nep-exp New Economics Papers
on Experimental Economics
Issue of 2007‒11‒10
nineteen papers chosen by
Daniel Houser
George Mason University

  1. Tax Evasion: Cheating Rationally or Deciding Emotionally? By Giorgio Coricelli; Mateus Joffily; Claude Montmarquette; Marie-Claire Villeval
  2. The Swing Voter's Curse in the Laboratory By Marci Battaglini; Rebecca Morton; Thomas Palfrey
  3. Public Opinion Polls, Voter Turnout, and Welfare: An Experimental Study By Jens Großer; Arthur Schram
  4. An Experimental Approach to Comparing Trust in Pastoral and Non-Pastoral Australia By Ryan R.J. McAllister; Andrew F. Reeson
  5. Cognition and Strategy: A Deliberation Experiment By Eric Dickson; Catherine Hafer; Dimitri Landa
  6. School Choice and Information. An Experimental Study on Matching Mechanisms By Joana Pais; Agnes Pinter
  7. Political Autonomy and Independence: Theory and Experimental Evidence By Klaus Abbink; Jordi Brandts
  8. Imitation and Luck: An Experimental Study on Social Sampling By Theo Offerman; Andrew Schotter
  9. Workaholics and Drop Outs in Optimal Organizations By Wieland Muller; Andrew Schotter
  10. Another experimental look at reciprocal behavior: indirect reciprocity By Bonein Aurélie; Serra Daniel
  11. The Hidden Costs of Control: An Unsuccessful Replication Study By Matteo Ploner; Anthony Ziegelmeyer
  12. An Experimental Test of Advice and Social Functioning By Bogachan Celen; Shachar Kariv; Andrew Schotter
  13. Do Participants and Observers Assess Intentions Differently During Bargaining and Conflict? By Eric S. Dickson
  14. Competition and Innovation: An Experimental Investigation By Dario Sacco
  15. A Note on Skewness Seeking: An Experimental Analysis By Tobias Broenner; Rene Levinsky; Jianying Qiu
  16. Endogenous Cognitive Types: An Experimental Study By Elizabeth Potamites; Andrew Schotter
  17. Belief Formation and Evolution in Public Good Games. By Jaromir Kovarik
  18. Forgive or Buy Back: An Experimental Study of Debt Relief By Vivian Lei; Steven Tucker; Filip Vesely
  19. Individual Differences in Allocation of Funds in the Dictator Game Associated with Length of the Arginine Vasopressin 1a Receptor (AVPR1a) RS3 Promoter-region and Correlation between RS3 Length and Hippocampal mRNA By Ariel Knafo; Salomon Israel; Ariel Darvasi; Rachel Bachner-Melman; Florina Uzefovsky; Lior Cohen; Esti Feldman; Elad Lerer; Efrat Laiba; Yael Raz; Lubov Nemanov; Inga Gritsenko; Christian Dina; Galila Agam; Brian Dean; Gary Bornstein; Richard P. Ebstein

  1. By: Giorgio Coricelli (CNRS); Mateus Joffily (CNRS); Claude Montmarquette (CIRANO, University of Montréal); Marie-Claire Villeval (CNRS-GATE, University of Lyon and IZA)
    Abstract: The economic models of tax compliance predict that individuals should evade taxes when the expected benefit of cheating is greater than its expected cost. When this condition is fulfilled, the high compliance however observed remains a puzzle. In this paper, we investigate the role of emotions as a possible explanation of tax compliance. Our laboratory experiment shows that emotional arousal, measured by Skin Conductance Responses, increases in the proportion of evaded taxes. The perspective of punishment after an audit, especially when the pictures of the evaders are publicly displayed, also raises emotions. We show that an audit policy that induces shame on the evaders favors compliance.
    Keywords: tax evasion, emotions, neuro-economics, physiological measures, shame, experiments
    JEL: C91 C92 D87 H26
    Date: 2007–10
  2. By: Marci Battaglini; Rebecca Morton; Thomas Palfrey
    Abstract: This paper reports the first laboratory study of the swing voter's curse and provides insights on the larger theoretical and empirical literature on "pivotal voter" models. Our experiment controls for different information levels of voters, as well as teh size of the electorate, the distribution of preferences, and other theoretically relevant parameters. The design varies hte share of partisan voters and the prior elief abouta payoff relevant state of the world. Our results support the equilibrium predictions of the Feddersen-Pesendorfer model, and clearly reject the notion that voters in the laboratory use naive decision-theoretic strategies. The voters act as if they are aware of the swing voter's curse and adjust their behavior to compensate. While the compensation is not complete and there is some heterogeneity in individual behavior, we find that aggregate outcomes, such as efficiency, turnout, and margin of victory, closely track the theoretical predictions.
