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Date of Award

Summer 8-15-2015

Author's School

Graduate School of Arts and Sciences

Author's Department

Economics

Degree Name

Doctor of Philosophy (PhD)

Degree Type

Dissertation

Abstract

In the first essay, we estimate the effect of an increase in time cost on behavior and ask what happens when pro-social behavior becomes more costly in terms of time. We use the length of time a blood donor spends waiting to make his donation as our measure of cost and instrument for a donor's wait time to address the possibility that wait times are endogenously determined. Consistent with theory we develop, our results indicate that waiting has a significant longer-term social cost: we estimate that a 38\% increase in the average wait results in a 14\% decrease in donations per year.

In the second essay, we distinguish between two biases in beliefs, both of which could explain why individuals over-estimate the probability of high-payoff outcomes. The first is optimism or wishful thinking, where individuals, independent of their own performance, over-estimate the probability of outcomes they prefer. The second is overconfidence, where agents believe they perform better than they actually do. We design and implement an experiment to assess (i) how optimism and overconfidence relate at the individual level and (ii) how optimism and overconfidence jointly affect how individuals form beliefs about uncertain outcomes. A key strength of our experimental design is that it establishes a subject-level control against which all experimentally induced shifts are measured. We report two main findings. First, optimism and overconfidence are positively correlated at the individual level. Second, both optimism and overconfidence help to explain why individuals over-estimate high-payoff outcomes. Previous work tends to focus solely on overconfidence to explain puzzling economic behavior. A leading example is over-entry into self employment. Our findings suggest that, since the role of optimism is omitted, the estimated impact of overconfidence on behavior is upwardly biased.

In the third essay, we study how individual traits shape information demand and acquisition to drive exploratory and innovative behavior. Using a laboratory experiment, we are able to examine how traits directly drive innovation versus how they indirectly drive innovation through information acquisition. We first study the impact of exogenously-assigned information on innovative behavior and we show that the exogenously-assigned information treatments generate two types of entrepreneurs: ``Jacks of All Trades" accumulate a wider range of knowledge by exploring more ideas and ``Specialists" are more exploitative and fine tune their ideas. Further, we find that individual traits play a predictive role in determining exploratory behavior and successful innovation, but that the same traits play a differential role depending on the type of information assigned. In particular, we find that Extroversion and Openness are assets for ``Jacks of All Trades" while Risk-Aversion is an asset for ``Specialists". In an Information Choice Treatment, we allow another group of subjects to choose the type of information that prefer to receive and find that more Extroverted prefer information consistent with becoming a ``Jack of All Trades", while the more risk-averse choose information consistent with becoming a ``Specialist". Further, once the choice of information is endogenous, individual traits fail to predict innovative behavior.

Language

English (en)

Chair and Committee

Barton Hamilton

Committee Members

Robert Pollak, Glenn MacDonald, Carl Sanders, ,

Comments

Permanent URL: https://doi.org/10.7936/K77S7KRW

Available for download on Thursday, August 15, 2115

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Economics Commons

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