nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒07‒14
twelve papers chosen by
Daniel Houser
George Mason University

  1. Eliciting Motives for Trust and Reciprocity by Attitudinal and Behavioural Measures By Farina, Francesco; O'Higgins, Niall; Sbriglia, Patrizia
  2. Tacit Collusion in Price-Setting Duopoly Markets: Experimental Evidence By Lisa R. Anderson; Beth A. Freeborn; Charles A. Holt
  3. Belief Elicitation in Experiments: Is there a Hedging Problem? By Blanco, Mariana; Engelmann, Dirk; Koch, Alexander K.; Normann, Hans-Theo
  4. Fungibility, Labels, and Consumption By Abeler, Johannes; Marklein, Felix
  5. Hypothetical bias and certainty calibration in a value of time experiment By Swärdh, Jan-Erik
  6. Social Interactions and the Salience of Social Identity By McLeish, Kendra N.; Oxoby, Robert J.
  7. Fines, Leniency, Rewards and Organized Crime: Evidence from Antitrust Experiments By Bigoni, Maria; Fridolfsson, Sven-Olof; Le Coq, Chloé; Spagnolo, Giancarlo
  8. The Effect of Short–Selling on the Aggregation of Information in an Experimental Asset Market By Marc Vorsatz; Helena Veiga
  9. Blood donations and incentives: evidence from a field experiment By Lorenz Goette; Alois Stutzer
  10. Does Irritation Induced by Charitable Direct Mailings Reduce Donations? By Diepen, M. van; Donkers, A.C.D.; Franses, Ph.H.B.F.
  11. On the Nature, Modeling, and Neural Bases of Social Ties By Frans van Winden; Mirre Stallen; K. Richard Ridderinkhof
  12. Discounting Financial Literacy: Time Preferences and Participation in Financial Education Programs By Meier, Stephan; Sprenger, Charles

  1. By: Farina, Francesco (University of Siena); O'Higgins, Niall (University of Salerno); Sbriglia, Patrizia (University of Naples II)
    Abstract: Value Surveys may reveal well-behaved societies by the statistical treatment of the agents’ declarations of compliance with social values. Similarly, the results of experiments conducted on games with conflict of interest trace back to two important primitives of social capital – trust and reciprocity – which can be used to explain deviations from the Nash equilibrium and which lead to the optimal cooperative outcome. In this paper we attempt to elicit the true motive(s) underlying the behaviour of players in experimental trust and dictator games and suggest that the most informative utilization of surveys in this regard goes beyond the simple comparison of answers to a questionnaire with actual behaviour. Specifically the paper uses descriptive statistics and ordered probit models to analyse whether, and to what extent, answers to a questionnaire about attitudes to trusting and reciprocating predict subjects’ behaviour and, by comparing behaviour in Trust and Dictator Game, disentangles the strategic and altruistic motivations. We find no simple or direct correlation between behavioural trust or trustworthiness and attitudinal trust or disposition to reciprocate. However, dividing subjects according to attitudinal trust and trustworthiness, we observe that the link between the questionnaire and experimental sessions is more subtle than the mere correlation between average attitudes and average behaviours. The information conveyed by a survey appears to be much more powerful ex post – once the two motivational components have been separated out.
    Keywords: trust, reciprocity, experimental economics, ordered probit
    JEL: C72 C91 D63 D64
    Date: 2008–07
  2. By: Lisa R. Anderson (Department of Economics, College of William and Mary); Beth A. Freeborn (Department of Economics, College of William and Mary); Charles A. Holt (Department of Economics, University of Virginia)
    Abstract: We study the effect of demand structure on the ability of subjects to tacitly collude on prices by considering Bertrand substitutes and Bertrand complements. We find evidence of collusion in the complements treatment, but no such evidence in the substitutes treatment. This finding is somewhat in contrast with Potters and Suetens (2007) who observe tacit collusion in two treatments with similar underlying demand structures but with no market context.
    Keywords: collusion, Bertrand, experiment
    JEL: C9 L1
    Date: 2008–07–10
  3. By: Blanco, Mariana (Royal Holloway, University of London); Engelmann, Dirk (Royal Holloway, University of London); Koch, Alexander K. (Royal Holloway, University of London); Normann, Hans-Theo (Royal Holloway, University of London)
    Abstract: Belief elicitation in economics experiments usually relies on paying subjects according to the accuracy of stated beliefs in addition to payments for other decisions. Such incentives, however, allow risk-averse subjects to hedge with their stated beliefs against adverse outcomes of other decisions in the experiment. This raises two questions: (i) can we trust the existing belief elicitation results, (ii) can we avoid potential hedging confounds? Our results instill confidence regarding both issues. We propose an experimental design that eliminates hedging opportunities, and use this to test for the empirical relevance of hedging effects in the lab. We find no evidence for hedging, comparing the standard “hedging-prone” belief elicitation treatment to a “hedging-proof” design in a sequential prisoners’ dilemma game. Our findings are strengthened by the absence of hedging even in an additional non-belief elicitation treatment using a financial investment frame, where hedging arguably would be most natural.