    Date: 2007–12–14
  3. By: Jens Großer; Arthur Schram
    Abstract: We experimentally study the impact of public opinion poll releases on voter turnout and welfare in a participation game. We find higher turnout rates when polls inform the electorate about the levels of support for various candidates than when polls are prohibited. Distinguishing between allied and floating voters, our data show that this increase in turnout is entirely due to floating voters. Very high turnout is observed when polls indicate equal support levels for the candidates. This has negative consequences for welfare. Though in aggregate social welfare is hardly affected, majorities benefit more often from polls than minorities. Finally, our comparative static results are better predicted by quantal response (logit) equilibrium than by Bayesian Nash equilibrium.
    Keywords: laboratory experiments.
    JEL: C92
    Date: 2007–09
  4. By: Ryan R.J. McAllister; Andrew F. Reeson (CSIRO Sustainable Ecosystems, Australia)
    Abstract: It is generally held that rural Australians are more cooperative in character than their urban counterparts. To explore one aspect of this notion, we conducted an experiment which compared trust and trustworthiness among a sample of Australian senior high school students which included students with both pastoral and non-pastoral backgrounds. While student behaviour is unlikely to mimic adult behaviour, any significant differences between pastoral and non-pastoral students would suggest differences do exist between the social norms that guide pastoral and non-pastoral communities. We repeated our experiment at three different schools containing students from both pastoral and non-pastoral backgrounds, allowing us to draw comparisons. In total 78 students participated. Our experiments were based on similar experiments that have been applied across a range of contexts internationally (trust game/investment game). We did not find evidence of differences between students with pastoral and non-pastoral backgrounds, either in the level of trust in others or in trustworthiness, though our methods probably have a bias towards this conclusion. Our results concurred with other studies in showing that social distance is an important determinant of the level of cooperation.
    Keywords: rural urban relations, economic behaviour, culture, arid zones, semiarid zones, pastoral society
    JEL: R00 C91 P25 A13
    Date: 2007–09
  5. By: Eric Dickson (Department of Politics, New York University); Catherine Hafer (Department of Politics, New York University); Dimitri Landa (Department of Politics, New York University)
    Abstract: A theory of deliberation must provide a plausible account both of individuals? choices to speak or to listen and of how they reinterpret their own views in the aftermath of deliberation. We describe a game-theoretic laboratory experiment in which subjects with diverse interests and information choose to speak or to listen and, after updating their beliefs, vote over a common outcome. An important feature of our strategic setting is that not receiving a specific communication is sometimes just as informative as receiving it. We analyze subjects? deliberative choices and the relationship between these choices, subjects? initial positions and arguments, and individual cognition. Our evidence shows that, although subjects behave instrumentally, their behavior reveals the existence of a cognitive hierarchy defined by differing abilities to grasp the strategic implications of different kinds of information. We trace the consequences of these underlying cognitive differences for individual deliberative choices and for the informativeness of deliberation.
    JEL: C92 D83 C12
    Date: 2007–11
  6. By: Joana Pais; Agnes Pinter
    Abstract: We present an experimental study where we analyze three well-known matching mechanisms. the Boston, the Gale-Shapley, and the Top Trading Cycles mechanisms. in di¤erent informational settings. Our experimental results are consistent with the theory, suggesting that the TTC mechanism outperforms both the Boston and the Gale-Shapley mechanisms in terms of efficiency and it is slightly more successful than the Gale-Shapley mechanism regarding the proportion of truthful preference revelation, whereas manipulation is stronger under the Boston mechanism. In addition, even though agents are much more likely to revert to truth-telling in lack of information about the others. payoffs. ignorance may be beneficial in this context. , the TTC mechanism results less sensitive to the amount of information that participants hold. These results therefore suggest that the use of the TTC mechanism in practice is more desirable than of the others.
