nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒05‒27
eighteen papers chosen by
Daniel Houser
George Mason University

  1. Pinocchio's Pupil: Using Eyetracking adn Pupil Dilation to Understand Truth-telling and Deception in Games By Joseph Tao-yi Wang; Michael Spezio; Colin F. Camerer
  2. The Relationship Between Risk Attitudes and Heuristics in Search Tasks: A Laboratory Experiment By Daniel Schunk; Joachim Winter
  3. Social Position and Distributive Justice: Experimental Evidence By Kurtis Swope; John Cadigan; Pamela Schmitt; Robert S. Shupp
  4. The Double Nature of Conventions - An Experimental Analysis By Luis M. Miller
  5. Personality Preferences in Laboratory Economics Experiments By Kurtis J. Swope; John Cadigan; Pamela M. Schmitt; Robert S. Shupp
  6. Personality Preferences and Pre-Commitment: Behavioral Explanations in Ultimatum Games By Pamela M. Schmitt; Robert S. Shupp; Kurtis J. Swope; Justin Mayer
  7. Resource Allocation Contests: Experimental Evidence By David Schmidt; Robert S. Shupp; James Walker
  8. Self-Selection and the Efficiency of Tournaments By Tor Eriksson; Sabrina Teyssier; Marie-Claire Villeval
  9. Preferences, Poverty and Politics: Experimental and Survey Data from Vietnam By Tomomi Tanaka; Colin F. Camerer; Quang Nguyen
  10. Effort and Comparison Income : Survey and Experimental Evidence By Andrew Clark; Davis Masclet; Marie-Claire Villeval
  11. The Effect of Rewards and Sanctions in Provision of Public Goods By Martin Sefton; Robert S. Shupp; James Walker
  12. The Effect of an Additional Alternative on Measured Risk Preferences in a Laboratory Experiment in Peru By Jim Engle-Warnick; Javier Escobal; Sonia Laszlo
  13. Risk Preference Differentials of Small Groups and Individuals By Robert S. Shupp; Arlington Williams
  14. Learning and Visceral Temptation in Dynamic Savings Experiments By Alexander L. Brown; Colin F. Camerer; Zhikang Eric Chua
  15. Inequality aversion among gypsies: a field investigation By Ramón Cobo-Reyes; Natalia Jiménez
  16. The origins of bubbles in laboratory asset markets By Lucy F. Ackert; Narat Charupat; Richard Deaves; Brian D. Kluger
  17. Design of web questionnaires : the effect of layout in rating scales By Toepoel,Vera; Das,Marcel; Soest,Arthur van
  18. Behavioral Economics Comes of Age By Wolfgang Pesendorfer

  1. By: Joseph Tao-yi Wang; Michael Spezio; Colin F. Camerer
    Date: 2006–05–14
  2. By: Daniel Schunk; Joachim Winter (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: The existing evidence from laboratory experiments suggests that relatively simple heuristics describe observed search behavior better than the optimal stopping rule derived under risk neutrality. Such behavior could be generated by two entirely di®erent classes of decision rules: (i) rules that are optimal conditional on utility functions that depart from risk neutrality or (ii) heuristics that derive from limited cognitive processing capacities and satisfycing. In this paper, we develop and test search models that depart from the standard assumption of risk neutrality in order to distinguish these two possi- bilities. In our experiment, we present subjects not only with a standard search task, but also with a series of lottery tasks that serve to elicit the shape of their utility functions. We do not ¯nd a relationship between behavior in the search task and measures of risk aversion. Our data suggest, however, that loss aversion is important for explaining search behavior.
