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on Experimental Economics |
| By: | Frederic Koessler; Charles Noussair; Anthony Ziegelmeyer |
| Abstract: | We study experimental parimutuel betting markets with asymmetrically informed bettors. We propose a theoretical model, the Adaptive Model, which serves as our source of null hypotheses about individual behavior and the capacity of the markets to aggregate information. In one treatment, groups of eight participants bet against each other in twenty repetitions of a sequential betting market. The second treatment is identical, except that bets are observed by other participants who assess the winning probabilities of each outcome. In the third treatment, the same individuals place bets and assess the winning probabilities of the outcomes. A favorite-longshot bias is observed in the first and second treatments, but it is sharply reduced in the third treatment. Information aggregation is better in the third than in the other two treatments, because contrarian betting is almost completely eliminated by the belief elicitation procedure. Placing bets improves the accuracy of belief statements. A statistical generalization of the Adaptive Model explains the data very effectively. |
| Keywords: | belief elicitation, information aggregation, parimutuel betting, experiment |
| JEL: | C90 C91 C92 D40 D8 D82 |
| URL: | http://d.repec.org/n?u=RePEc:esi:discus:2005-12&r=exp |
| By: | Abbring, Jaap H (Free University Amsterdam); van den Berg, Gerard J (Free University Amsterdam) |
| Abstract: | This paper examines the empirical analysis of treatment effects on duration outcomes from data that contain instrumental variation. We focus on social experiments in which an intention to treat is randomized and compliance may be imperfect. We distinguish between cases where the treatment starts at the moment of randomization and cases where it starts at a later point in time. We derive exclusion restrictions under various informational and behavioral assumptions and we analyze identifiability under these restrictions. It turns out that randomization (and by implication, instrumental variation) by itself is often insufficient for inference on interesting effects, and needs to be augmented by a semi-parametric structure. We develop corresponding non- and semi-parametric tests and estimation methods. |
| Keywords: | Event-history analysis; intention to treat; non-compliance; policy evaluation; selection |
| JEL: | C14 C31 C41 |
| Date: | 2005–05–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2005_011&r=exp |
| By: | Dean S. Karlan (Economic Growth Center, Yale University and Princeton University) |
| Abstract: | Questions remain as to whether results from experimental economics games are generalizable to real decisions in non-laboratory settings. Furthermore, important questions persist about whether social capital can help solve seemingly missing credit markets. I conduct two experiments, a Trust game and a Public Goods game, and a survey to measure social capital. I then examine whether behavior in the games predicts repayment of loans to a Peruvian group lending microfinance program. Since the structure of these loans relies heavily on social capital to enforce repayment, this is a relevant and important test of the games, as well as of other measures of social capital. I find that individuals identified as "trustworthy" by the Trust game are in fact less likely to default on their loans. I do not find similar support for the Trust game as a measure of trust. |
| Keywords: | trust game, experimental economics, microfinance |
| JEL: | B4 C9 D8 O1 |
| Date: | 2005–04 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:909&r=exp |
| By: | Dean S. Karlan (Economic Growth Center, Yale University and Princeton University); Jonathan Zinman (Federal Reserve Bank of New York) |
| Abstract: | Information asymmetries are important in theory but difficult to identify in practice. We estimate the empirical importance of adverse selection and moral hazard in a consumer credit market using a new field experiment methodology. We randomized 58,000 direct mail offers issued by a major South African lender along three dimensions: 1) the initial "offer interest rate" appearing on direct mail solicitations; 2) a "contract interest rate" equal to or less than the offer interest rate and revealed to the over 4,000 borrowers who agreed to the initial offer rate; and 3) a dynamic repayment incentive that extends preferential pricing on future loans to borrowers who remain in good standing. These three randomizations, combined with complete knowledge of the Lender's information set, permit identification of specific types of private information problems. Specifically, our setup distinguishes adverse selection from moral hazard effects on repayment, and thereby generates unique evidence on the existence and magnitudes of specific credit market failures. We find evidence of both adverse selection (among women) and moral hazard (predominantly among men), and the findings suggest that about 20% of default is due to asymmetric information problems. This helps explain the prevalence of credit constraints even in a market that specializes in financing high-risk borrowers at very high rates. |
| Keywords: | Information asymmetries, field experiment, adverse selection, moral hazard, development finance, credit markets, microfinance |
| JEL: | C9 D8 G2 G3 O1 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:911&r=exp |
| By: | Pablo Brañas Garza (Department of Economic Theory and Economic History, University of Granada); Ramón Cobo-Reyes; Almudena Domínguez (Universidad Autónoma de Madrid.) |
| Abstract: | "Si él lo necesita" (if he really needs it) was the most common argument given by the subjects who accepted the zero offer in the ultimatum game during experiments were conducted among illiterate (adult) gypsies in Vallecas, Madrid. Interestingly the acceptance of the zero offer was not a rare case but, in contrast, it was the modal value. This is even more remarkable if we consider that the 97% of the subjects proposed the equal split. |
| Keywords: | Gypsies, fairness, social welfare, strategy method ultimatum game, bargaining. |
| JEL: | D63 D64 C93 J15 |
| Date: | 2005–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:05/02&r=exp |
| By: | Pablo Brañas Garza (Department of Economic Theory and Economic History, University of Granada); Nikolaos Georgantzis (Universidad Jaume I); Pablo Guillen (Harvard Business School) |
| Abstract: | We study individual decision making in a lottery-choice task performed by three subject populations: gamblers under psychological treatment (“addicts”), gamblers’ relatives (“victims”), and normal (as far as gambling is considered) individuals. We find that addicts are willing to take less risk than normal individuals, but the large majority of victims reports themselves unwilling to take any risk at all. Furthermore, both addicts and victims maintain their choices invariant across di fferent scenarios concerning the risk-return tradeoff. |
| Keywords: | risky decision making, pathological gambling, attraction and re-pulsion to chance. |
| JEL: | C91 |
| Date: | 2005–05–16 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:05/04&r=exp |
| By: | Pablo Brañas Garza (Department of Economic Theory and Economic History, University of Granada); Antonio Morales (Universidad de Málaga) |
| Abstract: | Recent papers on double-blind dictator games have obtained significant generous behavior when information regarding recipient is provided. But the lack of information disincentives other-regarding behavior and then, the subject’s behavior closely approximates the game theoretic prediction based on the selfishness assumption. This paper conducted four treatment of dictator games. We used one-room design, between-subjects anonymity and extra-credit point as rewards. Two treatments were used as baseline whereas the other two were aimed at reinforcing the recipient powerlessness and positive reciprocity. To promote these environments we include a “non—neutral” sentence to the instructions. Our baseline and modified DG are statistically di fferent from each other, indicating that the additional sentences promote other—regarding behaviour. In fact, pure-selfish behavior vanishes. |
| Keywords: | dictator game, framing e ffect, social issues, fairness, reciprocity. |
| JEL: | D63 D64 C91 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:05/06&r=exp |