nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒07‒30
ten papers chosen by
Daniel Houser
George Mason University

  1. Epistemic Conditions and Social Preferences in Trust Games By Gillies, Anthony S; Rigdon, Mary L
  2. Some differences in revealed behaviour under different inquiry methods By Ortona, Guido; Ottone, Stefania; Ponzano, Ferruccio; Scacciati, Francesco
  3. The effect of short-selling of the aggregation of information in an experimental asset market By Helena Veiga; Marc Vorsatz
  4. English Auctions with Toeholds: An Experimental Study By Sotiris Georganas; Rosemarie Nagel
  5. An Experimental Analysis of Time-Inconsistency in Long-Run Projects By Zafer Akin; Abdullah Yavas
  6. Is there a U-shaped Relation between Competition and Investment? By Dario Sacco
  7. Boundary and interior equilibria: what drives convergence in a ‘beauty contest’? By Andrea, Morone; Piergiuseppe, Morone
  8. Are the Treasures of Game Theory Ambiguous? By Jürgen Eichberger; David Kelsey
  9. Powerful Women: Does Exposure Reduce Bias? By Lori A. Beaman; Raghabendra Chattopadhyay; Esther Duflo; Rohini Pande; Petia Topalova
  10. Rationalization and Cognitive Dissonance: Do Choices Affect or Reflect Preferences? By M. Keith Chen