    Keywords: Laboratory Experiments
    JEL: C92
    Date: 2007–09
  7. By: Klaus Abbink; Jordi Brandts
    Abstract: We study the process by which subordinated regions of a country can obtain a more favourable political status. In our theoretical model a dominant and a dominated region first interact through a voting process that can lead to different degrees of autonomy. If this process fails then both regions engage in a costly political conflict which can only lead to the maintenance of the initial subordination of the region in question or to its complete independence. In the subgame-perfect equilibrium the voting process always leads to an intermediate rrangement acceptable for both parts. Hence, the costly political struggle never occurs. In contrast, in our experiments we observe a large amount of fighting involving high material losses, even in a case in which the possibilities for an arrangement without conflict are very salient. In our experimental environment intermediate solutions are feasible and stable, but purely emotional elements prevent them from being reached.
    Keywords: secession, collective action, independence movements, laboratory experiments, rent-seeking.
    JEL: C92 C93 D72 D74
    Date: 2007–09
  8. By: Theo Offerman (University of Amsterdam); Andrew Schotter (New York University)
    Abstract: In this paper, we present the results of two experiments on social sampling. In both experiments, people are asked to make a risky decision in a situation where an idiosyncratic luck term a?ects their performance. Before they make their decision, people have the opportunity to sample others who have done exactly the same problem before them. These previous participants are ranked on the basis of their success. In the first experiment, we find that, by and large, subjects sample and imitate lucky risk seekers, while they could have sampled others to retrieve information that is valuable to solve their problem rationally. The simple behavioral rule of imitating the best appears to be robust to the setting of the problem. In the second experiment, we find that subjects tend to imitate successful others in both the winner's curse version and the loser's curse version of the Bazerman-Samuelson takeover game. Because of the way these problems are constructed, imitation exacerbates the winner's curse while it alleviates the loser's curse. In all problems, social sampling makes people look more risk seeking than the people who do not have the opportunity to sample.
    Keywords: Imitation, Social Learning
    JEL: D83 C92
    Date: 2007–02–12
  9. By: Wieland Muller (Department of Economics, New York University); Andrew Schotter (Department of Politics, New York University)
    Abstract: This paper reports the results of experiments designed to test the theory of the optimal composition of prizes in contests. We find that while in the aggregate the behavior of our subjects is consistent with that predicted by the theory, such aggregate results mask an unexpected compositional effect on the individual level. While theory predicts that subject efforts are continuous and increasing functions of ability, the actual efforts of our laboratory subjects bifurcate. Low ability workers drop out and exert little or no effort while high ability subjects try too hard. This discontinuity, which is masked by aggregation, has significant consequences for behavior in organizations.
    Keywords: Contests, All-Pay Auctions, Experiments
    JEL: C92 D44 J31 D72 D82
    Date: 2007–01–05
  10. 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 dictatorultimatum 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 otherregarding behaviors, such as reciprocity, dominate.
    Date: 2007–04
  11. By: Matteo Ploner (Max Planck Institute of Economics, Strategic Interaction Group); Anthony Ziegelmeyer (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: This note reports a replication study of Falk and Kosfeld’s (2006) medium control treatment. In the experimental game, an agent has an endowment of 120 experimental currency units and decides how much to transfer to a principal. For every unit that the agent gives up, the principal receives two units. Before the agent decides how much to transfer voluntarily, the principal decides whether or not to control the agent by imposing a compulsory transfer of 10 units. Like the original study, we observe that control entails hidden costs. Unlike the original study, we do not observe that the hidden costs of control outweigh the beneï¬ts and we observe that most of the principals decide to control the agent.
    Keywords: Control, Experimental Economics, Incentives, Intrinsic Motivation, Trust.
    JEL: C91 M52
    Date: 2007–10–30
  12. By: Bogachan Celen (Columbia Business School); Shachar Kariv (Department of Economics, University of California, Berkeley); Andrew Schotter (Department of Economics, New York University)
    Abstract: Social learning is the process of individuals learning by observing the actions of others. In the real world, however, although people learn by observing the actions of others, they also learn from advice. This paper introduces advice giving into a standard social-learning problem. The experiment is designed so that both pieces of information ? actions and advice ? are equally informative (in fact, identical) in equilibrium. Despite the informational equivalence of advice and actions, in the laboratory, subjects are more willing to follow the advice given to them by their predecessors than to copy their actions. In addition, when advice is given subject behavior is more consistent with the prediction of the theory. Consequently, advice is both more informative and welfare improving.