    JEL: D83 C91
    Date: 2005–06–21
  3. By: Kurtis Swope (Department of Economics, United States Naval Academy); John Cadigan (Department of Public Administration, American University); Pamela Schmitt (Department of Economics, United States Naval Academy); Robert S. Shupp (Department of Economics, Ball State University)
    Abstract: In a simple double-blind dictator experiment, systematically removing subjects’ levels of power and entitlement increases their choice of an income distribution generally consistent with Rawls (1971) concept of distributive justice, although choices are less unanimous and risk-averse than hypothesized
    Keywords: Power; entitlement; justice; experiments
    JEL: C91 D31
    Date: 2005–06
  4. By: Luis M. Miller
    Abstract: This paper aims to integrate both economic and sociological notions of conventions in a single analytical framework. To this end, it starts by distinguishing conceptually between behavioral convention, i.e. an arbitrary but stable social regularity, and normative convention, i.e. a principle of action prescribing how to behave in a certain class of situations. A game theoretical framework to represent the interrelation between both concepts is then introduced. Finally, this relation is studied experimentally. The main results of the experiment are: (1) normative conventions have to be commonly known and accepted among subjects in order to work as guides to coordinate on behavioral conventions; (2) once subjects follow a normative convention they are highly consistent with it in a repeated environment; (3) efficiency concerns are focal in the class of games studied in this paper.
    Keywords: coordination, convention, consistency, efficiency, experiments
    Date: 2006–04
  5. By: Kurtis J. Swope (Department of Economics, U. S. Naval Academy); John Cadigan (Department of Public Administration, American University); Pamela M. Schmitt (Department of Economics, U. S. Naval Academy); Robert S. Shupp (Department of Economics, Ball State University)
    Abstract: Student volunteers at the U.S. Naval Academy (USNA) participated in one of the following oneshot games: a dictator game, an ultimatum game, a trust game, or a prisoner’s dilemma game. We find limited support for the importance of personality type for explaining subjects’ decisions. With controls for personality preferences, we find little evidence of behavioral differences between males and females. Furthermore, we conclude that seniority breeds feelings of entitlement - seniors at USNA generally exhibited the least cooperative or other-regarding behavior.
    Keywords: Experiments; preferences; personality
    JEL: A12 C72 C78
    Date: 2005–07
  6. By: Pamela M. Schmitt (U. S. Naval Academy); Robert S. Shupp (Department of Economics, Ball State University); Kurtis J. Swope (U. S. Naval Academy); Justin Mayer (U. S. Naval Academy)
    Abstract: This paper uses responder pre-commitment and psychological type, as measured by the Myers- Briggs Type Indicator (MBTI), to gain insight into subject behavior in a laboratory ultimatum bargaining experiment. Three experiment design details are noteworthy: (1) one design requires responders to make a nonbinding pre-commitment rejection level prior to seeing the offer, (2) one design requires responders to make a binding pre-commitment rejection level, and (3) one design includes a third person (or “hostage”) who makes no decision, but whose payment depends on the proposal being accepted. Offers are higher when proposers know that responders make a binding pre-commitment to reject but are not different when a hostage is present. Responders make lower pre-commitments when they are binding and when a hostage is present. Behavior in our experiment is generally consistent with hypotheses based on theoretical underpinnings of the MBTI and its descriptions of psychological type.
    Keywords: Ultimatum game; preferences; personality
    JEL: C72 C78 C91
    Date: 2005–05
  7. By: David Schmidt (Federal Trade Commission, Bureau of Economics); Robert S. Shupp (Department of Economics, Ball State University); James Walker (Department of Economics, Indiana University, Bloomington, IN)
    Abstract: Across many forms of rent seeking contests, the impact of risk aversion on equilibrium play is indeterminate. We design an experiment to compare individuals’ decisions across three contests which are isomorphic under risk-neutrality, but are typically not isomorphic under other risk preferences. The pattern of individual play across our contests is not consistent with a Bayes-Nash equilibrium for any distribution of risk preferences. We show that replacing the Bayes-Nash equilibrium concept with the quantal response equilibrium, along with heterogeneous risk preferences can produce equilibrium patterns of play that are very similar to the patterns we observe.
