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on Experimental Economics |
| By: | Ping Zhang (School of Economics, University of Nottingham) |
| Abstract: | We compare uniform price auctions with fixed price offerings in Initial Public Offerings (IPO) using laboratory experiments. The experimental environment is based on the Biais and Faugeron-Grouzet (2002) model. Standard predictions based on tacit collusion equilibria (TCE) suggest lower revenues in uniform price auctions, although alternative equilibria allow for higher revenues. In our experiment, there is no evidence that TCE are played. The experiment suggests that the uniform price auctions are superior to fixed price offerings in terms of raising revenues. |
| Keywords: | Experiment, IPO, Uniform price auction, Fixed price offering, Share auction |
| JEL: | D44 G12 C91 |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:cdx:dpaper:2008-05&r=exp |
| By: | Alexander Elbittar (Centro de Investigacion y Docencia Economica (CIDE)); Andrei Gomberg (Centro de Investigacion Economica (CIE), Instituto Tecnologico Autonomo de Mexico (ITAM)) |
| Abstract: | We report results of an experimental study of multi-object uniform and discriminatory-price auctions in an environment of publicly known common values, concentrating on an environment where theory predicts sharply different results of the two auction formats. We find that the bidding behavior in the uniform case exhibits two clear regularities: agents consistently play weakly dominated strategies by overbidding on the first unit and have moderate difficulty coordinating on the high payoff (low auction revenue) equilibrium predicted by theory. However, subjects with experience in the same environment are better at reducing demand to achieve higher payoff. Bidders in discriminatory auctions, as predicted, tend to submit bids close to value for all units and are not generally successful in attempts at collusion. |
| Keywords: | Experimental economics, Second price auctions |
| Date: | 2008–02 |
| URL: | http://d.repec.org/n?u=RePEc:cie:wpaper:0801&r=exp |
| By: | Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579); Robert-Vincent Joule (LPS - Laboratoire de Psychologie Sociale - Ecole des Hautes Etudes en Sciences Sociales); Jason Shogren (Departement Economy and Finance, University of Wyoming - University of Wyoming) |
| Abstract: | Recent work in experimental economics has explored whether observed behavior depends on whether wealth was windfall or earned. This paper extends this work by considering whether earned wealth ffects bidding behavior in an induced-value second-price auction. We find people bid more sincerely in the auction with earned wealth given monetary incentives; earned wealth did not induce sincere bidding in hypothetical auctions. |
| Keywords: | Auctions; Demand revelation; Experimental valuation; Hypothetical bias; Earned Money |
| Date: | 2008–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00277283_v1&r=exp |
| By: | Andreas Glöckner (Max Planck Institute for Research on Collective Goods, Bonn); Tilmann Betsch (University of Erfurt) |
| Abstract: | It has been repeatedly shown that in decisions under time constraints, individuals predominantly use noncompensatory strategies rather than complex compensatory ones. We argue that these findings might be due not to limitations of cognitive capacity but instead to limitations of information search imposed by the commonly used experimental tool Mouselab (Payne et al., 1988). We tested this assumption in three experiments. In the first experiment, information was openly presented, whereas in the second experiment the standard Mouselab program was used under different time limits. The results indicate that individuals are able to compute weighted additive decision strategies extremely quickly if information search is not restricted by the experimental procedure. In a third experiment, these results were replicated using more complex decision tasks, and the major alternative explanations that individuals use more complex heuristics or merely encode the constellation of cues were ruled out. In sum, the findings challenge the fundaments of bounded rationality and highlight the importance of automatic processes in decision making. |
| Keywords: | Automatic Information Integration, One Reason Decision Making, Mouselab, Probabilistic Inferences, Process Tracing, Time Limits, Intuition |
| Date: | 2008–04 |
| URL: | http://d.repec.org/n?u=RePEc:mpg:wpaper:2008_12&r=exp |
| By: | Pedro Dal Bó; Andrew Foster; Louis Putterman |
| Abstract: | A novel experiment is used to show that the effect of a policy on the level of cooperation is greater when it is chosen democratically by the subjects than when it is exogenously imposed. In contrast to the previous literature, our experimental design allows us to control for selection effects (e.g. those who choose the policy may be affected differently by it). Our finding implies that democratic institutions may affect behavior directly in addition to having effects through the choice of policies. Our findings have implications for the generalizability of the results of randomized policy interventions. |
| JEL: | C10 C9 D7 O10 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:13999&r=exp |
