nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒05‒20
eight papers chosen by
Daniel Houser
George Mason University

  1. Peer Punishment in Teams: Emotional or Strategic Choice? By Casari, Marco; Luini, Luigi
  2. Punishment, Inequality and Emotions By David Masclet; Marie-Claire Villeval
  3. Group Cooperation Under Alternative Peer Punishment Technologies: An Experiment. By Casari, Marco; Luini, Luigi
  4. Pre-Commitment and Flexibility in a Time Decision Experiment. By Casari, Marco
  5. Solidarity and Performance Differences By Marion Eberlein; Judith Przemeck
  6. The Competitive Market Paradox. By Gjerstad, S.
  7. Choosing Monetary Sequences: Theory and Experimental Evidence By Paola Manzini; Marco Mariotti; Luigi Mittone
  8. An Experimental Test of Taylor-Type Rules with Inexperienced Central Bankers By Jim Engle-Warnick; Nurlan Turdaliev

  1. By: Casari, Marco; Luini, Luigi
    Abstract: Punishing the free-riders of a team can promote group efficiency but is costly for the punisher. For this reason, economists see punishment as a second-order public good. We show in an experiment that subjects do not value punishment for its deterrence but instead for the satisfaction of retaliating. Punishment choices are made with little strategic reasoning.
    Keywords: experiments ; public goods ; informal punishment ; emotions ; legal systems
    JEL: C91 C92 D23
    Date: 2006–04
  2. By: David Masclet (CNRS, CREM, University of Rennes 1); Marie-Claire Villeval (GATE (CNRS, University of Lyon 2, ENS-LSH) and IZA Bonn)
    Abstract: Cooperation among people who are not related to each other is sustained by the availability of punishment devices which help enforce social norms (Fehr and Gächter, 2002). However, the rationale for costly punishment remains unclear. This paper reports the results of an experiment investigating inequality aversion and negative emotions as possible determinants of punishment. We compare two treatments of a public good game, one in which costly punishment reduces the immediate payoff inequality between the punisher and the target, and one in which it does not affect inequality. We show that while inequality-aversion prevents some subjects from punishing in the equal cost treatment, negative emotions are the primary motive for punishment. Results also indicate that the intensity of punishment increases with the level of inequality, and reduces earnings inequality over time.
    Keywords: inequality aversion, negative emotions, free-riding, cooperation, experiment
    JEL: A13 C92 D63
    Date: 2006–05
  3. By: Casari, Marco; Luini, Luigi
    Abstract: This paper experimentally studies peer punishment under three alternative technologies. We find that the choice of peer punishment technology has a substantial impact on group performance. First, under technology where at least two subjects in the group must agree before another group member can be punished, group cooperation and group net earnings are the highest. Second, outcomes are similar regardless of whether punishment choices are simultaneously or sequential. These results suggest that punishment is not perceived as a second-order public good but is instead an emotional reaction unresponsive to changes in the strategic environment.
    Keywords: decentralized punishment ; public goods ; other-regarding preferences ; team production ; experiments
    JEL: C91 C92 D23
    Date: 2005–05
  4. By: Casari, Marco
    Abstract: This study presents experimental data on pre-commitment and flexibility where monetary rewards are delivered with an actual delay. Preference for pre-commitment is defined as willingness to pay a cost to restrict the size of the choice set available in the future. Preference for flexibility is defined as willingness to pay a cost to enlarge the choice set available in the future. The existing empirical evidence about these phenomena is rather limited. On the other hand, models of intertemporal choice differ widely on these issues, with some predicting only demand for pre-commitment, others only demand for flexibility, while others neither one. We find that two-thirds of the subjects cannot be accounted for with the canonical exponential discounting model and that there is demand for both pre-commitment and flexibility.
    Keywords: experiments ; time preferences ; time inconsistency ; preference for commitment ; preference for flexibility ; discounting
    JEL: C91 D90 D81
    Date: 2006–03
  5. By: Marion Eberlein; Judith Przemeck
    Abstract: To investigate the influence of performance differences on donating behavior in a solidarity game we introduce a real effort task. In each three-person-group subjects are ranked according to their task performance. Since each potential winner is informed about his own rank and the potential losers? ranks, they are able to regard performance differences between various potential losers and between themselves and a potential loser. We run another treatment without a real effort task to check for the influence of performance. We find different kinds of donating behaviour which seem to be fundamental characteristics.
