nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒03‒03
six papers chosen by
Daniel Houser
George Mason University

  1. Communication and Renegotiation in Two-stage Games By Andersson , Ola; Wengström, Erik
  2. The Impact of Naïve Advice and Observational Learning in Beauty-contest Games By Martin G. Kocher; Matthias Sutter; Florian Wakolbinger
  3. Social Learning of Efficiency Enhancing Trade With(out) Market Entry Costs - An experimental study By Nadine Chlaß; Werner Güth; Christoph Vanberg
  4. Methodological Frontiers of Public Finance Field Experiments By Jeffrey R. Kling
  5. Effects of Tax Morale on Tax Compliance: Experimental and Survey Evidence By Ronald G. Cummings; Jorge Martinez-Vazquez; Michael McKee; Benno Torgler
  6. Naïve, Resolute or Sophisticated? A Study of Dynamic Decision Making By John D Hey; Gianna Lotito

  1. By: Andersson , Ola (Department of Economics, Lund University); Wengström, Erik (Department of Economics, Lund University)
    Abstract: In this paper we experimentally investigate cooperation and non-binding communication in a two-stage game. The game has a subgame perfect equilibrium where subjects can sustain cooperation in the first stage by threatening to punish deviant behavior in the second stage. In contrast, renegotiation-proofness rules out cooperation in the first stage when intra-play communication is possible. Our results provide some support for this argument. We observe less cooperation in the first stage when intra-play communication is possible. Moreover, pre-play communication only has a significant impact on actions when intra-play communication is not allowed. The experimental design also enables us to perform an in-depth analysis of communication.
    Keywords: Renegotiation; Communication; Cooperation; Experiments
    JEL: C72 C92
    Date: 2007–02–21
  2. By: Martin G. Kocher (Universiteit van Amsterdam); Matthias Sutter (University of Innsbruck); Florian Wakolbinger (University of Innsbruck)
    Abstract: We study the impact of advice or observation on the depth of reasoning in an experimental beauty-contest game. Both sources of information trigger faster convergence to the equilibrium. Yet, we find that subjects who receive naïve advice outperform uninformed subjects permanently, whereas subjects who observe others’ past behavior before making their decision do only have a temporary advantage over uninformed subjects. We show in a simulation that the latter result is due to subjects failing to make the most out of observing others.
    Keywords: social learning; advice; observational learning; beauty-contest game
    JEL: C70 C72 C91
    Date: 2007–01–29
  3. By: Nadine Chlaß; Werner Güth; Christoph Vanberg
    Abstract: We investigate experimentally whether entry costs have an impact on the evolution of cooperation in a social dilemma game. In particular, subjects repeatedly play the so-called takeover game with anonymous partners randomly drawn from a fixed population of participants. The game represents a social dilemma because selfishly rational players can fail to make efficient trades due to information asymmetries. In order to create a potential for social learning, we provide subjects with feedback about average results in the population. Our interest lies in observing the extent to which cooperative behaviors facilitating trade are adopted. Our main conjecture is that market entry costs inspire more trade. This is only partly confirmed by the data.
    Keywords: Cooperation, sunk costs, social learning, takeover game
    JEL: C78 C91 C92
    Date: 2007–01
  4. By: Jeffrey R. Kling
    Abstract: The purpose of this article is to demonstrate how a rich array of methods can be applied to increase the relevance of field experiments in public economics. Two cross-cutting themes are important in multiple phases of the research. First, greater statistical sophistication can draw more value from a field experiment without obscuring the simple and compelling information from the differences in average outcomes of intervention and control groups. Second, the methodological frontier is interdisciplinary, drawing on knowledge and techniques developed in psychology, anthropology, and sociology that can be adapted in order to make public finance field experiments more useful.
    JEL: C93 H0 I0 J18
    Date: 2007–02
  5. By: Ronald G. Cummings; Jorge Martinez-Vazquez; Michael McKee; Benno Torgler
    Abstract: There is considerable evidence that enforcement efforts can increase tax compliance. However, there must be other forces at work because observed compliance levels cannot be fully explained by the level of enforcement actions typical of most tax authorities. Further, there are observed differences, not related to enforcement effort, in the levels of compliance across countries and cultures. To fully understand differences in compliance behavior across cultures one needs to understand differences in tax administration and citizen attitudes toward governments. The working hypothesis is that cross-cultural differences in behavior have foundations in these institutions. Tax compliance is a complex behavioral issue and its investigation requires the use of a variety of methods and data sources. Results from laboratory experiments conducted in different countries demonstrate that observed differences in tax compliance levels can be explained by differences in the fairness of tax administration, in the perceived fiscal exchange, and in the overall attitude towards the respective governments. These experimental results are shown to be robust by replicating them for the same countries using survey response measures of tax compliance.
    JEL: H20 C90
    Date: 2007–02–27
  6. By: John D Hey; Gianna Lotito
    Abstract: Dynamically inconsistent decision makers have to decide, implicitly or explicitly, what to do about their dynamic inconsistency. Economic theorists have identified three possible responses - to act naively (thus ignoring the dynamic inconsistency), to act resolutely (not letting their inconsistency affect their behaviour) or to act sophisticatedly (hence taking into account their inconsistency). We use data from a unique experiment (which observes both behaviour and perferences) in order to distinguish these three possibilities. We find that the majority of subjects are resolute, a substantial proportion are naïve and very few are sophisticated. These results have important implications for predicting the behaviour of people in dynamic situations.
    Keywords: Dynamic decision making, naivety, sophistication, resoluteness, dynamic inconsistencies
    JEL: D90 D80 C91
    Date: 2007–02

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