nep-exp New Economics Papers
on Experimental Economics
Issue of 2005‒10‒29
fifteen papers chosen by
Daniel Houser
George Mason University

  1. Bidding Behavior in Asymmetric Auctions: An Experimental Study By Werner Güth; Radosveta Ivanova-Stenzel; Elmar Wolfstetter
  2. Rage Against the Machines: How Subjects Learn to Play Against Computers By Peter Duersch; Albert Kolb; Joerg Oechssler; Burkhard Schipper
  3. Imitation - Theory and Experimental Evidence By Jose Apestgeguia; Steffen Huck; Jörg Oechssler
  4. In Search of Workers' Real Effort Reciprocity - A Field and a Laboratory Experiment By Heike Hennig-Schmidt; Bettina Rockenbach; Abdolkarim Sadrieh
  5. Herding with and without Payoff Externalities - An Internet Experiment By Mathias Drehmann; Jörg Oechssler; Andreas Roider
  6. The Role of Equality and Efficiency in Social Preferences By Ernst Fehr; Michael Naef; Klaus M. Schmidt
  7. Measuring Strategic Uncertainty in Coordination Games By Frank Heinemann; Rosemarie Nagel; Peter Ockenfels
  8. Fairness and the Optimal Allocation of Ownership Rights By Ernst Fehr; Susanne Kremhelmer; Klaus M. Schmidt
  9. A Proxy Bidding Mechanism that Elicits all Bids in an English Clock Auction Experiment By Dirk Engelmann; Elmar Wolfstetter
  10. The role of personal involvement and responsibility in dictatorial allocations: a classroom investigation By Pablo Brañas-Garza; Miguel Angel Durán; María Paz Espinosa
  11. Price Formation in a Sequential Selling Mechanism By Radosveta Ivanova-Stenzel; Sabine Kroger
  12. Herding and Contrarian Behavior in Financial Markets - An Internet Experiment By Mathias Drehmann; Jörg Oechssler; Andreas Roider
  13. Courtesy and Idleness: Gender Differences in Team Work and Team Competition By Radosveta Ivanova-Stenzel; Dorothea Kübler
  14. Emotions and the Optimality of Unfair Tournaments By Matthias Kräkel
  15. Workgroup Gender Diversity and Charismatic Leadership: Asymmetric Effects Among Men and Women By JUAN CARLOS PASTOR; MARGARITA MAYO

  1. By: Werner Güth (Max Planck Institute for Research into Economic Systems, Kahlaische Str. 10, D-07745 Jena, Germany); Radosveta Ivanova-Stenzel (Humboldt University Berlin, Department of Economics, Spandauer Str. 1, D-10099 Berlin, Germany); Elmar Wolfstetter (Humboldt University Berlin, Department of Economics, Spandauer Str. 1, D-10099 Berlin, Germany)
    Abstract: We review an asymmetric auction experiment. Based on Plum (1992) private valuations of the two bidders are independently drawn from distinct but commonly known distributions, one of which first-order stochastically dominates the other. We test the qualitative properties of that model of asymmetric auctions, in particular whether the weak bidder behaves more aggressively than the strong, and then test bidders' preference for first- vs. second-price auctions.
    Keywords: sealed bid suctions, asymmetric bidders, private-independent values, experiments
    JEL: D44 C91
    Date: 2004–08
  2. By: Peter Duersch (Department of Economics, University of Heidelberg); Albert Kolb (Department of Economics, University of Bonn); Joerg Oechssler (Department of Economics, University of Heidelberg); Burkhard Schipper (Department of Economics, University of California)
    Abstract: We use an experiment to explore how subjects learn to play against computers which are programmed to follow one of a number of standard learning algorithms. The learning theories are (unbeknown to subjects) a best response process, fictitious play, imitation, reinforcement learning, and a trial & error process. We test whether subjects try to influence those algorithms to their advantage in a forward-looking way (strategic teaching). We find that strategic teaching occurs frequently and that all learning algorithms are subject to exploitation with the notable exception of imitation. The experiment was conducted, both, on the internet and in the usual laboratory setting. We find some systematic differences, which however can be traced to the different incentives structures rather than the experimental environment.
