nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒07‒05
seven papers chosen by
Daniel Houser
George Mason University

  1. When Equality Trumps Reciprocity: Evidence from a Laboratory Experiment By Xiao, Erte; Bicchieri, Cristina
  2. Cognitive Biases and Gaze Direction: An Experimental Study By Alessandro Innocenti; Alessandra Rufa; Jacopo Semmoloni
  3. Psychological and environmental determinants of myopic loss aversion By Hopfensitz, Astrid; Wranik, Tanja
  4. Eliciting motives for trust and reciprocity by attitudinal and behavioural measures By Francesco Farina; Niall O'Higgins; Patrizia Sbriglia
  5. In Search of Workers' Real Effort Reciprocity - A Field and a Laboratory Experiment By Heike Hennig-Schmidt; Bettina Rockenbach; Abdolkarim Sadrieh
  6. Willingness to Pay of Committed Citizens: A Field Experiment By Dominique Ami; Olivier Chanel; Frédéric Aprahamian; Robert-Vincent Joule; Stephane Luchini
  7. Direct Democracy and Local Public Goods: Evidence from a Field Experiment in Indonesia By Benjamin A. Olken

  1. By: Xiao, Erte; Bicchieri, Cristina
    Abstract: Inequity aversion and reciprocity have been identified as two primary motivations underlying human decision making. However, because income and wealth inequality exist to some degree in all societies, these two key motivations can point to different decisions. In particular, when a beneficiary is less wealthy than a benefactor, a reciprocal action can lead to greater inequality. In this paper we report data from a trust game variant where trustees’ responses to kind intentions generate inequality in favor of investors. In relation to a standard trust game treatment where trustees’ responses reduce inequality, the proportion of non-reciprocal decisions is twice as large when reciprocity promotes inequality. Moreover, we find investors expect that this will be the case. Overall, although both motives clearly play a role, we found strong evidence for inequality aversion. Our results call attention to the potential importance of inequality in principal-agent relationships, and have important implications for designing policies aimed at promoting cooperation.
    JEL: D63 C72 C91
    Date: 2008–06–01
  2. By: Alessandro Innocenti; Alessandra Rufa; Jacopo Semmoloni
    Abstract: This paper investigates the validity of the model of dual processing by means of eyetracking methods. In this theoretical framework, gaze direction may be a revealing signal of how automatic detection is modified or sustained by controlled search. We performed an experiment by using a stylized decisional framework, i.e. informational cascade, proposed by economists to investigate the rationality of imitative behavior. Our main result is that automatic detection as revealed by gaze direction is driven by mechanisms that are dependent on cognitive biases. In particular, we find significant statistical correlation between subjects’ first fixation and their revealed patterns of choice. Our findings support the hypothesis that the process of automatic detection is not independent on cognitive processes.
    Keywords: informational cascades, overconfidence, eye-tracking, information processing, cognitive biases
    JEL: C91 D82 D83 D87
    Date: 2008–06
  3. By: Hopfensitz, Astrid; Wranik, Tanja
    Abstract: Each economic actor is characterized by his own evaluations, traits, and strategies. Although heterogeneity of economic actors is widely acknowledged, little is known about the factors causing it. In this paper, we will examine the behavioral bias known as myopic loss aversion, and the environmental and psychological factors leading to different behavioral reactions. Myopic loss aversion has been used to suggest that fund managers should reveal information only rarely, to lead investors to choose options with (on average) higher returns. Specifically, we experimentally studied the impact of experience, individual differences, and emotions on behavioral responses to feedback frequency in an investment setting. Participants made investment decisions in one of three feedback frequency conditions: (1) they received feedback after each round and had the opportunity to make investment changes each time; (2) they received feedback after each round, but were only given the possibility to make changes every three rounds; and (3) they received aggregated feedback every three rounds, and also had the opportunity to make changes every three rounds. We collected information about personality and individual difference factors before the experiment. Finally, evaluations and emotions were measured every three rounds, immediately after feedback was given. We hypothesized that myopic loss aversion is not a general phenomenon, but that stable individual differences lead to different evaluations and emotional reactions concerning feedback. This implies that myopic loss aversion will only be present for some groups of people under certain conditions. As predicted, we found that myopic loss aversion is not generally observed; rather, we found both an experience effect and a personality effect. In particular, myopic loss aversion was particularly likely: (1) when initial investment rounds lead to negative investment experiences (i.e., losses); and (2) for investors with low self-efficacy concerning the investment situation. ‘Self efficacy’ is related to a personality profile characterized by confidence in decision-making abilities, high optimism, and low anxiety. Our results may help explain which individual and situational factors lead to myopic loss aversion, and should help researchers and practitioners provide optimal feedback to different types of investment clients.
