nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒07‒15
four papers chosen by
Daniel Houser
George Mason University

  1. Budget Processes: Theory and Experimental Evidence By Karl-Martin Ehrhart; Roy Gardner; Jürgen von Hagen; Claudia Keser
  2. Competition as a Socially Desirable Dilemma By Christoph Engel
  3. Health Information and the Choice of Fish Species: An Experiment Measuring the Impact of Risk and Benefit Information By Stephan Marette; Jutta Roosen; Sandrine Blanchemanche; Philippe Verger
  4. A New Type of Preference Reversal By Han Bleichrodt; Jose Luis Pinto-Prades

  1. By: Karl-Martin Ehrhart (University of Karlsruhe); Roy Gardner (Indiana University and ZEI, University of Bonn); Jürgen von Hagen (University of Bonn, Indiana University, and CEPR); Claudia Keser (IBM T.J. Watson Research Center and CIRANO, Montreal)
    Abstract: This paper studies budget processes, both theoretically and experimentally. We compare the outcomes of bottom-up and top-down budget processes. It is often presumed that a top-down budget process leads to a smaller overall budget than a bottom-up budget process. Ferejohn and Krehbiel (1987) showed theoretically that this need not be the case. We test experimentally the theoretical predictions of their work. The evidence from these experiments lends strong support to their theory, both at the aggregate and the individual subject level.
    Keywords: Budget processes, voting equilibrium, experimental economics
    JEL: H61 C91 C92
    Date: 2006–04
  2. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: A cartel is socially not desirable. But is it a normative problem? And has merger control reason to be concerned about tacit collusion? Neither is evident once one has seen that the members of a cartel face a problem of strategic interaction. It is routinely analysed in terms of game theory. Much less frequently, however, an obvious parallel is drawn. For cartel members, the formation of the cartel and cartel discipline are a public good. Making the parallel explicit is elucidating both at the theoretical and at the experimental levels. The paper contrasts oligopoly theory with public goods theory, and oligopoly experiments with public goods experiments.
    Keywords: Oligopoly, Public Good, Experiment
    JEL: C D D H K L L
    Date: 2006–05
  3. By: Stephan Marette (Center for Agricultural and Rural Development (CARD); Food and Agricultural Policy Research Institute (FAPRI)); Jutta Roosen; Sandrine Blanchemanche; Philippe Verger
    Abstract: An experiment was conducted in France to evaluate the impact of health information on consumers' choice between two different types of fish. Successive messages revealing risks (methylmercury) and benefits (omega-3s) of consuming the fish, along with consumption recommendations, were delivered. Results show a significant difference of reaction according to the order and type of information. The information about risks had a larger marginal impact on change in willingness to pay (WTP) than did the information about benefits. While the results show that detailed messages on risks/benefits, including recommendations for nutrition behavior, matter in the modification of WTP, 40% of respondents did not change their initial choices after the revelation of health information.
    Keywords: experimental economics, fish consumption, health information, nutrition.
    JEL: C9 D8 I1
    Date: 2006–04
  4. By: Han Bleichrodt (Erasmus University, Rotterdam); Jose Luis Pinto-Prades (Department of Economics, Universidad Pablo de Olavide)
    Abstract: The classic preference reversal phenomenon arises in a comparison between a choice and a matching task. We present a new type of preference reversal which is entirely choice-based. Because choice is the basic primitive of economics, the preference reversal we observe is more troubling for economics. The preference reversal was observed in two experiments, both involving large representative samples from the Spanish population. The data were collected by professional interviewers in face-to-face interviews. Possible explanations for the preference reversal are the anticipation of disappointment and elation in risky choice and the impact of ethical considerations.
    Keywords: Preference reversal, Choice behavior, Stochastic dominance, Disappointment and elation, Health
    JEL: I10
    Date: 2006–07

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