    Keywords: learning; fictitious play; imitation; reinforcement; trial & error; strategic teaching; Cournot duopoly; experiments; internet.
    JEL: C72 C91 C92 D43 L13
    Date: 2005–10–25
  3. By: Jose Apestgeguia (Department of Economics, Public University of Navarre.; Steffen Huck (Department of Economics and ELSE, University College London.; Jörg Oechssler (Department of Economics, University of Heidelberg.
    Abstract: We introduce a generalized theoretical approach to study imitation and subject it to rigorous experimental testing. In our theoretical analysis we find that the different predictions of previous imitation models are due to different informational assumptions, not to different behavioral rules. It is more important whom one imitates rather than how. In a laboratory experiment we test the different theories by systematically varying information conditions. We find significant effects of seemingly innocent changes in information. Moreover, the generalized imitation model predicts the differences between treatments well. The data provide support for imitation on the individual level, both in terms of choice and in terms of perception. But imitation is not unconditional. Rather individuals' propensity to imitate more successful actions is increasing in payoff differences.
    Keywords: Evolutionary game theory; Stochastic stability; Imitation; Cournot markets; Information; Experiments; Simulations
    JEL: C72 C91 C92 D43 L13
    Date: 2005–04
  4. By: Heike Hennig-Schmidt (Laboratory of Experimental Economics, University of Bonn, Adenauerallee 24-42, 53113 Bonn, Germany, Tel. +49 228 7391-95 (Fax -93),,; Bettina Rockenbach (Lehrstuhl für Mikrooekonomie, Universitaet Erfurt, Postfach 900 221, 99105 Erfurt, Germany, Tel. +49 361 73745-21 (Fax: -29),,; Abdolkarim Sadrieh (Faculty of Economics and Management, University of Magdeburg, Postbox 4120, 39016 Magdeburg, Germany, Tel. +49 391 67-18492 (Fax. 11355),,
    Abstract: We present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages. Work effort neither reacts to an increase of the own wage, nor to a positive or negative peer comparison. This result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort. In an additional real-effort laboratory experiment we show that explicit cost and surplus information that enables to exactly calculate employer’s surplus from the work contract is a crucial pre-requisite for a positive wage-effort relation. This demonstrates that employee’s reciprocity requires a clear assessment of the surplus at stake.
    Keywords: efficiency wage, reciprocity, fairness, field experiment, real effort
    JEL: C91 C92 J41
    Date: 2005–07
  5. By: Mathias Drehmann (Bank of England); Jörg Oechssler (Department of Economics, University of Bonn, Germany); Andreas Roider (Department of Economics, University of Bonn, Germany)
    Abstract: Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experimentally investigate the effects of several different forms of payoff externalities (e.g., network effects, .first-mover advantage, etc.) in a standard information-based herding model. Our results are based on an internet experiment with more than 6000 subjects, including a subsample of 267 consultants from an international consulting firm. We also replicate and review earlier cascade experiments. Finally, we study reputation effects (i.e., the influence of success models) in the context of herding.
    Keywords: information cascades, herding, network effects, experiment, internet
    JEL: C92 D8
    Date: 2004–11
  6. By: Ernst Fehr (Institute for Empirical Research in Economics, University of Zurich, Bluemlisalpstrasse 10, CH-8006 Zurich, Switzerland); Michael Naef (Institute for Empirical Research in Economics, University of Zurich, Bluemlisalpstrasse 10, CH-8006 Zurich, Switzerland); Klaus M. Schmidt (Department of Economics, University of Munich, Ludwigstr. 28, D-80539 Muenchen, Germany)
    Abstract: Engelmann and Strobel (AER 2004) claim that a combination of efficiency seeking and minmax preferences dominates inequity aversion in simple dictator games. This result relies on a strong subject pool effect. The participants of their experiments were undergraduate students of economics and business administration who self-selected into their field of study and learned early on that efficiency is desirable. We show that for non-economists the preference for efficiency is much less pronounced. We also find a gender effect indicating that women are more egalitarian than men. However, perhaps surprisingly, the dominance of equality over efficiency is unrelated to political attitudes.
