Abstract. We develop the concept of virtual experiments and consider their application to environmental policy. A virtual experiment combines insights from virtual reality in computer science, naturalistic decision-making from psychology, and field experiments from economics. The environmental policy applications of interest to us include traditional valuation tasks and less traditional normative decision-making. The methodological objective of virtual experiments is to bridge the gap between the artefactual controls of laboratory experiments and the naturalistic domain of field experiments or direct field studies. This should provide tools for policy analysis that combine the inferential power of replicable

Political trust has never returned to Great Society era levels. Conventional wisdom suggests that chronically poor performance explains why. Over the last twenty five years, however, performance has often been at least very good. We show that one key to understanding the persistence of lower levels of political trust is that Americans have become more apt to use less favorable criteria when asked to evaluate government. When more people identify international problems as most important, trust increases. Hence the steep decline in concern about international issues after the 1960s has set a lower baseline than before. In addition, we show that the effect of economic performance on political trust is asymmetric. Since fewer people think the economy is important during good times than bad, even the often strong economies of the past thirty years increased trust less than the poor economies diminished it. Taken together, our results imply that a return to 1960s era trust levels is unlikely. Hetherington and Rudolph 1 In the mid to late 1960s, trust in the federal government began a dramatic decline that

Title: Similar effects of feature-based attention on motion perception and pursuit eye movements at different levels of awareness Abbreviated title: Feature-based attention affects perception and pursuit

This paper analyzes the impact of trade reforms on household welfare. In particular, the importance of each of the links that together constitute the impact is studied using data from the Vietnamese experience in the 1990s. The implementation of trade reforms in the 1990s, most noteworthy of which was the liberalization of rice, resulted in a substantial improvement in welfare as evidenced by the drastic decline in poverty. Using analytical and empirical methods, we examine the role of each channel (direct vs. indirect) in this improvement for different groups of households. Results indicate that the growth has been broad based and pro-poor. Poorer households experienced more growth for each and every group analyzed. Moreover, contrary to the standard literature, net buyer households had more growth compared to net sellers, emphasizing the importance of the indirect links. Decomposition of the growth illustrates that for rural households, both the direct effects and the multiplier effect drive growth while the multiplier effect was key in urban areas. The importance of the secondary effects underscores the need for a broader model to estimate the impact of trade reforms fully.

Document de Travail de la série

number of commentators advocating an enhanced role for market discipline, it is important to assess the effectiveness of depositor discipline. Many argue that private sector stakeholders can play a significant role in constraining excessive risk-taking and encour-aging prudent banking practices

The past three years have witnessed a record decline in the exchange value of the U.S. dollar. This depreciation generally has been consistent with market fundamentals, such as the U.S.

exchange of ideas about development issues. An objective of the series is to get the findings out quickly, even if the presentations are less than fully polished. The papers carry the names of the authors and should be cited accordingly. The findings, interpretations, and conclusions expressed in this paper are entirely those of the authors. They do not necessarily represent the view of the World Bank, its Executive Directors, or the countries they represent. Policy Research Working Papers are available online at

In an optimal auction, a revenue-optimizing seller often awards goods inefficiently, either by placing them in the wrong hands or by withholding goods from the market. This conclusion rests on two assumptions: (1) the seller can prevent resale among bidders after the auction; and (2) the seller can commit to not sell the withheld goods after the auction. We examine how the optimal auction problem changes when these assumptions are relaxed. In sharp contrast to the no resale assumption, we assume perfect resale: all gains from trade are exhausted in resale. In a multiple object model with independent signals, we characterize optimal auctions with resale. We prove generally that with perfect resale, the seller’s incentive to misassign goods is destroyed. Moreover, with discrete types, any misassignment of goods strictly lowers the seller’s revenue from the optimum. In auction markets followed by perfect resale, it is optimal to assign goods to those with the highest values.

We explore an equilibrium model of games where players ’ choice behavior is given by logit response functions, but their payoff responsiveness and beliefs about other players’ payoff responsiveness is heterogeneous. We extend the definition of quantal response equilibrium to this setting, calling it subjective quantal response equilibrium, and study two substantively different ways to introduce heterogeneity: (1) Heterogeneus quantal response equilibrium (HQRE), where players share the same, correct beliefs, about the distribution of payoff responsiveness; and (2) Truncated quantal response equilibrium (TQRE), where players have downward looking beliefs: i.e., systematically underestimate the distribution of the other players ’ responsiveness. We show that the congnitive hierarchy model is a special case of TQRE. We conduct a series of experiments designed to differentiate these various approaches, including a battery of matrix games and a dominance-solvable game of incomplete information. We find significant evidence of heterogeneity and downward looking beliefs in some games, and significant evidence of payoff responsive stochastic choice. JEL classification numbers: 024, 026