    Keywords: rent seeking, experiments, risk aversion, game theory
    JEL: C72 C92 D72
    Date: 2005–02
  8. By: Tor Eriksson; Sabrina Teyssier (GATE CNRS); Marie-Claire Villeval (GATE CNRS)
    Abstract: When exogenously imposed, rank-order tournaments have incentive properties but their overall efficiency is reduced by a high variance in performance (Bull, Schotter, and Weigelt 1987). However, since the efficiency of performance-related pay is attributable both to its incentive effect and to its selection effect among employees (Lazear, 2000), it is important to investigate the ex ante sorting effect of tournaments. This paper reports results from an experiment analyzing whether allowing subjects to self-select into different payment schemes helps in reducing the variability of performance in tournaments. We show that when the subjects choose to enter a tournament, the average effort is higher and the between-subject variance is substantially lower than when the same payment scheme is imposed. Mainly based on the degree of risk aversion, sorting is efficiency-enhancing since it increases the homogeneity of the contestants. We suggest that the flexibility of the labor market is an important condition for a higher efficiency of relative performance pay.
    Keywords: experiment, incentives, performance pay, selection, selection, tournament
    JEL: C81 C91 J31 J33 M52
    Date: 2006–03
  9. By: Tomomi Tanaka; Colin F. Camerer; Quang Nguyen
    Date: 2006–05–14
  10. By: Andrew Clark; Davis Masclet; Marie-Claire Villeval (GATE CNRS)
    Abstract: This paper combines ISSP survey data and experimental evidence from a gift-exchange game to determine the effect of status or relative income on work effort. We find a strong effect of others’ incomes on individual effort decisions in both datasets. The individual’s rank in the income distribution has a more powerful effect on effort than does others’ average income, suggesting that comparisons are more ordinal than cardinal. We further show that, controlling for own income and income rank, the width of the relevant income distribution matters, with effort increasing in the distance from the bottom of the income distribution. Last, effort is also affected by comparisons over time: those who received higher income offers or had higher income rank in the past exert lower levels of effort for a given current income
    Keywords: comparison income, effort, experiment, income distribution, peak-end, rank
    JEL: A13 C92 D63 J33 M54
    Date: 2006–01
  11. By: Martin Sefton (University of Nottingham, United Kingdom); Robert S. Shupp (Department of Economics, Ball State University); James Walker (Department of Economics, Indiana University, Bloomington, IN)
    Abstract: A growing number of field and experimental studies in social dilemma settings focus on the institutional arrangements by which individuals are able to solve collective action problems. Important in this research is the role of reciprocity and institutions that facilitate cooperation via opportunities for monitoring, sanctioning, and rewarding others. This study contrasts sanction and reward institutions in the context of a public goods experiment. Sanctions represent a net loss, a cost to both the participant imposing the sanction and the individual receiving the sanction. Rewards represent a zero sum transfer from participants giving rewards to those receiving rewards. These institutions are compared in regard to their impact on overall levels of cooperation and economic efficiency.
    JEL: C92
    Date: 2005–02
  12. By: Jim Engle-Warnick; Javier Escobal; Sonia Laszlo
    Abstract: We experimentally test for the effect of an additional alternative on the measured risk preferences of farmers in rural Peru. In our experiment, subjects revealed their risk preferences with a series of choices between two gambles. We added a third gamble, which was always dominated by one of the two existing gambles. We found that subjects chose this gamble nearly one quarter of the time, in some cases causing the subjects to appear to be more risk loving. We found that subjects in a traditional laboratory environment did not choose the dominated gamble, but their choices were affected by its presence. <P>Une étude expérimentale a été menée dans le but de vérifier l’incidence qu’un choix supplémentaire peut avoir sur les préférences mesurées des fermiers des zones rurales du Pérou à l’égard du risque. Au cours de notre expérience, les sujets étaient appelés à exprimer leurs préférences face au risque en fonction d’une série de choix entre deux loteries. Nous avons ajouté une troisième loterie, laquelle était toujours dominée par une des deux loteries existantes. Nous avons pu constater que, le quart du temps, les sujets choisissaient cette nouvelle loterie, de sorte que, dans certains cas, les sujets semblaient être plus enclins au risque. Nous avons constaté, dans un environnement de laboratoire traditionnel, que les sujets ne choisissaient pas la loterie dominée, mais que leurs choix étaient influencés par sa présence.
