nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒05‒19
twelve papers chosen by
Daniel Houser
George Mason University

  1. Replication in Economics By Daniel Hamermesh
  2. Another experimental look at reciprocal behavior: indirect reciprocity By Bonein, Aurélie; Serra, Daniel
  3. On the Efficiency of AC/DC: Bon Scott versus Brian Johnson By Oxoby, Robert
  4. Experimental Evidence on English Auctions: Oral Outcry vs. Clock By Ricardo Gonçalves; John D Hey
  5. On the absorbability of the Guessing Game Theory. A Theoretical and Experimental Analysis By Andrea Morone; Serena Sandri; Tobias Uske
  6. Crowding out in an indefinitely repeated Asymmetric Trust Game By Thomas Dirkmaat; Stephanie Rosenkranz; Vincent Buskens
  7. An Experimental Study of Complex-Offer Auctions: Payment Cost Minimization vs. Offer Cost Minimization By Rimvydas Baltaduonis
  8. Decentralized Organizational Learning: An Experimental Investigation By John Duffy; Andreas Blume; April Franco
  9. Simple-Offer vs. Complex-Offer Auctions in Deregulated Electricity Markets By Rimvydas Baltaduonis
  10. Altruistic Versus Spiteful Behavior in a Public Good Game By Alexander Matros
  11. Evidence of Unequal Treatment in Hiring against Obese Applicants: A Field Experiment By Dan-Olof Rooth
  12. Returns to capital in microenterprises : evidence from a field experiment By Woodruff, Christopher; McKenzie, David; de Mel, Suresh

  1. By: Daniel Hamermesh (University of Texas at Austin, NBER and IZA)
    Abstract: This examination of the role and potential for replication in economics points out the paucity of both pure replication - checking on others' published papers using their data - and scientific replication - using data representing different populations in one's own work or in a Comment. Several controversies in empirical economics illustrate how and how not to behave when replicating others' work. The incentives for replication facing editors, authors and potential replicators are examined. Recognising these incentives, I advance proposals aimed at journal editors that will increase the supply of replication studies, and I propose a way of generating more scientific replication that will make empirical economic research more credible.
    Keywords: empirical economics, methodology
    JEL: A14 B41 C59
    Date: 2007–04
  2. By: Bonein, Aurélie; Serra, Daniel
    Abstract: This paper highlights a new social motivation, the indirect reciprocity, through a three-player dictator-ultimatum game. Player 2 has the opportunity to reward or punish indirectly the player 1 by inciting – with her offer - player 3 to accept or to reject the division. We implement three treatments: in the first two we vary player 2’s available information whereas in treatment 3, players take part in a dictator game - as proposers - before being player 2s in the dictator-ultimatum game. Results show that 55% of subjects in treatment 2 and 28% in treatment 3 behave as indirect reciprocity predicts. Another reciprocal behavior - the generalized reciprocity - is investigated through a three-player dictator game. Our data show that 80% of players 2 act according to this reciprocal behavior. Finally, our findings confirm that the more complex the strategic interaction becomes the more self-regarding behavior is likely and the less other-regarding behaviors, such as reciprocity, dominate.
    Keywords: indirect reciprocity; generalized reciprocity; dictator game; ultimatum game; individual behavior
    JEL: D63 C72 C91
    Date: 2007–02
  3. By: Oxoby, Robert
    Abstract: We explore the effects of listening to the music of AC/DC in a simple bargaining environment.
    Keywords: bargaining; reciprocity; music; experiments
    JEL: Z19 C91
    Date: 2007–05–07
  4. By: Ricardo Gonçalves; John D Hey
    Abstract: This paper tests experimentally, in a common value setting, the equivalence between the Japanese English auction (or clock auction) and an open outcry auction, where bidders are allowed to call their own bids. We find that (i) bidding behaviour is different in each type of auction, but also that (ii) this difference in bidding behaviour does not affect significantly the auction prices. This lends some support to the equivalence between these two types of auction. The winner's curse is present: overbidding led to higher than expected prices (under Nash bidding strategies) in both types of auction.
