nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒06‒27
ten papers chosen by
Daniel Houser
George Mason University

  1. Being of two minds: an ultimatum experiment investigating affective processes By Dominique Cappellettia; Werner Güth; Matteo Ploner
  2. Equity Aversion By Fershtman, Chaim; Gneezy, Uri; List, John
  3. Network Structure and Strategic Investments: An Experimental Analysis By Rosenkranz, Stephanie; Weitzel, Utz
  4. Naked Exclusion: An Experimental Study of Contracts with Externalities By Claudia M. Landeo; Kathryn E. Spier
  5. The role of fairness motives and spatial considerations in explaining departures from Nash equilibrium: stationary and evolutionary lessons from 2x2 games By Tavoni, Alessandro
  6. Looking Awkward When Winning and Foolish When Losing: Inequity Aversion and Performance in the Field By Benno Torgler; Markus Schaffner; Bruno S.Frey; Sascha L. Schmidt
  7. Positive and Negative Team Identity in a Promotion Game By Marion Eberlein; Gari Walkowitz
  8. Inexperienced Investors and Bubbles By Robin Greenwood; Stefan Nagel
  9. Are leading papers of better quality? Evidence from a natural experiment By Tom Coupé; Victor Ginsburgh; Abdul Noury
  10. Does Professor Quality Matter? Evidence from Random Assignment of Students to Professors By Scott E. Carrell; James E. West

