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on Experimental Economics |
| By: | Vyrastekova,Jana; Garikipati,Supriya (Tilburg University, Center for Economic Research) |
| Abstract: | In this paper, we address the concept of trust by combining (i) the self-reported trust and belief in trustworthiness of others from a general unpaid questionnaire, (ii) choices made in a social valuation task designed to measure subjects' distributional preferences, (iii) strategies submitted in the trust game in both roles of the game, and (iv) subjects' beliefs about the strategies of their co-player submitted in the form of probability distributions nad incentivized by the quadratic scoring rule. We show that trust can be expressed as a belief in positive reciprocity of the trustee, and answers to general questionnaire lack predictive power. Distributional preferences also play a role in the decision to trust in that they affect the subjects' beliefs about the positive reciprocity of others. Cooperative subjects are more optimistic in their beliefs and therefore trust more. |
| Keywords: | experimental economics;trust;beliefs;distributional preferences |
| JEL: | C72 C91 |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:200588&r=exp |
| By: | Jeremy Lise (Queen's University); Shannon Seitz (Queen's University); Jeffrey Smith (University of Maryland and IZA Bonn) |
| Abstract: | This paper introduces an innovative test of search and matching models using the exogenous variation available in experimental data. We take an off-the-shelf Pissarides matching model and calibrate it to data on the control group from a randomized social experiment. We then simulate a program group from a randomized experiment within the model. As a measure of the performance of the model, we compare the outcomes of the program groups from the model and from the randomized experiment. We illustrate our methodology using the Canadian Self-Sufficiency Project (SSP), a social experiment providing a time limited earnings supplement for Income Assistance recipients who obtain full time employment within a 12 month period. We find two features of the model are consistent with the experimental results: endogenous search intensity and exogenous job destruction. We find mixed evidence in support of the assumption of fixed hours of labor supply. Finally, we find a constant job destruction rate is not consistent with the experimental data in this context. |
| Keywords: | calibration, equilibrium search and matching models, policy experiments, Self-Sufficiency Project, welfare, social experiments |
| JEL: | J2 I38 J6 |
| Date: | 2005–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp1717&r=exp |
| By: | Susanne Büchner; Werner Güth; Luis M. Miller |
| Abstract: | Conventions are interpreted in the narrow sense of coordinated equilibrium selection, i.e. a behavioral convention tells all players in a game with multiple strict equilibria which strict equilibrium to play. What we are interested in are more realistic environments where coordination takes place before learning about the games to be played. Here coordination aims at a normative convention, i.e. a principle of equilibrium selection, which selects a strict equilibrium for all games with multiple equilibria. In a subclass class of 2x2-bimatrix games with two strict equilibria we analyze the evolutionary stability of various normative conventions. In our experiment, we allow participants to first coordinate on a normative convention before playing various games. Agents in different treatments do this behind a complete (they know neither their role nor the game parameters), a partial (they know either their role or the game parameters) veil of ignorance, or with no ignorance (they know their role and the game parameters). |
| Keywords: | coordination games, conventions, experimental economics, evolutionary stability |
| JEL: | C72 C91 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:esi:discus:2005-21&r=exp |
| By: | Carlsson, Fredrik (Department of Economics, School of Economics and Commercial Law, Göteborg University); Gupta, Gautam (Department of Economics, Jadavpur University); Johansson-Stenman, Olof (Department of Economics, School of Economics and Commercial Law, Göteborg University) |
| Abstract: | We investigate the importance of relative income within the Indian Caste system, using a choice experiment. We find that slightly more than half of the marginal utility of income comes from some kind of relative income effects, on average, which is comparable to the results from previous studies in other countries. Belonging to a low caste and having a low family income are associated with higher concern for relative income. Moreover, an increase in the mean income of the caste to which the individual belongs, everything else held constant, reduces utility for the individual. Thus, the negative welfare effect of reduced relative income compared to the average own caste income dominates the positive welfare effect of increased relative income of the own caste relative to other castes. <p> |
| Keywords: | Caste; India; relative income; positionality; status; questionnaire-experimental methods; random utility models; choice experiments |
| JEL: | C91 D63 H21 |
| Date: | 2005–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0171&r=exp |
| By: | Dan Ariely; Uri Gneezy; George Loewenstein; Nina Mazar |
