nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒06‒03
eight papers chosen by
Daniel Houser
George Mason University

  1. Cooperative Networks: Theory and Experimental Evidence By Katinka Pantzy; Anthony Ziegelmeyer
  2. Strategic Delay and Rational Imitation in the Laboratory By Anthony Ziegelmeyer; Kene Boun My; Jean-Christophe Vergnaud; Marc Willinger
  3. Evaluating Search and Matching Models Using Experimental Data By Jeremy Lise; Shannon Seitz; Jeffrey Smith
  4. Laboratory Bilateral Gift Exchange: The Impact of Loss Aversion By Dennis A.V. Dittrich; Anthony Ziegelmeyer
  5. Conformity and Indifference: The Structure of Frequency-Dependent Social Learning By Charles Efferson; Rafael Lalive; Peter J. Richerson,; Richard McElreath; Mark Lubell
  6. Models and Anti-Models: The Structure of Payoff-Dependent Social Learning By Charles Efferson; Rafael Lalive; Peter J. Richerson,; Richard McElreath; Mark Lubell
  7. A Micro-foundation for the Laffer Curve In a Real Effort Experiment By Louis Lévy-Garboua; David Masclet; Claude Montmarquette
  8. Who really wants to be a millionaire? Estimates of risk aversion from gameshow data By Hartley, Roger; Lanot, Gauthier; Walker, Ian

  1. By: Katinka Pantzy; Anthony Ziegelmeyer
    Abstract: We consider a modified pure public good game characterized by a pre-play negotiation stage, on which pairs of players can form binding cooperation commitments. As the introduced mechanism only supports pairwise rather than more inclusive commitments, it does not implement the efficient outcome. We theoretically derive the incentive compatible and efficient cooperative networks and evaluate the behavioral efficacy of the suggested mechanism to promote and stabilize cooperation. We present the results of two separate experiments. The first experiment serves to provide necessary methodological prerequisites and establishes that neither repetition with an unknown end nor voluntary costly monitoring are behaviorally sufficient to induce cooperative outcomes. In the second experiment we introduce the pairwise commitment mechanism. We show that the mechanism induces aggregate cooperation rates not only beyond the rates observed under the voluntary contribution mechanism operationalized in the first experiment, but also beyond the rate which is supported by the formation of incentive compatible networks. We observe a large heterogeneity between groups: while some groups converge to full cooperation by managing to coordinate on the formation of efficient networks over time, both networks and cooperation rates unravel in other groups. An extended version of our theoretical setting with inequity averse players in the form suggested by Fehr and Schmidt (1999) captures the stylized facts of both experiments.
    Keywords: Strategic formation of networks, Social dilemma, Positive externalities, Experiments
    JEL: C92 D85 H41 Z13
    Date: 2006–05
  2. By: Anthony Ziegelmeyer; Kene Boun My; Jean-Christophe Vergnaud; Marc Willinger
    Abstract: This paper investigates market failures due to strategic delays. We test experimentally a discrete model of dynamic investment, where two privately informed agents have an option to invest at the time of their choice in the presence of waiting costs. The equilibrium outcome of our experimental game is characterized by efficient imitation but complete revelation of information is time consuming. In accordance with the equilibrium solution, subjects better informed take investment decision before subjects who are less informed and subjects’ decisions exhibit rational imitation. Still, subjects do not play exactly in accordance with the equilibrium sequence and we interpret their deviations from equilibrium play as an attempt to internalize the information externalities.
    Keywords: Information Externalities, Social Learning, Strategic Delay, Experiments
    JEL: C91 D82
    Date: 2006–05
  3. By: Jeremy Lise (Queen's University); Shannon Seitz (Queen's University); Jeffrey Smith (University of Michigan)
    Abstract: This paper introduces an innovative test of search and matching models using the exogenous variation available in experimental data. We take an off-the-shelf Pissarides matching model and calibrate it to data on the control group from a randomized social experiment. We then simulate a program group from a randomized experiment within the model. As a measure of the performance of the model, we compare the outcomes of the program groups from the model and from the randomized experiment. We illustrate our methodology using the Canadian Self-Sufficiency Project (SSP), a social experiment providing a time limited earnings supplement for Income Assistance recipients who obtain full time employment within a 12 month period. We find two features of the model are consistent with the experimental results: endogenous search intensity and exogenous job destruction. We find mixed evidence in support of the assumption of fixed hours of labor supply. Finally, we find a constant job destruction rate is not consistent with the experimental data in this context.