    Keywords: myopic loss aversion; risk taking; character traits; self efficacy; emotions; personality
    JEL: D53 G11 D81 D14 C91
    Date: 2008
  4. By: Francesco Farina; Niall O'Higgins; Patrizia Sbriglia
    Abstract: The intention to “invest” in the Trust Game in extensive form revealed by a move could conceal different motivations. Whether the motive hidden beneath the manifest behaviour of the first mover is the desire to invest in a relationship of mutual advantage with the trustee or the desire to be good to him independently from his own final payoff, remains an unsettled question. The question then is how to identify the motive which is actually at work, out of the two possible motives embedded in the trust game: 1) an “investment” motive - conditional cooperation is a way to express the expectation of reciprocal behaviour; and/or, 2) an altruistic motive - what may appear as an “investment” actually conceals a social preferences, that is the intention to gratuitously favour the other player. In this paper we attempt to elicit the true motive underlying the behaviour of each of the two players and suggest that the most informative utilization of surveys in this regard goes beyond the simple comparison between answers to a questionnaire and actual behaviour. The statistical treatment of players’ behaviour in the sessions, by means of attitudes as shown by their answers, allows a deeper understanding of the players’ behaviour and a better evaluation of the experimental results. Therefore, the objective of disentangling the strategic motive (the intention of the trustor to elicit benevolence from the trustee, and the trustee interest in reciprocating) from the altruistic motive will be pursued by establishing a correlation between the attitudinal and the behavioural measures of trust and trustworthiness. In this paper, we will then be using the “words” of answers to a questionnaire in order to more deeply understand the motivations behind “actions”.
    Keywords: Experimental economics, Surveys, Trust, Reciprocity
    JEL: C42 C72 C91 D63 D64 D83
    Date: 2008–06
  5. By: Heike Hennig-Schmidt (Laboratory of Experimental Economics, University of Bonn, Adenauerallee 24-42, 53113 Bonn, Germany, Tel. +49 228 7391-95 (Fax -93),,; Bettina Rockenbach (Lehrstuhl für Mikrooekonomie, Universitaet Erfurt, Postfach 900 221, 99105 Erfurt, Germany, Tel. +49 361 73745-21 (Fax: -29),,; Abdolkarim Sadrieh (Faculty of Economics and Management, University of Magdeburg, Postbox 4120, 39016 Magdeburg, Germany, Tel. +49 391 67-18492 (Fax. 11355),,
    Abstract: We present a field experiment to assess the effect of own and peer wage variations on actual work effort of employees with hourly wages. Work effort neither reacts to an increase of the own wage, nor to a positive or negative peer comparison. This result seems at odds with numerous laboratory experiments that show a clear own wage sensitivity on effort. In an additional real-effort laboratory experiment we show that explicit cost and surplus information that enables to exactly calculate employer’s surplus from the work contract is a crucial pre-requisite for a positive wage-effort relation. This demonstrates that employee’s reciprocity requires a clear assessment of the surplus at stake.
    Keywords: efficiency wage, reciprocity, fairness, field experiment, real effort
    JEL: C91 C92 J41
    Date: 2008–06
  6. By: Dominique Ami (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); Olivier Chanel (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); Frédéric Aprahamian (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); 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)
    Abstract: In this paper, we propose a behavioural approach to determine the extent to which the consumer/citizen distinction affects interpretations of monetary values. We perform a field experiment dealing with air pollution, where some (randomly selected) subjects are given the opportunity to behave politically by signing a petition for environmental protection prior to stating their private preferences in a standard contingent valuation exercise. We show that the petition has the potential to influence respondents' willingness to pay and that whether the effect is negative or positive depends on the degree of (dis)similarity between the petition and the scenario in which willingness to pay are elicited. We interpret the results using the theory of commitment borrowed from social psychology.
    Keywords: Field Experiment, Citizen, Consumer, Contingent Valuation, Willingness to pay, Commitment, Air Pollution
    Date: 2008–06–20
  7. By: Benjamin A. Olken
    Abstract: This paper presents an experiment where 48 Indonesian villages were randomly assigned to choose development projects through either representative-based meetings or direct election-based plebiscites. Plebiscites resulted in dramatically higher satisfaction among villagers, increased knowledge about the project, greater perceived benefits, and higher reported willingness to contribute. Changing the political mechanism had much smaller effects on the actual projects selected, with some evidence that plebiscites resulted in projects chosen by women being located in poorer areas. The results show that direct participation in political decision making can substantially increase satisfaction and legitimacy, even when it has little effect on actual decisions.
    JEL: D72
    Date: 2008–06

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