nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒02‒02
fifteen papers chosen by
Daniel Houser
George Mason University

  1. Social Networks and Trust: not the Experimental Evidence you may Expect By Daniela Di Cagno; Emanuela Sciubba
  2. Field Experiments in Economics: Palgrave Entry By List, John A.; Reiley, David
  3. Matching and Challenge Gifts to Charity: Evidence from Laboratory and Natural Field Experiments By Rondeau, Daniel; List, John A.
  4. Insurance Purchase for Low-Probability Losses By Susan K. Laury; Melayne Morgan McInnes; J. Todd Swarthout
  5. Does Competition Enhance Performance or Cheating? A Laboratory Experiment By Schwieren, Christiane; Weichselbaumer, Doris
  6. Measuring Risk Attitudes Controlling for Personality Traits By Jungmin Lee; Cary Deck; Javier Reyes; Chris Rosen
  7. Transparency, Inequity Aversion, and the Dynamics of Peer Pressure in Teams: Theory and Evidence By Mohnen, Alwine; Pokorny, Kathrin; Sliwka, Dirk
  8. Non-monotonic Repayment Contracts are Superior: An Experimental Approach By Reiss J. Philipp; Wolff Irenaeus
  9. An experimental comparison of sequential first- and second-price auctions with synergies By Leufkens Kasper; Peeters Ronald; Vorsatz Marc
  10. On the Absorbability of Herd Behaviour and Informational Cascades: An Experimental Analysis By Morone, Andrea; Fiore, Annamaria; Sandri, Serena
  11. Distributional Orderings: An Approach with Seven Flavours By Yoram Amiel; Frank A Cowell; Wulf Gaertner
  12. Getting Punnishment Right: Do Costly Monitoring or Redustributive Punishment Help? By Talbot Page; Louis Putterman; Bruno Garcia
  13. measures of social capital and trust By o'higgins, s. niall; Sbriglia, Patrizia
  14. Awards - A View from Psychological Economics By Bruno S. Frey; Susanne Neckermann
  15. In Bargaining We Trust By Saran Rene

  1. By: Daniela Di Cagno; Emanuela Sciubba (School of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We run a laboratory experiment were friendship networks are generated endogenously within an anonymous group. Our experiment builds on two phases in sequence: a network formation game and a trust game. We ?find that in those sessions where the trust game is played before the network formation game, the overall level of trust is not signi?cantly different from the one observed in a simple trust game; in those sessions where the trust game is played after the network formation game we ?find that the overall level of trust is signi?cantly lower than in the simple trust game. Hence surprisingly trust does not increase because of enforced reciprocity and moreover a common social history does affect the level of trust, but in a negative manner. Where network effects matter is in the choice of whom to trust: while we tend to trust less on average those with whom we have already interacted compared to total strangers, past history allows us to select whom to trust relatively more than others.
    Keywords: network formation, trust game, experiments
    JEL: C91 C92 L14
    Date: 2008–01
  2. By: List, John A. (University of Maryland); Reiley, David (University of Arizona)
    Abstract: Field experiments occupy a middle ground between laboratory experiments and naturally occurring field data. The idea is to perform a controlled experiment that captures important characteristics of the real world. Relative to traditional empirical economics, field experiments provide an advantage by creating exogenous variation in the variables of interest, allowing us to establish causality rather than mere correlation. Relative to a laboratory experiment, a field experiment gives up some of the control that a laboratory experimenter may have over her environment in exchange for increased realism.
    Keywords: field experiments
    JEL: C72
    Date: 2008–01
  3. By: Rondeau, Daniel (University of Victoria); List, John A. (University of Maryland)
    Abstract: This study designs a natural field experiment linked to a controlled laboratory experiment to examine the effectiveness of matching gifts and challenge gifts, two popular strategies used to secure a portion of the $200 billion annually given to charities. We find evidence that challenge gifts positively influence contributions in the field, but matching gifts do not. Methodologically, we find important similarities and dissimilarities between behavior in the lab and the field. Overall, our results have clear implications for fundraisers and provide avenues for future empirical and theoretical work on charitable giving.
    Keywords: fundraising, threshold public goods, charitable giving, field experiments
    JEL: C93 H41
    Date: 2008–01
  4. By: Susan K. Laury; Melayne Morgan McInnes; J. Todd Swarthout
    Abstract: It is widely accepted that individuals tend to underinsure against low-probability, high-loss events relative to high-probability, low-loss events. This conventional wisdom is based largely on field studies, as there is very little experimental evidence. We reexamine this issue with an experiment that accounts for possible confounds in prior insurance experiments. Our results are counter to the prior experimental evidence, as we observe subjects buying more insurance for low-probability events than the higher-probability events, given a constant expected loss and load factor. Our results suggest that, to the extent underinsurance for catastrophic risk is observed in the field, it can be attributed to factors other than the relative probability of the loss events.
