nep-exp New Economics Papers
on Experimental Economics
Issue of 2005‒03‒13
four papers chosen by
Daniel Houser
George Mason University

  1. Norm Enforcement: Anger, Indignation or Reciprocity? By Jeffrey Carpenter; Peter Hans Matthews
  2. Performance Measurement, Expectancy and Agency Theory: An Experimental Study By Randolph Sloof; Mirjam van Praag
  3. The effect of precommitment and past-experience on insurance choices : an experimental study By Thomas Papon
  4. Hiring discrimination : a field experiment in the French financial sector By Pascale Petit

  1. By: Jeffrey Carpenter; Peter Hans Matthews
    Abstract: The enforcement of social norms often requires that unaffected third parties sanction offenders. Given the renewed interest of economists in norms, the literature on third party punishment is surprisingly thin, however. In this paper, we report on the results of an experiment designed to evaluate two distinct explanations for this phenomenon, indignation and group reciprocity. We find evidence in favor of both, with the caveat that the incidence of indignation-driven sanctions is perhaps smaller than earlier studies have hinted. Furthermore, our results suggest that second parties use sanctions to promote conformism while third parties intervene primarily to promote efficiency.
    Keywords: experiment, voluntary contribution mechanism, norm, third party punishment, reciprocity, indignation
    JEL: C79 C91 C92 D64 H41
    Date: 2005–03
  2. By: Randolph Sloof (Faculty of Economics and Econometrics, Universiteit van Amsterdam); Mirjam van Praag (Faculty of Economics and Econometrics, Universiteit van Amsterdam)
    Abstract: Theoretical analyses of (optimal) performance measures are typically performed within the realm of the linear agency model. An important implication of this model is that, for a given compensation scheme, the agent's optimal effort choice is unrelated to the amount of noise in the performance measure. In contrast, expectancy theory as developed by psychologists predicts that effort levels are increasing in the signal-to-noise ratio. We conduct a real effort laboratory experiment to assess the relevance of this prediction in a setting where all key assumptions of the linear agency model are met. Moreover, our experimental design allows us to control expectancy exactly as in Vroom's (1964) original expectancy model. In this setting, we find that effort levels are invariant to changes in the distribution of the noise term, i.e. to expectancy. Our results thus confirm standard agency theory and reject this particular aspect of expectancy theory.
    Keywords: Expectancy theory; agency theory; performance measurement; experiments
    JEL: J33 C91 D81
  3. By: Thomas Papon (EUREQua)
    Abstract: This paper reports results from an experimental study that investigates insurance behaviors in low-probability high-loss risk situations. This study reveals that insurance behaviors may depend on the individual prior experience towards risk. It may also depend on the duration of the commitment period, namely the period during which individuals commit themselves to maintain the same insurance decision. Non-additive decision models such as Dual Theory and Cumulative Prospect Theory seem to have a higher descriptive power than Expected Utility Theory when explaining subjects' behaviors. This paper presents a direct experimental test of the prediction of Myopic Prospect Theory relative to insurance demand. This study is also designed to test the significance of gambler's fallacy and availability bias in the insurance decision process. These theoretical concepts help to understand many behaviors commonly observed in reality but which remain unexplained within the E.U framework. In particular, this paper provides new explanations about the puzzling fact that people usually fail to obtain insurance against disaster-type risks such as natural disasters, even when premiums are close to actuarially fair levels. According to our experimental results, the deficiency of insurance demand for natural disasters may be due to the lack of individual prior experience towards such risks ; as well as the relatively short commitment period of insurance policies (usually one fiscal year) compared with the empirical frequency of major natural hazards (centennial and even more).
    Keywords: Insurance demand; Low-probability high-consequence risks; heuristics and bias in risk perception; experimental methodology; Cumulative Prospect Theory; Dual Theory
    JEL: C90 C91 D1 D81 D84 G22 M31
    Date: 2004–09
  4. By: Pascale Petit (EUREQua)
    Abstract: Using correspondence testing, we investigate whether gender access gap in job interviews is due to different effects of present or future family responsibilities on expected productivity of male and female job applicants or if it is due to a taste for discrimination. We have sent job applications of three pairs of candidates to the same job advertisements in the French financial sector. Using three pairs of applicants, we compare the effect on the gender access gap to job interviews of a high probability of maternity/paternity (1) ; high family responsibilities (2) ; neither risk of maternity or family responsibility (3). Within each pair, the applicants' characteristics are similar except for their gender. We find significant discrimination against women with a high probability of maternity for highly qualified administrative jobs. In the other cases, unequal treatment between genders is not significant. So, controling for female probability of maternity, we find no significant unequal treatment between genders. We conclude that female employment suffers more from their probability of maternity (and their anticipated career interruptions) than family responsibilities alone. So, statistical discrimination due to female probability of maternity exists on the French labor market. An appropriate economic policy may correct it by reducing firms' cost due to maternity leave.
    Keywords: Field experiment; hiring discrimination
    JEL: J16 J71 J82
    Date: 2004–07

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