nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒01‒31
fifteen papers chosen by
Daniel Houser
George Mason University

  1. The attitude toward probabilities of portfolio managers : an experimental study. By Nicolas Roux
  2. Green goods: are they good or bad news for the environment? Evidence from a laboratory experiment on impure public goods By Munro, Alistair; Valente, Marieta
  3. Do Welfare Programs Damage Interpersonal Trust? Experimental Evidence from Representative Samples for Four Latin American Cities By Alberto Chong; Hugo Nopo; Vanessa Rios
  4. Can Sanctions Induce Pessimism? An Experiment By Roberto Galbiati; Karl Schlag; Joël van der Weele
  5. Peer Pressure, Incentives, and Gender: An Experimental Analysis of Motivation in the Workplace By Bellemare, Charles; Lepage, Patrick; Shearer, Bruce S.
  6. On the Coefficient of Variation as a Measure of Risk Sensitivity By James C. Cox; Vjollca Sadiraj
  7. The influence of decision-making rules on individual preference for ecological restoration: Evidence from an experimental survey By Nobuyuki Ito; Kenji Takeuchi; Koichi Kuriyama; Yasushi Shoji; Takahiro Tsuge; Yohei Mitani
  8. Who Makes a Good Leader? Social Preferences and Leading-by-Example By Gächter, Simon; Nosenzo, Daniele; Renner, Elke; Sefton, Martin
  9. Social Connections and Incentives in the Workplace: Evidence from Personnel Data By Bandiera, Oriana; Barankay, Iwan; Rasul, Imran
  10. Truth or Efficiency? Communication in a Sequential Public Good Game By Serra Garcia, M.; Damme, E.E.C. van; Potters, J.J.M.
  11. Savings Constraints and Microenterprise Development: Evidence from a Field Experiment in Kenya By Pascaline Dupas; Jonathan Robinson
  12. Exit Options in Incomplete Contracts with Asymmetric Information By Klaus M. Schmidt
  13. Words, Numbers and Visual Heuristics in Web Surveys: Is there a Hierarchy of Importance? By Toepoel, V.; Dillman, D.A.
  14. Survey Evidence on Conditional Norm Enforcement By Traxler, Christian; Winter, Joachim
  15. Design of Experiments: An Overview By Kleijnen, J.P.C.

  1. By: Nicolas Roux (Centre d'Economie de la Sorbonne)
    Abstract: This paper proposes an experiment about the attitude toward probabilities on a population of portfolio managers. Its aim is to check whether or not portfolio managers are neutral toward probabilities. Meanwhile, it presents a experimental protocole that highlights an inconsistency between two experimental techniques. It also introduces a new functional form for the probability weighting function. Results unambiguously show that portfolio managers are not neutral toward probabilities and that they display a strong heterogeneity in their preferences.
    Keywords: Attitude toward probabilities, probability weighting function, expected utility, rank dependent expected utility, experimental economics, decision under risk.
    JEL: C91
    Date: 2008–09
  2. By: Munro, Alistair; Valente, Marieta
    Abstract: An impure public good is a commodity that combines public and private characteristics in fixed proportions. Green goods such as dolphin-friendly tuna or green electricity programs provide increasings popular examples of impure goods. We design an experiment to test how the presence of impure public goods affects pro-social behaviour. We set parameters, such that from a theoretical point of view the presence of the impure public good is behaviorally irrelevant. In a baseline setting, where the impure public good provides only small contributions to the public good. We observe that on aggregate pro-social behaviour, defined as total contributions to the public good, is lower in the presence of the impure good. Some individuals do not alter their decisions, but roughly two fifths of subjects make a lower contribution to the public good in the presence of the impure public good. On the contrary, in the case where the impure public good favours the public good component at the expense of private earnings, individuals are unaffected in their behaviour. We conclude that the presence of green goods which have only a small environmental component may reduce pro-environmental behaviour.
