nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒02‒09
eight papers chosen by
Daniel Houser
George Mason University

  1. Inter-Group Conflict and Intra-Group Punishment in an Experimental Contest Game By Klaus Abbink; Jordi Brandts; Benedikt Herrmann; Henrik Orzen
  2. Trust and Reciprocity in 2-node and 3-node Networks By Alessandra Cassar, ac; Mary Rigdon, mr
  3. Betting on Own Knowledge: Experimental Test of Overconfidence By Pavlo R. Blavatskyy
  4. Lottery Pricing in the Becker-DeGroot-Marschak Procedure By Pavlo R. Blavatskyy; Wolfgang R. Köhler
  5. Selection and Mode Effects in Risk Preference Elicitation Experiments By Gaudecker, H.M. von; Soest, A.H.O. van; Wengstrom, E.
  6. An Experimental Investigation of Violations of Transitivity in Choice under Uncertainty By Michael H. Birnbaun; Ulrich Schmidt
  7. The Emergence of Information Sharing in Credit Markets By Martin Brown; Christian Zehnder
  8. Social Interactions and Schooling Decisions By Rafael Lalive; Alejandra Cattaneo

  1. By: Klaus Abbink (CREED, University of Amsterdam); Jordi Brandts (Institut d'Anàlisi Econòmica (CSIC), Barcelona); Benedikt Herrmann (University of Nottingham); Henrik Orzen (University of Nottingham)
    Abstract: We study how conflict in a contest game is influenced by rival parties being groups and by group members being able to punish each other. Our main motivation stems from the analysis of socio-political conflict. The relevant theoretical prediction in our setting is that conflict expenditures are independent of group size and independent of whether punishment is available or not. We find, first, that our results contradict the independence of groupsize prediction: conflict expenditures of groups are substantially larger than those of individuals, and both are substantially above equilibrium. Towards the end of the experiment material losses in groups are 257% of the predicted level. There is, however, substantial heterogeneity in the investment behaviour of individual group members. Second, allowing group members to punish each other after individual contributions to the contest effort are revealed leads to even larger conflict expenditures. Now material losses are 869% of the equilibrium level and there is much less heterogeneity in individual group members’ investments. These results contrast strongly with those from public goods experiments where punishment enhances efficiency and leads to higher material payoffs.
    Keywords: Laboratory experiments, Rent-seeking, Conflict, Group competitiveness
    JEL: C90 D72 D74 F51 H41
    Date: 2007–12
  2. By: Alessandra Cassar, ac; Mary Rigdon, mr
    Abstract: In this paper we focus on the interaction between exogenous network structure and bargaining behavior in a laboratory experiment. Our main question is how competition and cooperation interact in bargaining environments based on networked versions of the investment game. We focus on 3-node networked markets and vary the network structure to model competition upstream (multiple sellers paired with a monopsonistic buyer) and competition downstream (a monopolistic seller paired with multiple buyers). We describe two kinds of models of trust for such networked environments, absolute and relativized models, and use this structure to generate a general hypothesis about these environments: that information crowds in cooperation on the competitive side of the market. The experimental results support this hypothesis.
    Keywords: networks; trust; reciprocity; experiments; investment game
    JEL: L14 D00 C91
    Date: 2008–01–26
  3. By: Pavlo R. Blavatskyy
    Abstract: This paper presents a new incentive compatible method for measuring confidence in own knowledge. This method consists of two parts. First, an individual answers several general knowledge questions. Second, the individual chooses among three alternatives: 1) one question is selected at random and the individual receives a payoff if he or she has answered this question correctly; 2) the individual receives the same payoff with a probability equal to the percentage of correctly answered questions; 3) either the first or the second alternative is selected. The choice of the first (second) alternative reveals overconfidence (underconfidence). The individual is well calibrated if he or she chooses the third alternative. Experimental results show that subjects, on average, exhibit underconfidence about their own knowledge when the incentive compatible mechanism is used. Their confidence in own knowledge does not depend on their attitude towards risk/ambiguity.
    Keywords: Overconfidence, underconfidence, lottery, experiment, risk aversion
    JEL: C91 D81
    Date: 2008–01
  4. By: Pavlo R. Blavatskyy; Wolfgang R. Köhler
