nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒09‒11
seven papers chosen by
Daniel Houser
George Mason University

  1. Cognition and Behavior in Two-Person Guessing Games: An Experimental Study By Miguel A. Costa-Gomes; Vincent P. Crawford
  2. Bridging the Great Divide in South Africa: Inequality and Punishment in the Provision of Public Goods By Visser, Martine; Burns, Justine
  3. What Determines the Shape of the Probability Weighting Function? By Helga Fehr-Duda; Marc Schürer; Renate Schubert
  4. Welfare Implications of Peer Punishment in Unequal Societies By Visser, Martine
  5. Trust and Recidivism; the Partial Success of Corporate Leniency Program in the Laboratory By Jeroen Hinloopen; Adriaan Soetevent
  6. A Note on the Risk Behavior and Death of Homo Economicus By Johansson-Stenman, Olof
  7. Less is more: An Observability Paradox in Repeated Games By Michihiro Kandori; Ichiro Obara

  1. By: Miguel A. Costa-Gomes; Vincent P. Crawford
    Date: 2006–09–02
  2. By: Visser, Martine (Department of Economics, School of Business, Economics and Law, Göteborg University); Burns, Justine (University of Cape Town, Private Bag,)
    Abstract: We explore the effect of income inequality and peer punishment on voluntary provision of public goods in an experimental context. Our sample draws from nine fishing communities in South-Africa where high levels of inequality prevail. We find that aggregate cooperation is higher in both the voluntary contribution mechanism (VCM) and punishment treatments for unequal groups. Once peer sanctioning is introduced over-contribution by low relative to high endowment players observed in the VCM treatment is significantly enhanced. Demand for punishment by low and high endowment players are similar, irrespective of differences in relative costs, and in unequal groups free-riding is punished more, specifically by low endowment players. We observe inequality aversion both in endowments and with respect to the interaction of endowments and contributions: high endowment players receive more punishment, but also receive more punishment for negative deviation from the group mean share. <p>
    Keywords: Inequality; cooperation; punishment; public goods experiments
    JEL: C90 D63 H41 Q20
    Date: 2006–08–31
  3. By: Helga Fehr-Duda (Institute of Economic Research, Swiss Federal Institute of Technology Zurich (ETH)); Marc Schürer (Institute of Economic Research, Swiss Federal Institute of Technology Zurich (ETH)); Renate Schubert (Institute of Economic Research, Swiss Federal Institute of Technology Zurich (ETH))
    Abstract: When valuing risky prospects, people typically overweight small probabilities and underweight medium and large probabilities, but there is vast heterogeneity in individual behavior. We explore the relationship between person-specific probability weights, estimated from investment decisions in a laboratory experiment, and personal characteristics. We find considerable interaction effects with gender. While women’s probability weighting is strongly and significantly susceptible to mood states, men’s is not. Moreover, we show that cheerful and optimistic people weight probabilities of investment gains more favorably than do pessimistic people. People who calculate expected payoffs are less prone to probability distortions than those who do not use a lottery’s expected value as a decision criterion. None of the factors studied impact subjects’ valuations of monetary outcomes.
    Keywords: Probability Weighting Function, Prospect Theory, Risk Aversion, Gender Differences
    Date: 2006–08
  4. By: Visser, Martine (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We show that peer sanctioning increases cooperation in public goods experiments more in unequally endowed groups than in equally endowed groups. Punishment results in a redistribution of wealth from high to low endowment players within groups. <p>
    Keywords: Inequality; cooperation; punishment; public goods; welfare and poverty; social norms
    JEL: C90 D63 H41 I30 Q20 Z13
    Date: 2006–01–31
  5. By: Jeroen Hinloopen (Faculty of Economics and Econometrics, Universiteit van Amsterdam); Adriaan Soetevent (Faculty of Economics and Econometrics, Universiteit van Amsterdam)
    Abstract: An experiment is conducted were subjects interact repeatedly to examine the effect of a particular leniency program on cartel formation, cartel stability and cartel recidivism. The program leads to lower prices for three reasons. First, non-cooperators are more persistent in their behavior which effectively blocks cartel formation in their respective groups. Second, members of groups that do form a cartel defect more often thus reducing the average cartel lifetime. Third, the difference between the agreed-upon price and the undercutting price is larger. The leniency program does not however affect the probability that a dismantled cartel is re-established.
    Keywords: cartels; corporate leniency programs; Bertrand competition; experiment
    JEL: C92 D43 L41
    Date: 2006–08–01
  6. By: Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: Recent papers by Cox and Sadiraj (2006) and Rubinstein (2006) have pointed out that expected utility theory is more general than has sometimes been acknowledged, and can hence not be refuted as easily by means of experiments. While acknowledging this fact, this note nevertheless demonstrates that typical risk experimental results are impossible to reconcile with conventional dynamic consumption theory under risk, where people are time consistent and integrate all sources of income perfectly. <p>
    Keywords: The Rabin critique; expected utility of income; expected utility of final wealth; dynamic consumption theory; risk experiments; imperfect income integration; prospect theory
    JEL: D81 D91
    Date: 2006–08–01
  7. By: Michihiro Kandori; Ichiro Obara
    Date: 2006–09–02

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