    Keywords: Social Preferences, Inequity Aversion, Efficiency Preferences
    JEL: C7 C91 C92 D63 D64
    Date: 2004–10
  7. By: Frank Heinemann (Ludwig-Maximilians-Universität München); Rosemarie Nagel (Universitat Pompeu Fabra, Barcelona, Spain); Peter Ockenfels (Goethe-Universität Frankfurt am Main, Germany)
    Abstract: This paper explores predictability of behavior in coordination games with multiple equilibria. In a laboratory experiment we measure subjects' certainty equivalents for three coordination games and one lottery. Attitudes towards strategic uncertainty in coordination games are related to risk aversion, experience seeking, gender and age. From the distribution of certainty equivalents among participating students we estimate probabilities for successful coordination in a wide range of coordination games. For many games success of coordination is predictable with a reasonable error rate. The best response of a risk neutral player 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. Data indicate that subjects have probabilistic beliefs about success or failure of coordination rather than beliefs about individual behavior of other players.
    JEL: C72 C91 D81 D84
    Date: 2004–05
  8. By: Ernst Fehr (Institute for Empirical Research in Economics, University of Zurich (CESifo and CEPR), Bluemlisalpstrasse 10, CH-8006 Zurich, Switzerland); Susanne Kremhelmer (Department of Economics, University of Munich, Ludwigstr. 28, D-80539 Muenchen, Germany); Klaus M. Schmidt (Department of Economics, University of Munich (CESifo and CEPR), Ludwigstr. 28, D-80539 Muenchen, Germany)
    Abstract: We report on several experiments on the optimal allocation of ownership rights. The experiments confirm the property rights approach by showing that the ownership structure affects relationship-specific investments and that the subjects achieve the most efficient ownership allocation starting from different initial conditions. However, in contrast to the property rights approach, the most efficient ownership structure is joint ownership. These results are neither consistent with the self-interest model nor with models that assume that all people behave fairly, but they can be explained by the theory of inequity aversion that focuses on the interaction between selfish and fair players.
    Keywords: Ownership Rights, Double Moral Hazard, Fairness, Reciprocity, Incomplete Contracts
    JEL: C7 C9 J3
    Date: 2004–07
  9. By: Dirk Engelmann (Department of Economics Royal Holloway, University of London TW20 OEX, United Kingdom); Elmar Wolfstetter (Department of Economics, Humboldt University at Berlin, Spandauer Str. 1, D- 10178 Berlin, Germany)
    Abstract: This paper reconsiders experimental tests of the English clock auction. We point out why the standard procedure can only use a small subset of all bids, which gives rise to a selection bias. We propose an alternative yet equivalent format that makes all bids visible, and apply it to a “wallet auction” experiment. Finally, we test the theory against various alternative hypotheses, and compare the results with those that would have been obtained if one had used the standard procedure. Our results confirm that the standard tests are subject to a significant selection bias.
    Keywords: English Clock Auctions, Experimental Economics
    JEL: D44 D45 C91
    Date: 2005–02
  10. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada); Miguel Angel Durán (Department of Economic Theory and Economic History, University of Granada); María Paz Espinosa (Universidad del País Vasco)
    Abstract: This paper explores new motivations behind giving. Specifically, it focuses on personal involvement and responsibility to explain why decision makers give positive amounts in dictatorial decisons. The experiment is designed to uncover these motivations. Subjects face the problem of a dictator's allocation of an indivisible pie P to one of two players; indivisibility creates an extremely unequal outcome and the dictator is given a chance to correct this outcome at a cost. The willingness to pay to correct the outcome is examined under different scenarios so that we learn about several features concerning preferences.
