nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒12‒01
six papers chosen by
Daniel Houser
George Mason University

  1. Bargaining under Large Risk - An Experimental Analysis - By Werner Guth; Sabine Kroger; Ernst Maug
  2. Do Individuals Recognize Cascade Behavior of Others? - An Experimental Study - By Tim Grebe; Julia Schmid; Andreas Stiehler
  3. Helping the meaner, hurting the nicer: The contribution versus distribution game By Staffiero, Gianandrea
  4. Social Networks and Employment - An Experimental Analysis By Siegfried Berninghaus; Sven Fischer; Werner Güth
  5. Risque relatif et sélection d'équilibre dans un jeu de coordination : une analyse expérimentale By Dimitri Dubois; Marc Willinger; Phu Nguyen Van
  6. Competition Fosters Trust By Steffen Huck; Gabriele K. Ruchala; Jean-Robert Tyran

  1. By: Werner Guth; Sabine Kroger; Ernst Maug
    Abstract: We present an experimental study to learn about behavior in bargaining situations under large risks. In order to implement realistic risks involved in the field, we calibrate the experimental parameters from an environment involving substantial variation in profits, the motion picture industry. The leading example is the production of a movie that may give rise to a sequel, so actors and producers negotiate sequentially. We analyze the data in light of alternative behavioral approaches to understanding bargaining behavior under large risk.
    Keywords: Bargaining, Large Risk, Equity, Experiments, Calibration
    JEL: C72 C91 D81
    Date: 2006
  2. By: Tim Grebe; Julia Schmid; Andreas Stiehler
    Abstract: In an information cascade experiment participants are confronted with artificial predecessors predicting in line with the BHW model (Bikchandani et al., 1992). Using the BDM (Becker et al., 1964) mechanism we study participants' probability perceptions based on maximum prices for participating in the prediction game. We find increasing maximum prices the more coinciding predictions of predecessors are observed, regardless of whether additional information is revealed by these predictions. Individual price patterns of more than two thirds of the participants indicate that cascade behavior of predecessors is not recognized.
    Keywords: Information Cascades, Bayes' Rule, Decision Under Risk and Uncertainty, Experimental Economics.
    JEL: C91 D81 D82
    Date: 2006–11
  3. By: Staffiero, Gianandrea (IESE Business School)
    Abstract: Wide experimental evidence shows that people do care about their opponents' payoff during social interaction. Our research aims to shed light on the relative importance of different motives in non-selfish choices highlighted in the recent literature. After a standard public-good game, one player is given the possibility to increase or decrease his opponent's payoff. While our baseline treatment replicates the tendency to hurt richer but lower-contributing players and help poorer but higher-contributing players, if we add exogenous assignments we find substantial willingness to hurt the rich, even if they have contributed more, and to help the poor, even if they have contributed less. These results show a greater focus on correcting inequality than on punishing or rewarding particular behavior. Moreover, we also find that subjects disregard efficiency, in terms of the overall "pie" to be shared. Overall, our data support inequality aversion as a more robust phenomenon than reciprocity and efficiency considerations.
    Keywords: Fairness; Cooperation; Inequality; Reciprocity;
    JEL: C91 D63 H41
    Date: 2006–09–24
  4. By: Siegfried Berninghaus; Sven Fischer; Werner Güth
    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 explore this experimentally. Participants first play a simple public good game with two interaction partners ("friends"), and share whatever they earn this way with two different sharing partners ("cousins") who in turn have different friends. Thus a participant'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 others be recommend for the additional job in spite of this competition, will "friends" or "cousins" be preferred and how does this depend on contributions (of "friends") or shared profits (with "cousins")? Our findings are partly puzzling. Most participants, for instance, recommend quite actively but compete very fiercely for the bonus.
    Keywords: Unemployment, Social Networks, Job Search
    JEL: C91 J65
    Date: 2006–11
  5. By: Dimitri Dubois (Université de Montpellier 1 (LAMETA)); Marc Willinger (Université de Montpellier 1 (LAMETA)); Phu Nguyen Van (Université de Cergy-Pontoise (Théma))
    Abstract: We compare the experimental results of three stag-hunt games. In contrast to Battalio et al.(2001), our design keeps the relative riskiness of the two strategies at a constant level as the optimisation premium is increased. Furthermore, we also test the effect of a decrease of the relative riskiness of the two strategies, when the optimization premium remains constant. Our results show that in the latter case, the frequency of the risk-dominant strategy increases sharply, while in the former case the frequency of the risk-dominant strategy is unaffected. However, we confirm the earlier findings of Battalio et al. that an increase of the optimisation premium, all things equal, favours best response and sensitivity to the payoff-history.
    Keywords: coordination, sélection d’équilibre, expériences
    JEL: C72 C92 D81
    Date: 2006
  6. By: Steffen Huck (Department of Economics, University College London); Gabriele K. Ruchala (Department of Economics, University of Erfurt); Jean-Robert Tyran (Department of Economics, University of Copenhagen)
    Abstract: We study the effects of reputation and competition in a stylized market for experience goods. If interaction is anonymous, such markets perform poorly: sellers are not trustworthy, and buyers do not trust sellers. If sellers are identifiable and can, hence, build a reputation, efficiency quadruples but is still at only a third of the first best. Adding more information by granting buyers access to all sellers’ complete history has, somewhat surprisingly, no effect. On the other hand, we find that competition, coupled with some minimal information, eliminates the trust problem almost completely.
    Keywords: experience goods; competition; reputation; trust; moral hazard; information conditions
    JEL: C72 C92 D40 L14
    Date: 2006–11

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