| By: | Carla Marchese; Marcello Montefiori |
| Abstract: | This paper considers the problem of voting about the quantity of a public good. An experiment has been run in order to test the extent of the strategic bias that arises in the individual vote when the social choice rule is to select the mean of the quantities voted for; conflicting theoretical predictions are available in the literature on this purpose. The political implications of the mean rule and its effects upon efficiency are also discussed. |
| Keywords: | experiment, voting rule, public good |
| JEL: | C91 D72 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:usi:labsit:020&r=exp |
| By: | Hopfensitz, Astrid; Krawczyk, Michal; van Winden, Frans A.A.M. |
| Abstract: | This experimental study is concerned with the impact of the timing of the resolution of risk on people’s willingness to take risks, with a special focus on the role of affect. While the importance of anticipatory emotions has so far been only inferred from decisions regarding hypothetical choice problems, we had participants put their own money at risk in a real investment task. Moreover, emotions were explicitly measured, including anticipatory emotions experienced during the waiting period under delayed resolution (which involved two days). Affective traits and risk attitudes were measured through a web-based questionnaire before the experiment and participants’ preferences for resolution timing, risk, and time were incentive compatibly measured during the experiment. Main findings are that delayed resolution can affect investment, that the effect depends on the risk involved, and that (among all the measures considered) only emotions can explain our results, albeit in ways that are not captured by existing models. |
| Keywords: | delayed resolution of risk; emotions; experiment; Investment decision |
| JEL: | C91 D81 G11 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:6822&r=exp |
| By: | Daniela Raeva; Luigi Mittone; Jens Schwarzbach |
| Abstract: | Theoretical and empirical body of research have exposed the powerful role of experiencing regret in guiding choice behavior. In this paper, we examined the impact of experienced regret (and rejoicing) induced by a feedback provided on a risk decision prior to a two-period intertemporal choice (i.e. decision-unrelated experienced regret). To our knowledge, this is the first attempt to bring together experienced regret and choice over time.We used the two-component discounted utility model approach as a framework. We applied previous research findings on the effect of experienced regret on utility, and we performed an experiment to test whether experienced decision-unrelated regret and rejoicing have an impact on the discount factor. We found that both experienced decisionunrelated regret and rejoicing have an impact on the way people discount future: when regret is experienced the discount factor decreases, whereas when rejoicing is experienced the discount factor increases. |
| Keywords: | intertemporal choice, regret theory |
| JEL: | A12 C91 D91 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:0804&r=exp |
| By: | Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, Ecole d'économie de Paris - Paris School of Economics - Université Panthéon-Sorbonne - Paris I); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales - CNRS : UMR6579); Robert-Vincent Joule (LPS - Laboratoire de Psychologie Sociale - Ecole des Hautes Etudes en Sciences Sociales); Jason Shogren (Departement Economy and Finance, University of Wyoming - University of Wyoming) |
| Abstract: | Do French Students really bid sincerely in real and hypothetical incentive compatible auctions? Recent evidence suggests they do, which goes counter to most observed bidding behavior in the<br />United States, and supports the idea that cultural differences may explain bidding behavior more than economic circumstances. Herein we run a robustness check by exploring bidding behavior in classic Vickrey auction for real and hypothetical values in the two largest cities (Paris and Lyon). Two striking results emerge–(1) French students bid sincerely; and (2) no hypothetical bias exists. |
| Keywords: | Auctions; Demand revelation; Experimental valuation; Hypothetical bias |
| Date: | 2008–05–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:papers:halshs-00277282_v1&r=exp |
| By: | Marco LiCalzi; Paolo Pellizzari (Department of Applied Mathematics, University of Venice) |
| Abstract: | This paper studies the consequences of removing the resampling assumption from the zero-intelligence trading model in Gode and Sunder (1993). We obtain three results. First, individual rationality is no longer sufficient to attain allocative effciency in a continuous double auction; hence, the rules of the market matter. Second, the allocative effciency of the continuous double auction is higher than for other sequential protocols both with or without resampling. Third, compared to zero intelligence, the effect of learning on allocative effciency is sharply positive without resampling and mildly negative with resampling. |
| JEL: | D40 D51 C70 C92 |
| Date: | 2008–05 |
| URL: | http://d.repec.org/n?u=RePEc:vnm:wpaper:164&r=exp |