Book Description

This dissertation consists of three essays in applied microeconomics. The first chapter offers an overview of the work, highlighting the main contributions, methodology and results. The second chapter extensively discusses how one could and should take into account two different but inter-related impacts that tournament prizes have on outcome: the sorting and the incentive effects. The sorting effect refers to the fact that if higher prizes are offered in a tournament, more able participants will join. The incentive effect of prizes relates to an increase in effort corresponding to an increase in prizes, from participants that already decided to join a competition. Previous theoretical and empirical literature focused mainly on the second effect as if relevantly economic tournaments are close in nature. Also, previous empirical studies missed an important channel through which prizes affect outcome and likely estimated biased coefficients for the incentive effect. The third chapter analyzes the impact of the first old-age relief program on the health of the elderly in the United States in the 1930s. The study attempts to provide a picture of how the elderly would fare in an economy where the Social Security system of today does not exist but instead a less birocratic and costly system is in place. The 1930s offers an economist interested in such a counterfactual analysis a unique opportunity since this is precisely the time when Social Security had not started to make payments yet but the states and the federal government became involved in financially supporting the needy elderly. The fourth chapter examines whether public messages can break bubbles in experimental asset markets. This study has policy relevancy in termsof the role a central bank might have in targeting not only inflation as currently defined but asset prices as well. Whereas this role is controversial and remains to be determined, theoretical models advanced the idea of public messages as potential coordination devices among traders in an environment that experiences a bubble. Chapter 4 details the design and results of an experiment that tests this coordination role of a public message. The final chapter summarizes the findings.