nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒01‒28
ten papers chosen by
Daniel Houser
George Mason University

  1. Dynamic Choice, Independence, and Emotions By Hopfensitz, Astrid; van Winden, Frans A.A.M.
  2. Endogenous Network Formation in the Laboratory By Celen, Bogachan; Hyndman, Kyle
  3. Enjoy the Silence: An Experiment on Truth-Telling By Santiago Sanchez-Pages; Marc Vorsatz
  4. Best Responding to What? A Behavioral Approach to One Shot Play in 2x2 Games By Gallice, Andrea
  5. Equilibrium Play and Best Response to (Stated) Beliefs in Constant Sum Games By Pedro Rey-Biel
  6. The Compromise Game: Two-sided Adverse Selection in the Laboratory By Juan D. Carrillo; Thomas R. Palfrey
  7. How to Help Unemployed Find Jobs Quickly; Experimental Evidence from a Mandatory Activation Program By Krogh Graversen, Brian; van Ours, Jan C
  8. The Swing Voter’s Curse in the Laboratory By Marco Battaglini; Rebecca Morton; Thomas Palfrey
  9. Measuring Impatience: Elicited Discount Rates and the Barratt Impulsiveness Scale By McLeish, Kendra N; Oxoby, Robert J
  10. Is Beauty only Skin-deep? Disentangling the Beauty Premium on a Game Show By Michele Belot,; V. Bhaskar; Jeroen van de Ven

  1. By: Hopfensitz, Astrid; van Winden, Frans A.A.M.
    Abstract: From the viewpoint of the independence axiom of expected utility theory, an interesting empirical dynamic choice problem involves the presence of a 'global risk', that is, a chance of losing everything whichever safe or risky option is chosen. In this experimental study, participants have to allocate real money between a safe and a risky project. Treatment variable is the particular decision stage at which a global risk is resolved: (i) before the investment decision; (ii) after the investment decision but before the resolution of the investment risk; (iii) after the resolution of the investment risk. The baseline treatment is without global risk. Our goal is to investigate the isolation effect and the principle of timing independence under the different timing options of the global risk. In addition, we examine the role played by anticipated and experienced emotions in the choice problem. Main findings are a violation of the isolation effect, and support for the principle of timing independence. Although behaviour across the different global risk cases is approximately the same, we observe clear differences in people's affective responses. This may be responsible for the conflicting results observed in earlier experiments. Dependent on the timing of the global risk different combinations of anticipated and experienced emotions influence decision making.
    Keywords: anxiety; background risk; emotions; global risk; investment; laboratory experiment; regret
    JEL: A12 C91 D81
    Date: 2007–01
  2. By: Celen, Bogachan (Columbia GSB); Hyndman, Kyle (SMU)
    Abstract: This paper provides an experimental test of a theory of endogenous network forma- tion. 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 econo- metric 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: A14 C73 C91 C92 D8
    Date: 2007–01
  3. By: Santiago Sanchez-Pages; Marc Vorsatz
    Abstract: We analyze experimentally two sender-receiver games with conflictive preferences. In the first game, the sender can choose to tell the truth, to lie, or to remain silent. The latter strategy is costly and similar to an outside option. If sent, the receiver can either trust or distrust the sender’s message. In the second game, the receiver must decide additionally whether or not to costly punish the sender after having observed the history of the game. We investigate the existence of two kinds of social preferences: Lie-aversion and preference for truth-telling. In the first game, senders tell the truth more often than predicted by the sequential equilibrium concept, they remain silent frequently, and there exists a positive correlation between the probability of being truthful and the probability of remaining silent. Our main experimental result for the extended game shows that those subjects who punish the sender with a high probability after being deceived are precisely those who send fewer but more truthful messages. We then explore two formal models of the baseline game that can account for our experimental results. First, we fit the data to the logit agent quantal response equilibrium; secondly, we solve for the Perfect Bayesian Nash equilibria of a stylized version of the baseline game with two types of senders. The equilibrium predictions obtained in both cases are consistent with both preferences for truth-telling and lie-aversion although the latter seems to be more pronounced.
    Keywords: Experiment, Lie-Aversion, Social Preferences, Strategic Information Transmission, Truth-Telling.
    JEL: C72 C73 D83
  4. By: Gallice, Andrea
    Abstract: We introduce a simple procedure to be used for selecting the strategies most likely to be played by inexperienced agents who interact in one shot 2x2 games. We start with an axiomatic description of a function that may capture players' beliefs. Various proposals connected with the concept of mixed strategy Nash equilibrium do not match this description. On the other hand minimax regret obeys all the axioms. Therefore we use minimax regret to approximate players' beliefs and we let players best respond to these conjectured beliefs. When compared with existing experimental evidences about one shot matching pennies games, this procedure correctly indicates the choices of the vast majority of the players. Applications to other classes of games are also explored.
    Keywords: prediction; beliefs; mixed strategy Nash equilibrium; minimax regret; matching pennies; experiments.
    JEL: C72 C91
    Date: 2007–01
  5. By: Pedro Rey-Biel
    Abstract: We report experimental results on one-shot two person 3x3 constant sum games played by non-economists without previous experience in the laboratory. Although strategically our games are very similar to previous experiments in which game theory predictions fail dramatically, 80% of actions taken in our ex- periment coincided with the prediction of the unique Nash equilibrium in pure strategies and 73% of actions were best responses to elicited beliefs. We argue how social preferences, presentation effects and belief elicitation procedures may influence how subjects play in simple but non trivial games and explain the diferences we observe with respect to previous work.
    Keywords: Experiments, Constant Sum Games, Stated Beliefs
    JEL: C72 C91 D81
    Date: 2007–01–15
  6. By: Juan D. Carrillo; Thomas R. Palfrey
    Date: 2007–01–12
  7. By: Krogh Graversen, Brian; van Ours, Jan C
    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: Experiment; Unemployment duration; Unemployment insurance
    JEL: C41 H55 J64 J65
    Date: 2007–01
  8. By: Marco Battaglini; Rebecca Morton; Thomas Palfrey
    Date: 2007–01–12
  9. By: McLeish, Kendra N; Oxoby, Robert J
    Abstract: We explore intertemporal decision making to test the extent to which elicited discount rates and a self-reported scale of impatience measure the same behavioral characteristic. We conduct experiments in which we elicit discount rates using monetary rewards and a self-reported measure of impatience (the Barratt Impulsiveness Scale, BIS-11). Although researchers have utilized these measures to infer aspects of intertemporal preferences, we find no significant correlation between discount rates and the BIS-11 except in the special case where discount rates were elicited after individuals were primed with negative feedback.
    Keywords: intertemporal choice; impulsiveness; discounting; experiments
    JEL: C9 D9
    Date: 2006
  10. By: Michele Belot,; V. Bhaskar; Jeroen van de Ven
    Abstract: This paper analyzes behavior on a TV game show where players' monetary payoffs depend upon an array of factors, including ability in answering questions, perceived cooperativeness and the willingness of other players to choose them. We find a substantial beauty premium and are able to disentangle contributing factors. Attractive players perform no differently than less attractive ones, on every dimension. They also exhibit and engender the same degree of cooperativeness. Nevertheless, attractive players are substantially less likely to be eliminated by their peers. Our results suggest a consumption value basis for the beauty premium.
    Date: 2007–01–11

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