nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒10‒21
eleven papers chosen by
Daniel Houser
George Mason University

  1. Rebate Subsidies, Matching Subsidies and Isolation Effects By Douglas D. Davis
  2. Perceiving strategic environments: An experimental study of learning under minimal information By Andreas Nicklisch
  3. Ex Interim Voting in Public Good Provision By Sven Fischer; Andreas Nicklisch
  4. Less fighting than expected — experiments with wars of attrition and all-pay auctions. By Oliver Kirchkamp,
  5. Another explanation for overbidding and another bias for underbidding in first-price auctions. By Oliver Kirchkamp,; Philipp Reiß
  6. Interpersonal Comparisons of Utility in Bargaining: Evidence from a Transcontinental Ultimatum Game By Romina Boarini; Jean-Francois Laslier; Stéphane Robin
  7. Do Social Networks Inspire Employment? - An Experimental Analysis - By Berninghaus, Siegfried K.; Fischer, Sven; Gueth, Werner
  8. Expectations in first-price auctions By Oliver Kirchkamp,; Philipp Reiß
  9. Disclosing Conflict of Interest – Does Experience and Reputation Matter? By Koch, Christopher; Schmidt, Carsten
  10. Do fiscal variables affect fiscal expectations? Experiments with real world and lab data By Oliver Kirchkamp; Michele Bernasconi; Paolo Paruolo
  11. Outside options: Another reason to choose the first-price auction. By Oliver Kirchkamp,; Eva Poen,; Philipp Reiß

