nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒09‒24
twenty-one papers chosen by
Daniel Houser
George Mason University

  1. Inequity Aversion and Individual Behavior in Public Good Games: An Experimental Investigation By Dannenberg, Astrid; Riechmann, Thomas; Sturm, Bodo; Vogt, Carsten
  2. Comparing Small-Group and Individual Behavior in Lottery-Choice Experiments By Ronald J. Baker II; Susan K. Laury; Arlington W. Williams
  3. Trust in cooperation or ability? An experimental study on gender differences By Christiane Schwieren; Matthias Sutter
  4. Are cooperators effciency- or fair-minded? Evidence from a public goods experiment By M. Vittoria Levati; Matteo Ploner; Stefan Traub
  5. Risky Punishment and Reward in the Prisoner’s Dilemma By Peter Duersch; Maros Servátka
  6. Exogenous Targeting Instruments under Differing Information Conditions By John Spraggon
  7. Institutions and Behavior: Experimental Evidence on the Effects of Democracy By Pedro Dal Bo; Andrew Foster; Louis Putterman
  8. Preferences, Intentions, and Expectations: A Large-Scale Experiment with a Representative Subject Pool By Charles Bellemare; Sabine Kröger; Arthur van Soest
  9. Lavish Returns on Cheap Talk: Non-binding Communication in a Trust Experiment By Avner Ben-Ner; Louis Putterman; Ting Ren
  10. An Experimental Investigation of Age Discrimination in the English Labor Market By Peter A. Riach; Judith Rich
  11. The glue of the economic system: the effect of relational goods on trust and trustworthiness By BECCHETTI LEONARDO; DEGLI ANTONI GIACOMO; FAILLO MARCO; MITTONE LUIGI
  12. Do Rational Demand Estimates Differ From Irrational Ones? Evidence from an Induced Budget Experiment By Shomu Banerjee; James H. Murphy
  13. Preferences For Redistribution and Perception of Fairness: An Experimental Study By Ruben Durante; Louis Putterman
  14. Discrete Implementation of the Groves-Ledyard Mechanism By J. Todd Swarthout; Mark Walker
  15. Competitive politics, simplified heuristics, and preferences for public goods By Felix Schlaepfer; Marcel Schmitt; Anna Roschewitz
  16. Trust and Reciprocity: Implications of Game Triads and Social Contexts By James C. Cox
  17. Legitimacy of Control By Wendelin Schnedler; Radovan Vadovic
  18. Impact of Initial-Trust Image on Shopper Trust and Patronage Intentions By Kaul Subhashini; Sahay Arvind; Koshy Abraham
  19. Why Volunteer? Evidence on the Role of Altruism, Reputation, and Incentives By Jeffrey Carpenter; Caitlin Knowles Myers
  20. Psychology and Economics: Evidence from the Field By Stefano DellaVigna
  21. Property Rights and Economic Growth: Evidence from a Natural Experiment By Brunt, Liam

  1. By: Dannenberg, Astrid; Riechmann, Thomas; Sturm, Bodo; Vogt, Carsten
    Abstract: We present a simple two-steps procedure for a within-subject test of the inequity aversion model of Fehr and Schmidt (1999). In the first step, subjects played modified ultimatum and dictator games and were classified according to their preferences. In the second step, subjects with specific preferences according to the Fehr and Schmidt model were matched into pairs and interacted with each other in a standard public good game and a public good game with punishment possibility. Our results show that the specific composition of groups significantly influences the subjects’ performance in the public good games. We identify the aversion against advantageous inequity and the information about the coplayer’s type as the main influencing factors for the behavior of subjects.
    Keywords: individual preferences, inequity aversion, experimental economics, public goods
    JEL: C91 C92 H41
    Date: 2007
  2. By: Ronald J. Baker II (Millersville University of Pennsylvania); Susan K. Laury (Georgia State University); Arlington W. Williams (Indiana University Bloomington)
    Abstract: Lottery-choice experiments are conducted to compare risk preferences revealed by three-person groups versus isolated individuals. A lottery-choice experiment consists of a menu of paired lottery choices structured so that the crossover point from a low-risk to a high-risk lottery can be used to infer the degree of risk aversion. A between-subjects experiment of group versus individual lottery-choice decisions reveal that there is not a significant difference in the average crossover point, but lottery choices are affected by a significant interaction between subject composition (individual or group) and lottery winning percentage. Also, a three-phased individual-group-individual sequenced experiment reveals that the count of safe lotteries chosen by groups is, on average, significantly greater than the mean of the individual members. Finally, making a phase-two group decision has a significant impact on subsequent phase-three individual decisions relative to the initial phase-one (individual) decisions.
