nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒06‒23
nine papers chosen by
Daniel Houser
George Mason University

  1. Group polarization in the team dictator game reconsidered By Wolfgang Luhan; Martin Kocher; Matthias Sutter
  2. Trust and truth By Ellingsen, Tore; Johannesson, Magnus; Lilja, Jannie; Zetterqvist, Henrik
  3. Inconsistent Choices in Lottery Experiments: Evidence from Rwanda By Sarah Jacobson; Ragan Petrie
  4. The Referendum Incentive Compatibility Hypothesis:Some New Results Using Information Messages By Gianluca Stefani; Riccardo Scarpa
  5. On Punishment and Well-being By Jordi Brandts; María Fernanda Rivas
  6. The cost of lying By Lundquist, Tobias; Ellingsen, Tore; Gribbe, Erik; Johannesson, Magnus
  7. Time is not money By Ellingsen, Tore; Johannesson, Magnus
  8. Is There A Plausible Theory for Risky Decisions? By James C. Cox; Vjollca Sadiraj; Bodo Vogt; Utteeyo Dasgupta
  9. Power to the People: Evidence from a Randomized Field Experiment of a Community-Based Monitoring Project in Uganda By Björkman, Martina; Svensson, Jakob

  1. By: Wolfgang Luhan; Martin Kocher; Matthias Sutter
    Abstract: While most papers on team decision-making find that teams behave more selfishly, less trustingly and less altruistically than individuals, Cason and Mui (1997) report that teams are more altruistic than individuals in a dictator game. Using a within-subjects design we re-examine group polarization by letting subjects make individual as well as team decisions in an experimental dictator game. In our experiment teams are more selfish than individuals, and the most selfish team member has the strongest influence on team decisions. Various explanations for the different findings in Cason and Mui (1997) and in our paper are discussed.
    Keywords: Experiment, dictator game, team behavior, social preferences
    JEL: C72 C91 C92 D70
    Date: 2007–07
  2. By: Ellingsen, Tore (Dept. of Economics, Stockholm School of Economics); Johannesson, Magnus (Dept. of Economics, Stockholm School of Economics); Lilja, Jannie (Department of Peace and Conflict Research, Uppsala University); Zetterqvist, Henrik (Hilti)
    Abstract: In a laboratory experiment, we create relationships between pairs of anonymous subjects through a Prisoners' dilemma game. Thereafter the same subjects play a private values (sealed-bid double auction) bargaining game with or without communication. Communication substantially increases bargaining efficiency among subjects who cooperated in the Prisoners' dilemma, but has no significant effect on bargaining outcomes when one subject defected. Subjects who cooperated in the Prisoners' dilemma bid more aggresively if their opponent defected. Cooperators also lie more about their valuations when their opponent defected: Compared to the case of mutual cooperation, the cooperators' rate of honest revelation decreases from 64% to 6% and the rate of outright deception increases from 7% to 53%. Our results provide qualitatively new evidence that many people are strong recipricators: They are willing to bear private costs in order to reward good behavior and punish bad behavior, even when the rewards and punishments are unobservable.
    Keywords: Bargaining; Communication; Honesty; Trust; Strong reciprocity
    JEL: C91 D74 Z13
    Date: 2006–11–01
  3. By: Sarah Jacobson; Ragan Petrie
    Abstract: Lottery experiments have been performed in many contexts to test theories of risk aversion and to measure risk preferences. People are typically offered a series of lotteries with increasing expected payoffs and variances. A person with a concave utility function should switch from risky bets to safer bets at some point and never switch back. Switching back implies preferences inconsistent with a concave utility function. Our experiment, conducted with a population of adults in Rwanda, presents respondents with a series of binary-choice lotteries over gains and losses. We observe that 54-55% of subjects made at least one inconsistent choice over gains or losses, and 7-13% made at least two inconsistent choices. This holds for both hypothetical and real lottery payoffs. Inconsistent choices were less common when stakes were higher, and women are more likely to be inconsistent. While risk aversion alone is not correlated with actual economic outcomes, such as membership in savings (tontines) and insurance groups and holding a larger number of bank accounts, inconsistency is.
    Date: 2007–04
  4. By: Gianluca Stefani (University of Firenze); Riccardo Scarpa (University of Waikato)
    Abstract: We report results from a laboratory experiment that allows us to test the incentive compatibility hypothesis of hypothetical referenda used in CV studies through the public or private provision of information messages. One of the main methodological issues about hypothetical markets regards whether people behave differently when bidding for a public good through casting a ballot vote than when they are privately purchasing an equivalent good. This study tried to address the core of this issue by using a good that can be traded both as private and public: information messages. This allows the elimination of confounding effects associated with the specific good employed. In our case information dispels some of the uncertainty about a potential gain from a gamble. So, the approximate value of the message can be inferred once the individual measure of risk aversion is known. Decision tasks are then framed in a systematic manner according to the hypothetical vs real nature of the decision and the public vs private nature of the message. A sample of 536 university students across three countries (I, UK and NZ) participated into this lab experiment. The chosen countries reflect diversity in exposure to the practice of advisory (NZ) and abrogative (Italy) referenda, with the UK not having any exposure to it. Under private provision the results show that the fraction of participants unwilling to buy information is slightly higher in the real treatment than in the hypothetical one. Under public provision, instead, there is no statistical difference between real and hypothetical settings, confirming in part the finding of previous researchers. A verbal protocol analysis of the thought processes during choice highlights that public provision of information systematically triggers concerns and motivations different from those arising under the private provision setting. These findings suggest that the incentive compatibility of public referenda is likely to rely more on affective and psychological factors than on the strategic behaviour assumptions theorised by economists.
