Free neighborhood choice boosts socially optimal outcomes in stag-hunt coordination problem

Situations where independent agents need to align their activities to achieve individually and socially beneficial outcomes are abundant, reaching from everyday situations like fixing a time for a meeting to global problems like climate change agreements. Often such situations can be described as stag-hunt games, where coordinating on the socially efficient outcome is individually optimal but also entails a risk of losing out. Previous work has shown that in fixed interaction neighborhoods agents’ behavior mostly converges to the collectively inefficient outcome. However, in the field, interaction neighborhoods often can be self-determined. Theoretical work investigating such circumstances is ambiguous in whether the efficient or inefficient outcome will prevail. We performed an experiment with human subjects exploring how free neighborhood choice affects coordination. In a fixed interaction treatment, a vast majority of subjects quickly coordinates on the inefficient outcome. In a treatment with neighborhood choice, the outcome is dramatically different: behavior quickly converges to the socially desirable outcome leading to welfare gains 2.5 times higher than in the environment without neighborhood choice. Participants playing efficiently exclude those playing inefficiently who in response change their behavior and are subsequently included again. Importantly, this mechanism is effective despite that only few exclusions actually occur.

Residents’ Resentment of Neighbourhood Choice in Port Harcourt Municipality

This study examined residents’ resentment of neighborhood choice in Port Harcourt municipality, Nigeria. The study utilized both secondary and primary data sources. Primary data were collected using face-to-face administration of a largely pre-coded household questionnaire, to a probability sample of 396 respondents, drawn from the neighbourhoods. Data analysis was based on responses from 193 questionnaires retrieved and the univariate analytical method was adopted. The study found that large percentage of residents reported a negative rating of neighbourhood choice indicators such as waste collection and disposal, safety of lives and property, fire stations, cleanliness of the neighbourhood, residential planning, and government provision of housing for the poor, hospitals/clinics, recreational areas, maintenance of streets, aesthetic condition, noise level and the neighbourhood condition. Residents rated markets adequate and fire hazards low. The study concluded that majority of the residents rated neighbourhood quality indicators inadequate. The study recommended that government should intervene in these areas to improve the neighbourhood quality to achieve sustainability.

Evidence of Neighborhood Effects from Moving to Opportunity: Lates of Neighborhood Quality

This paper estimates neighborhood effects on adult labor market outcomes using the Moving to Opportunity (MTO) housing mobility experiment. We propose and implement a new strategy for identifying transition-specific effects that exploits identification of the unobserved component of a neighborhood choice model. Estimated local average treatment effects (LATEs) are large, result from moves between the first and second deciles of the national distribution of neighborhood quality, and pertain to a subpopulation of nine percent of program participants.

Do Neighborhoods Affect the Credit Market Decisions of Low-Income Borrowers? Evidence from the Moving to Opportunity Experiment

This paper isolates the causal impact of neighborhood environment on the credit outcomes of low-income borrowers by analyzing the participants of the Moving to Opportunity (MTO) experiment. MTO was a unique, large-scale experiment that offered families vouchers to move to better neighborhoods via randomized lottery. We find higher credit scores and use among those required to move to the lowest poverty areas as young children. For those who moved as adults, we find that better neighborhoods lead to a reduction of overdue debts and delinquencies, but only among those given unrestricted neighborhood choice.