    Keywords: Advice, Social Learning, Experiment
    JEL: C91 C92 D8
    Date: 2007–02–15
  13. By: Eric S. Dickson (Department of Politics, New York University)
    Abstract: Political actors in settings of bargaining and conflict often find themselves uncertain about the motives of their counterparts. This paper explores the psychology of motive assessment using a novel experimental design involving imperfect-information versions of the ultimatum and dictator bargaining games. Subjects are randomly assigned to one of three roles { the traditional proposer and recipient roles in these games, and a novel impartial observer role. Recipients and observers are given identical, but ambiguous, information about proposers' offers, and make post-play assessments of proposers' intentions that are rewarded based on accuracy. When uncertainty is sufficiently high, recipients' assessments of proposers' intentions are significantly lower than observers' assessments in the ultimatum game, in stark contrast to Bayesian predictions, but there is no evidence of any difference in the dictator game. The results suggest that individuals' perceptions can be directly affected by the set of strategic alternatives they possess, independent of access to information. One interpretation is that the power to accept or reject may prime individuals to be more critical or negative in forming assessments than they otherwise would be. If correct, this interpretation has important implications for theories of bargaining and con?ict, and for the design of institutions for conflict resolution.
    Keywords: Role-dependent Beliefs, Imperfect Information, Ultimatum Game, Dictator Game
    JEL: C91 D81 D82 D83 C78
    Date: 2007–02
  14. By: Dario Sacco (Socioeconomic Institute, University of Zurich)
    Abstract: The paper analyzes the effects of competitive intensity on firms' incentives to invest in process innovations through an experiment based on two-stage games, where R&D investment choices are followed by product market competition. An increase in the intensity of competition is modeled as an increase in the number of Þrms or as a switch from Cournot to Bertrand. The theoretical prediction is that more intense competition is unfavorable to investments for both cases. In the experiment it turns out that the way of modeling the intensity of competition is essential. The theoretical prediction is confirmed for the number effects. On the other hand, the comparison of Cournot and Bertrand shows that more intense competition is beneÞcial for investments.
    Keywords: R&D investment, intensity of competition, experiment
    JEL: C92 L13 O31
    Date: 2007–10
  15. By: Tobias Broenner (Institut zur Erforschung der wirtschaftlichen Entwicklung, Albert-Ludwigs-Universitaet Freiburg); Rene Levinsky (Max Planck Institute of Economics, Jena); Jianying Qiu (Max Planck Institute of Economics, Jena)
    Abstract: In this paper we experimentally test skewness seeking at the individual level. Several prospects that can be ordered with respect to the third-degree stochastic dominance (3SD) criterion are ranked by the participants of the experiment. We ï¬nd that the skewness of a distribution has a signiï¬cant impact on the decisions. Yet, while skewness has an impact, its direction differs substantially across subjects: 39% of our subjects act in accordance with skewness seeking and 10% seem to avoid skewness. On the level of individual decisions we ï¬nd that the variance of the prospects and subjects’ experience increase the probability of their choosing the lottery with greater skewness.
    Keywords: Skewness, Stochastic dominance, Decision making under uncertainty
    JEL: D81 C91 G11
    Date: 2007–11–01
  16. By: Elizabeth Potamites; Andrew Schotter (Department of Politics, New York University)
    Abstract: A reading of the literature on cognitive hierarchies leaves the impression that a subject's type is predetermined before he comes into the lab so that the distribution of types is exogenous and immutable across games. In this paper we view the choice of a person's cognitive level as endogenous and explain it by focusing on subject's expectations about the cognitive levels endogenously chosen by others. We run a set of experiments using the 2/3rd?s guessing game where subjects receive public advice ordered by a set of advisors. We discover that certain types of public advice, those that are commonly interpreted as meaningful, are capable of shifting the distribution of observed cognitive types indicating that the distribution is endogenous.