  1. By: Dominique Cappellettia (CIFREM, University of Trento, Italy); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Matteo Ploner (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)
    Abstract: We experimentally investigate how affective processes influence proposers' and responders' behaviour in the Ultimatum Game. Using a dual-system approach, we tax cognitive resources through time pressure and cognitive load to enhance the influence of affective processes on behaviour. We find that proposers offer more under time pressure and this seems to be due to strategic considerations rather than to other-regarding concerns. We also find that responders are more likely to reject under time pressure. Surprisingly, both proposers and responders appear to be unaffected by cognitive load manipulation.
    Keywords: Ultimatum Game, dual-system theories, time pressure, cognitive load, Experimental Economics.
    JEL: C72 C78 C91
    Date: 2008–06–18
  2. By: Fershtman, Chaim; Gneezy, Uri; List, John
    Abstract: Models of inequity aversion and fairness have dominated the behavioural economics landscape in the last decade. This study gathers data from 240 subjects exposed to variants of two of the major experimental games - dictator and trust - that are employed to provide important empirical content to these models. With a set of simple laboratory treatments that focus on a manipulation of an important feature of real markets, competition over resources, we show that extant behavioural models are unable to explain data drawn from realistic manipulations of either game. Our empirical results highlight that if placed in an environment wherein socially acceptable actions provide one person with a greater portion of the rents, people will put forth extra effort to secure those rents, to the detriment of the other player. In this manner, when one can earn more than the other player through actions deemed customary, people reveal a preference for equity aversion, not inequity aversion. We propose an alternative modelling approach that can explain these data as well as accommodate other major data patterns observed in the experimental literature.
    Keywords: Equity Aversion; Social Preferences; Social Status
    JEL: C91 Z13
    Date: 2008–06
  3. By: Rosenkranz, Stephanie; Weitzel, Utz
    Abstract: This paper analyzes the effects of network positions and individual risk attitudes on individuals' strategic decisions in an experiment where actions are strategic substitutes. The game theoretic basis for our experiment is the model of Bramoullé and Kranton (2007). In particular, we are interested in disentangling the influence of global, local and individual factors. We study subjects' strategic investment decisions in four basic network structures. As predicted, we find that global factors, such as the regularity of the network structure, influence behavior. However, we also find evidence that individual play in networks is to some extent boundedly rational, in the sense that coordination is influenced by local and individual factors, such as the number of (direct) neighbors, local clustering and individuals' risk attitudes.
    Keywords: coordination; experiment; risk aversion; Social networks; strategic substitutes
    JEL: C72 C91 D00 D81 D85 H41
    Date: 2008–06
  4. By: Claudia M. Landeo; Kathryn E. Spier
    Abstract: This paper reports the results of an experiment designed to assess the ability of an incumbent seller to profitably foreclose a market with exclusive contracts. We use the strategic environment described by Rasmusen, Ramseyer, and Wiley (1991) and Segal and Whinston (2000) where entry is unprofitable when sufficiently many downstream buyers sign exclusive contracts with the incumbent. When discrimination is impossible, the game resembles a stag-hunt (coordination) game in which the buyers' payoffs are endogenously chosen by the incumbent seller. Exclusion occurs when the buyers fail to coordinate on their preferred equilibrium. Two-way non-binding pre-play communication among the buyers lowers the power of exclusive contracts and induces more generous contract terms from the seller. When discrimination and communication are possible, the exclusion rate rises. Divide-and-conquer strategies are observed more frequently when buyers can communicate with each other. Exclusion rates are significantly higher when the buyers' payoffs are endogenously chosen rather than exogenously given. Finally, secret offers are shown to decrease the incumbent's power to profitably exclude.
    JEL: C72 C90 K21 K41 L12 L40
    Date: 2008–06
  5. By: Tavoni, Alessandro
    Abstract: Substantial evidence has 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 and in the inequity aversion model. The first part of this paper is concerned with reviewing the recent reference point literature and advancing a new, empirically sound, hybrid concept. In the second part, evolutionary game theoretic models are employed to investigate the role played by fairness motives as well as spatial structure in explaining the evolution of cooperative behavior.
    Keywords: Other-regarding preferences; Inequity aversion; Endogenous preferences; Evolutionary stability; Prisoner’s dilemma
    JEL: B52 A13 D64 C72 C73
    Date: 2008–06–20
  6. By: Benno Torgler; Markus Schaffner; Bruno S.Frey; Sascha L. Schmidt
    Abstract: The experimental literature and studies using survey data have established that people care a great deal about their relative economic position and not solely, as standard economic theory assumes, about their absolute economic position. Individuals are concerned about social comparisons. However, behavioral evidence in the field is rare. This paper provides an empirical analysis, testing the model of inequity aversion using two unique panel data sets for basketball and soccer players. We find support that the concept of inequity aversion helps to understand how the relative income situation affects performance in a real competitive environment with real tasks and real incentives.
    Keywords: Inequity aversion, relative income, positional concerns, envy, social comparison, performance, interdependent preferences
    JEL: D00 D60 L83
    Date: 2008–06–16
  7. By: Marion Eberlein; Gari Walkowitz
    Abstract: Abstract: In this paper we experimentally investigate whether the so-called in-group/out-group bias leads to a favoring of own team members as candidates in promotion (by voting for them) relative to other teams and their members. In contrast to psychological approaches, mon- etary incentives for voting choices are implemented and objective performance criteria defined and thus the extent of the in-group/out-group bias is exactly measured. Our data show that face-to-face interaction with team members leads more subjects to favor own team-mates than in anonymous interaction. Moreover, not only the frequency but also the average extent of positive team identity is higher with face-to-face interaction according to objective performance measures. A further finding suggests that only anonymous team interaction often leads to substantial discrimination of own team members (i.e., negative team identity), which also is an interesting new finding and extends previous indings of psychologists on the in-group/out-group bias.
    Keywords: Team identity, promotion, experiments
    JEL: M5 L2 C9
    Date: 2008–06
  8. By: Robin Greenwood; Stefan Nagel
    Abstract: We use mutual fund manager data from the technology bubble to examine the hypothesis that inexperienced investors play a role in the formation of asset price bubbles. Using age as a proxy for managers' investment experience, we find that around the peak of the technology bubble, mutual funds run by younger managers are more heavily invested in technology stocks, relative to their style benchmarks, than their older colleagues. Furthermore, young managers, but not old managers, exhibit trend-chasing behavior in their technology stock investments. As a result, young managers increase their technology holdings during the run-up, and decrease them during the downturn. Both results are in line with the behavior of inexperienced investors in experimental asset markets. The economic significance of young managers' actions is amplified by large inflows into their funds prior to the peak in technology stock prices.
    JEL: G11
    Date: 2008–06
  9. By: Tom Coupé (Kyiv School of Economics and Kyiv Economics Institute); Victor Ginsburgh (ECARES, Université Libre de Bruxelles and CORE, Université Catholique de Louvain); Abdul Noury (CORE, Université Catholique de Louvain)
    Abstract: Leading papers in a journal’s issue attract, on average, more citations than those that follow. It is, however, difficult to assess whether they are of better quality (as is often suggested), or whether this happens just because they appear first in an issue. We make use of a natural experiment that was carried out by a journal in which papers are randomly ordered in some issues, while this order is not random in others. We show that leading papers in randomly ordered issues also attract more citations, which casts some doubt on whether, in general, leading papers are of higher quality.
    Date: 2008–06
  10. By: Scott E. Carrell; James E. West
    Abstract: It is difficult to measure teaching quality at the postsecondary level because students typically "self-select" their coursework and their professors. Despite this, student evaluations of professors are widely used in faculty promotion and tenure decisions. We exploit the random assignment of college students to professors in a large body of required coursework to examine how professor quality affects student achievement. Introductory course professors significantly affect student achievement in contemporaneous and follow-on related courses, but the effects are quite heterogeneous across subjects. Students of professors who as a group perform well in the initial mathematics course perform significantly worse in follow-on related math, science, and engineering courses. We find that the academic rank, teaching experience, and terminal degree status of mathematics and science professors are negatively correlated with contemporaneous student achievement, but positively related to follow-on course achievement. Across all subjects, student evaluations of professors are positive predictors of contemporaneous course achievement, but are poor predictors of follow-on course achievement.
    JEL: I20
    Date: 2008–06

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