nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒06‒07
nine papers chosen by
Daniel Houser
George Mason University

  1. Strategic vs Non-Strategic Motivations of Sanctioning By Vyrastekova, J.; Funaki, Y.; Takeuchi, A.
  2. Manipulating Reference States: the Effect of Attitudes on Utility By Astrid Matthey
  3. Competition and Innovation: An Experimental Investigation By Dario Sacco; Armin Schmutzler
  4. All-Pay Auctions with Negative Prize Externalities: Theory and Experimental Evidence By Dario Sacco; Armin Schmutzler
  5. Peaks and Valleys: Experimental Asset Markets With Non-Monotonic Fundamentals By Noussair, C.N.; Powell, O.R.
  6. Truth and trust in communication - Experiments on the effect of a competitive context By Rode, Julian
  7. Moral Sentiments and Material Interests behind Altruistic Third-Party Punishment By Stefania Ottone; Ferruccio Ponzano; Luca Zarri
  8. The Envious Punisher: Understanding Third and Second Party Punishment with Simple Games By Andreas Leibbrandt; Raúl López-Pérez
  9. The Intergenerational Transmission of Risk and Trust Attitudes By Dohmen, Thomas J; Falk, Armin; Huffman, David; Sunde, Uwe

  1. By: Vyrastekova, J.; Funaki, Y.; Takeuchi, A. (Tilburg University, Center for Economic Research)
    Abstract: We isolate strategic and non-strategic motivations of sanctioning in a repeated public goods game. In two experimental treatments, subjects play the public goods game with the possibility to sanction others. In the STANDARD sanctions treatment, each subject learns about the sanctions received in the same round as they were assigned, but in the SECRET sanctions treatment, sanctions are announced only after the experiment is finished, removing in this way all strategic reasons to punish. We find that sanctioning is similar in both treatments, giving support for nonstrategic explanations of sanctions (altruistic punishment). Interestingly, contributions to the public good in both treatments with sanctioning are higher than when the public goods game is played without any sanctioning, irrespective of announcing the sanctions to their receivers during the play of the game, or only after the game is finished. The mere knowledge that sanctions might be assigned increases cooperation: subjects correctly expect that nonstrategic sanctioning takes place against freeriders.
    Keywords: altruistic punishment;nonstrategic sanctions;strategic sanctions;public goods;economic experiment.
    JEL: C72 C92 D74
    Date: 2008
  2. By: Astrid Matthey (Max-Planck-Institute of Economics)
    Abstract: In economic theory, utility depends on past, present and future outcomes. The experiment described in this paper suggests that utility also depends on people's attitudes, and that it can easily be manipulated through these attitudes. The results imply, ?rst, that purely outcome-based models of individual utility may be incomplete. Second, that reference-states are not determined completely endogenously but can be influenced from outside. And third, that experiments in economics may be sensitive to subtle details of the experimental design.
    Keywords: utility, reference state, attitudes, priming, experiment
    JEL: D01 D10 C91
    Date: 2008–05–30
  3. By: Dario Sacco (Socioeconomic Institute, University of Zurich); Armin Schmutzler (Socioeconomic Institute, University of Zurich)
    Abstract: The paper analyzes the effects of more intense competition on firms’ incentives to invest in process innovations. We carry out experiments based on two-stage games, where R&D investment choices are followed by product market competition. As predicted by theory, an increase in the number of firms from two to four reduces investments. However, a positive effect is observed for a switch from Cournot to Bertrand, even though theory predicts a negative effect in the four-player case.
    Keywords: R&D investment, intensity of competition, experiment
    JEL: C92 L13 O31
    Date: 2008–05
  4. By: Dario Sacco (Socioeconomic Institute, University of Zurich); Armin Schmutzler (Socioeconomic Institute, University of Zurich)
    Abstract: The paper characterizes the mixed-strategy equilibria in all-pay auctions with endogenous prizes that depend positively on own effort and negatively on the effort of competitors. Such auctions arise naturally in the context of investment games, lobbying games, and promotion tournaments. We also provide an experimental analysis of a special case which captures the strategic situation of a two-stage game with investment preceding homogenous Bertrand competition. We obtain overinvestment both relative to the mixed-strategy equilibrium and the social optimum.
    Keywords: All-pay auctions, oligopoly, investment, experiment, overbidding
    JEL: C92 D44 L13 O31
    Date: 2008–05
  5. By: Noussair, C.N.; Powell, O.R. (Tilburg University, Center for Economic Research)
    Abstract: We report the results of an experiment designed to measure how well asset market prices track fundamentals when the latter experience peaks and troughs. We observe greater price efficiency in markets in which fundamentals rise to a peak and then decline, than in markets in which fundamentals decline to a trough and undergo a subsequent increase. The findings demonstrate that the characteristics of the time path of the fundamental value can influence the degree of market efficiency.
    Keywords: Bubble;Peak;Experiment
    JEL: C9 G10
    Date: 2008
  6. By: Rode, Julian (Sonderforschungsbereich 504)