    Keywords: belief elicitation, hedging, methods, experimental economics
    JEL: C72 C90 G11
    Date: 2008–05
  4. By: Abeler, Johannes (University of Bonn); Marklein, Felix (Federal Ministry of Finance)
    Abstract: Fungibility of money is a central principle in economics. It implies that any unit of money is substitutable for another and that the composition of income is irrelevant for consumption. We find in a field experiment that even in a simple, incentivized setup many subjects do not treat money as fungible. When a label is attached to a part of their budget, subjects change consumption according to the suggestion of the label. A controlled laboratory experiment confirms this result and further shows that subjects with lower mathematical abilities are more likely to violate fungibility. The findings lend support to behavioral models such as narrow bracketing or mental accounting. One implication of our results is that in-kind benefits distort consumption more than usually assumed.
    Keywords: fungibility, In-kind benefits, mental accounting, inframarginal consumers, field experiment, laboratory experiment
    JEL: C91 C93 D01 H31 I38
    Date: 2008–05
  5. By: Swärdh, Jan-Erik (VTI)
    Abstract: This study is the first to analyze hypothetical bias in a willingness to pay for time context as well as the first to test certainty calibration of the value of time. Hypothetical and real actions are compared in an experimental setting where the subjects are given an offer to leave the experiment in advance by paying a given amount of cash. The results show a weak tendency of positive hypothetical bias in the willingness to pay for value of time, though this effect is not different from zero at conventional significance levels. However, certainty calibration, by using the information from a follow-up question where the subjects are self-stating their preference certainty of their hypothetical choice, provides evidence of a significant positive hypothetical bias for non-certain subjects whereas this bias is eliminated for certain subjects.
    Keywords: Value of time; Hypothetical bias; Certainty calibration; Preference certainty
    JEL: C20 C91 D80
    Date: 2008–07–02
  6. By: McLeish, Kendra N. (University of Calgary); Oxoby, Robert J. (University of Calgary)
    Abstract: In this paper, we explore the effect of identity salience on behavior in a simple social interaction. Specifically, we compare behavior in a ultimatum game across three treatments: priming subjects with a shared identity, priming subjects with an identity distinct from those with whom they will interact, and priming subjects with no particular identity. We find that subjects are most cooperative in the identity-priming treatment and least cooperative in the distinctiveness-priming treatment. Similarly, subjects reveal the highest demands in the identity-priming treatment and the lowest demands in the distinctiveness-priming treatment. We discuss the implications of these results with respect to literature on organizational identity.
    Keywords: identity, experiments, bargaining
    JEL: C92 D64 M52
    Date: 2008–06
  7. By: Bigoni, Maria (IMT-Lucca); Fridolfsson, Sven-Olof (Research Institute of Industrial Economics (IFN)); Le Coq, Chloé (Stockholm Institute of Transition Economies); Spagnolo, Giancarlo (Stockholm Institute of Transition Economics)
    Abstract: Leniency policies and rewards for whistleblowers are being introduced in ever more fields of law enforcement, though their deterrence effects are often hard to observe, and the likely effect of changes in the specific features of these schemes can only be observed experimentally. This paper reports results from an experiment designed to examine the effects of fines, leniency programs, and reward schemes for whistleblowers on firms' decision to form cartels (cartel deterrence) and on their price choices. Our subjects play a repeated Bertrand price game with differentiated goods and uncertain duration, and we run several treatments differing in the probability of cartels being caught, the level of fine, the possibility of self-reporting (and not paying a fine), the existence of a reward for reporting. We find that fines following successful investigations but without leniency have a deterrence effect (reduce the number of cartels formed) but also a pro-collusive effect (increase collusive prices in surviving cartels). Leniency programs might not be more efficient than standard antitrust enforcement, since in our experiment they do deter a significantly higher fraction of cartels from forming, but they also induce even higher prices in those cartels that are not reported, pushing average market price significantly up relative to treatments without antitrust enforcement. With rewards for whistle blowing, instead, cartels are systematically reported, which completely disrupts subjects' ability to form cartels and sustain high prices, and almost complete deterrence is achieved. If the ringleader is excluded from the leniency program the deterrence effect of leniency falls and prices are higher than otherwise. As for tacit collusion, under standard anti-trust enforcement or leniency programs subjects who do not communicate (do not go for explicit cartels) tend to choose weakly higher prices than where there is no anti-trust enforcement. We also analyze post-conviction behavior, finding that there is a strong expost deterrence (desistance) effect. Moreover post-conviction prices are on average lower than before even though the average prices within cartels are the same. Finally, we find a strong cultural effect comparing treatments in Stockholm with those in Rome, suggesting that optimal law enforcement institutions differ with culture.