| Abstract: | Most upper-management and sales force personnel, as well as workers in many other jobs, are paid based on performance, which is widely perceived as motivating effort and enhancing productivity relative to non-contingent pay schemes. However, psychological research suggests that excessive rewards can in some cases produce supra-optimal motivation, resulting in a decline in performance. To test whether very high monetary rewards can decrease performance, we conducted a set of experiments at MIT, the University of Chicago, and rural India. Subjects in our experiment worked on different tasks and received performance-contingent payments that varied in amount from small to large relative to their typical levels of pay. With some important exceptions, we observed that high reward levels can have detrimental effects on performance. |
| Keywords: | Microeconomics |
| Date: | 2005 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:05-11&r=exp |
| By: | Neil J. Buckley, R. Andrew Muller, and Stuart Mestelman |
| Abstract: | Two approaches to emissions trading are cap-and-trade, in which an aggregate cap on emissions is distributed in the form of allowance permits, and baseline-and-credit, in which firms earn emission reduction credits for emissions below their baselines. Theoretical considerations suggest the long-run equilibria of the two plans will differ if baselines are proportional to output, because a variable baseline is equivalent to an output subsidy. This paper reports on a laboratory experiment designed to test the prediction in a laboratory environ- ment in which sub jects representing firms choose emission technologies and output capacities. A computerized environment has been created in which sub jects participate in markets for emission rights and for output. Demand for output is simulated. All decisions are tracked through a double-entry bookkeeping system. Our evidence supports the theoretical prediction that aggregate output and emissions are in- efficiently high under a baseline-and-credit trading plan compared to a corresponding cap-and-trade plan. |
| JEL: | C92 L50 Q58 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2005-04&r=exp |
| By: | Werner Güth; Nikos Nikiforakis; Hans-Theo Normann |
| Abstract: | This paper analyses vertical cross-shareholding, that is, the mutual holding of a minority of shares between vertically related firms. We investigate the conditions under which cross-shareholding improves efficiency. First, we explore the issue in a game-theoretic model and find that cross-shareholding is sufficient to obtain the first-best solution. We then proceed by testing these predictions experimentally. Our findings are that the theory predicts the sellers' decisions accurately and to some extent the price of the buyers. Cross-shareholding appears to occur more frequently than predicted and it enhances efficiency even where not predicted. |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:esi:discus:2005-11&r=exp |
| By: | Neil J. Buckley, R. Andrew Muller, and Stuart Mestelman |
| Abstract: | Two approaches to emissions trading are cap-and-trade, in which an aggregate cap on emissions is distributed in the form of allowance permits, and baseline-and-credit, in which firms earn emission reduction credits for emissions below their baselines. Theoretical considerations suggest the long-run equilibria of the two plans will differ if baselines are proportional to output, because a variable baseline is equivalent to an output subsidy. As a progressive step towards testing the full long-run model, this paper reports on a laboratory experiment designed to test the prediction under fixed emission rates and variable output capacity. A computerized environment has been created in which sub jects representing firms choose output capacities under fixed emission technology and participate in markets for emission rights and for output. Demand for output is simulated. All decisions are tracked through a double-entry bookkeeping system. Our evidence supports the theoretical prediction that aggregate output and emissions are inefficiently high under a baseline-and-credit trading plan compared to a corresponding cap-and-trade plan. |
| JEL: | C24 D21 O17 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2005-03&r=exp |
| By: | Jeffrey R. Kling; Jeffrey B. Liebman; Lawrence F. Katz |
| Abstract: | Families, primarily female-headed minority households with children, living in high-poverty public housing projects in five U.S. cities were offered housing vouchers by lottery in the Moving to Opportunity program. Four to seven years after random assignment, families offered vouchers lived in safer neighborhoods that had lower poverty rates than those of the control group not offered vouchers. We find no significant overall effects of this intervention on adult economic self-sufficiency or physical health. Mental health benefits of the voucher offers for adults and for female youth were substantial. Beneficial effects for female youth on education, risky behavior, and physical health were offset by adverse effects for male youth. For outcomes exhibiting significant treatment effects, we find, using variation in treatment intensity across voucher types and cities, that the relationship between neighborhood poverty rate and outcomes is approximately linear. |
| JEL: | H43 I18 I38 J38 |
| Date: | 2005–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11577&r=exp |