  1. By: Gillies, Anthony S; Rigdon, Mary L
    Abstract: It is well-known that subjects in bilateral bargaining experiments often exhibit choice behavior suggesting there are strong reciprocators in the population. But it is controversial whether explaining this data requires a social preference model that invokes genuine strong reciprocity or whether some social preference model built on other-regarding preferences as a surrogate can explain it. Since the data precedes theory here, all the social preference models agree on most of it — making direct tests more difficult. We report results from a laboratory experiment using a novel method for testing between the classes of social preference models in the trust game that manipulates the distribution of payoff information in the game. We find evidence supporting the strong reciprocity hypothesis.
    Keywords: social preferences; trust game; reciprocity; strong reciprocators
    JEL: C70 C91
    Date: 2008–07–13
  2. By: Ortona, Guido; Ottone, Stefania; Ponzano, Ferruccio; Scacciati, Francesco
    Abstract: The experiment presented in this paper has two aims, both methodological. First, we want to check for the role of what we may call (after Carpenter et al., 2006) the they came to play effect. Second, we want to test whether the lab outcomes are confirmed by a questionnaire on a hypothetical similar scenario. In order to pursue our aims, we design an experiment made of four treatments: a lab-experiment with strategy method, a lab-experiment without strategy method, a questionnaire with strategy method and a questionnaire without strategy method. We may conclude that the lab results are definitively more reliable than the questionnaire ones only if you manage, in one way or the other, to get rid of the bias induced by the they came to play effect: a post-experiment questionnaire, containing explicit questions on the matter, may be a device.
    Keywords: Experiments, questionnaire, come to play effect, strategy method
    JEL: B41 C91 C92 H21
    Date: 2008–07
  3. By: Helena Veiga; Marc Vorsatz
    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.
    Keywords: Asset market, Rational expectations, Experiment, Short Sales
    Date: 2008–07
  4. By: Sotiris Georganas; Rosemarie Nagel
    Abstract: We run experiments on English Auctions where the bidders already own a part (toehold) of the good for sale. The theory predicts a very strong effect of even small toeholds, however we find the effects are not so strong in the lab. We explain this by analyzing the flatness of the payoff functions, which leads to relatively costless deviations from the equilibrium strategies. We find that a levels of reasoning model explains the results better than the Nash equilibrium. Moreover, we find that although big toeholds can be effective, the cost to acquire them might be higher than the strategic benefit they bring. Finally our results show that in general the seller’s revenues fall when the playing field is uneven.
    Keywords: Experiments, toehold auction, takeover, payoff, flatness, quantal response, level-k
    JEL: D44 C91 G34
    Date: 2008–07
  5. By: Zafer Akin; Abdullah Yavas
    Date: 2008–07
  6. By: Dario Sacco (Socioeconomic Institute, University of Zurich)
    Abstract: We argue that, in a simple setting, the relation between the intensity of competition and cost-reducing investment is U-shaped. We consider a two-stage game with cost-reducing investments followed by a linear differentiated Cournot duopoly. We first show that, except for firms that are much less efficient than the competitor, investment in the subgame-perfect equilibrium is minimal for intermediate levels of competition, which is inversely parameterized by the extent of product differentiation. An extensive set of laboratory experiments also provides support for the U-shape, both for symmetric firms and for leaders. Also consistent with predictions, the relation is negative for firms that are lagging behind.
    Keywords: Investment, intensity of competition, experiment
    JEL: C92 L13 O31
    Date: 2008–07
  7. By: Andrea, Morone; Piergiuseppe, Morone
    Abstract: We present an experimental game in the p-beauty framework. Building on the definitions of boundary and interior equilibria, we distinguish between ‘speed of convergence towards the game-theoretic equilibrium’ and ‘deviations of the guesses from the game-theoretic equilibrium’. In contrast to earlier findings (Güth et al., 2002), we show, under a different game parameterisation, that (i) interior equilibria initially produce smaller deviation of the guesses from the game-theoretic equilibrium compared to boundary equilibria; (ii) interior and boundary equilibria do not differ in the timeframe needed for convergence; (iii) the speed of convergence is higher in the boundary equilibrium.
    Keywords: Guessing game; p-beauty contest; individual behaviour
    JEL: C72 C91
    Date: 2008
  8. By: Jürgen Eichberger (University of Heidelberg, Department of Economics); David Kelsey (University of of Exeter, School of Business and Economics)
    Abstract: Goeree & Holt (2001) observe that, for some parameter values, Nash equilibrium provides good predictions for actual behaviour in experiments. For other payoff parameters, however, actual behaviour deviates consistently from that predicted by Nash equilibria. They attribute the robust deviations from Nash equilibrium to actual players’ considering not only marginal gains and losses but also total pay-offs. In this paper, we show that optimistic and pessimistic attitudes towards strategic ambiguity may induce such behaviour.
    Keywords: Ambiguity, coordination games, experiments, traveller’s dilemma, matching pennies, optimism
    JEL: C72 D81
    Date: 2008–07
  9. By: Lori A. Beaman; Raghabendra Chattopadhyay; Esther Duflo; Rohini Pande; Petia Topalova
    Abstract: We exploit random assignment of gender quotas across Indian village councils to investigate whether having a female chief councillor affects public opinion towards female leaders. Villagers who have never been required to have a female leader prefer male leaders and perceive hypothetical female leaders as less effective than their male counterparts, when stated performance is identical. Exposure to a female leader does not alter villagers' taste preference for male leaders. However, it weakens stereotypes about gender roles in the public and domestic spheres and eliminates the negative bias in how female leaders' effectiveness is perceived among male villagers. Female villagers exhibit less prior bias, but are also less likely to know about or participate in local politics; as a result, their attitudes are largely unaffected. Consistent with our experimental findings, villagers rate their women leaders as less effective when exposed to them for the first, but not second, time. These changes in attitude are electorally meaningful: after 10 years of the quota policy, women are more likely to stand for and win free seats in villages that have been continuously required to have a female chief councillor.
    JEL: O1
    Date: 2008–07
  10. By: M. Keith Chen (Yale University)
    Abstract: Cognitive dissonance is one of the most influential theories in psychology, and its oldest experiential realization is choice-induced dissonance. In contrast to the economic approach of assuming a person's choices reveal their preferences, psychologists have claimed since 1956 that people alter their preferences to rationalize past choices by devaluing rejected alternatives and upgrading chosen ones. Here, I show that every study which has tested this preference-spreading effect has overlooked the potential that choices may reflect individual preferences. Specifically, these studies have implicitly assumed that subject's preferences can be measured perfectly, i.e., with infinite precision. Absent this, their methods, even with control groups, will mistakenly identify cognitive dissonance when there is none. Correctly interpreted, several prominent studies actually reject the presence of choice-induced dissonance. This suggests that mere choice may not always induce rationalization, a reversal that may significantly change the way we think about cognitive dissonance as a whole.
    Keywords: Cognitive dissonance, Revealed preference
    JEL: A12 C91 D01
    Date: 2008–07

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