nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒03‒05
five papers chosen by
Daniel Houser
George Mason University

  1. Rationalizing Irrational Beliefs By Geoffrey Dunbar; Juan Tu; Ruqu Wang; Xiaoting Wang
  2. Conformity in contribution games: gender and group effects By C. Mónica Capra; Lei Li
  3. Convergence: An Experimental Study By Wolf Ze'ev Ehrblatt; Kyle Hyndman; Erkut Y. ÄOzbay; Andrew Schotter
  4. Loss Aversion? Not with Half-a-Million on the Table! By Pavlo Blavatskyy; Ganna Pogrebna
  5. Communication and the extraction of natural renewable resources with threshold externalities By C. Mónica Capra; Tomomi Tanaka

  1. By: Geoffrey Dunbar (Simon Fraser University); Juan Tu (Queen's University); Ruqu Wang (Queen's University); Xiaoting Wang (Brock University)
    Abstract: In this paper, we re-examine various previous experimental studies of the Centipede Game in the literature. These experiments found that players rarely follow the subgame-perfect equilibrium strategies of the game, and various modifications to the game were proposed to explain the outcomes of the experiments. We here offer yet another modification. Players have a choice of whether or not to believe that their opponents use subgame-perfect equilibrium strategies. We define a `behavioral equilibrium' for this game. This equilibrium concept can reproduce the outcomes of those experiments.
    Keywords: centipede games, game theory, experimental economics, behavioral economics
    JEL: C72 C91
    Date: 2006–02
  2. By: C. Mónica Capra; Lei Li
    Abstract: Psychologists have established that task complexity, gender and group identity affect conformity rates. We test the effects of these variables in contribution games. Our experiments consist of two parts: a public goods and a dictator game, both are played once. After subjects make their initial choices, they can revise them. Before revising, they are allowed to choose among different payoff irrelevant information regarding choices made by other cohorts that differed in class and gender. Our data are consistent with some of the findings in the psychology literature. We find that complexity matters. We find no gender or group effects on conformity rates. However, gender has weak effects when combined with group identity.
    Date: 2006–01
  3. By: Wolf Ze'ev Ehrblatt; Kyle Hyndman; Erkut Y. ÄOzbay; Andrew Schotter
    Date: 2006–02–23
  4. By: Pavlo Blavatskyy; Ganna Pogrebna
    Abstract: In the television show Affari Tuoi a contestant is endowed with a sealed box containing a monetary prize between one cent and half a million euros. In the course of the show the contestant is offered to exchange her box for another sealed box with the same distribution of possible monetary prizes inside. This offers a unique natural laboratory for testing the predictions of expected utility theory versus prospect theory using lotteries with large stakes. While expected utility theory predicts that an individual is exactly indifferent between accepting and rejecting the exchange offer, prospect theory predicts that an individual should always reject the exchange offer due to the assumption of loss aversion. We find that the assumption of loss aversion is violated by 46 percent of all contestants in our recorded sample. Thus, contestants do not appear to be predominantly loss averse when dealing with lotteries involving large stakes.
    Keywords: loss aversion, expected utility theory, prospect theory, natural experiment
    JEL: C93 D81
    Date: 2006–02
  5. By: C. Mónica Capra; Tomomi Tanaka
    Abstract: Non-binding communication, or cheap talk, has been associated with the resolution of coordination failures and social dilemmas in both laboratory and field experiments (see Cooper, et al., 1992, and Clark, Kay, and Sefton, 2000; Isaac and Walker, 1991, Ostrom and Walker, 1991, Ostrom, Gardner and Walker, 1994, and Cardenas, Ahn, and Ostrom, 2003). In simple coordination games, communication is expected to reduce the uncertainty of what other players are likely to do and hence facilitate coordination in the better equilibrium. In social dilemma games, the reasons why communication works are still unclear. Perhaps communication results in an increased sense of group identity, an enhancement of normative orientations toward cooperation, or a necessity to avoid (seek) verbal reprimand (approval) when promises of cooperation are violated (fulfilled). In this paper we use a simple neoclassical growth model with multiple equilibria to investigate the mechanism by which non-binding communication results in lower equilibrium resource extraction. We use a growth model because it provides an adequate dynamic framework for modeling extraction of a natural resource with threshold externalities.
    Date: 2006–02

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