nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒11‒25
eight papers chosen by
Daniel Houser
George Mason University

  1. Group and individual risk preferences : a lottery-choice experiment. By David Masclet; Youenn Loheac; Laurent Denant-Boemont; Nathalie Colombier
  2. Voluntary contributions with imperfect information: An experimental study By Annamaria Fiore; M. Vittoria Levati; Andrea Morone
  3. Distinguishing Social Preferences from Preferences for Altruism By Raymond Fisman; Shachar Kariv; Daniel Markovits
  4. Behavioural Development Economics: Lessons from field labs in the developing world By Jeffery Carpenter; Juan Camilo Cardenas
  5. Secure Implementation Experiments: Do Strategy-proof Mechanisms Really Work? By Timothy N. Cason; Tatsuyoshi Saijo; Tomas Sjostrom; Takehiko Yamato
  6. Discounting Spotted Apples: Investigating Consumers’ Willingness to Accept Cosmetic Damage in an Organic Product By Yue, Chengyan; Alfnes, Frode; Jensen, Helen H.
  7. Minorities and Storable Votes By Alessandra Casella; Thomas Palfrey; Raymond Riezman
  8. Lexicographic Preferences in Discrete Choice Experiments: Consequences on Individual-Specific Willingness to Pay Estimates By Danny Campbell; W. George Hutchinson; Riccardo Scarpa

