nep-exp New Economics Papers
on Experimental Economics
Issue of 2008‒11‒25
fourteen papers chosen by
Daniel Houser
George Mason University

  1. Power, hierarchy and social preferences By Bosco, Luigi
  2. Strategic Voting in Multiparty Systems: A Group Experiment By Meffert, Michael F.; Gschwend, Thomas
  3. Downsizing the Labor Force by Low and High Proïfit Firms - An Experimental Analysis1 By Werner Güth; Christian Paul
  4. Sick Pay Provision in Experimental Labor Markets By Dürsch, Peter; Oechssler, Jörg; Vadovic, Radovan
  5. Feedback; Punishment and Cooperation in Public Good Experiments By Nikos Nikiforakis
  6. Do investors optimize, follow heuristics, or listen to experts? By Thomas Gehrig; Werner Güth; Rene Levinsky; Vera Popova
  7. Cooling-Off in Negotiations - Does It Work? By Oechssler, Jörg; Roider, Andreas; Schmitz, Patrick W.
  8. An experimental study of wine consumers€٠willingness to pay for environmental characteristics By Bazoche, P.; Deola, C.; Soler, L.G.
  9. Are the Treasures of Game Theory Ambiguous? By Eichberger, Jürgen; Kelsey, David
  10. Contracts as Reference Points - Experimental Evidence By Ernst Fehr; Oliver D. Hart; Christian Zehnder
  11. Eliciting public preferences for managing the public rights of way. By Morris, J.; Colombo, S.; Angus, A.; Stacey, K.; Parsons, D.; Brawn, M.; Hanley, N.
  12. An Experimental Study of Sex Segregation in the Swedish Labour Market: Is Discrimination the Explanation? By Carlsson, Magnus; Rooth, Dan-Olof
  13. Eliciting values for environmental attributes of a private good using a real choice experiment By Michaud, C.; Llerena, D.
  14. Constrained School Choice: An Experimental Study By Caterina Calsamiglia; Guillaume Haeringer; Flip Klijn

  1. By: Bosco, Luigi
    Abstract: I ran an experiment in order to evaluate the relationship, if any, between power, or the search for power, and the degree of altruism. In particular I experimentally tested whether an organization structured in a strictly hierarchical way was able to reduce the degree of altruism of a group of experimental subjects. The subjects were divided into groups and played a series of dictator and ultimatum games with the members of other groups; for each experimental euro that they earned, the experimenter assigned half of it to the group. Two different settings were analyzed according to how this group surplus was distributed among group members. In the control setting (treatment A) the group surplus was distributed equally among group members, while in the power setting (treatment B) there was a ranking of the earnings in the group, and the subject who earned the higher sum was given the power to decide the distribution scheme of the group different from her own. It was found that the introduction of a hierarchical structure generated a significant decrease in the rate of altruism, measured in terms of the allocation given to the receiver in the dictator game. In this case the tournament among group members for leadership and the competition for power was a very strong means to induce behaviour more in line with the classical assumption of economics. A remarkable gender effect emerges, suggesting that women seem less attracted and trapped by competition for power.
    Keywords: Altruism; Dictator game; Ultimatum game; Hierarchy
    JEL: C92 D64 C91
    Date: 2008–09
  2. By: Meffert, Michael F. (Sonderforschungsbereich 504); Gschwend, Thomas (Sonderforschungsbereich 504)
    Abstract: The paper tests the theory of strategic voting for multiparty systems with proportional representation and coalition governments at the micro-level. The study focuses in particular on the question whether participation in repeated elections allows voters to learn from experience and enables them to optimize their decision behavior. An economic group experiment with decision scenarios of varying degrees of difficulty was used to test decision making at both the individual and group level. The results suggest that a majority of voters were able to pursue successful decision strategies and that the difficulty of the decision scenarios affected the voting performance of the participants as expected. However, a learning effect is not supported by the data.
    Date: 2008–07–17
  3. By: Werner Güth (Max Planck Institute of Economics, Jena); Christian Paul (Institut für Wirtschaftstheorie und Operations Research, University of Karlsruhe)
    Abstract: One may hope to capture the behavioral and emotional effects of downsizing the labor force in rather abstract settings as an ultimatum game (see Fischer et al. (2008)), or try to explore downsizing in its more natural principal-agent scenario with a labor market background. We pursue the latter approach and test experimentally whether downsizing occurs whenever (game) theoretically predicted and whether effort reactions question its proïfitability. Our main findings are that downsizing seems to happen less often than predicted and that its frequency does not depend on whether, theoretically, its gains are rather large or small. Interestingly, we also find strong evidence that piece-rate offers are used in a suboptimal way.