    Keywords: lab experiments, risk preferences, group decisions
    JEL: C91 C92 D80
    Date: 2007–09
  3. By: Christiane Schwieren; Matthias Sutter
    Abstract: We examine gender differences in trust in another party’s cooperation (CC) or its ability (AC). While men and women do not differ concerning trust in cooperation, gender has a strong influence when trust in another subject’s ability is required.
    Keywords: Trust, Gender, Experiment, Cooperation, Ability, Stereotypes
    JEL: C72 C91
    Date: 2007–09
  4. By: M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Matteo Ploner (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany, and University of Trento, Italy); Stefan Traub (Department of Business and Economics, University of Bremen, Germany)
    Abstract: We use a two-person public goods experiment to distinguish between efficiency and fairness as possible motivations for cooperative behavior. Asymmetric marginal per capita returns allow only the high-productivity player to increase group payoffs when contributing positive amounts. Asymmetric contributions, however, yield unequal individual payoffs. To assess a priori cooperative preferences, we measure individual 'value-orientations' by means of the decomposed game technique. Overall, our results indicate that fairness (or inequality aversion) is more influential than efficiency in driving behavior.
    Keywords: Public goods experiments, Conditional cooperation, Fairness, Efficiency, Value orientations
    JEL: A13 C92 D63 H41
    Date: 2007–09–20
  5. By: Peter Duersch (University of Heidelberg, Department of Economics); Maros Servátka (University of Canterbury, Department of Economics)
    Abstract: We conduct a prisoner’s dilemma experiment with a punishment/reward stage, where punishments and rewards are risky. This is compared with a risk free treatment. We find that subjects do not change their behavior in the face of risky outcomes. Additionally, we measure risk attitude and the emotions of subjects. While we find a strong influence of emotions, individual risk aversion has no effect on the decision to punish or reward. This is good news for lab experiments who abstract from risky outcomes. From the perspective of social preferences, our results provide evidence for risk neutral inclusion of other player’s payoffs in the decisionmaker’s utility function.
    Keywords: Prisoner’s dilemma, risk, punishment, reward, emotions, experiment
    Date: 2007–09
  6. By: John Spraggon (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: This paper tests the ability of an exogenous targeting instrument to induce compliance when the principal cannot observe the actions of individual agents. A number of papers show that although these instruments are able to induce groups to the target outcome, they are not able to induce individuals to make socially optimal decisions in a number of different controlled laboratory experiments. This study investigates whether the information individuals have about others’ payoffs affects how they make their decisions in this environment. Ledyard (1995) suggests that when subjects have less information in public goods experiments they are more likely to choose the Nash equilibrium decision. However, as he points out, this effect differs between groups with homogeneous and heterogeneous payoff functions. The results show that reducing information reduces efficiency although there are no significant effects on the absolute level of group decisions at the aggregate level. At the individual level, reducing the information players have complicates the environment resulting in subjects choosing either lower decision numbers or more randomly. Moreover, these effects seem to be more serious for subjects whose Nash decisions are on the boundary of the decision space.
    Keywords: Moral Hazard in Groups, Exogenous Targeting Instruments, Experiments, Information
    JEL: C72 C92 D70
    Date: 2007–10
  7. By: Pedro Dal Bo; Andrew Foster; Louis Putterman
    Date: 2007
  8. By: Charles Bellemare (Université Laval, CIRPÉE and IZA); Sabine Kröger (Université Laval); Arthur van Soest (RAND, Tilburg University and IZA)
    Abstract: We specify and estimate an econometric model which separately identifies distributional preferences and the effects of perceived intentions on responder behavior in the ultimatum game. We allow the effects of perceived intentions to depend, among other things, on the subjective probabilities responders attach to the possible offers. We estimate the model on a large representative sample from the Dutch population. We find that the relative importance of distributional preferences and perceived intentions depends significantly on the socioeconomic characteristics of responders. Strong inequity aversion to the other player’s disadvantage is found for lower educated and older respondents. Responders tend to punish unfavorable offers more if they expect that fair proposals will occur with higher probability.
