Discussion Papers

Discussion Paper No. 179
August 7, 2019

How to Avoid Black Markets for Appointments with Online Booking Systems

Authors:

Hakimov, Rustamdjan (University of Lausanne)
Heller, Christian-Philipp (NERA Consulting)
Kübler, Dorothea (WZB Berlin)
Kurino, Morimitsu (Keio University Tokyo)

Abstract:

Allocating appointment slots is presented as a new application for market design. We consider online booking systems that are commonly used by public authorities to allocate appointments for driver's licenses, visa interviews, passport renewals, etc. We document that black markets for appointments have developed in many parts of the world. Scalpers book the appointments that are offered for free and sell the slots to appointment seekers. We model the existing first-come-first-served booking system and propose an alternative system. The alternative system collects applications for slots for a certain time period and then randomly allocates slots to applicants. We investigate the two systems under conditions of low and high demand for slots. The theory predicts and lab experiments confirm that scalpers profitably book and sell slots under the current system with high demand, but that they are not active in the proposed new system under both demand conditions.

Keywords:

market design; online booking system; first come first served; scalping

JEL-Classification:

C92; D47

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Discussion Paper No. 178
August 7, 2019

Managerial Payoff and Gift-Exchange in the Field

Authors:

Englmaier, Florian (LMU Munich)
Leider, Steve (University of Michigan)

Abstract:

We conduct a field experiment where we vary both the presence of a gift-exchange wage and the effect of the worker's effort on the manager's payoff. Results indicate a strong complementarity between the initial wage-gift and the agent's ability to "repay the gift". We control for differences in ability and reciprocal inclination and show that gift-exchange is more effective with more reciprocal agents. We present a principal-agent model with reciprocal subjects that motivates our findings. Our results help to reconcile the conflicting evidence on the efficacy of gift-exchange outside the lab.

Keywords:

incentives; field experiments; gift-exchange; reciprocity

JEL-Classification:

C91; J33; M52

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Discussion Paper No. 177
August 5, 2019

Should There Be Lower Taxes On Patent Income?

Authors:

Gaessler, Fabian (MPI-IC Munich)
Hall, Bronwyn H. (MPI-IC Munich)
Harhoff, Dietmar (MPI-IC Munich)

Abstract:

A "patent box" is a term for the application of a lower corporate tax rate to the income derived from the ownership of patents. This tax subsidy instrument has been introduced in a number of countries since 2000. Using comprehensive data on patents filed at the European Patent Office, including information on ownership transfers pre- and post-grant, we investigate the impact of the introduction of a patent box on international patent transfers, on the choice of ownership location, and on invention in the relevant country. We find that the impact on transfers is small but present, especially when the tax instrument contains a development condition and for high value patents (those most likely to have generated income), but that invention itself is not affected. This calls into question whether the patent box is an effective instrument for encouraging innovation in a country, rather than simply facilitating the shifting of corporate income to low tax jurisdictions.

Keywords:

patent box; ip box; innovation tax; beps; epo; invention incentive; patent ownership

JEL-Classification:

H32; H34; K34; O34

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Discussion Paper No. 176
August 5, 2019

Patents, Data Exclusivity, and the Development of New Drugs

Authors:

Gaessler, Fabian (MPI-IC Munich)
Wagner, Stefan (ESMT Berlin)

Abstract:

Pharmaceutical firms typically enjoy market exclusivity for new drugs from concurrent protection of the underlying invention (through patents) and the clinical trials data submitted for market approval (through data exclusivity). Patent invalidation during drug development renders data exclusivity the sole source of protection and shifts the period of market exclusivity at the project level. In instrumental variables regressions we quantify the effect of a one-year reduction in expected market exclusivity on the likelihood of drug commercialization. The effect is largely driven by patent invalidations early in the drug development process and by the responses of large originators. We hereby provide first estimates of the responsiveness of R&D investments to market exclusivity expectations.

Keywords:

patents; drugs; data exclusivity; clinical trials

JEL-Classification:

K41; L24; L65; O31; O32; O34

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Discussion Paper No. 175
August 5, 2019

Speculative Trade and Market Newcomers

Author:

Klishchuk, Bogdan (HU Berlin)

Abstract:

Arguing that in the real world relatively optimistic inexperienced investors are prey for relatively pessimistic veteran traders, we formalize this intuitive conjecture as a proven proposition in a simple model. This agreement to disagree leads to a perpetual bubble, in which more experienced, but less optimistic, investors keep selling overpriced assets to less experienced traders. As in a fraction of the uniform-experience literature, lack of short-selling makes room for the success of such bubble schemes. This previous literature did not allow for persistent effects of experience on beliefs and, instead, relied on more direct assumptions of belief heterogeneity. Although we map experience into beliefs in a specific way, the intuition behind the perpetual bubble involves the above-mentioned disagreement patterns, not belief formation itself.

