nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒07‒09
seven papers chosen by
Daniel Houser
George Mason University

  1. Bidding behavior in the bisection auction – an experimental investigation By Grigorieva Elena; Strobel Martin
  2. Punishment, Inequality and Emotions By David Masclet; Marie-Claire Villeval
  3. Task Transcending Satisficing - An Experimental Study By Werner Güth; Gerlinde Fellner; Ev Martin
  4. Satisficing or Optimizing? - An Experimental Study By Werner Güth; Gerlinde Fellner; Ev Martin
  5. Conditional cooperation: Behavioral regularities from the lab and the field and their policy implications By Simon Gaechter
  6. Price Manipulation in an Experimental Asset Market By Veiga Helena; Vorsatz Marc
  7. Does Price Matter in Charitable Giving? Evidence From a Large-Scale Natural Field Experiment By Dean Karlan; John A. List

  1. By: Grigorieva Elena; Strobel Martin (METEOR)
    Abstract: We present a laboratory experiment in which we investigate bidding behavior with independent private values in the recently proposed bisection auction, and compare it with two classical auction formats - the Vickrey auction and the English auction. We test whether subjects behave strategically equivalent, following the dominant truth-telling strategy, as predicted by theory. Furthermore, we provide some insights concerning the learning process, the efficiency of allocation, and the revenue to the auctioneer. Data show that the bisection auction performs better than the Vickrey auction and only in some terms worse than the English auction.
    Keywords: Economics ;
    Date: 2006
  2. By: David Masclet; Marie-Claire Villeval (GATE CNRS)
    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: cooperation, experiment, free-Riding, inequity aversion, negative emotions
    JEL: A13 C92 D63
    Date: 2006–04
  3. By: Werner Güth; Gerlinde Fellner; Ev Martin
    Abstract: The paper explores the applicability of bounded rationality theory. In particular, we investigate whether basic principles of aspiration formation and satisficing behavior are transferable between similar situations. Individuals are sequentially confronted with two risky investment tasks, a simple and a more complex one. Initially elicited state-contingent aspirations can be used to predict actual portfolio selection in both tasks. We explore whether individual characteristics of satisficing apply to both scenarios. Results indicate that stated aspirations frequently cannot be fulfilled. However, aspiration formation itself is highly transferable between tasks.
    Keywords: bounded rationality; aspirations; investment decisions
    JEL: C91 D81 G11
    Date: 2006–07
  4. By: Werner Güth; Gerlinde Fellner; Ev Martin
    Abstract: This experimental study investigates whether individuals prefer bounded rationality over rational choice theory when facing simple investment tasks. First, participants state some personal parameters that serve as an input to render a theoretical approach, namely satisficing or optimality, applicable. Then, they are guided through the decision making process where either ‘satisficing’ or ‘optimality’ is suggested and has to be implemented. The behavioral appeal of the two approaches is measured by the adjustments of personal parameters until accepting the investment decision suggested by theory. Additionally, a questionnaire is administered to elicit subjective contentment with the two approaches.
    Keywords: Theory absorption; Satisficing behavior; Portfolio selection
    JEL: C91 D81 G11
    Date: 2006–07
  5. By: Simon Gaechter (University of Nottingham)
    Abstract: This paper discusses the empirical evidence from lab and field experiments on voluntary cooperation. We present the most important findings from numerous public goods experiments and argue that conditional cooperation (contributions are conditional on other people’s contribution) is a primary motivation for many people to (not) contribute to the public good. We also discuss four experiments that test implications of conditional cooperation. We see these experiments as four behavioral models that can help interpreting naturally occurring phenomena, like charitable giving, work morale, and tax evasion. We conclude by discussing some policy implications of the observed behavioral regularities.
    Date: 2006–04
  6. By: Veiga Helena; Vorsatz Marc (METEOR)
    Abstract: We analyze in the laboratory whether an uninformed trader is able to manipulate the price of a financial asset. To do so, we compare the results of two different experimental treatments. In the Benchmark Treatment, twelve subjects trade a common value asset that takes either a high or a low value. Information is distributed asymmetrically, only three outof twelve subjects know the actual value of the asset. The Manipulation Treatment is identical to the Benchmark Treatment apart from the fact that we introduce a computer program as an additional trader. This manipulation program buys a fixed number of shares in the beginning of a trading period and sells them afterwards again. Our results show that the last contract price is significantly higher in the Manipulation Treatment if the asset takes a low value and that there are no price differences between the two treatments if the value of the asset is high. Moreover, this simple manipulation program is, at least in some instances, profitable.
    Keywords: financial economics and financial management ;
    Date: 2006
  7. By: Dean Karlan; John A. List
    Abstract: We conducted a natural field experiment to explore the effect of price changes on charitable contributions. To operationalize our tests, we examine whether an offer to match contributions to a non-profit organization changes the likelihood and amount that an individual donates. Direct mail solicitations were sent to over 50,000 prior donors. We find that the match offer increases both the revenue per solicitation and the probability that an individual donates. While comparisons of the match treatments and the control group consistently reveal this pattern, larger match ratios (i.e., $3:$1 and $2:$1) relative to smaller match ratios ($1:$1) had no additional impact. The results have clear implications for practitioners in the design of fundraising campaigns and provide avenues for future empirical and theoretical work on charitable giving. Further, the data provide an interesting test of important methods used in cost-benefit analysis.
    JEL: C93 D12 D72 H41 L31 M31
    Date: 2006–06

This nep-exp issue is ©2006 by Daniel Houser. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
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