    Keywords: inequity aversion, intentions, subjective expectations
    JEL: C93 D63 D84
    Date: 2007–08
  9. By: Avner Ben-Ner; Louis Putterman; Ting Ren
    Date: 2007
  10. By: Peter A. Riach (IZA (Research Fellow)); Judith Rich (University of Portsmouth and IZA)
    Abstract: Carefully-matched pairs of written job applications were made to test for age discrimination in hiring. A twenty-one year-old and a thirty-nine year-old woman applied for jobs where a "new graduate" was sought; men aged twenty-seven and forty-seven, inquired about employment as waiters; women aged twenty-seven and forty-seven, inquired about employment in retail sales. The rate of net discrimination against the older graduate, and against the older waiters in their London inquiries, correspond to the highest rates ever recorded anywhere, by written tests, for racial discrimination. There was a statistically significant preference for the older applicant in retail sales.
    Keywords: age, discrimination, employment, field experiment, hiring
    JEL: J71 C93
    Date: 2007–08
    Abstract: The role of “relational goods” is almost unexplored in the literature, yet our experimental results document that, even in their weakest form (opportunity of meeting an unknown player at the end of an experimental game), they significantly affect important “lubricants” of economic activity such as trust and trustworthiness and generate significant departures from the standard Nash equilibrium outcome in trust (investment) games. Our findings do not reject the hypothesis that relational goods are an important “source of energy” in economic interactions and that the study of this “neglected particle” of socioeconomic life may produce significant advancements on both positive and normative economics.
    Date: 2007–09
  12. By: Shomu Banerjee; James H. Murphy
    Abstract: Both early and recent work have highlighted certain similarities between rational and irrational demand. We re-examine these findings using experimental choice data. After separating our subjects’ choices into rational and irrational subsets based on consistency with the axioms of revealed preference, we estimate and compare demand coefficients from the resulting subsamples, finding significant differences between the two. We also predict consistency based on sociodemographics and cognitive ability, then split the sample using predicted consistency and again estimate and compare the resulting subsamples’ demand coefficients. These comparisons indicate differences between rational and irrational demand and are largely consistent with successful prediction.
    Date: 2007–09
  13. By: Ruben Durante; Louis Putterman
    Date: 2007
  14. By: J. Todd Swarthout; Mark Walker
    Abstract: When implementing an economic institution in the field or in the laboratory, the participants' action spaces and the institution's outcomes are typically discrete, while our theoretical analysis of the institution often assumes the sets are continuous. Predictions by the continuous model generally turn out to be good approximations to the performance of the discrete implementation. We present an example in which the continuous version has a unique and Pareto efficient equilibrium, but in which the discrete version often has vastly more equilibria, many of them far from efficient. We show that the same phenomenon appears in two experiments investigating the Groves-Ledyard mechanism, and that it may account for the experimental results.
    Date: 2007–09
  15. By: Felix Schlaepfer (Socioeconomic Institute, University of Zurich); Marcel Schmitt (Economics Division, Federal Research Institute WSL, Birmensdorf, Switzerland); Anna Roschewitz (Economics Division, Federal Research Institute WSL, Birmensdorf, Switzerland)
    Abstract: This paper examines the role of simplified heuristics in the formation of preferences for public goods. Political scientists have suggested that voters use simplified heuristics based on the positions of familiar parties to infer how a proposed policy will affect them and to cast a vote in line with their interests and values. Here, we use a two-stage field-survey experiment to investigate how knowledge of party positions affects policy choices. We followed standard procedures in developing an attribute-based choice experiment on alternative land-use policies in Switzerland. In contrast to the usual formulation, however, the hypothetical costs of the proposed policies were formulated as a percentage change in taxes. The benefit of this formulation relative to the usual absolute money amounts is that the credibility of the (hypothetical) costs for respondents does not depend on respondent income. Furthermore, the formulation allowed us to solicit party positions on the proposed policies. Six out of eight contacted parties provided their positions. We then conducted a split-sample mail survey where we included a table of the party positions with a sub-sample of the questionnaires. We report six main experimental results. (1) The response rate of the survey was unaffected by the party positions. (2) The proportion of no-choice answers was decreased by forty percent relative to the control. (3) The party information significantly affected the choices directly and in interaction with respondents’ general attitudes towards public spending for nature and landscape conservation and thus affected the way how individuals mapped from general attitudes to preferences for specific policies. (4) The information interacted with educational level in only eight out of forty choice sets, suggesting that even the more educated relied on simplified heuristics. (5) Respondents who knew the party positions were more sensitive to the tax attribute. (6) For respondents with medium and higher tax bills, the resulting willingness-to-pay estimates were decreased by a factor of two to ten relative to the control. These findings suggest that the party information helped the respondents to articulate more consistent preferences than in the treatment without the party information.