    Keywords: English auctions, discrete bidding, winner's curse
    JEL: D44 C91 C50
    Date: 2007–05
  5. By: Andrea Morone (University of Bari.); Serena Sandri (University of Dresden, Chair for Managerial Economics, Helmholtzstraße 10, 01069 Dresden, Germany); Tobias Uske (Max Planck Institute of Economics, Kahlaische Straße 10, 07745 Jena, Germany.)
    Abstract: Theory absorption, a notion introduced by Morgenstern and Schwödiauer (1972) and further elaborated by Güth and Kliemt (2004), discusses the problem whether a theory can survive its own acceptance. Whereas this holds for strategic equilibria according to the assumptions on which they are based, the problem if theories are absorbable by at most boundedly rational decision makers is hardly discussed. Based on guessing game experiments we discuss the requirements of equilibrium theory absorption and test experimentally the effects of informing none, some or all players about how to derive equilibrium predictions.
    Keywords: theory absorption, guessing game, p-beauty contest, individual behaviour, elimination of dominated strategies
    JEL: C72 C91
    Date: 2007–04
  6. By: Thomas Dirkmaat; Stephanie Rosenkranz; Vincent Buskens
    Abstract: In this paper we introduce an alternative version of the trust game by Dasgupta (1988) and Kreps (1990) that allows for asymmetric information. We use this version to study the effect of checking on the trustee’s behaviour, checking is a control option the trustor can decide to use and that takes place after both trustor and trustee made their initial decisions. ‘Checking’ differs in this respect from the often in the literature found ‘monitoring’ that allows the trustor to control the trustee’s behaviour before the trustee makes his decision. The game theoretical analysis suggests that checking increases cooperation. The experimental results show that this is only true for the selfish part of the trustee population. Honest trustee react negatively to checking, which is more in line with crowding out theory.
    Keywords: Trust, Asymmetric Information, Experiment, Checking, Crowding Out
    JEL: C71 C91 D82
    Date: 2006–12
  7. By: Rimvydas Baltaduonis (University of Connecticut and George Mason University)
    Abstract: A Payment Cost Minimization (PCM) auction has been proposed as an alternative to the Offer Cost Minimization (OCM) auction to be used in wholesale electric power markets with the intention to lower the procurement cost of electricity. Efficiency concerns about this proposal have relied on the assumption of true production cost revelation. Using an experimental approach, I compare the two auctions, strictly controlling for the level of unilateral market power. A specific feature of these complex-offer auctions is that the sellers submit not only the quantities and the minimum prices at which they are willing to sell, but also the start-up fees that are designed to reimburse the fixed start-up costs of the generation plants. I find that both auctions result in start-up fees that are significantly higher than the start-up costs. Overall, the two auctions perform similarly in terms of procurement cost and efficiency. Surprisingly, I do not find a substantial difference between less market power and more market power designs. Both designs result in similar inefficiencies and equally higher procurement costs over the competitive prediction. The PCM auction tends to have lower price volatility than the OCM auction when the market power is minimal but this property vanishes in the designs with market power. These findings lead me to conclude that both the PCM and the OCM auctions do not belong to the class of truth revealing mechanisms and do not easily elicit competitive behavior.
    Keywords: strategic behavior, sealed-bid auction, complex offer auction, electricity, efficiency
    JEL: C72 D4 D61 L94
    Date: 2007–04
  8. By: John Duffy; Andreas Blume; April Franco
    Abstract: We experimentally study decentralized organizational learning. Our objective is to understand how learning members of an organization cope with the confounding effects of the simultaneous learning of others. Rather than inferring or postulating some heuristic organizational learning behavior, we experimentally test the optimal learning predictions of a stylized, rational agent model of organizational learning due to Blume and Franco [2007]. This model provides sharp testable predictions as to how learning members of an organization might cope with the simultaneous learning of others as a function of fundamental variables that characterize an organization, e.g., the firm size and the discounting of future payoffs. While the problem of learning while others are learning is quite difficult, we find support for the comparative static predictions of the unique symmetric equilibrium of the model.