    Abstract: The paper employs laboratory experimentation to study the effect of competition on truth telling and trust in communication. A sequence of either competitive or cooperative interactions preceded an experimental communication game. In the game, informed advisors sent a recommendation to decision-makers who faced uncertainty about the consequences of their choice. While many advisors told the truth against their monetary self-interest, the propensity to tell the truth was unaffected by the contextual priming. In contrast, decision-makers trusted significantly less in a competitive context. The effect was strongest when they faced full uncertainty. The paper relates this result to psychological and neuro-economic findings on automatic information processing. The data of this study were largely in line with Subjective Equilibrium Analysis (Kalai and Lehrer, 1995).
    Date: 2008–04–10
  7. By: Stefania Ottone (EconomEtica and University of Eastern Piedmont; EconomEtica and University of Eastern Piedmont); Ferruccio Ponzano (University of Eastern Piedmont; University of Eastern Piedmont); Luca Zarri (Università di Verona; Dipartimento di Scienze economiche (Università di Verona))
    Abstract: Social norms are ubiquitous in human life. Their role is essential in allowing cooperation to prevail, despite the presence of incentives to free ride. As far as norm enforcement devices are concerned, it would be impossible to have widespread social norms if second parties only enforced them. However, both the quantitative relevance and the motivations underlying altruistic punishment on the part of ‘unaffected’ third parties are still largely unexplored. This paper contributes to shed light on the issue, by means of an experimental design consisting of three treatments: a Dictator Game Treatment, a Third-Party Punishment Game Treatment (Fehr and Fischbacher, 2004) and a Metanorm Treatment, that is a variant of the Third-party Punishment Game where the Recipient can punish the third party. We find that third parties are willing to punish dictators (Fehr and Fischbacher, 2004; Ottone, 2008) and, in doing so, they are affected by ‘reference-dependent fairness’, rather than by the ‘egalitarian distribution norm’. By eliciting players’ normative expectations, it turns out that all of them expect a Dictator to transfer something – not half of the endowment. Consequently, the Observers’ levels of punishment are sensitive to their subjective sense of fairness. A positive relation between the level of punishment and the degree of negative subjective unfairness emerges. Subjective unfairness also affects Dictators’ behaviour: their actual transfers and their ideal transfer are not significantly different. Finally, we interestingly find that third parties are also sensitive to the receivers’ (credible) threat to punish them: as the Dictator’s transfer becomes lower and lower than the Observer’s ideal transfer, the Observer’s reaction is – other things being equal – significantly stronger in the Metanorm Treatment than in the Third-Party Punishment Game Treatment. Hence, despite their being to some extent genuinely nonstrategically motivated, also third parties – like second parties – are sensitive to the costs of punishing.
    Keywords: Third-Party Punishment; Moral Sentiments; Material Interests; Subjective Unfairness; Social Norms.
    JEL: C72 C9 D63 Z13
    Date: 2008–05
  8. By: Andreas Leibbrandt; Raúl López-Pérez
    Abstract: We provide a systematic comparison of punishment from unaffected third parties and affected second parties using a within-subject design in ten simple games. We apply the classification analysis by El-Gamal and Grether (1995) and find that a parsimonious model assuming subjects are either envious or selfish best explains the punishment from both third and second parties. Third and second parties punish richer co-players, even if they chose a socially or Pareto-efficient allocation or if they are merely bystanders who made no choice. Despite their unaffected position, we do not find that third parties punish in a more impartial or normative manner.
    Keywords: Envy, fairness, inequity aversion, norms, punishment, reciprocity
    JEL: C70 C91 D63 D74 Z13
    Date: 2008–05
  9. By: Dohmen, Thomas J; Falk, Armin; Huffman, David; Sunde, Uwe
    Abstract: Recent theoretical contributions depart from the usual practice of treating individual attitude endowments as a black box, by assuming that these are shaped by the attitudes of parents and other role models. Attitudes include fundamental preferences such as risk preference, and crucial beliefs about the world, such as trust. This paper provides evidence on the three main mechanisms for attitude transmission highlighted in the theoretical literature: (1) transmission of attitudes from parents to children; (2) positive assortative mating of parents, which tends to reinforce the impact of parents on the child; (3) an impact of prevailing attitudes in the local environment. Investigating these mechanisms is important because they are crucial assumptions underlying a large literature. It also sheds light on the basic question of where individual attitude endowments come from, and the factors that determine these drivers of economic behaviour. The findings are supportive of attitude transmission models, and indicate that all three mechanisms play a role in shaping economically relevant attitudes.
    Keywords: Assortative Mating; Cultural Economics; Family Economics; Intergenerational Transmission; Risk Preferences; Social Interactions; SOEP; Trust
    JEL: D1 D8 J12 J13 J62 Z13
    Date: 2008–05

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.