Enabled by research funding from The Ronald and Maxine Linde Institute of Economic and Management Sciences, Caltech faculty and students were able to pursue important initiatives over the past year, including but not limited to the following projects:
Professor of Political Science Mike Alvarez and social science graduate student Yimeng Li worked on a pilot project aimed at improving the measurement of individual consumer data. With their Linde Institute grant, they developed and tested survey questions to more accurately estimate consumers' financial, consumption, and investing behaviors, as compared to surveys already in use such as the Federal Reserve Board's Survey of Consumer Finances. They adapted instructional manipulation checks as well as indirect eliciting methods to deal with problems in existing surveys of consumer finances.
Assistant Professor of Economics and Mathematics Omer Tamuz used his grant funding to enlist graduate research assistance in connection with his project "Strategic Interaction on Networks: Information, Dynamics and Formation." In his proposal, Tamuz explained that understanding strategic social interactions in networked environments is a multifaceted challenge, involving questions from economics, computer science, and mathematics. To tackle these problems, Tamuz worked with students to develop and study new theoretical models of strategic interaction on networks, building on his and his collaborators' past work.
Associate Professor of Finance and Entrepreneurship Michael Ewens received a grant to continue work on his project titled "Venture Capital Contracts and Startup Valuation." Since first proposing this research project in 2016, Ewens and his collaborators have successfully solved a matching model that includes equity and simple contract terms. Ewens used the latest grant funding to further their estimation and data collection efforts, resulting in what they believe to be the largest dataset of VC contracts that has ever been collected. They are confident that this dataset will provide an excellent platform for future research.
Assistant Professor of Finance Lawrence Jin received Linde Institute funds to pursue a research project titled "Efficient Coding and Risky Choice" with Cary Frydman (PhD '12 Social Science), assistant professor of finance and business economics at USC's Marshall School of Business. The project presents a model of risky choice in which the perception of a lottery payoff is noisy and optimally depends on the payoff distribution to which the decision maker has adapted. The perceived value of a payoff is precisely defined according to a core idea in neuroscience called the efficient coding hypothesis, which indicates that more perceptual resources are allocated to those stimuli that occur more frequently. Jin and Frydman used their grant funding to conduct laboratory experiments to test the model and hire a research assistant, and they expect to continue the research into 2019.
Figure from Mike Ewens, which shows the model's predictions about how entrepreneurs and venture capitalists match and their choice of contracts.