    Keywords: Calibration, equilibrium search and matching models, policy experiments, Self-Sufficiency Project, welfare, social experiments
    JEL: J2 I38 J6
    Date: 2006–05
  4. By: Dennis A.V. Dittrich; Anthony Ziegelmeyer
    Abstract: We present a systematic robustness test of the persistence of gift-exchanges in the laboratory. Our data clearly establish that the effect of social forces is dramatically crowded out by loss aversion. This was not observed before, as in other studies that allow for nominal losses participants were endowed with a substantial lump sum payment. We did not endow our participants with some initial wealth (they also got no show-up fee). Instead, participants were required to sign an agreement before the start of the experimental session in which they agreed to cover losses by either incomes from future participation in experimental sessions or by their own money. We conjecture that by providing some initial endowment to their participants, previous experimental studies have clearly failed to investigate the impact of losses on the level of gift exchange reported. Further, we observe a considerable between treatment variability in the effort-wage relation. Small lump-sum payments to the first-mover reduce the effort-wage slope significantly. A reduction in the profitability of effort increases the effort-wage slope.
    Date: 2006–05
  5. By: Charles Efferson; Rafael Lalive; Peter J. Richerson,; Richard McElreath; Mark Lubell
    Abstract: We conducted an experiment to describe precisely how social learners use information about the distribution of behaviors in a relevant social group. Players chose between two technologies repeatedly. Payoffs were random, but one technology was better in the sense that its expected payoff was higher. Players were divided into two groups: 1) individual learners who knew their realized payoffs after each choice and 2) social learners who had information about the relative frequencies of the two technologies among the individual learners but no private feedback about their own payoffs. For a subset of the social learners, a theoretical model of conformity matches the data very closely. The remaining social learners, however, made choices without responding to the social information provided. This kind of heterogeneity among social learners has received little theoretical attention with respect to aggregate behavioral dynamics.
    Keywords: social learning, conformity, gene-culture coevolution, laboratory experiment
    JEL: C92 O31 Z13
    Date: 2006–05
  6. By: Charles Efferson; Rafael Lalive; Peter J. Richerson,; Richard McElreath; Mark Lubell
    Abstract: We conducted an experiment to describe how social learners use information about the relation between payoffs and behavior. Players chose between two technologies repeatedly. Payoffs were random, but one technology was better because its expected payoff was higher. Players were divided into two groups: 1) individual learners who knew their realized payoffs after each choice and 2) social learners, who had no private feedback about their own payoffs, but in each period could choose to learn which behavior had produced the lowest payoff among the individual learners or which behavior had produced the highest payoff. When social learners chose to know the behavior producing the highest payoff, a model of imitating this successful behavior matches the data very closely. When social learners chose to know the behavior producing the lowest payoff, they tended to choose the opposite behavior in early periods, while increasingly choosing the same behavior in late periods. This kind of rapid temporal heterogeneity in the use of social information has received little or no attention in the theoretical study of social learning.