    Date: 2007–05
  9. By: Rimvydas Baltaduonis (University of Connecticut and George Mason University)
    Abstract: In my recent experimental research of wholesale electricity auctions, I discovered that the complex structure of the offers leaves a lot of room for strategic behavior, which consequently leads to anti- competitive and inefficient outcomes in the market. A specific feature of these complex-offer auctions is that the sellers submit not only the quantities and the minimum prices at which they are willing to sell, but also the start-up fees that are designed to reimburse the fixed start-up costs of the generation plants. In this paper, using the experimental method I compare the performance of two complex-offer auctions (COAs) against the performance of a simple-offer auction (SOA), in which the sellers have to recover all their generation costs --- fixed and variable ---through a uniform market-clearing price. I find that the SOA significantly reduces consumer prices and lowers price volatility. It mitigates anti-competitive effects that are present in the COAs and achieves allocative efficiency more quickly.
    Keywords: strategic behavior, sealed-bid auction, complex offer auction, electricity, efficiency
    JEL: C72 D4 D61 L94
    Date: 2007–04
  10. By: Alexander Matros
    Abstract: This paper analyses an evolutionary version of the Public Good game of Eshel, Samuelson, and Shaked (1998) in which agents can choose between imitation and best-reply decision rules. We describe conditions under which altruistic and spiteful (maximizing) behavior arise: these conditions are established for any number of neighbors and any total number of agents in the population. Given mistake-free play, (short-run) outcomes are identical whether agents are constrained to employ an imitation rule only; or they can choose between imitation and best-reply rules. Given the possibility of mistakes, (long-run) outcomes vary across these two scenarios. The paper suggests how to provide public goods and gives an explanation of why we observe seemingly irrational cooperation - altruistic behavior - in the rational world.
    JEL: C70 C72 C73
    Date: 2006–12
  11. By: Dan-Olof Rooth (Kalmar University, CReAM and IZA)
    Abstract: This study presents evidence of recruitment discrimination against obese individuals in Sweden by sending fictitious applications to real job openings. Otherwise identical applications were randomly assigned a portrait photograph of an obese or a normalweight job applicant. Applications with an obese applicant receive twenty percent fewer callbacks for an interview. It is also found that discrimination is the same against men and women and that it varies across occupations in a systematic way in that firms hiring employees in occupations with more customer contact discriminate more. The tentative conclusion is that customer discrimination and/or statistical discrimination based on the correlation between job performance and being obese is the explanation. Also, opposite to what is expected, register data show that the share of obese employees is higher in occupations were discrimination is found to be higher.
    Keywords: obesity, discrimination, correspondence testing
    JEL: J64 J71
    Date: 2007–05
  12. By: Woodruff, Christopher; McKenzie, David; de Mel, Suresh
    Abstract: Small and informal firms account for a large share of employment in developing countries. The rapid expansion of microfinance services is based on the belief that these firms have productive investment opportunities and can enjoy high returns to capital if given the opportunity. However, measuring the return to capital is complicated by unobserved factors such as entrepreneurial ability and demand shocks, which are likely to be correlated with capital stock. The authors use a randomized experiment to overcome this problem and to measure the return to capital for the average microenterprise in their sample, regardless of whether they apply for credit. They accomplish this by providing cash and equipment grants to small firms in Sri Lanka, and measuring the increase in profits arising from this exogenous (positive) shock to capital stock. After controlling for possible spillover effects, the authors find the average real return to capital to be 5.7 percent a month, substantially higher than the market interest rate. They then examine the heterogeneity of treatment effects to explore whether missing credit markets or missing insurance markets are the most likely cause of the high returns. Returns are found to var y with entrepreneurial ability and with measures of other sources of cash within the household, but not to vary with risk aversion or uncertainty.
    Keywords: Economic Theory & Research,Investment and Investment Climate,Microfinance,Small Scale Enterprise,Economic Growth
    Date: 2007–05–01

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