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on Experimental Economics |
| By: | Michael Berlemann; Marcus Dittrich; Gunther Markwardt |
| Abstract: | In this paper we present three simple theoretical models to explain the influence of the possibility to make non-binding announcements on investment behaviour in public goods settings. Our models build on the idea that voluntary contributions to the supply of a public good might be motivated by some form of joy of giving. We show that the possibility to make non-binding announcements has a positive effect on cooperative behaviour, especially if individual announcements and factual investments are communicated to the players after each round. We also show that this result holds true even though the players have an incentive to overstate their true degrees of cooperativeness. Altogether, our theoretical considerations point in the direction that revealing as much information on individual intentions and factual behaviour as possible enhances cooperative behaviour. These conclusions are broadly confirmed by the results of a series of classroom experiments we present. |
| Keywords: | public goods, announcements, joy of giving, experimental economics |
| JEL: | C92 D74 H41 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1352&r=exp |
| By: | Frank Heinemann; Rosemarie Nagel; Peter Ockenfels |
| Abstract: | This paper explores three aspects of strategic uncertainty: its relation to risk, predictability of behavior and subjective beliefs of players. In a laboratory experiment we measure subjects’ certainty equivalents for three coordination games and one lottery. Behavior in coordination games is related to risk aversion, experience seeking, and age. From the distribution of certainty equivalents we estimate probabilities for successful coordination in a wide range of games. For many games, success of coordination is predictable with a reasonable error rate. The best response to observed behavior is close to the global-game solution. Comparing choices in coordination games with revealed risk aversion, we estimate subjective probabilities for successful coordination. In games with a low coordination requirement, most subjects underestimate the probability of success. In games with a high coordination requirement, most subjects overestimate this probability. Estimating probabilistic decision models, we show that the quality of predictions can be improved when individual characteristics are taken into account. Subjects’ behavior is consistent with probabilistic beliefs about the aggregate outcome, but inconsistent with probabilistic beliefs about individual behavior. |
| JEL: | C72 C91 D81 D84 |
| Date: | 2004 |
| URL: | http://d.repec.org/n?u=RePEc:ces:ceswps:_1364&r=exp |
| By: | Bernard Fortin; Guy Lacroix; Marie-Claire Villeval |
| Abstract: | The paper extends the standard tax evasion model by allowing for social interactions. In Manski’s (1993) nomenclature, our model takes into account social conformity effects (i.e., endogenous interactions), fairness effects (i.e., exogenous interactions) and sorting effects (i.e., correlated effects). Our model is tested using experimental data. Participants must decide how much income to report given their tax rate and audit probability, and given those faced by the other members of their group as well as their mean reported income. The estimation is based on a two-limit simultaneous tobit with fixed group effects. A unique social equilibrium exists when the model satisfies coherency conditions. In line with Brock and Durlauf (2001b), the intrinsic nonlinearity between individual and group responses is sufficient to identify the model without imposing any exclusion restrictions. Our results are consistent with fairness effects but reject social conformity and correlated effects. <P>Cet article généralise le modèle standard de fraude fiscale en permettant la présence d’interactions sociales. Suivant la nomenclature de Manski (1993), notre modèle tient compte des effets de conformité sociale (i.e. interactions endogènes), des effets d’équité (i.e. interactions exogènes) et des effets de sélection (i.e. effets corrélés). Le modèle est testé à l’aide de données expérimentales. Les participants doivent choisir le montant déclaré de leur revenu, étant donné leur taux d’impôt, leur probabilité d’être contrôlé par le fisc et étant donné ceux de leur groupe de référence ainsi que le revenu moyen déclaré par ce dernier. L’estimation se fonde sur un modèle tobit simultané à deux bornes avec des effets fixes de groupe. Un équilibre social unique existe lorsque le modèle satisfait des conditions de cohérence. Suivant en cela Brock et Durlauf (2001b), la non-linéarité intrinsèque entre les réponses individuelles et celles du groupe est suffisante pour identifier le modèle sans avoir à imposer des restrictions d’exclusion. Nos résultats sont cohérents avec la présence d’effets d’équité mais rejettent la conformité sociale ainsi que les effets corrélés. |
| Keywords: | social, interactions, tax evasion, simultaneous tobit, laboratory experiments., interactions sociales, fraude fiscale, tobit simultané, économie expérimentale |
| JEL: | H26 D63 C24 C92 Z13 |
| Date: | 2004–12–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2004s-61&r=exp |
| By: | Carlsson, Fredrik (Department of Economics, School of Economics and Commercial Law, Göteborg University); Martinsson, Peter (Department of Economics, School of Economics and Commercial Law, Göteborg University) |
| Abstract: | Using a choice experiment survey, the marginal willingness to pay (WTP) among Swedish households for reductions in power outages is estimated. The results from the random parameter logit estimation indicate that the marginal WTP increases with the duration of the outages, and is higher if the outages occur during weekends and during winter months. The random parameter logit model allows us to estimate a sample distribution of WTP. We find a significant unobserved heterogeneity in some of the outage attributes but not all. Furthermore we show that the sample distribution of WTP does not to any large extent suffer from the problem of reverse sign of the WTP. Therefore, choosing an unconstrained normal distribution might not be as problematic as one would think. Given that households have negative welfare effects from outages, which differ in timing and duration, and are rarely compensated for them, it is important that policy makers consider these negative impacts on households utility when regulating the electricity market. <p> |