    Keywords: Beauty Contest, Cognitive Types, Cognitive Hierarchies
    JEL: C72 C91
    Date: 2007–04
  17. By: Jaromir Kovarik
    Abstract: We analyze first-order beliefs in a variation of the Public Good Game. We show that (1) the role that belief elicitation plays in the experiment affects both the contribution behavior and beliefs, and (2) framing influences stated beliefs, as much as contribution behavior. In the second part of the paper, we study the role of heterogeneity in the formation of initial beliefs, and provide an empirical model of the belief up-dating process. Subjects use the past experience, stressing the role of experience that comes from situations similar to the current ones.
    Keywords: Beliefs, Public Good, Framing, Experiment, (Belief) Learning
    JEL: C91 D83 D84 H40
    Date: 2007–09
  18. By: Vivian Lei; Steven Tucker; Filip Vesely
    Abstract: A large share of the debt claims owed by the world’s poorest countries has been cancelled through the HIPC (highly indebted poor countries) debt relief initiative. It is believed that, with less debt burden, the HIPC will be able to devote more resources to investment and thus promote their own growth and benefit their creditors in the long run. But does debt forgiveness really provide the best incentive for those countries who suffers from debt overhang? In this paper, we adopt experimental methods to study the impact of two different schemes for relieving debt. The two schemes we consider here are debt forgiveness and debt buyback, with the latter being more market-based since it allows indebted countries to repurchase their own debt on the secondary market at a discount. We find that creditors tend to reduce more debt when the relief takes the form of debt forgiveness than that of buyback. Debtors under the scheme of forgiveness are not significantly more reciprocal than those of buyback. After controlling for the amount of debt relief, creditors are significantly worse off under forgiveness whereas debtors are indifferent between the two schemes. Overall, debt forgiveness yields less desirable outcomes than debt buybacks.
    Keywords: Laboratory Experiments
    JEL: C92
    Date: 2007–09
  19. By: Ariel Knafo; Salomon Israel; Ariel Darvasi; Rachel Bachner-Melman; Florina Uzefovsky; Lior Cohen; Esti Feldman; Elad Lerer; Efrat Laiba; Yael Raz; Lubov Nemanov; Inga Gritsenko; Christian Dina; Galila Agam; Brian Dean; Gary Bornstein; Richard P. Ebstein
    Abstract: Human altruism is a widespread phenomenon that puzzled evolutionary biologists since Darwin. Economic games illustrate human altruism by demonstrating that behavior deviates from economic predictions of profit maximization. A game that most plainly demonstrates this altruistic tendency is the Dictator Game. We hypothesized that human altruistic behavior is to some extent hardwired and that a likely candidate that may contribute to individual differences in altruistic behavior is the arginine vasopressin 1a (AVPR1a) receptor that in some mammals such as the vole has a profound impact on affiliative behaviors. In the current investigation, 203 male and female university students played an online version of the Dictator Game, for real money payoffs. All subjects and their parents were genotyped for AVPR1a RS1 & RS3 promoter-region repeat polymorphisms. Parents did not participate in online game playing. Since variation in the length of a repetitive element in the vole AVPR1a promoter region is associated with differences in social behavior we examined the relationship between RS1 and RS3 repeat length (base pairs) and allocation sums. Participants with short versions (308-325 bp) of the AVPR1a RS3 repeat allocated significantly (Likelihood ratio=14.75, p=0.001, DF=2) fewer shekels to the 'other' than participants with long versions (327-343 bp). We also implemented a family-based association test, UNPHASED, to confirm and validate the correlation between the AVPR1a RS3 repeat and monetary allocations in the Dictator Game. Dictator Game allocations were significantly associated with the RS3 repeat (global p value: Likelihood ratio chi-sq = 11.73, DF= 4, p-value = 0.019). The association between the AVPR1a RS3 repeat and altruism was also confirmed using two self-report scales (the Bardi-Schwartz Universalism and Benevolence Value-expressive Behavior Scales). RS3 long alleles were associated with higher scores on both measures. Finally, long AVPR1a RS3 repeats were associated with higher AVPR1a human postmortem hippocampal mRNA levels than short RS3 repeats (One way-ANOVA: F=15.04, p=0.001, DF= 14) suggesting a functional molecular genetic basis for the observation that participants with the long RS3 repeats allocate more money than participants with the short repeats. This is the first investigation showing that a common human polymorphism, with antecedents in lower mammals, contributes to decision making in an economic game. The finding that the same gene contributing to social bonding in lower animals also appears to operate similarly in human behavior suggests a common evolutionary mechanism.
    Date: 2007–07

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