|
on Experimental Economics |
| By: | Charles N. Noussair (Tilburg University); Gregers Richter (Sydbank, Schweiz); Jean-Robert Tyran (Department of Economics, University of Copenhagen) |
| Abstract: | We test whether large but purely nominal shocks affect real asset market prices. We subject a laboratory asset market to an exogenous shock, which either inflates or deflates the nominal fundamental value of the asset, while holding the real fundamental value constant. After an inflationary shock, nominal prices adjust upward rapidly and we observe no real effects. However, after a deflationary shock, nominal prices display considerable inertia and real prices adjust only slowly and incompletely toward the levels that would prevail in the absence of a shock. Thus, an asymmetry is observed in the price response to inflationary and deflationary nominal shocks. |
| Keywords: | money illusion; nominal inertia; asset market bubble; nominal loss aversion; laboratory experiment |
| JEL: | C9 E40 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:kud:kuiedp:0829&r=exp |
| By: | Altmann, Steffen (IZA); Falk, Armin (University of Bonn); Wibral, Matthias (University of Bonn) |
| Abstract: | Promotion tournaments play an important role for the provision of incentives in firms. In this paper, we extend research on single-stage rank-order tournaments and analyze behavior in multi-stage elimination tournaments. The main treatment of our laboratory experiment is a two-stage tournament in which equilibrium efforts are the same in both stages. We compare this treatment to a strategically equivalent one-stage tournament and to another two-stage tournament with a more convex wage structure. Confirming previous findings average effort in our one-stage treatment is close to Nash equilibrium. In contrast, subjects in our main treatment provide excess effort in the first stage both with respect to Nash predictions and compared to the equivalent one-stage tournament. The results for the more convex two-stage tournament show that excess effort in the first stage is a robust finding and that subjects react only weakly to differences in the wage structure. |
| Keywords: | personnel economics, tournament, incentives, laboratory experiment |
| JEL: | M51 M52 J33 C92 |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp3835&r=exp |
| By: | Stranlund, John K.; Murphy, James J.; Spraggon, John M. |
| Abstract: | This paper uses laboratory experiments to investigate the performance of emission permit markets when compliance is imperfectly enforced. In particular we examine deviations in observed aggregate payoffs and expected penalties from those derived from a model of risk-neutral payoff-maximizing firms. We find that the experimental emissions markets were reasonably efficient at allocating individual emission control choices despite imperfect enforcement and significant noncompliance. However, violations and expected penalties were lower than predicted when these are predicted to be high, but were about the same as predicted values when these values were predicted to be low. Thus, although a standard model of compliance with emissions trading programs tends to predict significantly higher violations than we observe when subjects have strong incentives to violate their emissions permits, individual emissions control responsibilities are distributed among firms as predicted. |
| Keywords: | enforcement, compliance, emissions trading, permit markets, pollution, laboratory experiments, Environmental Economics and Policy, Public Economics, C91, L51, Q58, |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:umamwp:42124&r=exp |
| By: | Lopez, Maria Claudia; Murphy, James J.; Spraggon, John M.; Stranlund, John K. |
| Abstract: | In this paper we describe a field experiment conducted among mollusk harvesters in a community on the Pacific Coast of Columbia. The experiment is based on a standard linear public good and consists of two stages. In the first stage we compare the ability of monetary and nonmonetary sanctions among community members to increase contributions to the public good. In the second stage we add a government regulation with either a high or low sanction for noncompliance to community enforcement efforts. The results for the first stage are consistent with other comparisons of monetary and nonmonetary sanctions within groups; both led to higher contributions. The results from the second stage reveal that government regulations always complemented community enforcement efforts. While the subjects tended to reduce their sanctioning efforts under the government regulations, contributions and earnings were significantly higher than without government interventions. In fact, the combination of community and government enforcement efforts generated near-perfect contributions to the public good. However, more research into the combined roles of government intervention and community enforcement efforts is needed because the complementarity we find may be situation-specific. |
| Keywords: | Field experiments, public goods, government regulation, community enforcement, Environmental Economics and Policy, Institutional and Behavioral Economics, Public Economics, C93, H41, Q2, |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:umamwp:42128&r=exp |
| By: | Subhasish Dugar; Haimanti Bhattacharya |
