nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒01‒23
fourteen papers chosen by
Daniel Houser
George Mason University

  1. Imitation - Theory and Experimental Evidence - By Jose Apesteguia; Steffen Huck; Jörg Oechssler
  2. Rage Against the Machines: How Subjects Learn to Play Against Computers By Peter Dürsch; Albert Kolb; Jörg Oechssler; Burkhard C. Schipper
  3. Collective Trust Behavior By Holm, Håkan; Nystedt, Paul
  4. Endogenous Network Formation In the Laboratory By Celen, Bogachan; Hyndman, Kyle
  5. Herding with and without Payoff Externalities - An Internet Experiment By Mathias Drehmann; Jörg Oechssler; Andreas Roider
  6. Does Stake Size matter for Cooperation and Punishment? By Martin G. Kocher; Peter Martinsson; Martine Visser
  7. The Compromise Game: Two-sided Adverse Selection in the Laboratory By Thomas R. Palfrey
  8. Ambiguity Aversion as a Predictor of Technology Choice: Experimental Evidence from Peru By Jim Engle-Warnick; Javier Escobal; Sonia Laszlo
  9. Are people samaritans or avengers? By Ottone, Stefania
  10. Is the veil of ignorance only a concept about risk? An experiment By Hörisch, Hannah
  11. How to help unemployed find jobs quickly ; experimental evidence from a mandatory activation program By Graversen,Brian Krogh; Ours,Jan C. van
  12. Individual and Couple Decision Behavior under Risk: The Power of Ultimate Control By André de Palma; Nathalie Picard; Anthony Ziegelmeyer
  13. Small is Successful!? By Mathias Erlei
  14. Rationality, Rule-Following and Emotions: On the Economics of Moral Preferences By V. Vanberg

  1. By: Jose Apesteguia (Public University of Navarre, Department of Economics); Steffen Huck (, Department of Economics and ELSE); Jörg Oechssler (University of Heidelberg, Department of Economics)
    Abstract: We introduce a generalized theoretical approach to study imitation and subject it to rigorous experimental testing. In our theoretical analysis we find that the di¤erent predictions of previous imitation models are due to different informational assumptions, not to different behavioral rules. It is more important whom one imitates rather than how. In a laboratory experiment we test the different theories by systematically varying information conditions. We find significant effects of seemingly innocent changes in information. Moreover, the generalized imitation model predicts the differences between treatments well. The data pro- vide support for imitation on the individual level, both in terms of choice and in terms of perception. But imitation is not unconditional. Rather individuals propensity to imitate more successful actions is increasing in payoff differences.
    Keywords: Evolutionary game theory; Stochastic stability; Imita- tion; Cournot markets; Information; Experiments; Simulations
    JEL: C72 C91 C92 D43 L13
    Date: 2005–04
  2. By: Peter Dürsch (University of Heidelberg, Department of Economics); Albert Kolb (University of Bonn, Department of Economics); Jörg Oechssler (University of Heidelberg, Department of Economics); Burkhard C. Schipper (University of California, Department of Economics)
    Abstract: We use an experiment to explore how subjects learn to play against computers which are programmed to follow one of a number of standard learning algorithms. The learning theories are (unbeknown to subjects) a best response process, fictitious play, imitation, reinforcement learning, and a trial & error process. We test whether subjects try to influence those algorithms to their advantage in a forward-looking way (strategic teaching). We find that strategic teaching occurs frequently and that all learning algorithms are subject to exploitation with the notable exception of imitation. The experiment was conducted, both, on the internet and in the usual laboratory setting. We find some systematic differences, which however can be traced to the different incentives structures rather than the experimental environment.
    Keywords: learning; fictitious play; imitation; reinforcement; trial & error; strategic teaching; Cournot duopoly; experiments; internet.
    JEL: C72 C91 C92 D43 L13
    Date: 2005–10
  3. By: Holm, Håkan (Department of Economics, Lund University); Nystedt, Paul (Department of Economics and Management, Linköping University)
    Abstract: This paper investigates trust in situations, where decision-makers are large groups and the decision-mechanism is collective, by developing a game to study trust behavior. Theories from behavioral economics and psychology suggest that trust in such situations may differ from individual trust. Experimental results here reveal a large difference in trust but not in trustworthiness between the individual and collective setting. Furthermore, an artefactual field experiment captures the determinants of collective trust behavior among two cohorts in the Swedish population. One result is that beliefs about the other and the own group are strongly associated with collective trustworthiness and trust behavior.