    Keywords: downsizing, experimental economics, principal-agent model, labor economics
    JEL: C72 C91 D21 J01
    Date: 2008–11–12
  4. By: Dürsch, Peter (Department of Economics, University of Heidelberg); Oechssler, Jörg (Department of Economics, University of Heidelberg); Vadovic, Radovan (ITAM)
    Abstract: Sick pay is a common provision in most labor contracts. This paper employs an experimental gift-exchange environment to explore two related questions using both managers and undergraduates as subjects. First, do workers reciprocate sick pay in the same way as they reciprocate wage payments? Second, do firms benefit from offering sick pay? Firms may benefit in two different ways: directly, from workers reciprocating higher sick pay with higher efforts; and indirectly, from self-selection of reciprocal workers into contracts with higher sick pay. Our main finding is that the direct effect is rather weak in terms of effort and negative in terms of profits. However, when there is competition among firms for workers, sick pay can become an important advantage. Consequently, competition leads to a higher provision of sick pay relative to a monopsonistic labor market.
    Date: 2008–10–08
  5. By: Nikos Nikiforakis
    Abstract: A number of studies have shown that peer punishment can sustain cooperation in public good games. This paper shows that the format used to give subjects feedback is critical for the e¢ cacy of punishment. Providing subjects with infor- mation about the earnings of their peers leads to lower contributions and earnings compared to a treatment in which subjects receive information about the contri- butions of their peers even though the feedback format does not a¤ect incentives. The data suggest that this is because the feedback format acts as a coordination device, which in?uences the contribution standards that groups establish
    Keywords: feedback format; peer punishment; public good game; altruistic pun-ishment; cooperation
    JEL: C92 D70 H41
    Date: 2008
  6. By: Thomas Gehrig (Institut zur Erforschung der wirtschaftlichen Entwicklung, Albert-Ludwigs-Universität Freiburg i. Br.); Werner Güth (Max Planck Institute of Economics, Jena); Rene Levinsky (Max Planck Institute of Economics, Jena); Vera Popova (Max Planck Institute of Economics, Jena)
    Abstract: In the experimental scenario several agents repeatedly invest in n (n >= 2) state-speciïfic assets. The evolutionarily stable and equilibrium (Blume and Easley, 1992) portfolio for this situation requires to distribute funds according to the constant probabilities of the various states. The different treatments endow none, one, three, or all subjects in groups of eight investors each with probability information. Will investments follow the theoretical benchmark or the 1/n-heuristic of equal investments in all assets? Further, will agents with probability information be asked and paid for advice on how to invest? Although investment does not converge as predicted, portfolios of informed agents reflect the probabilities of states, and even uninformed agents do not invest according to the 1/n-heuristic. Advice is demanded and readily paid for. Surprisingly, clients do not always follow the recommendation. Competition among advisors reduces their fees as expected.
    Keywords: portfolio selection, evolution of expertise, advice, heuristics, evolutionary finance, experiments
    JEL: G11 C73
    Date: 2008–11–12
  7. By: Oechssler, Jörg (Department of Economics, University of Heidelberg); Roider, Andreas (Department of Economics, University of Heidelberg); Schmitz, Patrick W. (Staatswissenschaftliches Seminar, Universität Köln)
    Abstract: Negotiations frequently end in conflict after one party rejects a final offer. In a large-scale internet experiment, we investigate whether a 24-hour coolingoff period leads to fewer rejections in ultimatum bargaining. We conduct a standard cash treatment and a lottery treatment, where subjects receive lottery tickets for several large prizes - emulating a high-stakes environment. In the lottery treatment, unfair offers are less frequently rejected, and cooling-off significantly reduces the rejection rate further. In the cash treatment, rejections are more frequent and remain so after cooling-off. This treatment difference is particularly pronounced for subjects with lower cognitive abilities.
    Date: 2008–04–16
  8. By: Bazoche, P.; Deola, C.; Soler, L.G.
    Abstract: The reduction of pesticides use is becoming a priority for the public authorities in many countries. We conducted an experiment with wine consumers to see whether end-consumers value the dissemination of information about environmentally-friendly production practices. The experiment was devised to (i) evaluate whether there is a premium for environmentallyfriendly wines, (ii) determine whether or not consumers are sensitive to label owners who implement and guarantee the environmental actions, (iii) and assess the impact of public messages about the consequences of pesticide use. Some 139 participants were divided randomly into two groups. One group had no specific information about the current state of pesticide use in farming. The other group was given information about pesticide use in farming before making their valuations. Becker-DeGroot-Marshak mechanisms revealed that (i) the environmental signal is valued differently depending on who conveyed the information, and that (ii) dissemination of information about the environmental repercussions of farming methods does not significantly affect willingness-to-pay.
