nep-exp New Economics Papers
on Experimental Economics
Issue of 2005‒12‒01
nine papers chosen by
Daniel Houser
George Mason University

  1. An Experimental Test Of Taylor-Type Rules With Inexperienced Central Bankers By Jim Engle-Warnick; Nurlan Turdaliev
  2. Herding and Social Preferences By Luca Corazzini; Ben Greiner
  3. Pay Inequality, Pay Secrecy, and Effort: Theory and Evidence By Gary Charness; Peter Kuhn
  4. The Choice of the Agenda in Labor Negotiations: efficiency and behavioral considerations By Marie-Claire Villeval; Manfred Konigstein
  5. Tax Evasion and Social Interactions By Marie-Claire Villeval; Bernard Fortin; Guy Lacroix
  6. Cognition and Behavior in Two-Person Guessing Games: An Experimental Study By Miguel A. Costa-Gomes; Vincent P. Crawford
  7. Currency Speculation Behaviour of Industrial Firms: Evidence from a Two-Country Laboratory Experiment By Johannes Kaiser; Sebastian Kube
  8. Corruption as Betrayal : Experimental Evidence on Corruption Under Delegation By Nicolas Jacquemet
  9. Creative Careers: The Life Cycles of Nobel Laureates in Economics By Bruce A. Weinberg; David W. Galenson

  1. By: Jim Engle-Warnick (McGill University); Nurlan Turdaliev (McGill University)
    Abstract: We experimentally test whether a class of monetary policy decision rules describes decision making in a population of inexperienced central bankers. In our experiments, subjects repeatedly set the short-term interest rate for a computer economy with inflation as their target. A large majority of subjects learn to successfully control inflation. We find that Taylor-type rules fit the choice data well, and are instrumental in characterizing heterogeneity in decision making. Our experiment is the first to begin to organize data experimentally with an eye on monetary policy rules for this, one of the most widely watched and analyzed decisions in economics.
    Keywords: monetary policy, Taylor rule, experimental economics, repeated games
    JEL: C91 E42
    Date: 2005–11–19
  2. By: Luca Corazzini; Ben Greiner
    Abstract: We study the role of social preferences in explaining herding behavior in anonymous risky environments. In an experiment similar to information cascade settings, but with no private information, we find no evidence that inequality aversion causes herding. On the contrary, we observe a significant amount of non-conform behavior, which cannot be attributed to errors.
    Keywords: herding, information cascades, non-conformity, inequality aversion, laboratory experiments
    JEL: C92 D31 D81
    Date: 2005–11–16
  3. By: Gary Charness; Peter Kuhn
    Abstract: We study worker and firm behavior in an efficiency-wage environment where co-workers' wages may potentially influence a worker's effort. Theoretically, we show that an increase in workers' responsiveness to co-workers' wages should lead profit-maximizing firms to compress wages under quite general conditions. Our laboratory experiments, on the other hand, show that --while workers' effort choices are highly sensitive to their own wages-- effort is not affected by co-workers' wages. As a consequence, even though firms in our experiment tended to compress wages when wages became public information, this did not raise their profits. Our experimental evidence therefore provides little support for the notion that inter-worker equity concerns can make wage compression, or wage secrecy, a profit-maximizing policy.
    JEL: C91 J41 M52
    Date: 2005–11
  4. By: Marie-Claire Villeval (GATE CNRS); Manfred Konigstein
    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 multi-issue 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: 2005–11
  5. By: Marie-Claire Villeval (GATE CNRS); Bernard Fortin; Guy Lacroix
    Abstract: The paper extends the standard tax evasion model by allowing for social interactions. In Manski’s (1993) nomenclature, our model takes into account social conformity effects (i.e., endogenous interactions), fairness effects (i.e., exogenous interactions) and sorting effects (i.e., correlated effects). Our model is tested using experimental data. Participants must decide how much income to report given their tax rate and audit probability, and given those faced by the other members of their group as well as their mean reported income. The estimation is based on a two-limit simultaneous tobit with fixed group effects. A unique social equilibrium exists when the model satisfies coherency conditions. In line with Brock and Durlauf (2001b), the intrinsic nonlinearity between individual and group responses is sufficient to identify the model without imposing any exclusion restrictions. Our results are consistent with fairness effects but reject social conformity and correlated effects.
    Keywords: Social interactions, Tax evasion, Simultaneous tobit, Laboratory experiments
    JEL: C24 C92 D63 H26 Z13
    Date: 2005–11
  6. By: Miguel A. Costa-Gomes; Vincent P. Crawford
    Date: 2004–11–11
  7. By: Johannes Kaiser (Laboratory for Experimental Economics, University of Bonn, Germany); Sebastian Kube (Department of Economics, University of Karlsruhe, Germany)
    Abstract: We analyse the behavioural components of a firm's speculation decisions. Specifically, we conducted laboratory experiments to study how firms speculate in a deterministic two-country model with two currencies. The data is used to investigate how exchange rate variations and interest rates can influence a firm's behaviour. The subjects made only small use of technical trade. We show the existence of exchange rate uncertainty and show how the subjects try to cope with it by hedging and pessimistic expectations. One can observe that central banks can curb the influence of speculation on exchange rate volatility if they are powerful enough and collude.
    Keywords: currency speculation, exchange rate uncertainty, behavioural finance, laboratory experiment
    JEL: C91 D84 E44 E52 F31
    Date: 2005–11–19
  8. By: Nicolas Jacquemet (GATE CNRS)
    Abstract: We consider corruption behavior in a three-players game : Principal, Agent, Corrupter. When the Principal chooses a fair wage, the Agent faces con°icting interests to reciprocate. This delegation effect is expected to lower the level of corruption as compared to what arises in two-players settings. We set up two experiments varying in the exogeneity of the delegation relationship. The experimental evidence supports the delegation effect. This, in turn, could account for the deterrence effect of wage on corruption even in the absence of detection.
    Keywords: Mergers, Oligopoly, Cooperative game
    JEL: L10 L11 L20
    Date: 2005–11
  9. By: Bruce A. Weinberg; David W. Galenson
    Abstract: This paper studies life cycle creativity among Nobel laureate economists using citation data. We identify two distinct life cycles of scholarly creativity. Experimental innovators work inductively, accumulating knowledge from experience. Conceptual innovators work deductively, applying abstract principles. We find that conceptual innovators do their most important work earlier in their careers than experimental laureates. For instance, 75% of the most extreme conceptual laureates published their single best work in the first 10 years of their career, while none of the experimental laureates did. Thus while experience benefits experimental innovators, newness to a field benefits conceptual innovators.
    JEL: J24 O30 B31
    Date: 2005–11

This nep-exp issue is ©2005 by Daniel Houser. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.