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on Experimental Economics |
| By: | Bosman, R.A.J; van Winden, Frans A.A.M. |
| Abstract: | We investigate a novel dynamic choice problem in an experiment where emotions are measured through self-reports. The choice problem concerns the investment of an amount of money in a safe option and a risky option when there is a 'global risk' of losing all earnings, from both options, including any return from the risky option. Our key finding is that global risk can reduce the amount invested in the risky option. This result cannot be explained by classical Expected Utility or by its main contenders Rank-Dependent Utility and Cumulative Prospect Theory. An explanation is offered by taking account of emotions, using the emotion data from the experiment and recent psychological findings. We also find that people invest less if own earnings are at stake, compared to money obtained as an endowment. |
| Keywords: | dynamic choice; emotions; global risk; investment; real effort |
| JEL: | A12 C91 D80 G11 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5451&r=exp |
| By: | Alois Stutzer; Bruno S. Frey |
| Abstract: | Neoclassical economic theory rules out systematic errors in consumption choice. According to the basic view, individuals know what they choose. They are able to predict how much utility an activity or a good produces for them now and in the future and they can maximize their utility. This implies that behavior reveals consistent preferences. This approach makes it impossible to detect and understand sub-optimal consumption decisions, due to problems of self-control and the misprediction of utility. We propose the economics of happiness as a methodological approach to study these phenomena. Based on proxy measures for experienced utility, it is, in principle, possible to directly address whether some observed behavior is sub-optimal and is therefore reducing a person’s well-being. We discuss recent evidence on smoking and eating habits, TV viewing and commuting choice. |
| Keywords: | adaptation, individual decision-making, revealed preference, self-control, subjective well-being, utility misprediction |
| JEL: | D00 D11 D12 D84 D91 I12 I31 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:267&r=exp |
| By: | Ivana Capozza (Dipartimento di Scienze Economiche, Università degli Studi di Bari, Via Camillo Rosalba 53, BARI) |
| Abstract: | In this paper we investigate how the interaction between the product and the emission permit markets may affect firms' propensity to adopt cleaner technologies. The adoption of a cleaner technology has the direct effect of reducing the compliance cost of the firm, but it also involves a strategic decision, if the industry is not perfectly competitive. We look at this problem from both a theoretical and an experimental point of view. We develop a model of duopoly, in which two firms engage in quantity competition in the output market and behave as price takers in the permit market. Firms have the possibility of investing in a cleaner production technology, which is available on the market at some cost. We set up a dynamic game over an infinite horizon in order to investigate firms' investment decisions: in each period, each firm decides whether to invest in the new technology or not. The stationary equilibria to this game crucially depend on both the cost of switching to the cleanest technology and the emission cap. Technology diffusion is one of the possible equilibria of the game. In order to test the predictions of the theory, we design and implement an "innovation experiment" that replicates the "innovation game". The results of our pilot experiment suggest that firms' behaviour will eventually lead to innovation diffusion. |
| Keywords: | tradable permits, technology adoption, oligopoly, laboratory experiments |
| JEL: | C91 L13 Q28 |
| URL: | http://d.repec.org/n?u=RePEc:bai:series:wp0008&r=exp |
| By: | Maija Gao; Ari Hyytinen; Otto Toivanen |
| JEL: | L11 D12 |
| Date: | 2005–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:rif:dpaper:964&r=exp |
| By: | Banerjee, Abhijit; Cole, Shawn; Duflo, Esther; Linden, Leigh |
| Abstract: | Many efforts to improve school quality by adding school resources have proven to be ineffective. This paper presents the results of two experiments conducted in Mumbai and Vadodara, India, designed to evaluate ways to improve the quality of education in urban slums. A remedial education program hired young women from the community to teach basic literacy and numeracy skills to children lagging behind in government schools. We find the program to be very effective: it increased average test scores of all children in treatment schools by 0.14 standard deviations in the first year, and 0.28 in the second year, relative to comparison schools. A computer-assisted learning program provided each child in the fourth grade with two hours of shared computer time per week, in which students played educational games that reinforced mathematics skills. The program was also very effective, increasing math scores by 0.35 standard deviations the first year, and 0.47 the second year. These results were not limited to the period in which students received assistance, but persisted for at least one year after leaving the program. Two instrumental variable strategies suggest that while remedial education benefited the children who attended the remedial classes, their classmates, who did not attend the remedial courses but did experience smaller classes, did not post gains, confirming that resources alone may not be sufficient to improve outcomes. |
| Keywords: | computer aided education; India; program evaluation; remedial education |
| JEL: | I21 O11 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5446&r=exp |
| By: | Battaglini, Marco; Morton, Rebecca; Palfrey, Thomas R |
| Abstract: | This paper reports the first laboratory study of the swing voter’s curse and provides insights on the larger theoretical and empirical literature on 'pivotal voter' models. Our experiment controls for different information levels of voters, as well as the size of the electorate, the distribution of preferences, and other theoretically relevant parameters. The design varies the share of partisan voters and the prior belief about a payoff relevant state of the world. Our results support the equilibrium predictions of the Feddersen-Pesendorfer model, and clearly reject the notion that voters in the laboratory use naïve decision-theoretic strategies. The voters act as if they are aware of the swing voter’s curse and adjust their behaviour to compensate. While the compensation is not complete and there is some heterogeneity in individual behaviour, we find that aggregate outcomes, such as efficiency, turnout, and margin of victory, closely track the theoretical predictions. |
| Keywords: | information aggregation; swing voter's curse; voting behaviour |
| JEL: | D71 D72 |
| Date: | 2006–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:5458&r=exp |