nep-exp New Economics Papers
on Experimental Economics
Issue of 2005‒10‒22
ten papers chosen by
Daniel Houser
George Mason University

  1. The Scarcity Bias By Luigi Mittone; Lucia Savadori
  2. In Search of Stars: Network Formation among Heterogeneous Agents By Jacob K. Goeree; Arno Riedl; Aljaz Ule
  3. Sealed Bid Auctions with Ambiguity: An Experimental Study By Yan Chen; Peter Katuscak; Emre Ozdenoren
  4. The Choice of the Agenda in Labor Negotiations: Efficiency and Behavioral Considerations By Manfred Königstein; Marie-Claire Villeval
  5. Job Market Signaling and Screening: An Experimental Comparison By Dorothea Kübler; Wieland Müller; Hans-Theo Normann
  6. Incentives, Decision Frames, and Motivation Crowding Out - An Experimental Investigation By Bernd Irlenbusch; Dirk Sliwka
  7. Mean voting rule and strategical behavior: an experiment By Marchese, Carla; Montefiori, Marcello
  8. Courtesy and Idleness: Gender Differences in Team Work and Team Competition By Radosveta Ivanova-Stenzel; Dorothea Kübler
  9. Competition and Well-Being By Jordi Brandts; Arno Riedl; Frans van Winden
  10. Good bye Lenin (or not?): The Effect of Communism on People%u2019s Preferences By Alberto Alesina; Nichola Fuchs Schuendeln

