nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒11‒04
twelve papers chosen by
Daniel Houser
George Mason University

  1. Does Resorting to Online Dispute Resolution Promote Agreements? Experimental Evidence By Yannick Gabuthy; Nicolas Jacquemet; Nadège Marchand
  2. Earned Wealth, Engaged Bidders? Evidence from a second price auction By Nicolas Jacquemet; Stephane Luchini; Robert-Vincent Joule; Jason Shogren
  3. The Emotional Information Processing System is Risk Averse: Ego-Depletion and Investment Behavior By De Langhe, B.; Sweldens, S.T.; Osselaer, S.M.J. van; Tuk, M.A.
  4. Competition and the Ratchet Effect By Gary Charness; Marie-Claire Villeval; Peter Kuhn
  5. As if or What? – Expectations and Optimization in a Simple Macroeconomic Environment By Michael W.M. Roos; Wolfgang J. Luhan
  6. License to Fail? How Leader Group Prototypicality Moderates the Effects of Leader Performance on Perceptions of Leadership Effectiveness By Giessner, S.R.; Knippenberg, D.L. van; Sleebos, E.
  7. Training Without Certification :An Experimental Study By Nadège Marchand; Claude Montmarquette
  8. Monitoring optimistic agents By Nicolas Jacquemet; Jean-Louis Rullière; Isabelle Vialle
  9. Are Expectations Formed by the Anchoring-and-adjustment Heuristic? – An Experimental Investigation By Michael W.M. Roos; Wolfgang J. Luhan
  10. Matching the gold standard: Comparing experimental and non-experimental evaluation techniques for a geographically targeted program By Sudhanshu Handa; John Maluccio
  11. Indirect Reciprocity and Strategic Reputation Building in an Experimental Helping Game By Dirk Engelmann; Urs Fischbacher
  12. Tax Salience, Voting, and Deliberation By Rupert Sausgruber; Jean-Robert Tyran

  1. By: Yannick Gabuthy (BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université Louis Pasteur - Strasbourg I); Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Nadège Marchand (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: This paper presents an experiment performed to test the properties of an innovativebargaining mechanism (called automated negotiation) used to resolve disputes arising fromInternet-based transactions. The main result shows that the settlement rule tends to chillbargaining as it creates incentives for individuals to misrepresent their true valuations, whichimplies that automated negotiation is not able to promote agreements. However, this perverseeffect depends strongly on the conflict situation. When the threat that a disagreement occurs ismore credible, the strategic effect is reduced since defendants are more interested inmaximizing the efficiency of a settlement than their own expected profit. The implications ofthese results are then used to discuss the potential role of public regulation and reputationmechanisms in Cyberspace
    Keywords: : Online Dispute Resolution, Electronic Commerce, Bargaining, Arbitration,Experimental Economics
    Date: 2008
  2. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); 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); Robert-Vincent Joule (LPS - Laboratoire de Psychologie Sociale - Ecole des Hautes Etudes en Sciences Sociales); Jason Shogren (Departement Economy and Finance, University of Wyoming - University of Wyoming)
    Abstract: Recent work in experimental economics has explored whether observed behavior depends on whether wealth was windfall or earned. This paper extends this work by considering whether earned wealth ffects bidding behavior in an induced-value second-price auction. We find people bid more sincerely in the auction with earned wealth given monetary incentives; earned wealth did not induce sincere bidding in hypothetical auctions.
    Keywords: Auctions; Demand revelation; Experimental valuation; Hypothetical bias; Earned Money
    Date: 2008–05–06
  3. By: De Langhe, B.; Sweldens, S.T.; Osselaer, S.M.J. van; Tuk, M.A. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Two experiments show that a shortage of self-regulatory resources results in more risk aversion in mixed-gamble (gain/loss) situations. The findings support a dual process view that distinguishes between a rational and an affective information processing system, in which self-regulatory resources are the necessary fuel for the rational system. Depending on the expected values of risk seeking versus risk averse behavior, ego depletion can have negative (experiment 1) as well as positive (experiment 2) consequences for investment behavior.
