nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒02‒23
eight papers chosen by
Daniel Houser
George Mason University

  1. Single versus Multiple Prize Contests to Finance Public Goods: Theory and Experimental Evidence By Marco Faravelli; Luca Stanca
  2. A Prize to Give for: An Experiment on Public Good Funding Mechanisms By Luca Corazzini; Marco Faravelli; Luca Stanca
  3. Technology Adoption Subsidies: An Experiment with Managers By Rob Aalbers; Eline van der Heijden; Jan Potters; Daan van Soest; Herman Vollebergh
  4. Emotion Expression and Fairness in Economic Exchange By Erte Xiao; Daniel Houser
  5. Influence of time delay on choice between gambles: Savoring the emotion By Luigi Mittone; Lucia Savadori
  6. Edgar Allen Poe's Riddle: Do Guessers Outperform Misleaders in a Repeated Matching Pennies Game? By Kfir Eliaz; Ariel Rubinstein
  7. Mechanism Design: How to Implement Social Goals By Eric S. Maskin
  8. Voting Equilibria in Multi-candidate Elections By John Duggan; Yoji Sekiya

  1. By: Marco Faravelli; Luca Stanca
    Abstract: This paper investigates single and multiple prize contests as incentive mechanisms for the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally a one-prize contest with a three-prize contest in a case where theory predicts that several prizes maximise revenues. We find that, contrary to the theoretical predictions, total contributions are significantly higher in the one-prize contest. In both treatments contributions converge towards theoretical predictions over successive rounds, but the effects of repetition are different: convergence is fast in the one-prize treatment, while gradual and with some undershooting in the three-prize treatment. Focusing on individual income types, the better performance of the single-prize contest is largely explained by the contributions of high income individuals: a single larger prize provides a more effective incentive for richer individuals than three smaller prizes.
    Keywords: Auctions; Public Goods; Laboratory Experiments
    JEL: C91 D44 H41
    Date: 2007–12
  2. By: Luca Corazzini; Marco Faravelli; Luca Stanca
    Abstract: This paper investigates fund-raising mechanisms based on a prize as a way to overcome free riding in the private provision of public goods, under the assumptions of income heterogeneity and incomplete information about income levels. We compare experimentally the performance of a lottery, an all-pay auction and a benchmark voluntary contribution mechanism. We find that prize-based mechanisms perform better than voluntary contribution in terms of public good provision after accounting for the cost of the prize. Comparing the prize-based mechanisms, total contributions are significantly higher in the lottery than in the all-pay auction. Focusing on individual income types, the lottery outperforms voluntary contributions and the all-pay auction throughout the income distribution
    Keywords: Auctions; Lotteries; Public Goods; Laboratory Experiments.
    JEL: C91 D44 H41
    Date: 2007–12
  3. By: Rob Aalbers (SEO Economic Research, Amsterdam); Eline van der Heijden (Tilburg University); Jan Potters (Tilburg University); Daan van Soest (Tilburg University); Herman Vollebergh (Erasmus University Rotterdam)
    Abstract: We evaluate the impact of technology adoption subsidies on in- vestment behavior in an individual choice experiment. In a laboratory setting professional managers are confronted with an intertemporal decision problem in which they have to decide whether or not to search for, and possibly adopt, a new technology. Technologies differ in the per-period benefits they yield, and their purchase price increases with the per-period benefits provided. We introduce a subsidy on the more expensive technologies (that also yield the larger per-period benefits), and find that the subsidy scheme induces agents to search for and adopt these more expensive technologies even though the subsidy itself is too small to render these technologies profitable. We speculate that the result is driven by the positive connotation (affect) that the concept 'subsidy' invokes.
    Keywords: framed field experiment; search model; technology subsidies
    JEL: C9 D8 H2
    Date: 2007–10–25
  4. By: Erte Xiao; Daniel Houser (Interdsciplinary Center for Economic Science, George Mason University)
    Abstract: Research in economics and psychology has established that informal sanctions,particularly expressions of negative emotion, can enforce fair economic exchange. However, scholars are only beginning to understand the reasons informal sanctions affect economic outcomes. Here we provide direct empirical evidence that a preference to avoid negative emotion expression plays an important role in promoting fair exchange. We study one-shot Dictator games, where one subject has the right to determine a division of an amount of money between herself and her receiver. In relation to the standard game, there are significantly less profit-maximizing offers when receivers can react to offers with ex post written messages. Our data provide new perspectives on roles communication systems play in promoting economic efficiency in social environments, and support economic theories of decision that incorporate psychological factors such as guilt and self-deception.
    Keywords: emotions, fairness, ultimatum games
    JEL: C92 D63
    Date: 2007–11
  5. By: Luigi Mittone; Lucia Savadori
    Abstract: In two laboratory studies involving 285 undergraduate students presented with a one-shot real choice we observe a systematic influence of time delay on the preferences for two lotteries, equal in expected value, but different in the degree of probability and outcome. The more the outcome is postponed (2 weeks, 1 month, 3 months, 6 months), the more individuals prefer the lottery offering a higher value (400 Euro) but a lower probability (.02) compared to the one offering a lower value (14 Euro) but a higher probability (.60). We explain these findings assuming a savoring hypothesis according to which, for highly emotional events, individuals prefer to postpone the desirable outcome, enjoying the savoring experience of anticipating the future emotions. It also suggests that for decisions where uncertainty resolution is postponed in the future, people will underweight the probability and overweight the outcome.
    Keywords: intertemporal choice, time delay, time horizon, gambles, risk
    Date: 2008
  6. By: Kfir Eliaz; Ariel Rubinstein
    Date: 2008–02–18
  7. By: Eric S. Maskin (School of Social Science,)
    Date: 2008–02
  8. By: John Duggan; Yoji Sekiya (W. Allen Wallis Institute of Political Economy, 107 Harkness Hall, University of Rochester, Rochester, NY 14627-0158)
    Abstract: We consider a general plurality voting game with multiple candidates, where voter preferences over candidates are exogenously given. In particular, we allow for arbitrary voter indierences, as may arise in voting subgames of citizen-candidate or locational models of elections. We prove that the voting game admits pure strategy equilibria in undominated strategies. The proof is constructive: we exhibit an algorithm, the “best winning deviation” algorithm, that produces such an equilibrium in finite time. A byproduct of the algorithm is a simple story for how voters might learn to coordinate on such an equilibrium.
    Date: 2008–02

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