Economics Insights @ CBS

We study the interaction between competitive markets and income redistribution that reallocates unequal pre-tax market incomes away from the rich to the poor majority. In one setup, participants earn their income by trading in a double auction (DA) with exogenous zero or full redistribution. In another setup, after trading, they vote on redistributive tax policies in a majoritarian election with two competing candidates. This results in virtually full redistribution, even when participants have the opportunity to influence taxes by transferring money to the candidates.

Integrating recent work on emotional communication with social science theories on unpredictability, we investigated whether communicating emotional inconsistency and unpredictability would affect recipients' concession-making in negotiation. We hypothesized that emotional inconsistency and unpredictability would increase recipients' concessions by making recipients feel less control over the outcome. In Experiment 1, dyads negotiated face-to-face after one negotiator within each dyad expressed either anger or emotional inconsistency by alternating between anger and happiness.

The current research examines the extent to which visual perception is distorted by one's experience of power. Specifically, does power distort impressions of another person's physical size? Two experiments found that participants induced to feel powerful through episodic primes (Study 1) and legitimate leadership role manipulations (Study 2) systematically underestimated the size of a target, and participants induced to feel powerless systematically overestimated the size of the target. These results emerged whether the target person was in a photograph or face-to-face.

As the debate over banking reform continues, the 800-pound gorilla in the room is the anemic market value of America's banks. The market-to-book value ratio of U.S. banks — an indicator of market perceptions of their future cash flow-generating potential — remains in the tank. This ratio averaged between 1.8 and 2.9 from 2000 until mid-2007, but then plunged to an average of between 0.9 and 1.3.