nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒02‒17
nine papers chosen by
Daniel Houser
George Mason University

  1. Cooperation, Competition, and Risk Attitudes: An Intergenerational Field and Laboratory Experiment By Gary Charness; Marie-Claire Villeval
  2. Re-matching, Information and Sequencing Effects in Posted Offer Markets By Douglas D. Davis; Korenok Oleg; Robert Reilly
  3. Personal Autonomy in Trust-Based Interactions. An Experimental Analysis By Matteo Ploner
  4. Identity, Cooperation, and Punishment By Kendra N. McLeish; Robert J. Oxoby
  5. Asymmetric Enforcement of Cooperation in a Social Dilemma By Nikos Nikiforakis; Hans-Theo Normann; Brian Wallace
  6. Minimal group identity and gender in ultimatum games By Camille Chaserant
  7. Consistency, Heterogeneity, and Granularity of Individual Behavior under Uncertainty By Syngjoo Choi; Raymond Fisman; Douglas Gale; Shachar Kariv
  8. Pricing and Trust By Steffen Huck; Gabriele K. Ruchala; Jean-Robert Tyran
  9. A Classroom Experiment on Exchange Rate Determination with Purchasing Power Parity By Mitchell, David; Rebelein, Robert P.; Schneider, Patricia; Simpson, Nicole B.; Eric Fisher

