nep-exp New Economics Papers
on Experimental Economics
Issue of 2006‒12‒09
six papers chosen by
Daniel Houser
George Mason University

  1. Pure Redistribution and the Provision of Public Goods By Rupert Sausgruber; Jean-Robert Tyran
  2. Reciprocity and Payment Schemes: When Equality Is Unfair By Abeler, Johannes; Altmann, Steffen; Kube, Sebastian; Wibral, Matthias
  3. The Power of the Test in Three-Level Designs By Spyros Konstantopoulos
  4. Relative Rewards within Team-Based Compensation By Bernd Irlenbusch; Gabriele K. Ruchala
  5. Monetary Incentives: Usually Neither Necessary Nor Sufficient? By Andreas Ortmann; Ralph Hertwig
  6. Three heuristics of search for a low price when initial information about the market is obsolete By Michal Skořepa

  1. By: Rupert Sausgruber (Department of Public Economics, University of Innsbruck); Jean-Robert Tyran (Department of Economics, University of Copenhagen)
    Abstract: We study pure redistribution as a device to increase cooperation and efficiency in the provision of public goods. Experimental subjects play a two-stage game. The first stage is the standard linear public goods game. In the second stage, subjects can redistribute payoffs among other subjects in their group. We find that cooperation and efficiency increases substantially with this redistribution scheme, and that the redistribution option is popular. Our results provide an intuitive explanation for why an imposed redistribution rule, as proposed by Falkinger (1996), is capable of sustaining cooperation in the provision of public goods.
    Keywords: experiment; public goods; redistribution
    JEL: C9 H41
    Date: 2006–12
  2. By: Abeler, Johannes (IZA Bonn and University of Bonn); Altmann, Steffen (IZA Bonn and University of Bonn); Kube, Sebastian (University of Karlsruhe); Wibral, Matthias (IZA Bonn and University of Bonn)
    Abstract: A growing literature stresses the importance of reciprocity, especially for employment relations. In this paper, we study the interaction of different payment modes with reciprocity. In particular,we analyze how equal wages affect performance and effciency in an environment characterized by contractual incompleteness. In our experiment, one principal is matched with two agents. The principal pays equal wages in one treatment and can set individual wages in the other. We find that the use of equal wages elicits substantially lower efforts and effciency. This is not caused by monetary incentives per se since under both wage schemes it is profit-maximizing for agents to exert high efforts. The treatment difference is rather driven by the fact that reciprocity is violated far more frequently in the equal wage treatment. Agents suffering from a violation of reciprocity subsequently withdraw effort. Our results suggest that individual reward and punishment opportunities are crucial for making reciprocity a powerful contract enforcement device.
    Keywords: laboratory experiment; wage setting; wage equality; gift exchange; reciprocity; social norms; incomplete contracts; multiple agents
    JEL: C92 J33 J41 M12 M52
    Date: 2006–12–04
  3. By: Spyros Konstantopoulos (Northwestern University and IZA Bonn)
    Abstract: Field experiments that involve nested structures may assign treatment conditions either to entire groups (such as classrooms or schools), or individuals within groups (such as students). Since field experiments involve clustering, key aspects of their design include knowledge of the intraclass correlation structure and the sample sizes necessary to achieve adequate power to detect the treatment effect. This study provides methods for computing power in three-level designs, where for example, students are nested within classrooms and classrooms are nested within schools. The power computations take into account clustering effects at the classroom and at the school level, sample size effects (e.g., number of students, classrooms, and schools), and covariate effects (e.g., pre-treatment measures). The methods are generalizable to quasi-experimental studies that examine group differences in an outcome, or associations between predictors and outcomes.
    Keywords: nested designs, statistical power, randomized trials, treatment effects, random effects, experiments, clustering
    JEL: C9
    Date: 2006–10
  4. By: Bernd Irlenbusch (London School of Economics and IZA Bonn); Gabriele K. Ruchala (University College London)
    Abstract: How to design compensation schemes to motivate team members appears to be one of the most challenging problems in the economic analysis of labour provision. We shed light on this issue by experimentally investigating team-based compensations with and without bonuses awarded to the highest contributors in teams. A purely team-based compensation scheme induces agents to voluntarily cooperate while introducing an additional relative reward increases effort and efficiency only when the bonus is substantial. In this case, however, the data suggests that tournament competition crowds out voluntary cooperation within a team.
    Keywords: teamwork, bonus pools, relative rewards, motivation crowding out, voluntary cooperation, personnel economics, experiments
    JEL: C72 C91 H41 J33 L23 M52
    Date: 2006–11
  5. By: Andreas Ortmann; Ralph Hertwig
    Abstract: Read (2005), in The Journal of Economic Methodology, took our target article in Behavioral and Brain Sciences (Hertwig & Ortmann 2001) as one point of departure to question the usefulness of monetary incentives for experimental work. In making his case, he misrepresents our analysis, and continues the unfortunate ritual of opportunistic sampling of evidence. As in our target article, we call for an empirical analysis of the impact of monetary incentives.
    Keywords: Experimental practices, monetary incentives, financial incentives, rhetorical cactics.
    JEL: C72 C91
    Date: 2006–09
  6. By: Michal Skořepa (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic; Czech National Bank, Prague, Czech Republic)
    Abstract: In traditional economics, buyer behaviour is usually modelled under the assumption of full information either on prices and their locations within the market or at least on the probability distribution of prices in the market. Neither of these assumptions seems appropriate in some cases such as when the buyer enters the specific market only very infrequently (e.g., markets for durables). This paper studies experimentally the search rules that buyers might use in this case of extreme lack of information on prices. The paper identifies three general search heuristics, derives three specific rules from the heuristics and, using data from a small-scale experiment, estimates parameters of the rules.
    Keywords: search; heuristics; aspiration level; experiment
    JEL: D12 D83
    Date: 2006–07

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