The Efficiency Impact of Regulatory Uncertainty: An Experimental Study

Last registered on January 29, 2018

View Trial History

Pre-Trial

Trial Information

General Information

Title

The Efficiency Impact of Regulatory Uncertainty: An Experimental Study

RCT ID

AEARCTR-0002675

Initial registration date

January 29, 2018

Initial registration date is when the trial was registered.

It corresponds to when the registration was submitted to the Registry to be reviewed for publication.

First published

January 29, 2018, 6:15 PM EST

First published corresponds to when the trial was first made public on the Registry after being reviewed.

Locations

Country

United States of America

Region

Primary Investigator

Name

Calvin Blackwell

Affiliation

College of Charleston

Contact Primary Investigator

Other Primary Investigator(s)

PI Name

Russell Sobel

PI Affiliation

The Citadel

Additional Trial Information

Status

In development

Start date

2018-01-29

End date

2018-12-31

Keywords

Governance

Additional Keywords

Regulatory Uncertainty, Tax Uncertainty

JEL code(s)

Secondary IDs

Abstract

We design an experiment to examine the impact of regulatory uncertainty on efficiency. We use a double-auction design as a baseline and then examine two regulatory regimes: a known tax and an unknown, retroactively applied tax. That is, in the second regime participants are told there is the possibility that a tax will be imposed on any transactions made, but subjects do not find out if the tax will be imposed until after the double auction is completed. We compare the efficiency of the market with the known tax to that of the market with the unknown tax. We have two primary competing hypotheses: 1) the lost efficiency with the unknown tax will be less than with the known tax or 2) the lost efficiency with the unknown tax will be more that with the know tax.

External Link(s)

Registration Citation

Citation

Blackwell, Calvin and Russell Sobel. 2018. "The Efficiency Impact of Regulatory Uncertainty: An Experimental Study." AEA RCT Registry. January 29. https://doi.org/10.1257/rct.2675-1.0

Former Citation

Blackwell, Calvin and Russell Sobel. 2018. "The Efficiency Impact of Regulatory Uncertainty: An Experimental Study." AEA RCT Registry. January 29. https://www.socialscienceregistry.org/trials/2675/history/25363

Sponsors & Partners

Experimental Details

Interventions

Intervention(s)

We design an experiment to examine the impact of regulatory uncertainty on efficiency. We use a double-auction design as a baseline and then examine two regulatory regimes: a known tax and an unknown, retroactively applied tax. That is, in the second regime participants are told there is the possibility that a tax will be imposed on any transactions made, but subjects do not find out if the tax will be imposed until after the double auction is completed. We compare the efficiency of the market with the known tax to that of the market with the unknown tax. The unknown tax treatment will have two sub-treatments: a regime in which participants are told the probability that the tax will be imposed, and a regime in which the participants are merely told that the tax could occur, but are not given a precise probability. In both sub-treatments the actual probability of the tax being imposed will be 0.5.

Intervention Start Date

2018-01-29

Intervention End Date

2018-12-31

Primary Outcomes

Primary Outcomes (end points)

We will measure the economic surplus generated under each treatment. The ratio of actual surplus to potential surplus generated will be used as our measure of efficiency. We will compare efficiency under each treatment.

Primary Outcomes (explanation)

Secondary Outcomes

Secondary Outcomes (end points)

Secondary Outcomes (explanation)

Experimental Design

We design an experiment to examine the impact of regulatory uncertainty on efficiency. We use a double-auction design as a baseline and then examine two regulatory regimes: a known tax and an unknown, retroactively applied tax. That is, in the second regime participants are told there is the possibility that a tax will be imposed on any transactions made, but subjects do not find out if the tax will be imposed until after the double auction is completed. We compare the efficiency of the market with the known tax to that of the market with the unknown tax. The unknown tax treatment will have two sub-treatments: a regime in which participants are told the probability that the tax will be imposed, and a regime in which the participants are merely told that the tax could occur, but are not given a precise probability. In both sub-treatments the actual probability of the tax being imposed will be 0.5.

Experimental Design Details

Randomization Method

Coin flip

Randomization Unit

Individual level randomization. Participants are randomly assigned to a treatment.

Was the treatment clustered?

Experiment Characteristics

Sample size: planned number of clusters

Experimental sessions will be run with 10 or 20 participants at a time. We plan to start with 4 sessions.

Sample size: planned number of observations

Initial set of sessions will include 60 participants.

Sample size (or number of clusters) by treatment arms

We plan to use 20 participants in our 2 control sessions, and then 20 participants in each of the sub-treatments (known probability vs unknown probability of tax).

Minimum detectable effect size for main outcomes (accounting for sample design and clustering)

Supporting Documents and Materials

IRB