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Essays on Prediction and Betting Markets
Kálovcová, Katarína ; Ortmann, Andreas (advisor) ; Blavatskyy, Pavlo (referee) ; McKenzie, Jordi (referee)
Over the last decades, there has been a marked increase in the interest in prediction and betting markets. This interest was driven by their demonstrated capacity to aggregate information and to improve on the more traditional forecasting methods. In the first chapter, we analyze key differences between prediction and betting markets and make conjectures about the effect of these different characteristics on markets' performance. In the second chapter, we replicate the betting market experiment, cited in Plott, Wit & Yang (2003), to analyze the process of information aggregation. Based on observed market odds, Plott, Wit & Yang (2003) show that information was aggregated on their market. On the other hand, model based only on the use of private information fits traders' behavior best. In contrast to aggregate level data analysis employed in Plott, Wit & Yang (2003), we analyze individual level data and explain these paradoxical results. Finally, we conducted a CERGE-EI internal prediction market to take a well- known and experimentally tested information aggregation mechanism and implement it in a real institution for internal use to examine if it could work in this particular setting. In the third chapter, we report on the results of this market and we show that for the performance of the market,...
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The Road to Efficient Liberalization of EU Energy Markets: Obstacles and Consequences
Mravec, Michal ; Ortmann, Andreas (advisor) ; Kmenta, Jan (referee) ; Roland, Gérard (referee)
1 Understanding the Lack of Competition in Natural Gas Markets: The Impact of Limited Upstream Competition Motivated by the slow emergence of competition after the natural gas market in the Czech Republic was liberalized, I explore the impact of upstream competition on the downstream level. I extend standard Cournot models to understand current and likely future developments, paying particular attention to the impact of market liberalization on a country characterized by a lack of domestic production and limited foreign upstream competition. I show that the upstream producer might exercise his market power to capture some of the benefits of liberalization and increase the wholesale price, which hinders the desired decline of the end-user price in the long run. This pricing change in turn makes the entry of new players in the transition period more difficult. This problem might be mitigated or even completely reversed if upstream competition develops simultaneously with downstream liberalization. What Role Does Storage Play in the Liberalization of the Natural Gas Market? Focusing on the liberalization of the natural gas market in the Czech Republic, in this paper I explore the impact of the structure of natural gas storage on the development of competition and prices after market liberalization. I...
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Essays on Philanthropy
Svítková, Katarína ; Ortmann, Andreas (advisor) ; Bekkers, René (referee) ; Bilodeau, Marc (referee)
The basic concern of any empirical work is to employ statistical data that correspond to the notion of the theoretical variables in the model. The problems and economic consequences connected with the measurement of selected economic variables are the focus of this thesis. It consists of three chapters that in succession analyze the issues associated with the measurement of economic growth, multi-factor productivity and capital input into production. The first chapter looks into the differences among the growth rates of GDP per capita based on data from the three most commonly used databases, namely International Financial Statistics, World Development Indicators and Penn World Table. Using a wide international dataset, we find significant differences in the growth rates that are mainly due to the adjustment for cross-country comparability of GDP per capita levels. Importantly, these differences are correlated with the level of development. We replicate six recent studies of growth determinants and find their results sensitive to the choice of data. The second chapter analyses the sensitivity of calculated multi-factor productivity (MFP) growth to assumptions of growth accounting, concentrating on the measurement of quantity, composition and the respective shares of labor and capital inputs, and...
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The Impact of Financial Incentives on Task Performance: The Role of Cognitive Abilities & Intrinsic Motivation
Rydval, Ondřej ; Ortmann, Andreas (advisor) ; Harrison, Glenn (referee) ; Camerer, Colin (referee)
DISSERTATION ABSTRACT Economists widely believe that, absent strategic considerations such as agency problems, financial incentives represent the dominant and effective stimulator of human productive activities. In production settings that are cognitively demanding, however, the effectiveness of financial incentives may be moderated by individual heterogeneity in cognitive abilities, intrinsic motivation and other personality characteristics. Even if strong financial incentives induce high effort, both financial and cognitive resources may be wasted for individuals with insufficient cognitive abilities. This prediction, if warranted, calls for attention to cognitive abilities in designing efficient incentive schemes in firms, experimental settings and elsewhere. My dissertation examines how financial incentives interact with intrinsic motivation and especially cognitive abilities in determining cognitive performance. In Rydval (2003), I present an initial literature review, particularly noting lack of empirical evidence on the interaction between financial incentives and cognitive abilities. Building on the review, Chapter 1 of the dissertation illustrates that general cognitive abilities appear at least as important for performance in a psychometric test as does a sizeable variation in piece-rate financial...
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Anti-Corruption Mechanism in Economic Models of Corruption
Krajčová, Jana ; Ortmann, Andreas (advisor) ; Frank, Bjorn (referee) ; Spagnolo, Giancarlo (referee)
This dissertation consists of three chapters that, theoretically and experimentally, address the effectiveness of anti-corruption mechanisms. In the first chapter, I analyze the effects of monitoring on an agent's incentives in a two-period principal-agent model in which the agent decides on his effort and corruptibility. The agent's type and strategy are unknown to the principal. I compare incentive-compatible wages under three different scenarios: 1) the principal does not monitor and only observes output; 2) the principal monitors the agent's effort choice; and 3) the principal monitors the agent's corruptibility. I find that monitoring of effort improves the sorting of types but it might also give the agent more incentive to be corrupt. Monitoring of corruption does not improve the sorting of types but it negatively affects the agent's incentive to be corrupt. In the second and in the third chapter I analyze experimentally how promising as anti-corruption measures leniency policies really are. Buccirossi and Spagnolo (2006) had conjectured, based on theoretical work, that ill-designed legal environments might, in fact, produce results that contradict the intentions of the designers of the leniency policies. And, indeed, I demonstrate, for the first time as far as I know, that real-world subjects...