    Keywords: Solidarity, Performance Differences, Real Effort, Experiment
    JEL: C91 D31
    Date: 2006–03
  6. By: Gjerstad, S.
    Abstract: The competitive market model is a paradoxical. In perfect competition, agents cannot influence price: they only select an output quantity. Such passive behavior doesn’t conform to the intuitive notion of competition. This paper describes an experiment which demonstrates that near or even at a competitive equilibrium price, competition is undiminished. A substantial difference between the performance of sellers and buyers frequently results from this vigorous competition, even with low price variability and approximate efficiency. In double auction experiment sessions conducted with both automated and human agents, exogenous variation of the pace of asks and bids of automated agents demonstrates that the performance difference between sellers and buyers results primarily from a difference between the pace of asks and bids. If the buyers’ pace is slower than sellers’ pace, buyers make price concessions less frequently than sellers so that prices move below the equilibrium price. Then more buyers become active and fewer sellers remain active. Prices stabilize when changes to the numbers of active buyers and sellers offset the superior bargaining capability of one side or the other. In competitive equilibrium, to a first approximation agents are price takers, but that doesn’t preclude vigorous competition: competitive behavior moves to the dimension of bargaining pace.
    Keywords: Bargaining ; bounded rationality ; competitive equilibrium ; double auction ; experimental economics
    JEL: C78 C92 D41 D44
    Date: 2006–02
  7. By: Paola Manzini (Queen Mary, University of London and IZA Bonn); Marco Mariotti (Queen Mary, University of London); Luigi Mittone (University of Trento)
    Abstract: In this paper we formulate and investigate experimentally a model of how individuals choose between time sequences of monetary outcomes. The theoretical model assumes that a decision-maker uses, sequentially, two criteria to screen options. Each criterion only permits a decision between some pairs of options, while the other options are incomparable according to that criterion. When the first criterion is not decisive, the decision maker resorts to the second criterion to select an alternative. This type of decision procedures has encountered the favour of several psychologists, though it is quite under-explored in the economics domain. In the experiment we find that: 1) traditional economic models based on discounting alone cannot explain a significant (almost 30%) proportion of the data no matter how much variability in the discount functions is allowed; 2) our model, despite considering only a specific (exponential) form of discounting, can explain the data much better solely thanks to the use of the secondary criterion; 3) our model explains certain specific patterns in the choices of the ‘irrational’ people. We can safely reject the hypothesis that anomalous behaviour is due simply to random ‘mistakes’ around the basic predictions of discounting theories: the deviations are not random and there are clear systematic patterns of association between ‘irrational’ choices.
    Keywords: time preference, time sequences, negative discounting
    JEL: C91 D9
    Date: 2006–05
  8. By: Jim Engle-Warnick; Nurlan Turdaliev
    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. <P>Nous avons mené une étude expérimentale dans le but de savoir si les règles de décision en matière de politique monétaire sont utilisées par les banquiers inexpérimentés au sein des banques centrales. Au cours de nos expériences, des sujets établissaient un taux d’intérêt à court terme dans un contexte d’économie informatisée dans le but de maîtriser l’inflation. Une grande majorité des sujets ont appris à maîtriser efficacement l’inflation. Nous sommes d’avis que les règles du type Taylor correspondent bien aux données liées aux choix et contribuent grandement à établir l’hétérogénéité du processus de décision. Notre étude est la première à recourir à l’organisation expérimentale des données sans, pour autant, perdre de vue les règles liées à la politique monétaire qui fait le plus l’objet de surveillance et d’analyse dans le domaine de l’économie.
    Keywords: experimental economics, monetary policy, repeated games, Taylor rule, économie expérimentale, jeux répétés, politique monétaire, règle Taylor
    JEL: C91 E42
    Date: 2006–05–01

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