  1. By: David Masclet (CREM, Department of Economics, University of Rennes 1 et CIRANO,Montréal); Youenn Loheac (Graduate School of Management of Brittany et Centre d'Economie de la Sorbonne); Laurent Denant-Boemont (CREM, Department of Economics, University of Rennes 1); Nathalie Colombier (CREM, Department of Economics, University of Rennes 1)
    Abstract: This paper focuses on decision making under risk, comparing group and individual risk preferences in a lottery-choice experiment inspired by Holt and Laury (2002). The experiment presents subjects with a menu of unordered lottery choices which allows us to measure risk aversion. In the individual treatment, subjects make lottery choices individually ; in the group treatment, each subject was placed in an anonymous group of three, where unanimous lottery choice decisions were made via voting. Finally, in a third treatment, called the choice treatment, subjects could choose whether to be on their own or in a group. our main findings are that groups are more likely than individuals to choose safe lotteries for decisions with low winning percentages. Moreover, groups converge toward less risky decisions because subjects who were relatively less risk averse were more likely to change their vote in order to conform to the group average decision ; more risk-averse individuals were less likely to change their preferences. Finally our results reveal a positive relationship between preference for risk and willingness to decide alone.
    Keywords: Experiment, decision rule, individual decision, group decision.
    JEL: C91 C92 D81 D70 M10
    Date: 2004–10
  2. By: Annamaria Fiore; M. Vittoria Levati; Andrea Morone
    Abstract: We use a two-person linear voluntary contribution mechanism with stochastic marginal benefits from the public good to examine the effect of imperfect information on contributions levels. To assess prior risk attitudes, individual valuations of several risky prospects are elicited via a second-price auction. We find that limited information about the productivity of the public good lowers significantly initial contributions in comparison to a setting with perfect information, whereas different information conditions do not result in qualitatively different contribution patterns. Moreover, our results show clear evidence of risk aversion, and of a negative relationship between the latter and willingness to cooperate.
    Keywords: Public goods experiments, Vickrey auctions, Imperfect information, Risk attitudes
    JEL: C72 C92 D80 H41
    Date: 2006–11
  3. By: Raymond Fisman (Graduate School of Business, Columbia University); Shachar Kariv (Department of Economics, University of California, Berkeley); Daniel Markovits (Yale Law School)
    Abstract: We report a laboratory experiment that enables us to distinguish preferences for altruism (concerning tradeoffs between own payoffs and the payoffs of others) from social preferences (concerning tradeoffs between the payoffs of others). By using graphical representations of three-person Dictator Games that vary the relative prices of giving, we generate a very rich data set well-suited to studying behavior at the level of the individual subject. We attempt to recover subjects’ underlying preferences by estimating a constant elasticity of substitution (CES) model that represents altruistic and social preferences. We find that both social preferences and preferences for altruism are highly heterogeneous, ranging from utilitarian to Rawlsian. In spite of this heterogeneity across subjects, there exists a strong positive withinsubject correlation between the efficiency-equity tradeoffs made in altruistic and social preferences.
    JEL: C79 C91 D64
    Date: 2005–11
  4. By: Jeffery Carpenter; Juan Camilo Cardenas
    Abstract: Explanations of poverty, growth and development more generally depend on the assumptions made about individual preferences and the willingness to engage in strategic behaviour. Economic experiments, especially those conducted in the field, have begun to paint a picture of economic agents in developing communities that is at some variance from the traditional portrait. We review this growing literature with an eye towards preference-related experiments conducted in the field. We rely on these studies, in addition to our own experiences in the field, to offer lessons on what development economists might learn from experiments. We conclude by sharing our thoughts on how to conduct experiments in the field, and then offer a few ideas for future research.
    Date: 2006
  5. By: Timothy N. Cason (Department of Economics, Purdue University); Tatsuyoshi Saijo (Osaka University); Tomas Sjostrom (Department of Economics, Rutgers University); Takehiko Yamato (Department of Value & Decision Science, Tokyo Institute of Technology)
    Abstract: Strategy-proofness, requiring that truth-telling is a dominant strategy, is a standard concept used in social choice theory. Saijo et al. (2003) argue that this concept has serious drawbacks. In particular, many strategy-proof mechanisms have a continuum of Nash equilibria, including equilibria other than dominant strategy equilibria. For only a subset of strategy-proof mechanisms do the set of Nash equilibria and the set of dominant strategy equilibria coincide. For example, this double coincidence occurs in the Groves mechanism when preferences are single-peaked. We report experiments using two strategy-proof mechanisms. One of them has a large number of Nash equilibria, but the other has a unique Nash equilibrium. We found clear differences in the rate of dominant strategy play between the two.
    Keywords: Experiment, Laboratory, Secure Implementation, Groves-Clarke, Pivotal, Learning
    JEL: C92 D71 D78 H41
    Date: 2005–07
  6. By: Yue, Chengyan; Alfnes, Frode; Jensen, Helen H.
    Abstract: Organic producers have limited methods of avoiding plant diseases that result in cosmetic damage to produce. Therefore, the appearance of organic produce is often less than perfect. We use an experimental auction to investigate how cosmetic damage affects consumers’ willingness to pay for organic apples. We find that 75% of the participants are willing to pay more for organic than for conventional apples given identical appearance. However, at the first sight of any imperfection in the appearance of the organic apples, this segment is significantly reduced. Furthermore, we find that there is a significant effect of interaction between cosmetic damage and product methods. Even though most consumers say they buy organic products to avoid pesticides, we find that cosmetic damage has a larger impact on the willingness to pay for organic apples than for conventional apples.
    Keywords: appearance, apples, experimental auctions, organic, willingness to pay.
    Date: 2006–11–06
  7. By: Alessandra Casella (Department of Economics, Columbia University); Thomas Palfrey (Division of Humanities, Cal Tech); Raymond Riezman (Department of Economics, University of Iowa)
    Abstract: The paper studies a simple voting system that has the potential to increase the power of minorities without sacrificing aggregate efficiency. Storable votes grant each voter a stock of votes to spend as desired over a series of binary decisions. By accumulating votes on issues that it deems most important, the minority can win occasionally. But because the majority typically can outvote it, the minority wins only if its strength of preference is high and the majority's strength of preference is low. The result is that with storable votes, aggregate efficiency either falls little or in fact rises. The theoretical predictions of our model are confirmed by a series of experiments: the frequency of minority victories, the relative payoff of the minority versus the majority, and the aggregate payoffs all match the theory.
    Date: 2005–11
  8. By: Danny Campbell (Gibson Institute of Land, Food and Environmen, Queen’s University Belfast); W. George Hutchinson (Gibson Institute of Land, Food and Environmen, Queen’s University Belfast); Riccardo Scarpa (University of Waikato)
    Abstract: In discrete choice experiments respondents are generally assumed to consider all of the attributes across each of the alternatives, and to choose their most preferred. However, results in this paper indicate that many respondents employ simplified lexicographic decision-making rules, whereby they have a ranking of the attributes, but their choice of an alternative is based solely on the level of their most important attribute(s). Not accounting for these simple decision-making heuristics introduces systemic errors and leads to biased point estimates, as they are a violation of the continuity axiom and a departure from the use of compensatory decision-making. In this paper the implications of lexicographic preferences are examined. In particular, using a mixed logit specification this paper investigates the sensitivity of individual-specific willingness to pay (WTP) estimates conditional on whether lexicographic decision-making rules are accounted for in the modelling of discrete choice responses. Empirical results are obtained from a discrete choice experiment that was carried out to address the value of a number of rural landscape attributes in Ireland.
    Keywords: Continuity axiom, Discrete Choice Experiments, Lexicographic Preferences, Mixed Logit, Individual-Specific Willingness to Pay
    JEL: C35 Q24 Q51
    Date: 2006–10

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