    Keywords: emotional information processing system;risk averse;ego depletion;investment behavior
    Date: 2008–10–20
  4. By: Gary Charness (Department of Economics - University of California, Santa Barbara); Marie-Claire Villeval (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Peter Kuhn (Department of Economics, University of California - University of California, Santa Barbara)
    Abstract: The ‘ratchet effect’ refers to a situation where a principal uses private information that is revealed by an agent’s early actions to the agent’s later disadvantage, in a context where binding multi-period contracts are not enforceable. In a simple, context-rich environment, we experimentally study the robustness of the ratchet effect to the introduction of ex post competition for principals or agents. While we do observe substantial and significant ratchet effects in the baseline (no competition) case of our model, we find that ratchet behavior is nearly eliminated by labor-market competition ; interestingly this is true regardless of whether market conditions favor principals or agents.
    Keywords: Ratchet effect, competition, experiment, private information, labor markets
    Date: 2008
  5. By: Michael W.M. Roos; Wolfgang J. Luhan
    Abstract: In this paper we report the results of a laboratory experiment, in which we observed the behavior of agents in a simple macroeconomic setting. The structure of the economy was only partially known to the players which is a realistic feature of our experiment. We investigate whether subjects manage to approach optimal behavior even if they lack important information. Furthermore, we analyze subjects’ perceptions of the model and whether their behavior is consistent with their perceptions. The full information model predicts changes of employment correctly, but not the level of employment. In the aggregate, subjects have correct perceptions, although individual perceptions are biased.We finally show that deviations from the full information solution are due to optimization failures than than misperceptions.
    Keywords: Methodology, macroeconomic experiment, perceptions, optimization, expectations
    JEL: D01 D83 D84 B41 C91
    Date: 2008–07
  6. By: Giessner, S.R.; Knippenberg, D.L. van; Sleebos, E. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: Leadership often serves as an explanatory category for performance outcomes (i.e., failure and success). This process can strengthen or weaken leadership effectiveness, because contingent on their performance leaders may gain or lose follower endorsement – the basis of leadership. Drawing on the social identity analysis of leadership, we hypothesized that leader group prototypicality and performance information interact to predict followers’ perceptions of leadership effectiveness. Because group prototypical leaders are more trusted by their followers, we hypothesized that group prototypical leaders are evaluated as more effective after failure information than non-prototypical leaders. In contrast, we predicted that both prototypical and non-prototypical leaders should receive similar evaluations of leadership effectiveness after success. We found support for our predictions in a scenario experiment, a cross-sectional field study, and a laboratory experiment.
    Keywords: leader prototypicality;leader performance;leadership effectiveness;trust in leadership
    Date: 2008–10–21
  7. By: Nadège Marchand (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Claude Montmarquette (Université de Montréal - Département de Sciences Economique - Université de Montréal)
    Abstract: Our study considers the question of training in firms using an experimental laboratory approach. We investigate the following questions : What conditions, excluding external certification, will bring workers and employers to cooperate and share a rent generated by the workers’ training ? What conditions will induce workers to accept the training offer, for employers to initially offer the training and to reward the trained workers in the last stage of the game ? We analyse the impact of the size of the rent created by training and the existence of an information system on employer reputation rewarding trained employees. Reputation does matter to induce cooperation, but in the absence of external institutions, coordination on the optimal outcome remains difficult.
    Keywords: general and speficic trainings in firms ; accreditation ; cooperation and reputation ; experimental econonmics
    Date: 2008
  8. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Jean-Louis Rullière (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines); Isabelle Vialle (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: Monitoring is typically included in economic models of crime thanks to a probability of detection, constant across individuals. We build on recent results in psychology to argue that comparative optimism deeply affects this standard relation. To this matter, we introduce an experiment involving proper incentives that allow a measurement of optimism bias. Our experiments support the relevance of so-called comparative optimism in decision under risk. In the context of illegal activities, our results provide a guide into costless devices to undermine fraud, through well-designed information campaigns.