| Abstract: | This paper presents an experimental investigation of how a systematic variation in the cognitive demands on subjects affects the optimal play. The innovation of this paper is the choice of a game, which we call the Game of Position. This is a two-player zero-sum game characterized by a dominant-strategy solution that involves iterative steps of reasoning. The equilibrium play is independent of mutual beliefs of players; hence inability of a subject to play the dominant-strategy unambiguously implies the failure of human reasoning prowess. We alter the two parameters of the game to vary the cognitive constraints, as represented by these steps of reasoning, on players. Our main substantive conclusion is that the frequency of the dominant-strategy play sharply increases as we limit the cognitive demands on players. |
| Keywords: | Non-cooperative game theory, cognition, laboratory experiment |
| JEL: | C72 D83 C91 |
| Date: | 2008 |
| URL: | http://d.repec.org/n?u=RePEc:uta:papers:2008_20&r=exp |
| By: | McEvoy, David M.; Murphy, James J.; Spraggon, John M.; Stranlund, John K. |
| Abstract: | This study examines the performance of stable cooperative coalitions that form to provide a public good when coalition members have the opportunity to not comply with their commitments. A stable coalition is one in which no member wishes to leave and no non-member wishes to join. To counteract the incentive to violate their commitments, coalition members fund a third-party enforcer. This leads to the theoretical conclusion that stable coalitions are larger (and provide more of a public good) when their members must finance enforcement relative to when compliance is ensured without the need for costly enforcement. However, our experiments reveal that giving coalition members the opportunity to violate their commitments while requiring them to finance enforcement to maintain compliance reduces the overall provision of the public good. The decrease in the provision of the public good is attributed to an increase in the participation threshold for a theoretically stable coalition to form and to significant levels of noncompliance. When we abandon the strict stability conditions and require all subjects to join a coalition for it to form, the average provision of the public good increases significantly. |
| Keywords: | stable coalitions, self-enforcing agreements, compliance, enforcement, public goods, Environmental Economics and Policy, Institutional and Behavioral Economics, Public Economics, H41, C92, |
| Date: | 2008–07 |
| URL: | http://d.repec.org/n?u=RePEc:ags:umamwp:42126&r=exp |
| By: | Louis Lévy-Garboua (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, CIRANO - Centre Interuniversitaire de Recherche en ANalyse des Organisations, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal); David Masclet (CIRANO - Centre Interuniversitaire de Recherche en ANalyse des Organisations, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal, CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université Rennes I - Université de Caen); Claude Montmarquette (CIRANO - Centre Interuniversitaire de Recherche en ANalyse des Organisations, CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal, Université de Montréal - Département de Sciences Economique - Université de Montréal) |
| Abstract: | This paper demonstrates, through a controlled experiment, that the “Laffer curve” phenomenon does not always reflect a conventional income - leisure trade-off. Whether out of reason or out of emotion, taxpayers may also be willing to punish intentionally unfair tax setters by working less than they would under the same exogenous circumstances. We conduct a real effort experiment in which a player A (the "tax receiver") is matched with a player B (the "worker") to elicit the conditions under which tax revenues will increase under a certain threshold and decrease thereafter. We ran four different treatments by manipulating work opportunities and the power to tax. Consistent with the history of tax revolts, the working partner overreacts to the perceived unfairness of taxation when the tax rate exceeds 50%, most strongly so in the high effort treatment. With two types of players, selfish and empathic, our model predicts the emergence of a social norm of fairness under asymmetric information, and elicits the optimal and emotional patterns of punishments and rewards consistent with the norm's enforcement. The social norm allows players to coordinate tacitly on a “focal equilibrium”, which offers a solution to the indeterminacy raised by the Folk theorem for infinitely-repeated games and a behavioral justification for the tit-for-tat strategy. The social norm of fairness enhances productive efficiency in the long run. |
| Keywords: | Taxation and labor supply; Laffer curve; experimental economics; fairness and efficiency; social norms and sanctions; informational asymmetry; emotions. |
| Date: | 2008–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:hal-00340459_v1&r=exp |
| By: | Dimitri Dubois; Marc Willinger; Phu Nguyen Van |
| Abstract: | We compare the experimental results of three stag-hunt games. In contrast to Battalio et al. (2001), our design keeps the riskiness ratio of the payoff-dominant and the risk-dominant strategies at a constant level as the optimisation premium is increased. We define the riskiness ratio as the relative payoff range of the two strategies. We find that decreasing the riskiness ratio while keeping the optimization premium constant increases sharply the frequency of the risk-dominant strategy. On the other hand an increase of the optimization premium with a constant riskiness ratio has no effect on the choice frequencies. Finally, we confirm the dynamic properties found by Battalio et al. that increasing the optimization premium favours best-response and sensitivity to the history of play. |
| Date: | 2008–11 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:08-19&r=exp |