|
on Experimental Economics |
| By: | Brosig, Jeannette; Riechmann, Thomas; Weimann, Joachim |
| Abstract: | This paper puts three of the most prominent specifications of ‘other-regarding’ preferences to the experimental test, namely the theories developed by Charness and Rabin, by Fehr and Schmidt, and by Andreoni and Miller. In a series of experiments based on various dictator and prisoner’s dilemma games, we try to uncover which of these concepts, or the classical selfishapproach, is able to explain most of our experimental findings. The experiments are special with regard to two aspects: First, we investigate the consistency of individual behavior within and across different classes of games. Second, we analyze the stability of individual behavior over time by running the same experiments on the same subjects at several points in time. Our results demonstrate that in the first wave of experiments, all theories of other-regarding preferences explain a high share of individual decisions. Other-regarding preferences seem to wash out over time, however. In the final wave, it is the classical theory of selfish behaviorthat delivers the best explanation. Stable behavior over time is observed only for subjects, who behave strictly selfish. Most subjects behave consistently with regard to at least one of the theories within the same class of games, but are much less consistent across games. |
| Keywords: | individual preferences; consistency; stability; experimental economics |
| JEL: | C90 C91 C72 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:2035&r=exp |
| By: | Schunk, Daniel; Winter, Joachim |
| Abstract: | Experimental studies of search behavior suggest that individuals stop searching earlier than predicted by the optimal, risk-neutral stopping rule. Such behavior could be generated by two different classes of decision rules: rules that are optimal conditional on utility functions departing from risk neutrality, or heuristics derived from limited cognitive processing capacities and satisfycing. To discriminate among these two possibilities, we conduct an experiment that consists of a standard search task as well as a lottery task designed to elicit utility functions. We find that search heuristics are not related to measures of risk aversion, but to measures of loss aversion. |
| Keywords: | search; heuristics; utility function elicitation; risk attitudes; prospect theory |
| JEL: | D83 C91 |
| Date: | 2007–02 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:1377&r=exp |
| By: | Juergen Bracht; Nick Feltovich |
| Abstract: | We use a human-subjects experiment to test the effects of a simple mechanism designed to increase cooperation and efficiency in the trust game. In the equilibrium of the standard trust game, the investor does not invest, foreseeing that the allocator would have kept all of the returns from investment. Our mechanism adds a preplay escrow stage, in which the allocator places an amount (possibly zero) into escrow, to be forfeited if he keeps the proceeds of investment for himself. In the experiment, we vary the amounts that can be put into escrow. Our baseline treatment has no escrow. In a second treatment, only low escrow choices are possible, so the equilibrium is unaffected. In our third treatment, there is an escrow amount high enough that, in equilibrium, investment and sharing of the proceeds will occur. Two additional treatments mirror our second and third, except that in these, the escrow amount is randomly chosen and imposed on the allocator. We find that the high escrow amount, when chosen, does lead to the predicted efficient result. Contrary to the equilibrium prediction, we also find substantial investment in both the baseline and “low-escrow” treatments, leading to markedly higher efficiency than predicted (albeit well below that when the high amount is chosen). Over time, however, cooperation and efficiency after low or zero escrow amounts decline. We find only weak evidence for “crowding-out”, which predicts that given a low or zero amount placed into escrow in non-baseline treatments, investment and efficiency would actually be lower than in the baseline. We also find that initially, investment is more likely after allocators place the maximum possible amount into escrow – as if this action by allocators is being (mistakenly) read by investors as a signal that allocators plan to share. All of these results are seen when escrow choices are imposed as well as when they are voluntary. |
| Keywords: | experiment, trust game, incentives, signal, crowding out |
| JEL: | C72 D82 A13 |
| Date: | 2006–08 |
| URL: | http://d.repec.org/n?u=RePEc:bri:cmpowp:06/154&r=exp |
| By: | Hägglund, Pathric (Swedish Institute for Social Research, Stockholm University) |
| Abstract: | In this paper experimental data from three Swedish demonstration programmes in 2004 are used to study pre-programme effects of active placement efforts. In one of the experiments, targeted towards a broad group of UI receivers, arranged job-search activities in groups combined with increased monitoring of job-search efforts generated a 46 per cent increase in the escape rate between referral to and start of the programme services. This translates into a two-week reduction of the ongoing UI spell. Referrals to increased monitoring alone did not have the same effect on exit behaviour. In the other two experiments, targeted towards youth and highly educated respectively, referrals to active placement efforts had no effect on the pre-programme outflow. |
| Keywords: | Pre-programme effect; policy evaluation; social experiment |
| JEL: | C93 J64 |
| Date: | 2007–02–22 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sofiwp:2007_002&r=exp |