    Keywords: low-probability hazards, insurance, risk, experiments
    JEL: C91 D80
    Date: 2008–01
  5. By: Schwieren, Christiane (University of Heidelberg); Weichselbaumer, Doris (University of Linz)
    Abstract: In this paper we experimentally test whether competing for a desired reward does not only affect individuals’ performance, but also their tendency to cheat. Recent doping scandals in sports as well as forgery and plagiarism scandals in academia have been partially explained by “competitive pressures”, which suggests a link between competition and cheating. In our experiment subjects conduct a task where they have the possibility to make use of illegitimate tools to better their results. We find that women react much stronger to competitive pressure by increasing their cheating activity while there is no overall sex difference in cheating. However, the effect of competition on women’s cheating behavior is entirely due to the fact that women, on average, are doing worse with respect to the assigned task. Indeed we find that it is the ability of an individual to conduct a particular task and not sex that crucially affects the reaction to competition. Poor performers significantly increase their cheating behavior under competition which may be a face-saving strategy or an attempt to retain a chance of winning.
    Keywords: cheating, piece rate, tournament, competition, experiment
    JEL: C91 J24 J31 M52
    Date: 2008–01
  6. By: Jungmin Lee (Department of Economics, Florida International University); Cary Deck (Department of Economics, University of Arkansas); Javier Reyes (Department of Economics, University of Arkansas); Chris Rosen (Department of Management, University of Arkansas)
    Abstract: This study measures risk attitudes using two paid experiments: the Holt and Laury (2002) procedure and a variation of the game show Deal or No Deal. The participants also completed a series of personality questionnaires developed in the psychology literature including the risk domains of Weber, Blais, and Betz (2002). As in previous studies risk attitudes vary within subjects across elicitation methods. However, this variation can be explained by individual personality traits. Specifically, subjects behave as though the Holt and Laury task is an investment decision while the Deal or No Deal task is a gambling decision.
    Keywords: Risk Attitudes, Risk Taking Behavior, Personality Traits, Laboratory Experiments.
    JEL: C9 D8
    Date: 2008–01
  7. By: Mohnen, Alwine (University of Cologne); Pokorny, Kathrin (University of Cologne); Sliwka, Dirk (University of Cologne)
    Abstract: We provide an explanation for peer pressure in teams based on inequity aversion. Analyzing a two-period model with two agents, we find that the effect of inequity aversion strongly depends on the information structure. When contributions are unobservable, agents act as if they were purely selfish. However, when contributions are made transparent at an interim stage, agents exert higher efforts in the first period and adjust their efforts according to the interim information in the second period. This form of peer pressure reduces free-riding and thus, more efficient outcomes are attained. The results are confirmed in a real effort experiment.
    Keywords: inequity aversion, incentives, free-riding, peer pressure, transparency, team, real effort, experiment
    JEL: D23 M12
    Date: 2008–01
  8. By: Reiss J. Philipp; Wolff Irenaeus (METEOR)
    Abstract: We experimentally investigate if theoretically superior non-monotonic repayment contracts yield superior results in the laboratory. We find replacing standard debt contracts with repayment-equivalent non-monotonic contracts increases entrepreneurial income by 170% and total surplus by 30%.
    Keywords: financial economics and financial management ;
    Date: 2007
  9. By: Leufkens Kasper; Peeters Ronald; Vorsatz Marc (METEOR)
    Abstract: The presence of synergies in recurrent procurement auctions leads to an exposure problem and asymmetries among bidders. We consider sequential first- and second-price auctions with synergies in a setting with four bidders. In a series of experiments we compare the performance of the two pricing formats for three different sizes of the synergy. We find that for small synergies, the first-price auction performs better in terms of efficiency, revenue, and the probability on losses. However, once the synergy factor becomes very large the performance of the two different pricing formats becomes more similar. We also find that even though the potential total surplus that can be divided between buyers and seller increases in the synergy factor, subjects’ earnings within a pricing rule do not significantly change in the synergy factor. Finally, we observe that the two pricing formats give rise to different price trends within the auction sequence. In general, our results provide support for the common use of first-price instead of second-price auctions for public procurement.
    Keywords: industrial organization ;
    Date: 2007
  10. By: Morone, Andrea; Fiore, Annamaria; Sandri, Serena
    Abstract: A theory is said to be fully absorbable whenever its own acceptance by all of the individuals belonging to a certain population does not question its predictive validity. This accounts for strategic equilibria and can be related to the logic underlying convergence of behaviour and intentional herding in sequential games. This paper discusses the absorbability of informational cascades’ theory by bounded rational decision-makers and analyses whether providing individuals with theoretic information on informational cascades affects overall probability of herding phenomena to occur as well as whether an incorrect cascade can be reversed because of bounded rational adapting of the theory’s prescriptive.