    Abstract: A standard method to elicit the certainty equivalent of a risky lottery is the Becker-DeGroot-Marschak (BDM) procedure. In the BDM procedure an individual bids her minimum selling price for a lottery in a second-price auction against a randomly drawn number. Experimental results presented in this paper demonstrate that elicited prices are systematically affected by the interval from which the random number is drawn. Expected utility theory cannot explain these results. Non-expected utility theories can only explain the results if subjects consider compound lotteries generated by the BDM procedure. We present an alternative explanation where subjects sequentially compare the lottery to monetary amounts in order to determine their minimum selling price.
    Keywords: Certainty equivalent, experiment, stochastic, Becker-DeGroot-Marschak (BDM) method, elicitation procedure
    JEL: C91 D81
    Date: 2007–05
  5. By: Gaudecker, H.M. von; Soest, A.H.O. van; Wengstrom, E. (Tilburg University, Center for Economic Research)
    Abstract: We combine data from a risk preference elicitation experiment conducted on a representative sample via the Internet with laboratory data on student subjects for the same experiment in order to investigate effects of implementation mode and of subject pool selection. We find that the frequency of errors in the lab experiment is drastically below that of the representative sample in the Internet experiment, and average risk aversion is lower as well. Considering the student-like subsample of the Internet subjects and comparing a traditional lab design with an Internet-like design in the lab gives us two ways to decompose these differences into differences due to subject pool selection and differences due to implementation mode. Both lead to the conclusion that the differerences are due to selection and not to implementation mode. An analysis of the various steps leading to participation or non-participation in the Internet survey leads to the conclusion that these processes are selective in selecting subjects who make fewer errors, but do not lead to biased conclusions on risk preferences. These findings point at the usefulness of the Internet survey as an alternative to a student pool in the laboratory if the ambition is to use the experiments to draw inference on a broad population.
    Keywords: Risk aversion;Internet surveys;Laboratory experiments
    JEL: C90 D81
    Date: 2008
  6. By: Michael H. Birnbaun; Ulrich Schmidt
    Abstract: Several models of choice under uncertainty imply systematic violations of transitivity of preference. Our experiments explored whether people show patterns of intransitivity predicted by these models. To distinguish “true” violations from those produced by “error,” a model was fit in which each choice can have a different error rate and each person can have a different pattern of true preferences that does not need to be transitive. Error rate for a choice is estimated from preference reversals between repeated presentations of the same choice. Our results showed that very few people repeated intransitive patterns. We can retain the hypothesis that transitivity best describes the data of the vast majority of participants.
    Keywords: decision making, errors, regret theory, transitivity
    JEL: C91 D81
    Date: 2008–01
  7. By: Martin Brown; Christian Zehnder
    Abstract: We examine how asymmetric information and competition in the credit market affect voluntary information sharing between lenders. We study an experimental credit market in which information sharing can help lenders to distinguish good borrowers from bad ones, because borrowers may exogenously switch locations. Lenders, however, are also engaged in spatial competition, and lose market power by sharing information with close competitors. Our results suggest that more asymmetric information in the credit market increases information sharing behavior significantly. Stronger competition between lenders reduces information sharing, but its impact seems to be only of second order importance.
    Keywords: Credit Market, Information Sharing, Spatial Competition, Adverse Selection
    JEL: C92 G21 D82
    Date: 2007–04
  8. By: Rafael Lalive; Alejandra Cattaneo
    Abstract: The aim of this paper is to study whether schooling choices are affected by social interactions. Such social interactions may be important because children enjoy spending time with other children or parents learn from other parents about the ability of their children. Identification is based on a randomized intervention that grants a cash subsidy encouraging school attendance among a sub-group of eligible children within small rural villages in Mexico. Results indicate that (i) the eligible children tend to attend school more frequently, (ii) but also the ineligible children acquire more schooling when the subsidy is introduced in their local village, (iii) social interactions are economically important, and (iv) they may arise due to changes in parents’ perception of their children’s ability.
    Keywords: peer effects, schooling, field experiment, PROGRESA.
    JEL: C93 I21 I28
    Date: 2006–08

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