interests of the institution, may choose to use their information to further personal rather than institutional ends. Researchers (e.g., Palfrey 1990) and the business press have both argued that multiagent mechanisms, which inject trustworthy but uninformed ?watchdog? agents into the governance process and impose penalties for conflicting recommendations, can implement institutionally ...
Working Paper
Trading institutions and price discovery: the cash and futures markets for crude oil
We provide substantial evidence that the futures market for West Texas Intermediate crude oil increased the short-term volatility of the cash price of crude oil. We show that the variability of prices increased using both published posted prices and transaction prices for producers. This increased volatility in the price of crude oil may reflect information aggregated into the price, an increase the variance of shocks to the price of crude oil, or noise in the futures price that affects the cash price. We present evidence from experiments consistent with the interpretation that information ...