    Keywords: Collective Trust; Voting; Experiment; Beliefs
    JEL: C72 C90 C93 D70
    Date: 2006–12–20
  4. By: Celen, Bogachan; Hyndman, Kyle
    Abstract: This paper provides an experimental test of a theory of endogenous network formation. A group of subjects face a decision problem under uncertainty. The subjects are endowed with a private information about the fundamentals of the problem, and they are supposed to make a decision one after the other. The key feature of the experiment is that a subject can observe the decisions of the preceding subjects by forming links. A link is costly, yet it enables a subject to observe previous decisions of those to whom he is linked. We show that subjects respond to changes in the information structure and the cost of link formation in the expected manner. However, we also show that behavior systematically deviates from the Bayesian benchmark as subjects form more links than theory predicts. Subjects also exhibit a tendency to conform rather than follow their own information. In order to explain this pattern, we provide an econometric model that posits that subjects care about their relative standing in the group. We show that the modified model provides a better fit than a standard QRE.
    Keywords: Social learning; social interaction; networks; network formation
    JEL: C91 C92 C73 A14 D8
    Date: 2006–12–15
  5. By: Mathias Drehmann (Bank of England); Jörg Oechssler (University of Heidelberg, Department of Economics); Andreas Roider (University of Bonn, Department of Economics and Stanford University)
    Abstract: Most real world situations that are susceptible to herding are also characterized by direct payoff externalities. Yet, the bulk of the theoretical and experimental literature on herding has focused on pure informational externalities. In this paper we experi- mentally investigate the effects of several different forms of payoff externalities (e.g., network effects, first-mover advantage, etc.) in a standard information-based herding model. Our results are based on an internet experiment with more than 6000 subjects, including a subsample of 267 consultants from an international consulting firm. We also replicate and review earlier cascade experiments. Finally, we study reputation e¤ects (i.e., the influence of success models) in the context of herding.
    Keywords: information cascades, herding, network e¤ects, experiment, internet.
    JEL: C92 D8
    Date: 2005–04
  6. By: Martin G. Kocher (CREED, Universiteit van Amsterdam); Peter Martinsson (Göteborg University, Sweden); Martine Visser (Göteborg University, Sweden)
    Abstract: The effects of stake size on cooperation and punishment are investigated using a public goods experiment. We find that an increase in stake size does neither significantly affect cooperation nor, interestingly, the level of punishment.
    Keywords: C72; C91; H41
    Date: 2006–11–22
  7. By: Thomas R. Palfrey (The Division of Humanities and Social Sciences, California Institute of Technology)
    Abstract: We analyze a game of two-sided private information characterized by extreme adverse selection, and study a special case in the laboratory. Each player has a privately known "strength" and can decide to fight or compromise. If either chooses to fight, there is a conflict; the stronger player receives a high payoff and the weaker player receives a low payoff. If both choose to compromise, conflict is avoided and each receives an intermediate payoff. The only equilibrium in both the sequential and simultaneous versions of the game is for players to always fight, independent of their own strength. In our experiment, we observe among other things (i) frequent compromise, (ii) little evidence of learning, and (iii) different behavior between first, second and simultaneous movers. We explore several models in an attempt to understand the reasons underlying these anomalous choices, including quantal response equilibrium, cognitive hierarchy, and cursed equilibrium.
    Keywords: two-sided private information, adverse selection, laboratory experiment, behavioral game theory, quantal response equilibrium, cognitive hierarchy, cursed equilibrium
    JEL: C92 D82
    Date: 2006–12
  8. By: Jim Engle-Warnick; Javier Escobal; Sonia Laszlo
    Abstract: The lack of adoption of new farming technologies despite known benefis is a well-documented phenomenon in development economics. In addition to a number of market constraints, risk aversion predominates the discussion of behavioral determinants of technology adoption. We hypothesize that ambiguity aversion may also be a determinant, since farmers may have less information about the distribution of yield outcomes from new technologies compared with traditional technologies. We test this hypothesis with a laboratory experiment in the field in which we measure risk and ambiguity preferences. We combine our experiment with a survey in which we collect information on farm decisions and identify market constraints. We find that ambiguity aversion does indeed predict actual technology choices on the farm. <P>Un phénomène bien documenté en économie du développement est le nombre peu élevé d’agriculteurs qui décident d’adopter de nouvelles technologies en agriculture, malgré leurs avantages connus. En plus des nombreuses contraintes imposées par le marché, l’aversion au risque prédomine la discussion sur les déterminants de l’adoption de nouvelles technologies. Nous émettons l’hypothèse que l’aversion à l’ambiguïté pourrait aussi être un déterminant puisqu’il est possible que les agriculteurs aient moins d’information sur la distribution du rendement des nouvelles technologies que sur celle des technologies traditionnelles. Nous testons la validité de cette hypothèse avec une expérience en laboratoire sur le terrain où nous mesurons les préférences vis-à-vis du risque et de l’ambiguïté. Nous combinons notre expérience à un sondage portant sur les décisions prises en matière d’agriculture et identifiant les contraintes du marché. Nous constatons qu’effectivement, l’aversion à l’ambiguïté dicte les choix technologiques réels relatifs à la ferme.
