We re-examine preference reversal data from previously published studies to (1) identify the effects of different incentive treatments and (2) determine the models that best explain data patterns across incentive treatments. Contrary to the quot;folk-wisdomquot; that incentives do not affect...

Prediction markets for future events are increasingly common, and they often trade several contracts for the same event. This paper considers the distribution of a normative risk-neutral trader who, given any portfolio of contracts traded on the event, would choose not to reallocate that...

We conducted prediction markets designed to forecast post-IPO valuations before a particularly unique IPO: Google. The prediction markets forecast Google's post-IPO market capitalization relatively accurately. While Google's auc-tion-based IPO price fell 15.3% below the first-day, closing market...

Short-term financial claims held by uninformed outside investors impose a tax on insider opportunism by diluting the ownership stake of opportunistic owner-managers. By thus limiting managerial opportunism, short-term financing increases firm value and social welfare. When given a choice,...

We examine communication in two-player games that represent simplified financial markets with asymmetric information. In each game, a seller knows the true quality of an asset while the potential buyer knows only the ex ante quality distribution. First we document the degree of adverse selection...

We examine communication in two-player games that represent simplified financial markets with asymmetric information. In each game, a seller knows the true quality of an asset while the potential buyer knows only the ex ante quality distribution. First we document the degree of adverse selection...

In this paper, we document a “play-out” effect in preference reversal experiments. We compare data where preferences are elicited using (1) purely hypothetical gambles, (2) played-out, but unpaid gambles and (3) played-out gambles with truth-revealing monetary payments. We ask whether a...

Researchers vigorously debate the impact of incentives in preference reversal experiments. Do incentives alter behavior and generate economically consistent choices? Lichtenstein and Slovic (1971) document inconsistencies (reversals) in revealed preference in gamble pairs across paired choice...