nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒04‒29
eight papers chosen by
Daniel Houser
George Mason University

  1. Do people behave in experiments as in the field?: evidence from donations By Matthias Benz; Stephan Meier
  2. Prices and Portfolio Choices in Financial Markets: Theory and Experiment By Peter Bossaerts; Charles Plott; William R. Zame
  3. The impact of group membership on cooperation and norm enforcement: evidence using random assignment to real social groups By Lorenz Goette; David Huffman; Stephan Meier
  4. Inducing Absent-Mindedness in the Lab By Sudipta Sarangi; Cary Deck
  5. Predicting one Shot Play in 2x2 Games Using Beliefs Based on Minimax Regret By Andrea Gallice
  6. Risk Aversion in Laboratory Asset Markets By Peter Bossaerts; William R. Zame
  8. Instinctive and Cognitive Reasoning: A Study of Response Times By Ariel Rubinstein

  1. By: Matthias Benz; Stephan Meier
    Abstract: Laboratory experiments are an important methodology in economics, especially in the field of behavioral economics. However, it is still debated to what extent results from laboratory experiments can be applied to field settings. One highly important question with respect to the external validity of experiments is whether individuals act the same in experiments as they would in the field. ; This paper presents evidence on how individuals behave in donation experiments and how the same individuals behave in a naturally occurring decision situation on charitable giving. The results show that behavior in experiments is correlated with behavior in the field. The results are robust to variations in the experimental setting, and the correlation between experimental and field behavior is between 0.25 and 0.4. We discuss whether this correlation should be interpreted as strong or weak and what consequences the findings have for experimental economics.
    Keywords: Human behavior ; Interpersonal relations ; Charitable bequests
    Date: 2006
  2. By: Peter Bossaerts; Charles Plott; William R. Zame
    Date: 2006–04–20
  3. By: Lorenz Goette; David Huffman; Stephan Meier
    Abstract: Due to incomplete contracts, efficiency of an organization depends on willingness of individuals to take non-selfish actions, such as cooperating when there is no incentive to do so or punishing inefficient actions by others. Organizations also constitute a social boundary, or group. We investigate whether this social aspect of organizations has an important benefit— fostering unselfish cooperation and norm enforcement within the group—but also whether there is a dark side, in the form of hostility between groups. Our experiment provides the first evidence free from the confounding effect of self-selection into groups. Individuals are randomly assigned to different platoons during a four-week period of officer training in the Swiss Army. We conduct choice experiments—simultaneous prisoner’s dilemma games, with and without third-party punishment—in week three. Random assignment significantly increases willingness to cooperate with fellow platoon members. Assignment does not lead to hostility, in the sense of vindictive punishment of outsiders, but does affect norm enforcement, enhancing willingness to enforce a norm of cooperation towards fellow platoon members. This suggests that the social aspect of organizations motivates efficient behavior even when ordinary incentives fail and helps to explain practices designed to foster social ties or group identification within an organization.
    Keywords: Human behavior ; Interpersonal relations
    Date: 2006
  4. By: Sudipta Sarangi; Cary Deck
    Abstract: After years of neglect, Piccione and Rubinstein (1997a) re-examined the problem of imperfect recall and its implications for game theory. They introduced the notion of absent-mindedness through a decision-making problem called the absentminded driver's paradox. This simple game precipitated a vigorous discussion with different researchers having strong opinions about whether the paradox actually exists. Alternative interpretations and varied ways to resolve the paradox were suggested. In the hopes of forwarding this debate, we provide a technique to directly test absentmindedness in the laboratory, even though in the past it has been claimed to be impossible to achieve absent-mindedness in a controlled environment. To accomplish this we rely on a technique called divided attention to impair a subject's recollection of previous choices. Our findings indicate that subjects in the experiment suffer from absent-mindedness while still behaving in a rational manner. Our experimental data for the absent-minded driver’s game shows that a substantial number of subjects demonstrate behavior consistent with the paradox.
  5. By: Andrea Gallice (European University Institute)
    Abstract: We present a simple procedure that selects the strategies most likely to be played by inexperienced agents who interact in one shot 2x2 matching pennies games. As a first step we axiomatically describe players’ beliefs. We find the minimax regret criterion to be the simplest functional form that satisfies all the axioms. Then we hypothesize players act as if they were best responding to the belief their opponent plays accordino to minimax regret. When compared with existing experimental evidences about one shot matching pennies games, the procedure correctly indicates the choices of around 80% of the players. Applications to other classes of games are also explored.
    Keywords: Predictions, Minimax regret, Beliefs, Matching pennies, Experiments
    JEL: C72 C91
    Date: 2006–02
  6. By: Peter Bossaerts; William R. Zame
    Date: 2006–04–20
  7. By: Aurora Garcia-Gallego; Nikolaos Georgantzis; Praveen Kujal
    Abstract: We test how a monopoly, a duopoly and a public monopoly manage and allocate water resources. Stock depletion for the public monopoly is fastest. However, it reaches the optimal stock level towards the end of the experimental sessions. The private monopoly and duopoly maintain inefficiently high levels of stock throughout the sessions. The average quality to price ratio offered by the public monopoly is substantially higher than that offered by the private monopoly or duopoly. A clear result from the experiments is that a public monopoly offers the highest (average) quality to price ratio and has the fastest rate of stock depletion compared to a private monopoly or duopoly.
    Date: 2006–04
  8. By: Ariel Rubinstein (Tel Aviv University)
    Abstract: Lecture audiences and students were asked to respond to virtual decision and game situations at Several thousand observations were collected and the response time for each answer was recorded. There were significant differences in response time across responses. It is suggested that choices made instinctively, that is, on the basis of an emotional response, require less response time than choices that require the use of cognitive reasoning.
    Keywords: Response Times, Instinctive and Cognitive, Reasoning, Experimental Game Theory
    JEL: C9
    Date: 2006–02

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