nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒03‒25
thirteen papers chosen by
Daniel Houser
George Mason University

  1. Risk-Taking Tournaments: Theory and Experimental Evidence By Nieken, Petra; Sliwka, Dirk
  2. Face-to-Face Lying – an experimental study in Sweden and Japan By Holm, Håkan J.; Kawagoe, Toshiji
  3. An auction mechanism for public goods provision: an experimental study By DIEV, Pavel; HICHRI, Walid
  4. Less fighting than expected - experiments with wars of attrition and all-pay auctions By Hannah Hörisch; Oliver Kirchkamp
  5. Forecasting the Risk Attitudes of Women and Men: An Experimental Test of the Strength of Gender Stereotypes By Oleksandr Lugovskyy; Philip J. Grossman
  6. Incorporating fairness motives into the Impulse Balance Equilibrium concept: an application to experimental 2X2 games By Tavoni, Alessandro
  7. Leadership and Group Size: An Experiment By Mana Komai; Philip J. Grossman
  8. Leadership and Gender: An Experiment By Philip J. Grossman; Mana Komai
  9. Outside options: Another reason to choose the ?rst-price auction By Oliver Kirchkamp; Eva Poen; J. Philipp Reiß
  10. Risk aversion in low income countries: Experimental evidence from Ethiopia By Yesuf, Mahmud; Bluffstone, Randy
  11. Out-of equilibrium bids in auctions - Wrong expectations or wrong bids By Oliver Kirchkamp; J. Philipp Reiß
  12. Subsidizing charitable contributions: a natural field experiment comparing matching and rebate subsidies By Catherine C. Eckel; Philip J. Grossman
  13. How do people play against Nash opponents in games which have a mixed strategy equilibrium? By Jason Shachat; J. Todd Swarthout

  1. By: Nieken, Petra (University of Cologne); Sliwka, Dirk (University of Cologne)
    Abstract: We study risk-taking behavior in a simple two person tournament in a theoretical model as well as a laboratory experiment. First, a model is analyzed in which two agents simultaneously decide between a risky and a safe strategy and we allow for all possible degrees of correlation between the outcomes of the risky strategies. We show that risk-taking behavior crucially depends on this correlation as well as on the size of a potential lead of one of the contestants. We find that the experimental subjects acted mostly quite well in line with the derived theoretical predictions.
    Keywords: tournaments, competition, risk-taking, experiment
    JEL: M51 C91 D23
    Date: 2008–03
  2. By: Holm, Håkan J. (Department of Economics, Lund University); Kawagoe, Toshiji (Department of Complex Systems)
    Abstract: This paper investigates face-to-face lying and beliefs associated with it. In experiments in Sweden and Japan, subjects answer questions about personal characteristics, play a face-to-face sender-receiver game and participate in an elicitation of lie-detection beliefs. The previous finding of too much truth-telling (compared to the equilibrium prediction) also holds in the face-to-face setting. A new result is that although many people claim that they are good at lie-detection, few reveal belief in this ability when money is at stake. Correlations between the subjects’ characteristics and their behavior and performances in the game are also explored.
    Keywords: Lying; Game theory; Truth detection; Lie-detection; Experiment
    JEL: C72 C91 D82
    Date: 2008–02–29
  3. By: DIEV, Pavel; HICHRI, Walid
    Abstract: We experiment a new mechanism for the provision of a discrete public good: in a fixed period individuals can contribute several times; at any moment they can see the total amount collected; at the end of the period, the public good is provided if the amount covers the cost. We find that the ability of the mechanism to provide efficiently the public good decreases with the amount of the provision cost.
    Keywords: Public Goods; Experiments; Mechanism Design
    JEL: C92 H41
    Date: 2008
  4. By: Hannah Hörisch (University of Munich); Oliver Kirchkamp (University of Jena, School of Economics)
    Abstract: We use experiments to compare dynamic and static wars of attrition (i.e. second-price all-pay auctions) and first-price all-pay auctions. Many other studies find overbidding in first-price all-pay auctions. We can replicate this property. In wars of attrition, however, we find systematic underbidding. We study bids and revenue in different experimental frames and matching procedures and draw a link to the literature on stepwise linear bidding functions.
