Three Essays on Experimental and Behavioral Economics

Joy Buchanan

Advisor: Daniel E Houser, PhD, Department of Economics

Committee Members: Tyler Cowen, Cesar Martinelli

Buchanan Hall, #D180
April 26, 2017, 10:00 AM to 07:00 AM


Chapters one and two provide analysis and an experiment to better understand the behavioral dynamics between employers and workers. Surveys have indicated that managers believe wage cuts will significantly decrease the productivity of their employees. While there is a large literature describing empirical evidence for wage cut aversion, there is still little known about the underlying mechanism. Chapter two reports the first controlled experiment to test what managers believe about wage cuts and how workers respond to them. The key variable that can be measured this way is precise input and output for each worker under stable wages and also under a wage cut, which is the counterfactual missing in most existing data. Incentivized belief elicitation of the managers provides data to compare with observed outcomes of employee behavior. This provides insight into the mechanism that may keep unemployment high after a recession.

Chapter three describes the results of a laboratory experiment to explore whether the protection of intellectual property (IP) incentivizes people to create non-rivalrous knowledge goods, foregoing the production of other rivalrous goods.  In the contrasting treatment with no IP protection, participants are free to resell and remake non-rivalrous knowledge goods originally created by others.  It is found that creators reap substantial profits when IP is protected and that rampant pirating is common when there is no IP protection, but IP protection in and of itself is neither necessary nor sufficient for generating wealth from the discovery of knowledge goods.  Rather, individual entrepreneurship is the key.  This provides new information about how intellectual property protection incentivizes innovation illuminates the role of entrepreneurial individuals in the process of value creation from original inventions.