nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒07‒07
eight papers chosen by
Daniel Houser
George Mason University

  1. Free riding and norms of control: self determination and imposition. An experimental comparison. By Luigi Mittone; Francesca Bortolami
  2. Cognitive Dissonance, Pessimism, and Behavioral Spillover Effects By David L. Dickinson; Robert J. Oxoby
  3. A Test of Perpetual R and D Races By Yves Breitmoser; Jonathan H. W. Tan; Daniel John Zizzo
  4. In Search of Stars: Network Formation among Heterogeneous Agents By Aljaž Ule; Jacob K. Goeree; Arno Riedl
  5. Discretionary Latitude and Relational Contracting By Steven Y. Wu; Brian E. Roe
  6. Information Networks and Worker Recruitment By Jordi Brandts; Arthur Schram; Klarita Gërxhani
  7. The Effect of Incentive Structure on Heuristic Decision Making: The Proportion Heuristic By Robert J. Oxoby
  8. Congestion in popular tourist areas: A multi-attribute experimental choice analysis Of willingness-to-wait in amsterdam By Riganti, Patrizia; Nijkamp, Peter

  1. By: Luigi Mittone; Francesca Bortolami
    Abstract: This is an experiment on the effect of norm application in a public good game. We want to investigate whether a control norm affects the contribution level differently, only in relation to the way in which the norm is applied in the game. We compare the amount of public good provided in two different groups. In the first group (constituent group), experimental subjects create a control norm, and then they self-apply it in a basic public good game. In the second group (control group), the norm created by the constituent group is exogenously imposed. Experimental results show a significant difference between the two public good levels considered. Self determination implies a higher level of efficiency, as compared to the exogenous one.
    Keywords: public good games, free riding, norm of control, voluntary contribution
    JEL: H41 C92
    Date: 2007
  2. By: David L. Dickinson (Appalachian State University); Robert J. Oxoby (University of Calgary and IZA)
    Abstract: This paper reports results from a unique two-stage experiment designed to examine the spillover effects of optimism and pessimism. In stage 1, we induce optimism or pessimism onto subjects by randomly assigning a high or low piece rate for performing a cognitive task. We find that participants receiving the low piece rate are significantly more pessimistic with respect to performance on this task. In stage 2 individuals participate in an ultimatum game. We find that minimum acceptable offers are significantly lower for pessimistic subjects, though this pessimism was generated in a completely unrelated environment. These results highlight the existence of important spillover effects that can be behaviorally and economically important - for example, pessimism regarding one’s initial conditions (e.g., living in poverty) may have spillover effects on one’s future labor market outcomes.
    Keywords: optimism, pessimism, bargaining, experiments
    JEL: C91 D84
    Date: 2007–06
  3. By: Yves Breitmoser (Institute of Microeconomics, European University Viadrina); Jonathan H. W. Tan (Institute of Microeconomics, European University Viadrina); Daniel John Zizzo (Centre for Competition Policy, University of East Anglia)
    Abstract: This paper presents an experimental study of dynamic indefinite horizon R and D races with uncertainty and multiple prizes. The theoretical predictions are highly sensitive: small parameter changes determine whether technological competition is sustained over time of converges into a market structure with an entrenched leadership and lower aggregate R and D research. The subjects' strategies are far less sensitive. In three out of four treatments (with the exception being a control treatment), the R and D races tend to converge to entrenched leadership. Investment is highest when rivals are close, and there is evidence of average over-investment.
    Keywords: R&D race, innovation, dynamics, experiment
    JEL: C72 C91 O31
    Date: 2006–07
  4. By: Aljaž Ule (University of Amsterdam); Jacob K. Goeree (California Institute of Technology); Arno Riedl (University of Maastricht)
    Abstract: This paper reports results from a laboratory experiment on network formation among heterogeneous agents. The experimental design extends the Bala-Goyal (2000) model of network formation with decay and two-way flow of benefits by allowing for agents with lower linking costs or higher benefits to others. Furthermore, agents’ types may be common knowledge or private information. In all treatments, the (efficient) equilibrium network has a “star” structure. With homogeneous agents, equilibrium predictions fail completely. In contrast, with heterogeneous agents stars frequently occur, often with the high-value or low-cost agent in the center. Stars are not born but rather develop: with a high-value agent, the network’s centrality, stability, and efficiency all increase over time. Probit estimations based on best-response behaviour and other-regarding preferences are used to analyze individual linking behavior. Our results suggest that heterogeneity is a major determinant for the predominance of star-like structures in real-life social networks.