Keywords:

speculative trade; price bubble; experience; optimism; belief heterogeneity; non-bayesian learning; short-selling

JEL-Classification:

D08; D09; G01; G04

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Discussion Paper No. 174
August 5, 2019

Immigration and the Evolution of Local Cultural Norms

Authors:

Schmitz, Sophia (Federal Ministry of Finance)
Weinhardt, Felix (DIW Berlin)

Abstract:

We study the local evolution of cultural norms in West Germany in reaction to the sudden presence of East Germans who migrated to the West after reunification. These migrants grew up with very high rates of maternal employment, whereas West German families followed the traditional breadwinner-housewife model. We find that West German women increase their labor supply and that this holds within household. We provide additional evidence on stated gender norms, West-East friendships, intermarriage, and childcare infrastructure. The dynamic evolution of the local effects on labor supply is best explained by local cultural learning and endogenous childcare infrastructure.

Keywords:

cultural norms; local learning; gender; immigration

JEL-Classification:

J16; J21; D01

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Discussion Paper No. 173
July 30, 2019

Boolean Representations of Preferences under Ambiguity

Authors:

Frick, Mira (Yale University)
Iijima, Ryota (Yale University)
Le Yaouanq, Yves (LMU Munich)

Abstract:

We propose a class of multiple-prior representations of preferences under ambiguity where the belief the decision-maker (DM) uses to evaluate an uncertain prospect is the outcome of a game played by two conflicting forces, Pessimism and Optimism. The model does not restrict the sign of the DM's ambiguity attitude, and we show that it provides a unified framework through which to characterize different degrees of ambiguity aversion, as well as to represent context-dependent negative and positive ambiguity attitudes documented in experiments. We prove that our baseline representation, Boolean expected utility (BEU), yields a novel representation of the class of invariant biseparable preferences (Ghirardato, Maccheroni and Marinacci, 2004), which drops uncertainty aversion from maxmin expected utility (Gilboa and Schmeidler, 1989), while extensions of BEU allow for more general departures from independence.

Keywords:

multiple priors; ambiguity; dual-self models

JEL-Classification:

D81

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Discussion Paper No. 172
July 30, 2019

The Rise of Fiscal Capacity

Authors:

Cantoni, Davide (LMU Munich)
Mohr, Cathrin (LMU Munich)
Weigand, Matthias (LMU Munich)

Abstract:

Having sufficient fiscal capacity to tax is a key hallmark and defining feature of states, and there is a growing literature trying to explain its origins. Existing empirical evidence on fiscal capacity is scarce and focuses on large, ex-post successful territories. In this paper we study the introduction of the first centralized, permanent fiscal institutions in the multifarious territories of the Holy Roman Empire from 1400 to 1800. We link information on fiscal centralization and the size and survival of territories to an extensive dataset on state-formation and growth-related outcomes. We empirically confirm that territories are more likely to centralize when neighboring territories are centralized and when they are exposed to a higher threat of war. In line with the literature on the consequences of fiscal capacity, we show that centralized territories are more likely to survive than non-centralized territories and as a result grow more in size. They invest more in administrative and military structures, but investments in the military only occur in the core areas of centralized territories. This contradicts the central assumption of models on fiscal capacity which states that investments into the military are a non-excludable public good.

Keywords:

JEL-Classification:

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Discussion Paper No. 171
July 30, 2019

The Standard Portfolio Choice Problem in Germany

Authors:
Breunig, Christoph (HU Berlin)
Huck, Steffen (WZB Berlin and UCL)
Schmidt, Tobias (QuantCo)
Weizsäcker, Georg (HU Berlin and DIW Berlin)
Abstract:

We study an investment experiment with a representative sample of German households. Respondents invest in a safe asset and a risky asset whose return is tied to the German stock market. Experimental investments correlate with beliefs about stock market returns and exhibit desirable external validity at least in one respect: they predict real-life stock market participation. But many households are unresponsive to an exogenous increase in the risky asset's return. The data analysis and a series of additional laboratory experiments suggest that task complexity decreases the responsiveness to incentives. Modifying the safe asset's return has a larger effect on behaviour than modifying the risky asset's return.

Keywords:
stock market expectations; stock market participation; portfolio choice; financial literacy; complexity
JEL-Classification:
D01; D14; D84; G11
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Discussion Paper No. 170
July 30, 2019

Belief Updating: Does the ‘Good-News, Bad-News’ Asymmetry Extend to Purely Financial Domains?

Author:
Barron, Kai (WZB Berlin)
Abstract:

Bayes' statistical rule remains the status quo for modeling belief updating in both normative and descriptive models of behavior under uncertainty. Some recent research has questioned the use of Bayes' rule in descriptive models of behavior, presenting evidence that people overweight 'good news' relative to 'bad news' when updating ego-relevant beliefs. In this paper, we present experimental evidence testing whether this 'good-news, bad-news' effect is present in a financial decision making context (i.e. a domain that is important for understanding much economic decision making). We find no evidence of asymmetric updating in this domain. In contrast, in our experiment, belief updating is close to the Bayesian benchmark on average. However, we show that this average behavior masks substantial heterogeneity in individual updating. We find no evidence in support of a sizeable subgroup of asymmetric updators.

Keywords:
economic experiments; bayes' rule; belief updating; belief measurement; proper scoring rules; motivated beliefs
JEL-Classification:
C11; C91; D83
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