    Keywords: Law Enforcement; Antitrust; Cartel Deterrence; Leniency; Experiment
    JEL: K21 K42 L13 L41
    Date: 2008–04–24
  8. By: Marc Vorsatz; Helena Veiga
    Abstract: We show by means of a laboratory experiment that the relaxation of short–selling constraints causes the price of both an overvalued and an undervalued asset to decrease. Hence, the aggregation of information by the market price becomes better in case the asset is overvalued but worse if the asset is undervalued. With respect to payoffs, we find that not only uninformed but also some of the imperfectly informed traders suffer from the weakening of short–selling constraints.
    Date: 2008–07
  9. By: Lorenz Goette; Alois Stutzer
    Abstract: There is a longstanding concern that material incentives might undermine prosocial motivation, leading to a decrease in blood donations rather than an increase. This paper provides an empirical test of how material incentives affect blood donations in a large-scale field experiment spanning three months and involving more than 10,000 previous donors. We examine two types of incentive: a lottery ticket and a free cholesterol test. Lottery tickets significantly increase donations, in particular among less motivated donors. The cholesterol test leads to no discernable impact on usable blood donations. If anything, it creates a small negative selection effect in terms of donations that must be discarded.
    Keywords: Human behavior ; Altruism
    Date: 2008
  10. By: Diepen, M. van; Donkers, A.C.D.; Franses, Ph.H.B.F. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Charities mainly rely on direct mailings to attract the attention of potential donators. Individuals may feel irritated by these mailings, in particular when they receive many mailings. We study the consequences of perceived irritation on stated behavior and on actual behavior. Target selection by charities likely results in good donators receiving many mailings and hence they might also be most irritated. Therefore, irritation with direct mailings might be endogenously determined. To create exogenous variation in irritation, we design a unique controlled field experiment in cooperation with five of the largest charities in the Netherlands. Our analysis reveals that direct mailings do result in irritation, but surprisingly this affects neither stated nor actual donating behavior.
    Keywords: direct marketing;irritation;charity donations;field experiment
    Date: 2008–06–30
  11. By: Frans van Winden (University of Amsterdam); Mirre Stallen (Erasmus University Rotterdam); K. Richard Ridderinkhof (University of Amsterdam)
    Abstract: This paper addresses the nature, formalization, and neural bases of (affective) social ties and discusses the relevance of ties for health economics. A social tie is defined as an affective weight attached by an individual to the well-being of another individual (‘utility interdependence’). Ties can be positive or negative, and symmetric or asymmetric between individuals. Characteristic of a social tie, as conceived of here, is that it develops over time under the influence of interaction, in contrast with a trait like altruism. Moreover, a tie is not related to strategic behavior such as reputation formation but seen as generated by affective responses. A formalization is presented together with some supportive evidence from behavioral experiments. This is followed by a discussion of related psychological constructs and the presentation of suggestive neural findings, based on the existing literature. We conclude with some suggestions for future research.
    Keywords: Social Ties; Affect; Modeling; Neuroeconomics
    JEL: D01 D64 D87 H41 I10
    Date: 2008–06–24
  12. By: Meier, Stephan (Federal Reserve Bank of Boston); Sprenger, Charles (University of California, San Diego)
    Abstract: Many policy makers and economists argue that financial literacy is key to financial well-being. But why do many individuals remain financially illiterate despite the apparent importance of being financially informed? This paper presents results of a field study linking individual decisions to acquire personal financial information to a critical, and normally unobservable, characteristic: time preferences. We offered a short, free credit counseling and information program to more than 870 individuals. About 55 percent chose to participate. Independently, we elicited time preferences using incentivized choice experiments both for individuals who selected into the program and those who did not. Our results show that the two groups differ sharply in their measured discount factors. Individuals who choose to acquire personal financial information through the credit counseling program discount the future less than individuals who choose not to participate. Our results suggest that individual time preference may explain who will and who will not choose to become financially literate. This has implications for the validity of studies evaluating voluntary financial education programs and policy efforts focused on expanding financial education.
    Keywords: financial literacy, time preferences, selection, field experiment
    JEL: D14 D91 C93
    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.