    Keywords: rural development, technology choice; risk preferences, risk measurement instruments, experimental economics, choix de la technologie, développement rural, économie expérimentale, instruments de mesure du risque, préférences à l’égard du risque
    JEL: O33 O18 C91
    Date: 2006–05–01
  13. By: Robert S. Shupp (Department of Economics, Ball State University); Arlington Williams (Department of Economics, Indiana University)
    Abstract: The risk preferences of three-person groups and individuals are compared using a non-sequential repeated-measures lottery experiment with $20 per-player win percentages varying from 10% to 90%. Analysis based on independent samples of certainty equivalent ratios (certainty equivalent/expected value) elicited using a maximum willingness-to-pay mechanism for fifty-two individuals and sixteen groups reveals that: 1) certainty equivalent ratios (CERs) vary significantly across lottery win percentages, 2) CER dispersion tends to decline as the lottery win percentage increases and is significantly smaller for groups than individuals in seven of the nine lotteries, 3) for the highest-risk lotteries, the average CERs submitted by groups are significantly smaller (more risk averse) than the average CERs submitted by individuals, 4) for the lowest-risk lotteries, the average CERs submitted by groups are approximately risk-neutral (CER=1) and somewhat larger than the average CERs submitted by individuals.
    Keywords: lab experiments, risk preferences, group decisions, certainty equivalents
    JEL: C91 C92 D80
    Date: 2003–11
  14. By: Alexander L. Brown; Colin F. Camerer; Zhikang Eric Chua
    Date: 2006–05–14
  15. By: Ramón Cobo-Reyes (Department of Economic Theory and Economic History, University of Granada.); Natalia Jiménez (Department of Economic Theory and Economic History, University of Granada.)
    Abstract: This paper presents a first attempt to measure inequality aversion among gypsies. We conducted an experiment among adult gypsies living at slums outside Vallecas (Madrid). To analyze this variable we use the mechanism provided by Kroll & Davidovitz (2003) among 38 voluntary participants. Results indicate that: i) 52.6% of the individuals are inequality averse; ii) there is a positive relationship between inequality aversion and some features of the population such as individual religious practise, marital status, family size, position in the hierarchy of the family or club association and, iii) neither wealth, nor participation in voluntary activities affect inequality aversion.
    Keywords: inequality aversion, gypsies, field experiment.
    JEL: C93 D85 Z13
    Date: 2006–05–24
  16. By: Lucy F. Ackert; Narat Charupat; Richard Deaves; Brian D. Kluger
    Abstract: In twelve sessions conducted in a typical bubble-generating experimental environment, we design a pair of assets that can detect both irrationality and speculative behavior. The specific form of irrationality we investigate is probability judgment error associated with low-probability, high-payoff outcomes. Independently, we test for speculation by comparing prices of identically paying assets in multiperiod versus single-period markets. When these tests indicate the presence of probability judgment error and speculation, bubbles are more likely to occur. This finding suggests that both factors are important bubble drivers.
    Date: 2006
  17. By: Toepoel,Vera; Das,Marcel; Soest,Arthur van (Tilburg University, Center for Economic Research)
    Abstract: This article shows that respondents gain meaning from visual cues in a web survey as well as from verbal cues (words). We manipulated the layout of a five point rating scale using verbal, graphical, numerical, and symbolic language. This paper extends the existing literature in four directions: (1) all languages (verbal, graphical, numeric, and symbolic) are individually manipulated on the same rating scale, (2) a heterogeneous sample is used, (3) in which way personal characteristics and a respondent's need to think and evaluate account for variance in survey responding is analyzed, and (4) a web survey is used. Our experiments show differences due to verbal and graphical language but no effects of numeric or symbolic language are found. Respondents with a high need for cognition and a high need to evaluate are affected more by layout than respondents with a low need to think or evaluate. Furthermore, men, the elderly, and the highly educated are the most sensible for layout effects.
    Keywords: web survey;questionnaire lay out;context effects;need for cognition;need to evaluate
    JEL: C42 C81 C93
    Date: 2006
  18. By: Wolfgang Pesendorfer
    Date: 2006–05–14

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