| By: | Rigdon, Mary |
| Abstract: | Principals can attempt to get agents to perform certain actions preferable to the principal by using ex post punishments or rewards to align incentives. Field data is mixed on whether, and to what extent, such informal incentive contracting (paradoxically) crowds out efficient solutions to the agency problem. This paper explores, via a novel set of laboratory experiments, the impact of ex post incentives on informal contracts between principals and agents in bargaining environments in which there are gains from exchange and when there is an opportunity for the principal to relay a no-cost demand of the division of those gains. Incentive contracting in these environments does not crowd-out off-equilibrium cooperation, and at high incentive levels cooperation is crowded in. |
| Keywords: | incentives; trust; reciprocity; organizations; experimental economics |
| JEL: | D01 D02 D00 |
| Date: | 2005–05 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:2007&r=exp |
| By: | Luca Corazzini, Sebastian Kube, Michel André Maréchal (ISLA, Universita' Bocconi, Milano) |
| Abstract: | Mimicking standard features of electoral accountability and selection models, we conduct a computerized laboratory experiment in order to identify the influence of other-regarding preferences on democratic outcomes. We find that elected candidates are more pro-social towards their constituency the more favorable approval rates are. In contrast, this systematic positive relationship is not observed if the appointment is unintentionally determined by computer. These results suggest that a substantial fraction of candidates is motivated by guilt aversion. We discuss the implications of these findings for the design of democratic institutions. |
| Keywords: | guilt aversion, social preferences, accountability, constitutional design, public choice, experiment. |
| JEL: | A13 H1 D72 C92 |
| Date: | 2007–03 |
| URL: | http://d.repec.org/n?u=RePEc:slp:islawp:islawp27&r=exp |
| By: | Rigdon, Mary; McCabe, Kevin; Smith, Vernon |
| Abstract: | It is well-known in evolutionary game theory that population clustering in Prisoner's Dilemma games allows some cooperative strategies to invade populations of stable defecting strategies. We adapt this idea of population clustering to a two-person trust game. Without knowing it, players are typed based on their recent track record as to whether or not they are trusting (Players 1) and whether or not they are trustworthy (Players 2). They are then paired according to those types: trustors with trustworthy types, and similarly non-trustors with untrustworthy types. In the control comparisons, Players 1 are randomly repaired with Players 2 without regard to type. We ask: are there natural tendencies for people to cooperate more frequently in environments in which they experience more cooperation in comparison with controls? |
| Keywords: | exchange; trust; reciprocity; cooperation; clustering; bargaining; experimental economics |
| JEL: | D02 D0 |
| Date: | 2001–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:2006&r=exp |
| By: | Gary E Bolton; Jeannette Brosig |
| Abstract: | We investigate a three-person coalition game in which one bargainer, the builder, can propose and build a coalition over two stages. In equilibrium, coalition building ends with an efficient grand coalition, while the equilibrium path is contingent on the values of the two-person coalitions and associated externality payoffs. Considering relative payoffs need not change the equilibrium path. Nevertheless, outcomes in the experiment are often inefficient. One explanation is that bargainers have difficulties anticipating the future actions of other bargainers. This problem might be mitigated by allowing bargainers to communicate prior to each stage. A test finds that communication does in fact increase efficiency, although unevenly, and at the cost of the builder. The study implies that the nature and pattern of communication among bargainers is a critical factor in efficient coalition building. |
| Keywords: | coalitional bargaining, communication, game theory, experiment |
| JEL: | C7 C9 D7 |
| Date: | 2007–03–06 |
| URL: | http://d.repec.org/n?u=RePEc:kls:series:0030&r=exp |
| By: | Guzmán, Ricardo Andrés; Rodríguez-Sickert, Carlos; Rowthorn, Robert |
| Abstract: | We model the coevolution of behavioral strategies and social learning rules in the context of a cooperative dilemma, a situation in which individuals must decide whether or not to subordinate their own interests to those of the group. There are two learning rules in our model, conformism and payoff-dependent imitation, which evolve by natural selection, and three behavioral strategies, cooperate, defect, and cooperate plus punish defectors, which evolve under the influence of the prevailing learning rules. Group and individual level selective pressures drive evolution. We also simulate our model for conditions that approximate those in which early hominids lived. We find that conformism can evolve when the only problem that individuals face is a cooperative dilemma, in which prosocial behavior is always costly to the individual. Furthermore, the presence of conformists dramatically increases the group size for which cooperation can be sustained. The results of our model are robust: they hold even when migration rates are high, and when conflict among groups is infrequent. |
| Keywords: | Evolution of behavior; Social learning; Cooperation; Conformism; Altruistic punishment; Public good games |
| JEL: | Z13 Z1 H41 |
| Date: | 2006–04–06 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:2037&r=exp |