    Keywords: agriculture, bounded rationality, choice experiment, contingent valuation, landscape, heuristics, information, preference formation, public goods, voting
    JEL: D61 D70 D81 Q26 Q28 Q51
    Date: 2007–09
  16. By: James C. Cox
    Abstract: null
    Date: 2007–09
  17. By: Wendelin Schnedler (University of Heidelberg and IZA); Radovan Vadovic (ITAM, Mexico City)
    Abstract: What is the motivational effect of imposing a minimum effort requirement? Agents may no longer exert voluntary effort but merely meet the requirement. Here, we examine how such hidden costs of control change when control is considered legitimate. We study a principalagent model where control signals the expectations of the principal and the agent meets these expectations because he is guilt-averse. We conjecture that control is more likely to be considered legitimate (i) if it is not exclusively aimed at a specific agent or (ii) if it protects the endowment of the principal. Given the conjecture, the model predicts that hidden costs are lower when one of the two conditions is met. We experimentally test these predictions and find them confirmed.
    Keywords: moral hazard, intrinsic motivation, guilt aversion
    JEL: C7 C9 M5
    Date: 2007–08
  18. By: Kaul Subhashini; Sahay Arvind; Koshy Abraham
    Abstract: The objective of this study is to examine the role of store image in influencing shopper trust and patronage intentions when 1) the store has never been visited and 2) the store has been visited. This study also identifies three stages through which ‘trust-image’ progresses and uses the first stage to construct and ‘initial-trust-image’ of the store. The experimental study findings provide empirical support that initial-trust-image of the store has significant impact on trust and patronage intentions for some shoppers. Retailers entering the Indian market are advised to be conscious of the symbolic cues that they embed in the store appearance, especially since the initial-trust-image needs to convey more than just competence and expertise. Significantly, the findings also indicate that asymmetric effects of trust operate at the stage of initial-trust – negative initial-image perception causes greater mistrust than positive initial-image causes trust.
    Date: 2007–09–06
  19. By: Jeffrey Carpenter (Middlebury College and IZA); Caitlin Knowles Myers (Middlebury College and IZA)
    Abstract: Volunteering plays a prominent role in the charitable provision of goods and services, yet we know relatively little about why people engage in such prosocial acts. The list of possible motivations is long, but recent research has focused on altruism, reputational concerns, and material incentives. We present an analysis of a unique data set that combines an experimental measure of altruism, surveyed measures of other factors including reputational concerns, and call records from volunteer firefighters that provide an objective measure of the hours volunteered. Controlling for a variety of other explanations, we find that altruism and reputational concerns are positively associated with the decision to volunteer. Moreover, by utilizing variation in the presence and level of small stipends paid to the firefighters, we find that the positive effect of monetary incentives declines with reputational concerns, supporting a prediction that extrinsic incentives can crowd out prosocial behavior.
    Keywords: volunteer, altruism, reputation, firefighter
    JEL: C93 D12 J22 D64 D82
    Date: 2007–08
  20. By: Stefano DellaVigna
    Abstract: The research in Psychology and Economics (a.k.a. Behavioral Economics) suggests that individuals deviate from the standard model in three respects: (i) non-standard preferences; (ii) non-standard beliefs; and (iii) non-standard decision-making. In this paper, I survey the empirical evidence from the field on these three classes of deviations. The evidence covers a number of applications, from consumption to finance, from crime to voting, from giving to labor supply. In the class of non-standard preferences, I discuss time preferences (self-control problems), risk preferences (reference dependence), and social preferences. On non-standard beliefs, I present evidence on overconfidence, on the law of small numbers, and on projection bias. Regarding non-standard decision-making, I cover limited attention, menu effects, persuasion and social pressure, and emotions. I also present evidence on how rational actors -- firms, employers, CEOs, investors, and politicians -- respond to the non-standard behavior described in the survey. I then summarize five common empirical methodologies used in Psychology and Economics. Finally, I briefly discuss under what conditions experience and market interactions limit the impact of the non-standard features.
    JEL: A1 C91 C93 D00 D64 D91 G1 M3
    Date: 2007–09
  21. By: Brunt, Liam
    Abstract: In 1795 the British took control of the Cape colony (South Africa) from the Dutch; and in 1843 they exogenously changed the legal basis of landholding, giving more secure property rights to landholders. Since endowments and other factors were held constant, these changes offer clean tests of the effects on economic growth of colonial identity and secure property rights. The effects of both changes were immediate, positive and large. Other legal and institutional changes, such as the move to a common law system in 1827, had no such effects on economic growth.
    Keywords: Economic growth; Legal origins; Property rights
    JEL: N47 O43
    Date: 2007–09

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