    Keywords: Optimism; Risk aversion; Monitoring design; Illegal activity; Experimental economics
    Date: 2008
  9. By: Michael W.M. Roos; Wolfgang J. Luhan
    Abstract: Previous experimental investigations have shown that expectations are not perfectly rational due to bias. Traditional adaptive models, however, in many cases do not perfectly describe the formation of expectations either. This paper makes two contributions to the experimental literature on the formation of expectations: First, we investigate whether subjects who have more information about the economic model than in previous studies also form biased expectations. Second, we argue that in some cases macroeconomic expectations might be formed by the anchoring-and-adjustment heuristic, which is well known in psychology. We find that subjects’ expectations are biased although the design might be more favorable to rational expectations.The anchoring- and-adjustment model of expectations gets some support by our data, but the best model encompasses both the anchoring-and-adjustment model and the traditional adaptive model.
    Keywords: Expectations, heuristics, beliefs, mental models, macroeconomic experiment
    JEL: D84 D83 C99
    Date: 2008–07
  10. By: Sudhanshu Handa; John Maluccio
    Abstract: We compare non-experimental impact estimates based on matching methods with those from a randomized evaluation to determine whether the non-experimental approach can “match” the so-called gold standard. The social experiment we use was carried out to evaluate a geographically targeted conditional cash transfer antipoverty program in Nicaragua. The outcomes we assess include several components of household expenditure and a variety of children’s health outcomes including breast feeding, vaccinations, and morbidity. We find that using each of the following improves performance of matching for these outcomes: 1) geographically proximate comparison samples; 2) stringent common support requirements; and 3) both geographic- and household-level matching variables. Even for a geographically targeted program, in which the selection is at the geographic-, rather than at the individual- or household-level, and in which it is not possible to find comparison individuals or households in the program locales, matching can perform reasonably well. The results also suggest that the techniques may be more promising for evaluating the more easily measured individual-level binary outcomes, than for outcomes that are more difficult to measure, such as expenditure.
    Date: 2008
  11. By: Dirk Engelmann; Urs Fischbacher
    Abstract: We study indirect reciprocity and strategic reputation building in an experimental helping game. At any time only half of the subjects can build a reputation. This allows us to study both pure indirect reciprocity that is not contaminated by strategic reputation building and the impact of incentives for strategic reputation building on the helping rate. We find that pure indirect reciprocity exists, but also that the helping decisions are substantially a!ected by strategic considerations. We find that the behavioral pattern can best be captured by non-selfish preferences as assumed by reciprocity models. Finally, we find that strategic do better than non-strategic players and non-reciprocal do better than reciprocal players, casting doubt on previously proposed evolutionary explanations for indirect reciprocity.
    Keywords: indirect reciprocity, reputation, experimental economics
    Date: 2008
  12. By: Rupert Sausgruber (University of Innsbruck); Jean-Robert Tyran (Department of Economics, University of Copenhagen)
    Abstract: Tax incentives can be more or less salient, i.e. noticeable or cognitively easy to process. Our hypothesis is that taxes on consumers are more salient to consumers than equivalent taxes on sellers because consumers underestimate the extent of tax shifting in the market. We show that tax salience biases consumers’ voting on tax regimes, and that experience is an effective de-biasing mechanism in the experimental laboratory. Pre-vote deliberation makes initially held opinions more extreme rather than correct and does not eliminate the bias in the typical committee. Yet, if voters can discuss their experience with the tax regimes they are less likely to be biased.
    Keywords: tax salience; learning; deliberation; voting
    JEL: C92 H22 D72
    Date: 2008–10

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.
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