    Keywords: social learning, payoff information, gene-culture coevolution, laboratory experiment
    JEL: C92 O31 Z13
    Date: 2006–05
  7. By: Louis Lévy-Garboua; David Masclet; Claude Montmarquette
    Abstract: A conjecture of Laffer, which had considerable influence on fiscal doctrine, is that tax revenues of a Leviathan state eventually decrease when the tax rate exceeds a threshold value. We conduct a real effort experiment, in which a “worker” is matched with a non-working partner, to elicit the conditions under which a Laffer curve can be observed. We ran four different treatments by manipulating work opportunities and the power to tax. In the endogenous treatment, the non-working partner chooses a tax rate among the set of possibilities and receives the revenue generated by her choice and the worker’s effort response to this tax rate. In the exogenous treatment, the tax rate is randomly selected by the computer and the non-working partner merely receives the revenue from taxes. The Laffer curve phenomenon cannot be observed in the exogenous treatments, but arises in endogenous treatments. Tax revenues are then maximized at a 50% tax rate. We demonstrate that an “efficiency tax” model (with or without inequity aversion) falls short of predicting our experimental Laffer curve but an alternative model of social preferences provides a micro-foundation for the latter. This new model endogenously generates a social norm of fair taxation at a 50% tax rate under asymmetric information about workers’ type. Taxpayers manage to enforce this norm by working less whenever it has been violated but do not systematically reward “kind” tax setters. Workers who maximize their expected wealth adjust work to the tax rate equitably so that tax revenues remain at a fair level. Workers who respond affectively to norm violations want to hurt, and even refuse to work, so that tax revenues are cut down. Workers endowed with higher work opportunities tend to respond more emotionally to unfair taxation in our experiment, which is consistent with the observed Laffer curve and with the history of tax revolts. <P>En 1974, Arthur Laffer lançait l’idée que les recettes fiscales d’un état Léviathan se mettent à décroître lorsque le taux d’imposition excède un certain seuil. Cette idée a exercé une grande influence sur la doctrine fiscale des dernières décennies. Dans la présente étude, nous procédons à une expérience avec effort réel dans laquelle un « travailleur » est apparié à un partenaire inactif. Le but de l’expérience est de dégager les conditions de validité de la prédiction de Laffer. Nous avons retenu quatre traitements en manipulant les opportunités de travail et le pouvoir de taxer. Dans les deux traitements endogènes (avec opportunité de travail faible et forte), le participant inactif choisit le niveau de taxe qui déterminera le revenu qu’il recevra du travail de son partenaire. Dans les deux traitements exogènes, le niveau de taxe est choisi aléatoirement par l’ordinateur, et les taxes perçues distribuées au partenaire inactif. La courbe de Laffer n’est pas observable dans les traitements exogènes, mais existe bien dans les traitements endogènes, particulièrement lorsque l’opportunité du travail est forte. La recette fiscale est maximum au taux de 50 %. Nous démontrons qu’un modèle de « taxe d’efficience » (avec ou sans aversion à l’inégalité) ne parvient pas à prédire l’ensemble de ces résultats. En revanche, un modèle alternatif de préférences sociales procure des fondements microéconomiques à la courbe de Laffer. Ce nouveau modèle induit une norme sociale de juste taxation au taux de 50 % sous condition d’information asymétrique sur les types de travailleurs. Les travailleurs taxés assurent le maintien de la norme en travaillant moins lorsqu’elle n’est pas respectée, mais ne récompensent pas les choix d’imposition « généreux ». Les travailleurs qui maximisent leur richesse attendue ajustent leur travail au taux de taxation de sorte que la recette fiscale ne s’écarte pas du niveau équitable. Les travailleurs, notamment ceux qui ont une forte opportunité de travail, réagissent plus souvent de manière émotionnelle aux violations de la norme en refusant de travailler, validant ainsi la courbe de Laffer et l’histoire des révoltes de contribuables.
    Keywords: experimental economics, informational asymmetry, Laffer curve, social norms and sanctions, taxation and labour supply , asymétrie d’information, courbe de Laffer, économie expérimentale, normes sociales et sanctions, taxation et offre de travail
    JEL: C72 C91 H30 J22
    Date: 2006–02–01
  8. By: Hartley, Roger (University of Manchester); Lanot, Gauthier (Keele University); Walker, Ian (University of Warwick)
    Abstract: This paper analyses the behaviour of contestants in one of the most popular TV gameshows ever to estimate risk aversion. This gameshow has a number of features that makes it well suited for our analysis: the format is extremely straightforward, it involves no strategic decision-making, we have a large number of observations, and the prizes are cash and paid immediately, and cover a large range – from £100 up to £1 million. Our data sources have the virtue that we are able to check the representativeness of the gameshow participants. Even though the CRRA model is extremely restrictive we find that a coefficient or relative risk aversion which is close to unity fits the data across a wide range of wealth remarkably well.
    Keywords: Risk aversion ; gameshow
    JEL: D81 C93 C23
    Date: 2006

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