    Keywords: Network Formation, Experiment, Heterogeneity, Private Information
    JEL: C72 C92 D82 D85
    Date: 2007–06
  5. By: Steven Y. Wu (Ohio State University and IZA); Brian E. Roe (Ohio State University)
    Abstract: We use economic experiments to examine the nature of relational trading under a menu of incomplete contracts ranging from the repeat purchase mechanism of Klein and Leffler (1981) to highly incomplete contracts that are completely unenforceable by third-parties. Our results suggest that, with barriers to complete contracting, increasing the degree of contractual incompleteness can enhance efficiency. Intuitively, more incomplete contracts provide parties with greater discretionary latitude to reward and punish unenforceable performance factors. Moreover, trading under moderately incomplete contracts is characterized by efficiency wages, rent sharing and high levels of cooperation, whereas fully incomplete contracts that permit maximum discretion yield trading patterns that are closer what is observed under a perfectly complete contract. Our results are consistent with the theory of strategic ambiguity of Bernheim and Whinston (1998) and can be rationalized by a simple model of relational contracting that embeds different degrees of discretionary latitude.
    Keywords: relational contracts, implicit incentives, experimental economics, cooperation, incomplete contracts
    JEL: C91 D23 D84 D86 J33 K12
    Date: 2007–06
  6. By: Jordi Brandts; Arthur Schram; Klarita Gërxhani
    Abstract: This paper studies experimentally how the existence of social information networks affects the ways in which firms recruit new personnel. Through such networks firms learn about prospective employees' performance in previous jobs. Assuming individualistic preferences social networks are predicted not to affect overall labor market behavior, while with social preferences the prediction is that when bilaterally negotiated: (i) wages will be higher and (ii) that workers in jobs with incomplete contracts will respond with higher effort. Our experimental results are consistent with the social preferences view, both for the case of excess demand and excess supply of labor. In particular, the presence of information networks leads to more efficient allocations.
    Keywords: Labor Markets, Information Networks, Worker Recruitment, Indirect reciprocity, Experiments
    JEL: C90 J30 J40
    Date: 2007–06–15
  7. By: Robert J. Oxoby (University of Calgary and IZA)
    Abstract: When making judgments, individuals often utilize heuristics to interpret information. We report on a series of experiments designed to test the ways in which incentive mechanisms influence the use of a particular heuristic in decision-making. Specifically, we demonstrate how information regarding the number of available practice problems influences the behaviors of individuals preparing for an exam (the proportion heuristic). More importantly the extent to which this information influences behavior depends critically on the way in which performance incentives are structured. In particular, relative compensation schemes magnify the influence of this heuristic while joint compensation schemes dampen its influence. We discuss these results with respect to the literature on effective compensation.
    Keywords: performance judgments, heuristics, incentives, experiments
    JEL: C9 M5
    Date: 2007–06
  8. By: Riganti, Patrizia (Vrije Universiteit Amsterdam, Faculteit der Economische Wetenschappen en Econometrie (Free University Amsterdam, Faculty of Economics Sciences, Business Administration and Economitrics); Nijkamp, Peter
    Abstract: Many mature and popular tourist destinations are attracting large volumes of tourist flows. Especially during peak periods this may lead to congestion phenomena in different areas of tourist cities. This paper presents the results of a tourist survey carried out in the city centre of Amsterdam, during the high tourist season (2006), when congestion phenomena are clearly present. In addition to a descriptive and exploratory statistical analysis based on multi-attribute choice analysis, the paper also presents the findings from a statistical choice experiment based on the concept of willingness-to-accept tourism congestion. Various interesting results are discussed, with a specific focus on the question how these results can feed into the policy debate to manage congestion in mature cultural destinations.
    Date: 2007

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