    Keywords: experimental economics, risk measurement instruments, risk preferences, rural development, technology choice, choix technologiques, développement rural, économie expérimentale, instruments de mesure du risque, préférences vis-à-vis du risque
    JEL: O33 O18 C91
    Date: 2007–01–01
  9. By: Ottone, Stefania
    Abstract: The aim of this experiment is twofold. First of all, I want to compare the human tendency to punish unfair behavior to the desire to help victims of that unfairness, in presence of a budget constraint and without the expectation of a long-run pecuniary gain. Secondly, I want to check whether players'behavior changes when the initial endowment is earned and not randomly assigned. Our experiment frame is the Solomon's game.
    Date: 2007–01
  10. By: Hörisch, Hannah
    Abstract: We implement the Rawlsian thought experiment of a veil of ignorance in the laboratory which introduces risk and possibly social preferences. We find that both men and women react to the risk introduced by the veil of ignorance. Only the women additionally exhibit social preferences that reflect an increased concern for equality. Our results for women imply that maximin preferences can also be derived from a combination of some, not necessarily infinite risk aversion and social preferences. This result contrasts the Utilitarians' claim that maximin preferences necessarily represent preferences with infinite risk aversion.
    Keywords: veil of ignorance; social preferences; equality; efficiency; experiment
    JEL: D63 D64 C99
    Date: 2007–01
  11. By: Graversen,Brian Krogh; Ours,Jan C. van (Tilburg University, Center for Economic Research)
    Abstract: This paper investigates how a mandatory activation program in Denmark affects the job finding rate of unemployed workers. The activation program was introduced in an experimental setting where about half of the workers who became unemployed in the period from November 2005 to March 2006 were randomly assigned to the program while the other half was not. It appears that the activation program is very effective. The median unemployment duration of the control group is 14 weeks, while it is 11.5 weeks for the treatment group. The analysis shows that the job finding rate in the treatment group is 30% higher than in the control group. This result is mainly driven by the more intensive contacts between the unemployed and the public employment service.
    Keywords: unemployment insurance;unemployment duration;experiment
    JEL: C41 H55 J64 J65
    Date: 2006
  12. By: André de Palma; Nathalie Picard; Anthony Ziegelmeyer
    Abstract: This paper reports results of an experiment designed to analyze the link between risky decisions made by couples, and risky decisions made separately by each spouse. We estimate both the individuals and the couples’ degrees of risk aversion, and we analyze how the risk preferences of the two spouses aggregate when they have to perform joint decisions under risk. We show that the man has more decision power than the woman, but the woman’s decision power increases when she has ultimate control over the joint decision.
    Date: 2006–12
  13. By: Mathias Erlei (Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal))
    Abstract: This paper provides experimental evidence on exit behavior of asymmetrically sized firms in a duopoly with declining demand. We conduct three treatments: (a) The basic model with indivisible real capital. The structure of this treatment represents the main findings of Ghemawat and Nalebuff (1985); (b) an extension of the basic model by introducing a bankruptcy constraint; (c) here we allow for divisible real capital (Ghemawat and Nalebuff (1990)). In all three treatments we find behavior that is, by and large, in line with subgame perfect Nash Equilibrium. However, there is a problem of multiplicity of equilibria in (b) and we find an anchor effect as well as learning effects in (c).
    Keywords: Exit, duopoly, declining market, experimental economics
    JEL: D43 L11 C92
    Date: 2006
  14. By: V. Vanberg
    Abstract: The long-standing critique of the ‘economic model of man’ has gained new impetus not least due to the broadening research in behavioral and experimental economics. Many of the critics have focused on the apparent difficulty of traditional rational choice theory to account for the role of moral or ethical concerns in human conduct, and a number of authors have suggested modifications in the standard model in response to such critique. This paper takes issue with a quite commonly adopted ‘revisionist’ strategy, namely seeking to account for moral concerns by including them as additional preferences in an agent’s utility function. It is argued that this strategy ignores the critical difference between preferences over outcomes and preferences over actions, and that it fails to recognize that ‘moral preferences’ belong into the second category. Preferences over actions, however, cannot be consistently accounted for within a theoretical framework that focuses on the rationality of single actions. They require a shift of perspective, from a theory of rational choice to a theory of rule-following behavior. Length 30 pages
    Date: 2007–01

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