    Keywords: Willingness to pay, Wine, Effect of information, Experimental economics, Environment, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety,
    Date: 2008
  9. By: Eichberger, Jürgen (Sonderforschungsbereich 504); Kelsey, David (Department of Economics, The University of Birmingham)
    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.
    Date: 2008–05–27
  10. By: Ernst Fehr; Oliver D. Hart; Christian Zehnder
    Abstract: In a recent paper, Hart and Moore (2008) introduce new behavioral assumptions that can explain long-term contracts and important aspects of the employment relation. However, so far there exists no direct evidence that supports these assumptions and, in particular, Hart and Moore's notion that contracts provide reference points. In this paper, we examine experimentally the behavioral forces stipulated in their theory. The evidence confirms the model's prediction that there is a tradeoff between rigidity and flexibility in a trading environment with incomplete contracts and ex ante uncertainty about the state of nature. Flexible contracts - which would dominate rigid contracts under standard assumptions - cause a significant amount of shading on ex post performance, while under rigid contracts, much less shading occurs. Thus, although rigid contracts rule out trading in some states of the world, parties frequently implement them. While our results are broadly consistent with established behavioral concepts, they cannot easily be explained by existing theories. The experiment appears to reveal a new behavioral force: ex ante competition legitimizes the terms of a contract, and aggrievement and shading occur mainly about outcomes within the contract.
    JEL: D0 K0 C9
    Date: 2008–11
  11. By: Morris, J.; Colombo, S.; Angus, A.; Stacey, K.; Parsons, D.; Brawn, M.; Hanley, N.
    Abstract: Public Rights of Way (PROW) in England and Wales, provides a wide range of social and economic benefits to those other than owners of land. The protection and extension of PROW are an important way of encouraging people to engage in informal enjoyment of urban and rural areas, with beneficial consequences for health and welfare. In urban areas they provide networks of mobility and interaction for people at the community level, helping to reduce reliance on motorised transport. In the rural context they define access to the countryside, critically linked to recreation and tourism, as well as providing mobility networks for local residents. This study describes the use of a Choice Experiment (CE) to derive monetary estimates the social benefits of PROW in an English county.
    Keywords: Choice Experiments, Public Rights of Way, Willingness to Pay, Land Economics/Use, Resource /Energy Economics and Policy,
    Date: 2008
  12. By: Carlsson, Magnus (Kalmar University); Rooth, Dan-Olof (Kalmar University)
    Abstract: This paper studies whether sex discrimination is the cause of sex segregation in the Swedish labour market. The correspondence testing (CT) method was used, which entails two qualitatively identical applications, one with a female name and one with a male name, being sent to employers advertising for labour. The results show that females have a somewhat higher callback rate to interview in female-dominated occupations, while in male-dominated occupations there is no evidence of any difference. The conclusion is that the sex segregation prevailing in the Swedish labour market cannot be explained by discrimination in hiring. Instead, the explanation must be found on the supply side.
    Keywords: sex discrimination, segregation, exit from unemployment
    JEL: J64 J71
    Date: 2008–11
  13. By: Michaud, C.; Llerena, D.
    Abstract: Markets for environmentally friendly products have been expanding during the last decade. These products provide both private benefits to the consumer and environmental €Ӡpublic €Ӡbenefits. The demand for environmentally friendly products has consequently received a growing interest. Our study aims at studying consumers' choices for a non-food product, i.e. roses, with different environmental attributes. We combine a choice experiment with a laboratory experiment to provide real economic incentives.
    Keywords: Choice experiment, environmental attributes, real economic incentives, Environmental Economics and Policy,
    Date: 2008
  14. By: Caterina Calsamiglia; Guillaume Haeringer; Flip Klijn
    Abstract: The literature on school choice assumes that families can submit a preference list over all the schools they want to be assigned to. However, in many real-life instances families are only allowed to submit a list containing a limited number of schools. Subjects' incentives are drastically affected, as more individuals manipulate their preferences. Including a safety school in the constrained list explains most manipulations. Competitiveness across schools play an important role. Constraining choices increases segregation and affects the stability and efficiency of the final allocation. Remarkably, the constraint reduces significantly the proportion of subjects playing a dominated strategy.
    Keywords: school choice, matching, experiment
    JEL: C72 C78 D78 I20
    Date: 2008–11–17

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