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on Experimental Economics |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpma:0511022&r=exp |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:kls:series:0021&r=exp |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11786&r=exp |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0508&r=exp |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0410&r=exp |
| By: | Miguel A. Costa-Gomes; Vincent P. Crawford |
| Date: | 2004–11–11 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levrem:122247000000000113&r=exp |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:wpa:wuwpex:0511005&r=exp |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:0506&r=exp |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:11799&r=exp |