  1. By: Douglas D. Davis (Department of Economics, VCU School of Business)
    Abstract: In a series of recent experiments (Davis, Millner and Reilly, 2005, Eckel and Grossman, 2003, 2005a-c, 2006), matching subsidies generate significantly higher charity receipts than do theoretically equivalent rebate subsidies. This paper reports a laboratory experiment conducted to examine whether the higher receipts are attributable to a relative preference for matching subsidies or to an ‘isolation effect’ (McCaffery and Baron, 2003, 2006). Some potential policy implications of isolation effects on charitable contributions are also considered.
    Keywords: experiments, charitable contributions, methodology
    JEL: C91 D64 H24
    Date: 2006–06
  2. By: Andreas Nicklisch (Max Planck Institute for Research on Collective Goods)
    Abstract: We present the results of an experiment on learning with minimal information. Particularly, subjects are only provided with feedback about their own payoff from the last period of the game being played, but not with information about the structure of the game. We compare the empirical structure of the decision algorithm for this setting with the empirical structure of algorithms for subjects who receive sufficient information to learn the game. The laboratory data show that, depending on the information setting, players adjust their strategy choice differently. The structure of the decision algorithm for subjects operating with minimal information indicates myopic responses to success, while the structure for sufficiently informed players is more complex. As a consequence, sufficiently informed players outperform players who have minimal information in a simple coordination game. Yet, if the structure of the game changes, readjustment is more successful for the players operating with minimal information.
    Keywords: Experimental economics, learning, minimal social situation, myopia
    JEL: D83 D84
    Date: 2006–06
  3. By: Sven Fischer (Max Planck Institute of Economics, Jena); Andreas Nicklisch (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: We report the results of an experimental study that compares voting mechanisms in the provision of public goods. Subjects can freely decide how much they want to contribute. Whether the public good is finally provided is decided by a referendum under full information about all contributions. If provision is rejected, contributions are reduced by a fee and reimbursed. We compare unanimity with majority voting and both to the baseline of cheap talk. Contributions are highest under unanimity. Yet, results concerning overall efficiency are mixed. When provision occurs, only unanimity enhances efficiency. Overall, however, unanimity leads to too many rejections.
    Keywords: Experimental economics, learning, minimal social situation, myopia
    JEL: D83 D84
    Date: 2006–09
  4. By: Oliver Kirchkamp,
    Abstract: The paper compares with the help of experiments dynamic and static wars of attrition (i.e. second price all-pay auctions) and first-price all-pay auctions. While most experimental studies find overbidding in first-price all-pay auctions, we find underbidding in a similar institution, the war of attrition, in particular if the bidding process is dynamic. We study bids and revenue in different experimental frames and matching procedures and draw a link to the literature on stepwise linear bidding functions
    Keywords: War of attrition, dynamic bidding, all-pay auction, stabilisation, volunteer’s dilemma, experiment
    JEL: C72 C92 D44 E62 H30
    Date: 2006–06
  5. By: Oliver Kirchkamp,; Philipp Reiß
    Abstract: First-price auction experiments find often substantial overbidding which is typically related to risk aversion. We introduce a model where some bidders use constrained linear bids. As with risk aversion this leads to overbidding if valuations are high, but in contrast to risk aversion the model predicts underbidding if valuations are low. We test this model with the help of experiments, compare bidding in first-price and second-price auctions and study revenue under different treatments. We conclude that at least part of the commonly observed overbidding is an artefact of experimental setups which rule out underbidding. Constrained linear bids seem to fit observations better
    Keywords: Auction, Experiment, Overbidding, Underbidding, Risk-Aversion
    JEL: C92 D44
    Date: 2006–06
  6. By: Romina Boarini (PREG - Pole de recherche en économie et gestion - [CNRS : UMR7176] - [Polytechnique - X]); Jean-Francois Laslier (PREG - Pole de recherche en économie et gestion - [CNRS : UMR7176] - [Polytechnique - X]); Stéphane Robin (GATE - Groupe d'analyse et de théorie économique - [CNRS : UMR5824] - [Université Lumière - Lyon II] - [Ecole Normale Supérieure Lettres et Sciences Humaines])
    Abstract: This paper presents the experimental results of a “Transcontinental Ultimatum Game” implemented between India and France. The bargaining took the form of standard ultimatum games, but in one treatment Indian subjects made offers to French subjects and, in another treatment, French subjects made offers to Indian subjects. We observed that French→Indian bargaining mostly ended up with unequal splits of money in favour of French, while nearly equal splits were the most frequent outcome in Indian→French interactions. The experimental results are organized through a standard social reference model, modified for taking into account the different marginal value of money for bargainers. In our model bargaining is driven by relative standings comparisons between players, occurring in terms of real earnings (that is monetary earnings corrected for a purchasing power factor) obtained in the game. The norm of equity behind the equalization of real earnings is called local equity norm, and contrasted to a global equity norm which would encompass the wealth of players beyond the game. According to what we observed, no beyond-game concern seems to be relevantly endorsed by subjects.
    Keywords: Interpersonal Comparisons of Utility; Fairness; Bargaining experiment; Ultimatum Game
    Date: 2006–10–09
  7. By: Berninghaus, Siegfried K. (Universität Karlsruhe); Fischer, Sven (Max Planck Institute for Research into Economic Systems. Strategic Interaction Group); Gueth, Werner (Max Planck Institute for Research into Economic Systems, Strategic Interaction Group)
    Abstract: There is robust field data showing that a frequent and successful way of looking for a job is via the intermediation of friends and relatives. Here we want to test this experimentally. Participants first play a simple public goods game with two interaction partners ('friends'), and share whatever they earn this way with two different sharing partners ('cousins') who have different friends. Thus one's social network contains two 'friends' and two 'cousins'. In the second phase of the experiment participants learn about a job opportunity for themselves and one additional vacancy and decide whom of their network they want to recommend and, if so, in which order. In case of coemployment, both employees compete for a bonus. Will one recommend others for the additional job in spite of this competition, will one prefer 'friends' or 'cousins' and how does this depend on contributions (of 'friends') or shared profits (with 'cousins')? Our findings are partly quite puzzling. Most participants, for instance, recommend quite actively but compete very fiercely for the bonus.
    Date: 2006–10–02
  8. By: Oliver Kirchkamp,; Philipp Reiß
    Abstract: Bids in private value first price auctions consistently deviate from risk neutral symmetric equilibrium bids. It is difficult to explain this deviation with risk aversion. We propose and test two other explanations: (1) Bidders do not form correct expectations. (2) Bidders do not play a best reply against their expectations. We present a novel experimental setup which allows to observe bids and expectations separately. We extensively test the internal validity of this setup. We find that off equilibrium expectations explain, if at all, underbidding. Off equilibrium bids do not seem to be due to wrong expectations but due to deviations from a best reply
    Keywords: Experiments, Auction, Expectations.
    JEL: C92 D44
    Date: 2006–06
  9. By: Koch, Christopher (Sonderforschungsbereich 504); Schmidt, Carsten (Sonderforschungsbereich 504)
    Abstract: Disclosure of conflict of interest is currently seen as an effective tool for reducing threats to auditor independence. Cain, Loewenstein, and Moore (2005) provide evidence for perverse effects of disclosing conflict of interest. Using a controlled laboratory experiment, we replicate their finding that such a disclosure can cause an impairment of auditor independence. However, as subjects gain experience we find that these results revert and auditors give less biased advice. Our results imply that the perverse effects noted in the literature might be an artifact of an environment with inexperienced subjects and of less relevance for the audit environment where main actors are experienced. To the contrary, disclosure of conflict of interest can even improve auditor independence by fostering fairness. Furthermore, we find that disclosure of conflict of interests disturbs reputation building.
    Date: 2006–09–05
  10. By: Oliver Kirchkamp; Michele Bernasconi; Paolo Paruolo
    Abstract: We generate observable expectations about fiscal variables through laboratory experiments using real world data from several European countries as stimuli. We compare a VAR model of expectations for data which is presented in a fiscal frame with one for neutrally presented data. We find that participants understand the meaning of the fiscal variables, but also that their ability to perceive the correct characteristics of fiscal policy is limited. We tie the VAR analysis to specific models of forming expectations. We find that agents’ expectations are neither consistent with rational nor with purely adaptive expectations but, instead, follow an augmented-adaptive scheme
    Keywords: Experiments, fiscal policy, expectations, causality, cointegration, panel data.
    JEL: C91 D89 E62 H31
    Date: 2006–06
  11. By: Oliver Kirchkamp,; Eva Poen,; Philipp Reiß
    Abstract: In this paper we derive equilibrium bidding functions for first-price and second-price auctions with private values when bidders have outside options. We then study bidding behaviour with the help of experiments. We find that bidders respond to outside options and to variations of common knowledge about competitors’ outside options, though bidders in first-price auctions show more overbidding with outside options than without. In second-price auctions overbidding is not affected by outside options. As expected first-price auctions yield more revenue than second-price auctions. This revenue-premium is higher in the presence of outside options.
    Keywords: Auction, Experiment, Outside Option
    JEL: C72 C92 D44
    Date: 2006–06

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