  1. By: Gary Charness (University of California, Santa Barbara); Marie-Claire Villeval (CNRS-GATE and IZA)
    Abstract: The population of most developed societies is ‘graying’. As life expectancy increases and the large baby-boom generation approaches retirement age, this has critical consequences for maintaining a high standard of living and the sustainability of pension systems. In the light of these labor-force and social concerns, we consider experimentally the comparative behavior of juniors (under 30) and seniors (over 50) in both experiments conducted onsite with the employees of two large firms and in a conventional laboratory environment with students and retirees. Our results are compelling. First, seniors are not more risk-averse, as opposed to the conventional stereotype. Second, both juniors and seniors react to the competitiveness of the environment and there is no significant difference in performance in the real-effort task across the generations when they are competing. Third, seniors are typically more cooperative than juniors in a team-production game. Cooperation is highest in groups in which there is a mix of juniors and seniors, suggesting that there are indeed benefits in maintaining a work force with diversity in age. Overall, the implication is that it is beneficial to define additional short-term incentives near the end of the workers’ career to motivate and to retain older workers. A secondary, but important, issue is the external validity of conventional laboratory experiments. In general we do not find strong differences in behavior between workers and non-workers, indicating that laboratory experiments may not be such a bad approximation for the field environment.
    Keywords: age, performance, labor market, discrimination, diversity, stereotypes, experiments
    JEL: A13 B49 C91 C93 J14 J18 J38 J70
    Date: 2007–01
  2. By: Douglas D. Davis (Department of Economics, VCU School of Business); Korenok Oleg (Department of Economics, VCU School of Business); Robert Reilly (Department of Economics, VCU School of Business)
    Abstract: This paper reports an experiment conducted to evaluate the effects of some standard procedural variations on outcomes in posted offer oligopoly experiments. Procedures studied include the presence or absence of market information, alterations in the number of trading periods, the use of re-matching or fixed seller pairs, and sequencing effects. Experimental results indicate that while some results are robust to all variations, procedural variations can exert first order effects on outcomes. Results suggest that procedures should be chosen with care in oligopoly experiments, and that results should be carefully interpreted in light of the selected procedures.
    Keywords: market experiments, oligopoly, market concentration
    JEL: C9 D4 L4
    Date: 2007–01
  3. By: Matteo Ploner
    Abstract: The paper experimentally investigates the interactions between restrictions to personal autonomy and reciprocity in a Principal-Agent relationship. Previous experimental contributions have shown that actions aimed at restricting decisional autonomy are likely to reduce reciprocity in trust- based relationships. Results in our experiment, which is a modified version of the Investment Game, differ from previous findings and conform more to standard economic predictions. Principals in our interaction do not support the self-determination of agents. On the other side, agents do not show any positive reciprocity when allowed to freely determine their behavior in the game. (This is an updated version of the CEEL Working Paper 2-05)
    Keywords: Principal-Agent relationship, Trust, Reciprocity, Self-Determination, Incentives
    JEL: C72 C91 D23 M50
    Date: 2007
  4. By: Kendra N. McLeish (University of Calgary); Robert J. Oxoby (University of Calgary and IZA)
    Abstract: Among economists, there is increased recognition of the role individuals’ identities play in decision-making. In this paper, we conduct laboratory experiments in which we explore the motivations for and the effects of group identity. We find that negative out-group opinion (acting as an inter-group identity threat) can motivate in-group/out-group effects in a simple bargaining context. Further, our results suggest that disparagement of group norms by members of the in-group (acting as an intra-group identity threat) increases the use of costly punishment within the in-group.
    Keywords: identity, fairness, reciprocity, experiments
    JEL: C9 D1 M5
    Date: 2007–01
  5. By: Nikos Nikiforakis; Hans-Theo Normann; Brian Wallace
    Abstract: The imposition of sanctions is one of the most common means of enforcing cooperation in decentralized interactions. Typically, agents are asymmetric in the sense that each has a different sanctioning power. Using a public-good experiment we analyze such a decentralized punishment institution in which agents are asymmetric. The asymmetric punishment institution prevents the decay of cooperation towards the non-cooperative equilibrium level. Strong agents contribute less to the public good, but punish more than weak agents. At the aggregate level, we observe remarkable similarities between outcomes in asymmetric and symmetric punishment institutions.
    Keywords: asymmetry, decentralized punishment, public good, punishment effectiveness
    JEL: C92 D70 H41
    Date: 2007
  6. By: Camille Chaserant
    Abstract: Social identity, or group membership, affects economic outcomes. However, this influence may differ according to the nature of the groups involved. Investigating the weakest group cohesion necessary to influence individual behaviors, we undertook three linked ultimatum game experiments involving a minimal categorization process. Three main results are presented here: (i) Belonging to a minimal group affects behaviors; (ii) Men and women differ systematically in the nature of this influence and (iii) The ‘label’ given to a minimal group is in itself not neutral.
    Keywords: Minimal group, ultimatum game, social identity, gender
    JEL: C91 A12 C99
    Date: 2006
  7. By: Syngjoo Choi (Department of Economics, University College London); Raymond Fisman (Graduate School of Business, Columbia University); Douglas Gale (Department of Economics, New York University); Shachar Kariv (Department of Economics, University of California, Berkeley)
    Abstract: By using graphical representations of budget sets over bundles of state-contingent commodities, we generate a very rich data set well-suited to studying behavior under uncertainty at the level of the individual subject. We test the data for consistency with the maximization hypothesis, and we estimate preferences using a two-parameter utility function based on Faruk Gul (1991). This specification provides a good interpretation to the data at the level of the individual subject and can account for the highly heterogeneous behaviors observed in the laboratory. The parameter estimates jointly describe attitudes toward risk and allow us to characterize the distribution of risk preferences in the population.
    Keywords: uncertainty, revealed preference, Expected Utility Theory, loss/disappointment aversion, experiment
    JEL: D81 C91
    Date: 2007–01
  8. By: Steffen Huck (University College London); Gabriele K. Ruchala (University College London); Jean-Robert Tyran (Department of Economics, University of Copenhagen)
    Abstract: We experimentally examine the effects of flexible and fixed prices in markets for experience goods in which demand is driven by trust. With flexible prices, we observe low prices and high quality in competitive (oligopolistic) markets, and high prices coupled with low quality in non-competitive (monopolistic) markets. We then introduce a regulated intermediate price above the oligopoly price and below the monopoly price. The effect in monopolies is more or less in line with standard intuition. As price falls volume increases and so does quality, such that overall efficiency is raised by 50%. However, quite in contrast to standard intuition, we also observe an efficiency rise in response to regulation in oligopolies. Both, transaction volume and traded quality are, in fact, maximal in regulated oligopolies.
    Keywords: markets; price competition; price regulation; reputation; trust; moral hazard; experience goods
    JEL: C72 C90 D40 D80 L10
    Date: 2007–01
  9. By: Mitchell, David (St. Mary's College of CA Department of Economics); Rebelein, Robert P. (Vassar College Department of Economics); Schneider, Patricia (Mount Holyoke College Department of Economics); Simpson, Nicole B. (Colgate College Department of Economics); Eric Fisher (California Polytechnic State University and Federal Reserve Bank of Cleveland)
    Abstract: We develop a classroom experiment on exchange rate determination appropriate for undergraduate courses in macroeconomics and international economics. Students represent citizens from different countries and need to obtain currency to purchase goods. By participating in a sealed bid auction to buy currency, students gain a better understanding of currency markets and the determination of exchange rates. The implicit framework for exchange rate determination is one in which prices are perfectly flexible (in the long run) so that purchasing power parity (PPP) prevails. Additional treatments allow students to examine the impact of transport costs, nontradable goods and tariffs on the exchange rate and to explore possible deviations from PPP.

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