    Keywords: War of attrition, dynamic bidding, all-pay auction, stabilisation, volunteer's dilemma, experiment
    JEL: C72 C92 D44 E62 H30
    Date: 2008–03–18
  5. By: Oleksandr Lugovskyy; Philip J. Grossman (Department of Economics, St. Cloud State University)
    Abstract: This paper experimentally investigates the role of gender-based stereotypes in the forecasting of risk attitudes. Subjects predict the gamble choice of target subjects in one of three treatments: 1) Visual – the predictor can only observe the target; 2) Information – the predictor has information about the targets’ response to two statements from a risk-preference survey; and 3) Combined – the predictor both observes the targets and has the targets’ two responses to the risk-preference survey. Our results suggest that stereotypes play a considerable role in forming predictions about others’ risk attitudes and that these stereotypes persist even when more relevant information is available.
    Keywords: Experiment, Gender, Risk
    Date: 2006–10
  6. By: Tavoni, Alessandro
    Abstract: Substantial evidence has been accumulated in recent empirical works on the limited ability of the Nash equilibrium to rationalize observed behavior in many classes of games played by experimental subjects. This realization has led to several attempts aimed at finding tractable equilibrium concepts which perform better empirically, often by introducing a reference point to which players compare the available payoff allocations, as in impulse balance equilibrium (Selten & Chmura, forthcoming) and in the inequity aversion model (Fehr & Schmidt,1999). The purpose of this paper is to review some features of this recent literature and to propose a new, empirically sound, unifying concept which combines elements of fairness with reference considerations.
    Keywords: Fairness; Inequity aversion; Aspiration level; Impulse balance; Behavioral economics; Experimental economics; Jacknife estimator
    JEL: D63 D01 C72 C91
    Date: 2007–10
  7. By: Mana Komai; Philip J. Grossman (Department of Economics, St. Cloud State University)
    Abstract: Recent theoretical and experimental work suggests that leading by example can induce full cooperation in collective actions. Our experimental study suggests that leading by example loses its effectiveness in large groups. Our interpretation is that the discrepancy between the leaders’ incentives and those of an individual follower increases with group size. On one hand, leaders become more pivotal in larger groups and thus eager to participate. On the other hand, followers become more marginal in larger groups and thus more eager to free ride. Under these circumstances, leading by example becomes too weak to overcome the strong free riding problem.
    Keywords: Leading by example, Free-riding, Cooperation, Group size
    Date: 2008–03
  8. By: Philip J. Grossman; Mana Komai (Department of Economics, St. Cloud State University)
    Abstract: We present an information based model of leadership in a setting that exhibits the familiar problems of free riding and coordination failure. Leaders have superior information about the value of the project in hand and can send a costly signal to their uninformed followers to persuade them to cooperate in the project. Followers voluntarily choose whether or not to follow the better informed leader. We provide experimental evidence that, when the leaders’ gender is revealed to their followers, female subjects hesitate to lead (send a costly signal) while followers’ behavior does not indicate any gender discrimination. Such behavior is not observed among the male leaders.
    Keywords: Leadership, Information, Gender, Free Riding, Coordination Problem
    JEL: C92 H41
    Date: 2008–01
  9. By: Oliver Kirchkamp (University of Jena, School of Economics); Eva Poen (University of Nottingham); J. Philipp Reiß (Maastricht University, Economics Department)
    Abstract: In this paper we study equilibrium- and experimental bidding behaviour in ?rst-price and second price auctions with outside options. We ?nd that bidders do respond to outside options and to variations of common knowledge about competitors' outside options. However, overbidding in ?rst-price auctions is signi?cantly higher with outside options than without. First-price auctions yield more revenue than second-price auctions. This revenue-premium is signi?cantly higher with outside options. In second-price auctions the introduction of outside options has only a small effect.