| Keywords: | Choice experiment; Power outages; Random parameters; Willingness to pay |
| JEL: | C25 C93 D12 Q41 |
| Date: | 2004–12–20 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0155&r=exp |
| By: | Jennifer M. Mellor (Department of Economics, College of William and Mary) |
| Abstract: | This paper describes a classroom game that illustrates the effects of asymmetric information and adverse selection in health insurance markets. The first phase of this game simulates a market in which buyers can purchase insurance from sellers who sometimes lack information about buyer type. The results demonstrate the classic prediction that asymmetric information will result in adverse selection. Here, low risk buyers will forego the purchase of insurance at a measurable loss of potential earnings. In the second phase of the game, sellers and buyers can trade two different types of health insurance policies, one moderate and another generous. The results from this simulation demonstrate how adverse selection can lead to an inefficient sorting of buyers across plans, an outcome that is discussed in Cutler and Zeckhauser (1997). In this case, too few buyers elect to purchase the generous insurance plan. The paper provides a series of questions to stimulate class discussion on the causes and consequences of adverse selection for consumers and insurers, and solutions that can be implemented in employer and government-sponsored programs. |
| Keywords: | Classroom, Experiment, Adverse selection |
| JEL: | A2 C9 D4 I1 |
| Date: | 2004–12–10 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:11&r=exp |
| By: | Lisa R. Anderson (Department of Economics, College of William and Mary); Jennifer M. Mellor (Department of Economics, College of William and Mary); Jeffrey Milyo (Department of Economics and Truman School of Public Affairs, University of Missouri) |
| Abstract: | Recent studies report that economic inequality is associated with reduced government expenditures on social programs. Several prominent social scientists, including Putnam [2000], attribute this relationship to the detrimental Òpsychosocial effectsÓ of group heterogeneity on cooperation. We test the hypothesis that inequality within a group reduces individual contributions in a canonical public goods experiment. Unlike previous examinations of inequality and public good provision, our design introduces inequality by manipulating the levels and distributions of fixed payments given to subjects for participating in the experiment. When made salient through public information about each individualÕs standing within the group, inequality in the distribution of fixed payments reduces contributions to the public good for all group members. |
| Keywords: | Inequality, Heterogeneity, Cooperation, Public goods, Experiments |
| JEL: | C9 H4 |
| Date: | 2004–12–15 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:12&r=exp |
| By: | Lisa R. Anderson (Department of Economics, College of William and Mary); Jennifer M. Mellor (Department of Economics, College of William and Mary); Jeffrey Milyo (Department of Economics and Truman School of Public Affairs, University of Missouri) |
| Abstract: | A popular perception among the American electorate is that Democrats and liberals are more caring and kind-hearted than Republicans and conservatives. This stems in part from the consistent finding in opinion surveys that left-leaning individuals tend to support increased public spending on social programs. In this study, we put conventional wisdom to the test by examining differences in the behavior of liberal versus conservative subjects in two classic experimental settings: the public goods game and the bilateral trust game. First, we test whether Democrats or liberals are more likely to contribute to a group account when such actions are contrary to self-interest. Next, we test whether Democrats and liberals choose to trust strangers or to behave in a trustworthy fashion, despite monetary incentives to the contrary. To address the concern that liberals may not behave more compassionately in the artificially egalitarian setting of the laboratory, we induce inequality among subjects by manipulating the show-up fee paid to all participants. We find that despite conventional wisdom and survey evidence, there is no tendency for adherents of either major party to play nice, nor do self-described liberals have a greater tendency to make contributions in a public goods experiment. However, in keeping with conventional wisdom (but not necessarily national survey results), we find some evidence that self-described liberals behave in a more trusting and trustworthy manner. |
| Keywords: | public goods, experiment, political ideology |
| JEL: | C9 H4 |
| Date: | 2004–09–30 |
| URL: | http://d.repec.org/n?u=RePEc:cwm:wpaper:7&r=exp |
| By: | Suetens S. |
| Abstract: | In the paper I examine in an experiment whether for two different levels of technological spillovers, cooperative R&D behavior voluntarily arises when firms have communication possibilities. It is assumed that in the output market, firms compete `a la Cournot. Experimental results indicate that when technological spillovers are complete and subjects communicate, R&D decisions converge to the cooperative level, while in other cases R&D decisions converge towards the Nash equilibrium. |
| Date: | 2003–12 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2003029&r=exp |
| By: | Suetens S. |
| Date: | 2004–11 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2004024&r=exp |
| By: | Jeffrey Milyo (Department of Economics, University of Missouri-Columbia); Jennifer M. Mellor; Lisa Anderson |
| Abstract: | Recent studies argue that inequality reduces group cohesiveness and dampens support for expenditures on public goods and social programs. In light of competing theoretical explanations and mixed empirical evidence of the effect of inequality on public goods provision, we conduct a test using a public goods experiment. Our design introduces inequality by manipulating the levels and distributions of fixed payments given to subjects for participating in the experiment. When made salient through public information about each individual’s standing within the group, inequality in the distribution of fixed payments reduces contributions to the public good for all group members. |
| JEL: | D31 H41 Z13 |
| Date: | 2004–12–27 |
| URL: | http://d.repec.org/n?u=RePEc:umc:wpaper:0418&r=exp |