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Overconfidence in Business, Economics, Finance, and Psychology: How much of a Problem is it?
Krajč, Marian ; Ortmann, Andreas (advisor) ; Hoelzl, Erik (referee) ; Fellner, Gerlinde (referee)
The first chapter offers a theoretical model that suggests an alternative explanation to the so-called unskilled-and-unaware problem-the unskilled overestimate their skills while the skilled underestimate (but less than the unskilled). The unskilled-and-unaware problem was experimentally identified about a decade ago and numerous authors have elaborated on this problem since. We propose that the alleged unskilled-and-unaware problem, rather than being one of biased judgments, is a signal extraction problem that differs for the skilled and the unskilled. The model is based on two assumptions. First, we assume that skills are distributed according to a J-distribution, which can be regarded as an approximation of the very right tail of the IQ distribution. This assumption is reasonable given the typical subject pool used in the experimental studies of overconfidence - students from prominent US universities. Second, we assume an error term in own-ability perception, which is a common assumption in psychology models. Our simple model generates, by means of analytical computations, patterns similar to those identified in the previous experimental literature. We also discuss conditions under which the unskilled-and-unaware problem should disappear. The second chapter reports the results of three experiments (one...
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Essays on the Unbundling of Electricity Networks in the Eu an the USA: Theory and Empirics
Van Koten, Silvester ; Ortmann, Andreas (advisor) ; Leautier, Thomas-Olivier (referee) ; Kmenta, Jan (referee)
This Ph.D. dissertation focuses on a central question about regulation in the EU and US electricity markets: the effects of vertical integration of generation and transmission and distribution networks. I focus on the forms of vertical integration where the generation and network firms are partly separated, such as in a legal or organizational form. Such form of separation is called unbundling. In the first two papers, I develop theoretical models to analyze the economic effects of vertical integration under legal unbundling (firms are legally separated entities and have the same owner) relative to ownership unbundling (firms are legally separated entities and have different owners). Both papers have policy implications for the regulation of the EU and US electricity markets, and make new contributions to auction theory, especially toehold auctions. In the first paper I consider the legal unbundling of the network activities; in the second paper I consider the legal unbundling of both the network activities and the generation activity. In both papers I find theoretical evidence that, in terms of efficiency, legal unbundling gives results inferior to ownership unbundling. Furthermore, I find solutions for several cases of toehold auctions that have not been solved before and that I believe to be interesting....
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Essays on Quality Assurance Mechanism
Mysliveček, Jan ; Ortmann, Andreas (advisor) ; Zimmermann, Karel (referee) ; Strausz, Roland (referee)
This dissertation studies two quality assurance mechanisms know from markets with unobservable quality characteristics-certification and self-regulation. Certification is a mechanism based on a third party who tests producers and issues, for a fee, a certificate to those who meet the required quality standard. Self-regulation is a mechanism, where producers, rather than relying on a certifier, form a club, set standards, and monitor each other. In the first chapter, I compare certification and self-regulation. I show that if the testing technology is perfect and costless, the choice of standards and fees by the certifying organization (CO) is welfare inferior, while the self-regulatory organization (SRO) chooses a welfare optimal fee, and I identify conditions under which the SRO also chooses optimal standards. If the testing technology is costly and imperfect, this result is not necessarily valid and depends on the difference between the costs of the testing technology available to the CO and SRO. In the second chapter, Tomáš Konečný and I study an example of certification system - Fair Trade scheme. One of the arguments against the Fair Trade scheme is that the guaranteed minimum price tends to depress world prices and thus the incomes of non-participating farmers (e.g. The Economist, 2006). We develop a...
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Essays on Competition and Entrepreneurial Choice between Nonprofit and For-profit Firms
Brhlíková, Petra ; Ortmann, Andreas (advisor) ; Schlesinger, Mark (referee) ; Handy, Femida (referee)
In my four dissertation essays I focus on the entrepreneurial motivations to enter the nonprofit sector, the objectives of nonprofit institutions, and the competition between nonprofit and for-profit firms within an industry. The literature review looks at the nonprofit sector in a more general way, touching on its size and importance to society, its focus the characteristics that distinguish it from the for-profit sector. To motivate three theoretical chapters, I survey the literature on managerial motivations to enter the nonprofit sector, objective functions that nonprofits pursue, and mixed competition. Two theoretical essays explore competition between one nonprofit and one for-profit firm in the market for an excludable public good. The two competing firms follow different objectives and face different constraints and both optimize with respect to quality and price. Consumers are heterogeneous with respect to quality. The firms' behavior in mixed competition is compared to the nonprofit duopoly and for-profit duopoly. Among other results, the model reveals that the nonprofit firm is a natural leader in the market. The for- profit firm prefers a nonprofit competitor to a for-profit one, and it is better off when its nonprofit competitor is efficient and subsidized. The robustness of these...
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