    Keywords: Theory absorption; Herd behaviour; Informational cascades
    JEL: D8 C91 C72
    Date: 2007
  11. By: Yoram Amiel; Frank A Cowell; Wulf Gaertner
    Abstract: We examine individuals' distributional orderings in a number of contexts. This is done by using a questionnaire-experiment that is presented to respondents in any one of seven "flavours" or interpretations of the basic distributional problem. The flavours include inequality, risk, social welfare and justice. The issue of personal involvement in the distributional comparison is explicitly addressed.
    Keywords: social welfare, inequality, justice, risk, questionnaire experiments.
    JEL: C13 D63
    Date: 2007–10
  12. By: Talbot Page; Louis Putterman; Bruno Garcia
    Abstract: We introduce new treatments of a voluntary contribution mechanism with opportunities to punish, to see how contributions and punishments change when (a) each dollar lost in punishment must be awarded to another team member and/or when (b) obtaining information on individuals’ contributions is a costly choice. Conjectures that tying punishments to rewards might reduce punishment of high contributors (perverse punishment) or increase overall punishing are not completely born out, but innovation (a) nonetheless succeeds in making the net punishment of high contributors much less common because they receive enough rewards to offset punishment. A surprise finding is that innovation (b) also decreases the incidence of misdirected punishment, since high contributors do more monitoring than low ones while low contributors do most of the perverse punishing. Both innovations raise both contributions and earnings relative to the familiar VCM-with-punishment treatment.
    Date: 2008
  13. By: o'higgins, s. niall; Sbriglia, Patrizia
    Abstract: Trust and trustworthiness are important components of social capital and much attention has been devoted to the problems of their correct evaluation. Attitudinal survey questions as reported in the EVS – European Value Survey - are often regarded as inefficient indicators of trust, since they lack of behavioural underpinnings (Putnam, 1995) which one might desire when measuring trust. In this paper, we consider alternative measures of trust and trustworthiness, based on behavioural assumptions. We construct two relative behavioural measures of trust (RBM1 and RBM2), both based on the ex post measurement of trust, once individuals are informed on the level of trustworthiness of the social group to which they have been allocated during the experiment. Our main finding is that the relative behavioural measures show that trust strongly varies once the individual is informed on the on the level of trustworthiness of the social group to which he\she has been allocated during the experiment. This difference is higher the higher is the family level of income and the parental education status. As for previous findings (Glaeser et al., 2000, Lazzarini, 2005) which have found no correlation between attitudinal and behavioural measures of trust, we find that relative behavioural measures are not correlated to attitudinal measures but they are strongly correlated to groups’ trustworthiness. We also find that similar social preferences profiles (between Senders and Recipients) tend to enhance the individual level of trust, in the RBM2 context. This result seems to confirm the importance of the homogeneity of the social environment when studying the effects of policy interventions (Alesina and La Ferrara, 2002).
    Keywords: social capital; trust; experiments
    JEL: A10
    Date: 2007–08
  14. By: Bruno S. Frey; Susanne Neckermann
    Abstract: Awards in the form of orders, decorations, prizes, and titles are ubiquitous in monarchies and republics, private organizations, not-for-profit, and profit-oriented firms. This paper argues that awards present a unique combination of different stimuli and that they are distinct and unlike other monetary and non-monetary rewards. Despite their relevance in all areas of life awards have not received much scientific attention. We propose to study awards and present results on a vignette experiment that quantifies and isolates the effects of different award characteristics such as the publicity associated with winning an award. Further, employing a unique data set, we demonstrate that there are substantial differences in the intensity of usage of awards across countries.
    Keywords: Awards; compensation; incentives; principal-agent; honors and distinctions
    JEL: C93 J33 M52
    Date: 2008–01
  15. By: Saran Rene (METEOR)
    Abstract: We introduce trustworthy traders in bilateral trading. Trustworthy traders do not misrepresent their private information. We prove that an increase in the levels of trust (probabilities that traders are trustworthy) can reduce the maximum attainable probability of trade among the strategic traders in the set of k-double auctions. In contrast, if the levels of trust increase, then we can construct direct mechanisms with a higher probability of trade among the strategic traders. In fact, there exist ex-post efficient direct mechanisms if the levels of trust are high but k-double auctions are inefficient for all levels of trust. We prove that k-double auctions are constraint-inefficient for generic levels of trust when players have uniform priors.
    Keywords: microeconomics ;
    Date: 2007

This nep-exp issue is ©2008 by Daniel Houser. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.