This project consists of an experimental part and a theoretical part and it aims to examine the relationship between institutional trust, people’s trust for the society (the legal system in this case), and the contract designing process. For instance, this is intuitive to think that the more people trust the court, the more willing they are to make contracts, because they believe that contracts will be enforced and their interests respected. We want to test this idea and we do so by creating an experiment that mimics the contract making process.

The experiment involves an investor and an entrepreneur. The entrepreneur is tasked to offer a contract to attract investment. The investor would then choose whether and how much to invest based on her knowledge of the trustworthiness of the court and the entrepreneur. The game gets repeated in different combinations of the trustworthiness. By examining the contracts that the parties come to, we hope to find some patterns of behavior.

The game tree

In the theoretical part of the project, we calculated the theory-predicted equilibrium contracts, and we found that in general, the entrepreneur would be better off offering a lower return and committing to following the contract than if she offers a high return and later on decides to break the contract.

The next step for the project is to add another treatment. If the entrepreneur paid something back to the investor in the last round, she would get a start in front of her name. We expect this reputation signal to affect the entrepreneur’s behavior, and in particular to make them more trustworthy.

Claire Oxford ’14

Sarah Pearlman & Sukanya Basu

For my Ford Scholars project, I am working on recoding data and analyzing the relationship between drug-related violence and migration in Mexico with Professors Sukanya Basu and Sarah Pearlman. Professors Basu and Pearlman are working on a paper that uses kilometers of federal toll highway in Mexico as an instrumental variable to measure violence-related migration. For the Ford project, I am assisting with research to break their state-level analysis down to a municipal level. Ultimately, the project is meant to show that using federal toll highway kilometers to instrument for changes in homicides, which they have shown is significant on a statewide level, works on a municipal level as well. Most of the data used for the project comes from the Instituto Nacional de Estadística y Geografía (INEGI). I collected municipal level homicide, population, and migration data. After downloading the data sets from INEGI, I created STATA do-files to merge the data and create dummy variables to use in regressions. Additionally, I created maps of Mexico that showed the geographic distribution of the violence; see Image 1 for an example of these maps. Furthermore, I assisted with additional research by reading contemporary economic papers also examining the drug-related violence in Mexico. Our initial results suggest that the relationship between drug-related violence and migration holds on a municipal level. Furthermore, we see that the highway kilometers instrument still works. We still have additional work to do in determining what controls we want to use and whether or not we want to look at the total homicides per capita in a municipality as a measure of violence, or if we want to look at the change in homicides as a measure of the increase in violence as a result of the war on drugs.

Figure 1

Welcome to the Ford Scholar WordPress site for 2013!  Below is a calendar of the summer’s important dates, as well as the date for the Fall symposium.  Please note these dates:

Tuesday, May 28 — 10 am, Information Session in the Library Electronic Classroom

Tuesdays, June 4, June 18, July 2, 16, and 30  – URSI/Ford BBQs, 5 pm on Olmsted Lawn

Wednesday, June 19 – Ice Cream Social, 3-4 pm, Faculty Commons

Tuesday, July 9—Poster Workshop ,10-11:30 am; WordPress Workshop, 11:30 am-12:30 pm

Tuesday, July 16—Poster Workshop, 10-11:30 am; WordPress Workshop, 11:30 am-12:30 pm

Wednesday, July 17—WordPress posting of your 250-300 word project   summary plus 1 or 2 images that relate to your project posted to               http://pages.vassar.edu/fordscholars/

Tuesday, October 1—Students pick up posters from Media Resources

Wednesday, October 2—Ford Scholars Symposium, 4-6 pm, Vassar College Alumnae House