    Keywords: Fairness, Dictator game, Moral cost.
    JEL: C91 D63 D64
    Date: 2005–10–17
  11. By: Radosveta Ivanova-Stenzel; Sabine Kroger
    Abstract: This paper analyzes the trade of an indivisible good within a two-stage mechanism, where a seller first negotiates with one potential buyer about the price of the good. If the negotiation fails to produce a sale, a second-price sealed-bid auction with an additional buyer is conducted. The theoretical model predicts that with risk neutral agents all sales take place in the auction rendering the negotiation prior to the auction obsolete. An experimental test of the model provides evidence that average prices and profits are quite precisely predicted by the theoretical benchmark. However, a significant large amount of sales occurs already during the negotiation stage. We show that risk preferences can theoretically account for the existence of sales during the negotiation stage, improve the fit for buyers' behavior, but is not sufficient to explain sellers' decisions. We discuss other behavioral explanations that could account for the observed deviations.
    Keywords: Auction, negotiation, combined mechanisms, sequential mechanism, risk preferences, experiment
    JEL: C72 C91 D44 D82
    Date: 2005
  12. By: Mathias Drehmann (Bank of England); Jörg Oechssler (Department of Economics, University of Bonn, Germany); Andreas Roider (Department of Economics, University of Bonn, Germany)
    Abstract: We report results of an internet experiment designed to test the theory of informational cascades in financial markets (Avery and Zemsky, AER, 1998). More than 6400 subjects, including a subsample of 267 consultants from an international consulting firm, participated in the experiment. As predicted by theory, we find that the presence of a flexible market price prevents herding. However, the presence of contrarian behavior, which can (partly) be rationalized via error models, distorts prices, and even after 20 decisions convergence to the fundamental value is rare. We also report some interesting differences with respect to subjects' fields of study. Reassuringly, the behavior of the consultants turns out to be not significantly different from the remaining subjects.
    Keywords: informational cascades, herding, contrarians, experiment, internet
    JEL: C92 D8 G1
    Date: 2004–06
  13. By: Radosveta Ivanova-Stenzel; Dorothea Kübler
    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
  14. By: Matthias Kräkel (Department of Economics, BWL II, University of Bonn, Adenauerallee 24-42, D-53113 Bonn, Germany)
    Abstract: We introduce a concept of emotions that emerge when workers compare their own performance with the performances of co-workers. Assuming heterogeneity among the workers the interplay of emotions and incentives is analyzed within the framework of rank-order tournaments which are frequently used in practice. Tournaments seem to be an appropriate starting point for this concept because the main idea of a tournament is inducing incentives by making workers compare themselves with their opponents. We differentiate between exogenous and endogenous tournament prizes and identify certain conditions under which the employer benefits from emotional workers. In this case, he clearly prefers unfair to fair tournaments. Furthermore, the concept of emotions is used to explain the puzzling findings on the oversupply of effort in experimental tournaments.
    Keywords: anger, emotions, pride, tournaments
    JEL: J3 M5
    Date: 2005–05
  15. By: JUAN CARLOS PASTOR (Instituto de Empresa); MARGARITA MAYO (Instituto de Empresa)
    Abstract: A laboratory study was conducted to examine how gender team diversity influences men and women´s charismatic relationships with an elected group leader. We examined individuals´ charismatic relationships with their leaders when working in groups varying in gender composition. Results supported the argument that gender diversity provides a context that facilitates the emergence of charismatic leadership. Furthermore, the effect of gender diversity on charismatic relationships is asymmetric, being more marked in the case of men than that of women. Our results question the similarity-attraction hypothesis and contribute to the incipient follower-centric approach to leadership.
    Keywords: Diversity, Leadership
    Date: 2005–10

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