    Keywords: Experiments, Auction, Expectations
    JEL: C92 D44
    Date: 2008–02–18
  10. By: Yesuf, Mahmud; Bluffstone, Randy
    Abstract: "Production systems in low-income developing countries are generally poorly diversified, focusing on rainfed staple crop production and raising livestock. These activities are inherently risky and investment and production decisions by farm households are therefore made within environments that are affected by risk. Because of poorly developed or absent credit and insurance markets it is difficult to pass any of these risks to a third party. As a result, it is often found that even when the expected net return is high, households are reluctant to adopt new agricultural technologies when they involve risk. Better understanding risk behavior will be essential for identifying appropriate farm-level strategies for adaptation to climate change by low-income farmers. Despite risk's potentially central role in farm investment decisions, there have been few attempts to estimate the magnitude and nature of risk aversion of farm households in low-income developing countries. To partially close this gap, this paper uses an experimental approach applied to 262 households in the Ethiopian highlands with real payoffs. By incorporating both small and large stakes and gains and losses into the experiment, we test for the presence of low stake risk aversion and loss aversion. We find that more than 50 percent of the households are severely or extremely risk averse. This contrasts with studies in Asia where most household decision-makers exhibit moderate to intermediate risk aversion. We find that households that stand to lose as well as gain something from participation in games are significantly more risk averse than households playing gains-only games. This strongly suggests that agricultural extension efforts involving losses as well as gains may face systematic resistance by farmers in low-income, high-risk environments. Promotion of technologies with downside risks – even if the upside potential is enormous – should therefore be combined with insurance or other support. We also find that even without the possibility of losses households are much more averse to risk when stakes are high. Results indicate that insurance or other support can likely be phased out. After initial successes have convinced farmers that technologies are viable, risk aversion declines. There are also significant differences in risk averting behavior between relatively poorer and wealthier farm households, which is consistent with decreasing absolute risk aversion. This suggests that as wealth is built up households are willing to take on more risk in exchange for higher returns. Both these findings suggest a strong path dependence. Efforts to develop poor rural areas through promotion of risky technologies should take this path dependence into account. Early successes are important, but households should also be allowed to build up wealth before they are challenged or tempted to take on more risky ventures. Furthermore, the finding that even without the possibility of losses households are much more risk averse when stakes are higher, suggests that agricultural extension should start modestly before asking households to take on larger gambles." from Authors' Abstract
    Keywords: experimental studies, loss aversion, risk aversion, Risk management, econometric models, Farm households,
    Date: 2007
  11. By: Oliver Kirchkamp (University of Jena, School of Economics); J. Philipp Reiß (Maastricht University, Economics Department)
    Abstract: Deviations from equilibrium bids in auctions can be related to inconsistent expectations with correct best replies (see Eyster and Rabin, 2005; Crawford and Iriberri, 2007) or correct expectations but small (perhaps quantal-response) mistakes in best replies (see Goeree et al., 2002). To distinguish between these two explanations we use a novel experimental procedure and study expectations together with best replies. We extensively test the internal validity of this setup. We ?nd that deviations from equilibrium bids do not seem to be due to wrong expectations but due to deviations from a best reply.
    Keywords: Experiments, Auction, Expectations
    JEL: C92 D44
    Date: 2008–03–18
  12. By: Catherine C. Eckel; Philip J. Grossman (Department of Economics, St. Cloud State University)
    Abstract: We report the results of a field experiment conducted in conjunction with a mailed fundraising campaign of a nonprofit organization. The experiment is designed to compare the response of donors to subsidies in the form of matching amounts or refunded amounts. Matching subsidies are used by many corporations as an employee benefit; the US federal tax system subsidizes giving by making it tax deductible. The design includes a control group and two levels of subsidy of each type. Our main result is that matching subsidies result in larger total donations to charities than rebate subsidies. The results are qualitatively the same, and quantitatively very similar in magnitude to the lab results, validating lab estimates of responsiveness to subsidies of charitable giving.
    Keywords: Field experiment, rebate subsidy, Matching subsidy, Charitable giving
    Date: 2006–05
  13. By: Jason Shachat; J. Todd Swarthout
    Abstract: We examine experimentally how humans behave when they, unbeknownst to them, play against a computer which implements its part of a mixed strategy Nash equilibrium. We consider two games, one zero-sum and another unprofitable with a pure minimax strategy. A minority of subjects' play was consistent with their Nash equilibrium strategy. But a larger percentage of subjects' play was more consistent with different models of play: equal-probable play for the zero-sum game, and the minimax strategy in the non-profitable game.
    Date: 2008–03

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.
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