    Keywords: Contingent Valuation ; Incentive Compatibility ; Experimental Economics;
    JEL: Q50 H40 C91
    Date: 2007–06–13
  5. By: Jordi Brandts; María Fernanda Rivas
    Abstract: The existence of punishment opportunities has been shown to cause efficiency in public goods experiments to increase considerably. In this paper we ask whether punishment also has a downside in terms of process dissatisfaction. We conduct an experiment to study the conjecture that an environment with stronger punishment possibilities leads to higher material but lower subjective well-being. The more general motivation for our study stems from the notion that people??s subjective well-being may be affected by the institutional environment they find themselves in. Our findings show that harsher punishment possibilities lead to signficantly higher well-being, controlling for earnings and other relevant variables. People derive independent satisfaction from interacting under the protection of strong punishment possibilities. These results complement the evidence on the neural basis of altruistic punishment reported in de Quervain et al. (2004).
    Keywords: Public Goods, Experiments, Well-being, Punishment
    JEL: C92 D60 H40
    Date: 2007–06–15
  6. By: Lundquist, Tobias (Dept. of Economics, Stockholm School of Economics); Ellingsen, Tore (Dept. of Economics, Stockholm School of Economics); Gribbe, Erik (Dept. of Economics, Stockholm School of Economics); Johannesson, Magnus (Dept. of Economics, Stockholm School of Economics)
    Abstract: We experimentally investigate the effect of cheap talk in a bargaining game with one-sided asymmetric information. A seller has private information about his or her skill and is provided an opportunity to communicate this information to a buyer through a written message. Four different treatments are compared; one without communication, one with free-form communication, and two treatments with pre-specified communication in the form of promises of varying strength. Our results suggest that lying about private information is costly and that the cost of lying increases with the size of the lie and the strength of the promise. Freely formulated messages lead to the fewest lies and the most efficient outcomes.
    Keywords: Deception; Communication; Lies; Promises; Experiments
    JEL: C91 D82
    Date: 2007–06–12
  7. By: Ellingsen, Tore (Dept. of Economics, Stockholm School of Economics); Johannesson, Magnus (Dept. of Economics, Stockholm School of Economics)
    Abstract: Casual observation suggests that people are more generous with their time than with their money. In this paper we present experimental evidence supporting the hypothesis. A third of our subjects demand no compensation for non-monetary investments, whereas almost all subjects demand compensation for equally costly monetary investments. The finding supports the contention that generosity to some extent is symbolic and context dependent, and that social norms encourage generosity in the time domain.
    Keywords: Altruism; Bargaining; Non-monetary generosity
    JEL: C91 J20 L14 Z13
    Date: 2006–12–07
  8. By: James C. Cox; Vjollca Sadiraj; Bodo Vogt; Utteeyo Dasgupta
    Abstract: A large literature is concerned with analysis and empirical application of theories of decision making for environments with risky outcomes. Expected value theory has been known for centuries to be subject to critique by St. Petersburg paradox arguments. More recently, theories of risk aversion have been critiqued with calibration arguments applied to concave payoff transformations. This paper extends the calibration critique to decision theories that represent risk aversion solely with transformation of probabilities. Testable calibration propositions are derived that apply to four representative decision theories: expected utility theory, cumulative prospect theory, rank-dependent expected utility theory, and dual expected utility theory. Heretofore, calibration critiques of theories of risk aversion have been based solely on thought experiments. This paper reports real experiments that provide data on the relevance of the calibration critiques to evaluating the plausibility of theories of risk aversion. The paper also discusses implications of the data for (original) prospect theory with editing of reference payoffs and for the new dual-self model of impulse control. In addition, the paper reports an experiment with a truncated St. Petersburg bet that adds to data inconsistent with risk neutrality.
    Date: 2007–06
  9. By: Björkman, Martina; Svensson, Jakob
    Abstract: Strengthening the relationship of accountability between health service providers and citizens is by many people viewed as critical for improving access to and quality of health care. How this is to be achieved, and whether it works, however, remain open questions. This paper presents a randomized field experiment on increasing community-based monitoring. As communities began to more extensively monitor the provider, both the quality and quantity of health service provision improved. One year into the program, we find large increases in utilization, significant weight-for-age z-scores gains of infants, and markedly lower deaths among children. The findings on staff behaviour suggest that the improvements in quality and quantity of health service delivery resulted from an increased effort by the staff to serve the community. Overall, the results suggest that community monitoring can play an important role in improving service delivery when traditional top-down supervision is ineffective.
    Keywords: Accountability; Field experiment; Health; Monitoring
    JEL: D78 I12 O15
    Date: 2007–06

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