  1. By: Luigi Mittone; Lucia Savadori
    Abstract: The bias generated by the subjective perception of scarcity on the consumer's choice is investigated using two separated experiments. The first experiment is aimed to define the prevailing preferences towards a set of commodities, the second experiment checked the effects produced by the perception that a given good is "scarce". The results shown a preference reversal phenomenon when scarcity is introduced in the experimental design. The results are coherent with a previous experiment (Mittone, Savadori, Rumiati, 2005) based on a developmental explanation of the basic scarcity bias and carried on a sample of children as participants.
    Keywords: Scarcity, Decision-making, Economic behavior
    Date: 2005
  2. By: Jacob K. Goeree (California Institute of Technology); Arno Riedl (University of Maastricht and IZA Bonn); Aljaz Ule (CREED, University of Amsterdam)
    Abstract: This paper reports the results of a laboratory experiment on network formation among heterogeneous agents. The experimental design extends the basic Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by allowing for agents with lower linking costs or higher benefits to others. We consider treatments where agents' types are common knowledge and treatments where agents' types are private information. In all treatments, the (efficient) equilibrium network has a "star" structure. We find that with homogeneous agents, equilibrium predictions fail completely. In contrast, with heterogeneous agents stars frequently occur, often with the high-value or low-cost agent in the center. Stars are not borne but rather develop: in treatments with a high-value agent, the network's centrality, stability, and efficiency all increase over time. Our results suggest that agents' heterogeneity is a major determinant for the predominance of star-like structures in real-life social networks.
    Keywords: network formation, stars, heterogeneity, laboratory experiments
    JEL: C72 C91 C92 D85
    Date: 2005–09
  3. By: Yan Chen; Peter Katuscak; Emre Ozdenoren
    Abstract: This study presents a laboratory experiment of the first and second price sealed bid auctions with independent private values, where the distribution of bidder valuations is unknown. In our experimental setting, in first price auctions, bids are lower with the presence of ambiguity. This result is consistent with ambiguity loving in a model which allows for different ambiguity attitudes. Alternative interpretations of this result, such as the hostile nature hypothesis proposed by psychologists, are discussed in the paper. Another departure from previous experimental studies is the use of subjects as auctioneers. We find that compared to zero reserve prices the presence of auctioneers significantly reduces revenue in first price auctions. It also significantly reduces bidder earnings and efficiency. Without knowledge of the distribution of bidder valuations and with auctioneers, the first and second price auctions generate the same amount of revenue.
    Keywords: Sealed bid auctions, ambiguity, experiment.
    JEL: C91 D44 D83
    Date: 2005–08
  4. By: Manfred Königstein (University of Erfurt and IZA Bonn); Marie-Claire Villeval (GATE (CNRS, University Lumière Lyon 2, Ecole Normale Supérieure LSH) and IZA Bonn)
    Abstract: The labor economics literature has shown that the "efficient bargaining" model, in which wage and employment are negotiated simultaneously, is less frequently used on unionized markets than the less efficient "right-to-manage" model, in which wage is determined via bargaining and employment determined subsequently and unilaterally by the firm. This paper reports an experiment in which the choice of the bargaining agenda is endogenous within a noncooperative game. We find that participants show a preference for decision authority and choose single-issue bargaining in most cases even though efficiency is lower than in multiissue bargaining. Furthermore, multi-issue bargaining induces unions to offer smaller payoff shares and leads to a higher conflict rate than in a single-issue bargaining.
    Keywords: bargaining agenda, efficient contracts, right-to-manage, decision authority, experiments
    JEL: C72 C78 C91 J51 J53
    Date: 2005–09
  5. By: Dorothea Kübler (Technical University Berlin and IZA Bonn); Wieland Müller (Tilburg University); Hans-Theo Normann (Royal Holloway, University of London)
    Abstract: We analyze the Spence education game in experimental markets. We compare a signaling and a screening variant, and we analyze the effect of increasing the number of competing employers from two to three. In all treatments, more efficient workers invest more often in education and employers offer higher wages for workers who have invested. However, separation is incomplete, e.g., investment does not pay on average for efficient worker types. Increased competition leads to higher wages in the signaling sessions, not with screening. In the signaling version, we observe significantly more separating outcomes than in the screening version of the game.
    Keywords: job-market signaling, job-market screening, sorting, Bayesian games, experiments
    JEL: C35 I2 J24 P3 P52
    Date: 2005–10
  6. By: Bernd Irlenbusch (London School of Economics and IZA Bonn); Dirk Sliwka (University of Cologne and IZA Bonn)
    Abstract: A simple principal agent problem is experimentally investigated in which a principal repeatedly sets a wage and an agent responds by choosing an effort level. The principal's payoff is determined by the agent's effort. In a first setting the principal can only set a fixed wage in each period. In a second setting the principal has the possibility to supplement the fixed wage with a piece rate. Surprisingly, efforts are lower in the case where piece rates can be paid. Furthermore, switching in the same treatment from a setting where piece rates are available to one where only fixed wages can be paid tends to lead to even lower effort levels. Based on our findings we suggest a new explanation for motivation crowding out by arguing that the use of piece rates considerably alters the principals’ and agents’ perception of the situation.
    Keywords: incentives, crowding-out, reciprocity, reputation, experiment
    JEL: C91
    Date: 2005–09
  7. By: Marchese, Carla; Montefiori, Marcello
    Abstract: This paper considers the problem of voting about the quantity of a public good. An experiment has been run in order to test the extent of the strategic bias that arises in the individual vote when the social choice rule is to select the mean of the quantities voted for; conflicting theoretical predictions are available in the literature on this purpose. The political implications of the mean rule and its e.ects upon e.ciency are also discussed. The role of voters’ information is considered. A comparison is made with the working of the median rule.
    JEL: C91 D72
    Date: 2005–10
  8. By: Radosveta Ivanova-Stenzel (Humboldt University Berlin); Dorothea Kübler (Technical University Berlin and IZA Bonn)
    Abstract: Does gender play a role in the context of team work? Our results based on a real-effort experiment suggest that performance depends on the composition of the team. We find that female and male performance differ most in mixed teams with revenue sharing between the team members, as men put in significantly more effort than women. The data also indicate that women perform best when competing in pure female teams against male teams whereas men perform best when women are present or in a competitive environment.
    Keywords: team incentives, gender, tournaments
    JEL: C72 C73 C91 D82
    Date: 2005–09
  9. By: Jordi Brandts (Institut d'Anàlisi Econòmica (CSIC), Barcelona); Arno Riedl (University of Maastricht and IZA Bonn); Frans van Winden (Tinbergen Institute and University of Amsterdam)
    Abstract: This paper experimentally studies the effects of competition in an environment where people's actions can not be contractually fixed. We find that, in comparison with no competition, the presence of competition does neither increase efficiency nor does it yield any gains in earnings for the short side of the exchange relation. Moreover, competition has a clearly negative impact on the disposition towards others and on the experienced well-being of those on the long side. Since subjective well-being improves only for those on the short side competition contributes to larger inequalities in experienced well-being. All in all competition does not show up as a positive force in our environment.
    Keywords: competition, happiness, well-being, laboratory experiment, emotions, market interaction
    JEL: A13 C92 D30 J50 M50
    Date: 2005–09
  10. By: Alberto Alesina; Nichola Fuchs Schuendeln
    Abstract: Preferences for redistribution, as well as the generosities of welfare states, differ significantly across countries. In this paper, we test whether there exists a feedback process of the economic regime on individual preferences. We exploit the "experiment" of German separation and reunification to establish exogeneity of the economic system. From 1945 to 1990, East Germans lived under a Communist regime with heavy state intervention and extensive redistribution. We find that, after German reunification, East Germans are more in favor of redistribution and state intervention than West Germans, even after controlling for economic incentives. This effect is especially strong for older cohorts, who lived under Communism for a longer time period. We further find that East Germans' preferences converge towards those of West Germans. We calculate that it will take one to two generations for preferences to converge completely.
    JEL: H3 E6
    Date: 2005–10

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