    Keywords: green goods; impure public goods; pro-social behaviour; social norms; experimental economics
    JEL: Q50 H41 D64 C91
    Date: 2008–10–30
  3. By: Alberto Chong; Hugo Nopo; Vanessa Rios
    Abstract: This paper argues that welfare programs are linked with the destruction of social capital, as measured by interpersonal trust in laboratory games. The paper employs experimental data for representative samples of individuals in four Latin American capital cities (Bogota, Lima, Montevideo, and San Jose), finding that participation in welfare programs damage trust. This result is robust to the inclusion of individual risk measures and a broad array of controls. The findings also support the notion that low take-up rates may be due to stigma linked with trust and social capital, rather than transaction costs.
    Keywords: Experiments, Surveys, Social Programs, Trust, Stigma, Latin America
    JEL: D01 O12 O10
    Date: 2009–01
  4. By: Roberto Galbiati; Karl Schlag; Joël van der Weele
    Abstract: We experimentally investigate the effects of sanctions when there are multiple equilibria. Two subjects play a two-period minimum effort game in the presence of third player (principal). The principal benefits from coordination on higher effort, and is the only one informed of previous choices choices. We contrast introducing an exogenously imposed sanction in the second round to the case where the principal is allowed to decide whether or not, at a small cost, to impose a sanction. We find that exogenously introduced sanctions are effective in inducing optimistic beliefs about others and help coordination on more efficient equilibria. On the other hand, endogenously introduced sanctions negatively influence beliefs about the effort of the other player. The results supports the idea that sanctions have an expressive dimension which can undermine their effectiveness by discouraging optimistic players.
    Keywords: Sanctions, beliefs, expressive law, deterrence, coordination, minimum effort game
    JEL: C92 D83 K42
    Date: 2009–01
  5. By: Bellemare, Charles (Université Laval); Lepage, Patrick (Université Laval); Shearer, Bruce S. (Université Laval)
    Abstract: We present results from a real-effort experiment, simulating actual work-place conditions, comparing the productivity of workers under fixed wages and piece rates. Workers, who were paid to enter data, were exposed to different degrees of peer pressure under both payment systems. The peer pressure was generated in the form of private information about the productivity of their peers. We have two main results. First, we find no level of peer pressure for which the productivity of either male or female workers is significantly higher than productivity without peer pressure. Second, we find that very low and very high levels of peer pressure can significantly decrease productivity (particularly for men paid fixed wages). These results are consistent with models of conformism and self-motivation.
    Keywords: peer effects, fixed wages, piece rates, gender
    JEL: M52 C91
    Date: 2009–01
  6. By: James C. Cox; Vjollca Sadiraj
    Abstract: Weber, Shafir, and Blais (2004) advocate use of the coefficient of variation (CV) as a measure of risk sensitivity and apply CV in a meta-analysis of data for risky choices by humans and animals. We critically re-examine the CV measure as either a normative or descriptive criterion for decision under risk. CV fails as a normative criterion because it violates first order stochastic dominance. Whether or not CV succeeds as a descriptive criterion depends on its consistency or inconsistency with data from experiments designed to test its distinctive properties. We report an experiment with human subjects motivated by salient monetary payoffs. The data are inconsistent with the hypothesis that the CVs of risky lotteries are a significant determinant of subjects' choices between the lotteries and certain payoffs.
    Date: 2009–01
  7. By: Nobuyuki Ito (Graduate School of Economics, Kobe University); Kenji Takeuchi (Graduate School of Economics, Kobe University); Koichi Kuriyama (School of Political Science and Economics, Waseda University); Yasushi Shoji (Graduate School of Agriculture, Hokkaido University); Takahiro Tsuge (Faculty of Economics, Konan University); Yohei Mitani (School of Political Science and Economics, Waseda University)
    Abstract: We conduct an experimental survey to analyze how rules for collective decision-making influence individual preferences concerning nature restoration projects. Our study compares two decision-making rules - a consensus rule and a majority rule - wherein participants decide on a plan concerning nature restoration in the Kushiro Wetland, Japan. Our main finding is that the difference between the individual preferences and collective decision-making is less significant under the consensus rule than the majority rule. Furthermore, there is a larger disparity with regard to the marginal willingness to pay between collective and individual decisions when participants are unsatisfied with the results of collective choice.
    Date: 2008–10
  8. By: Gächter, Simon (University of Nottingham); Nosenzo, Daniele (University of Nottingham); Renner, Elke (University of Nottingham); Sefton, Martin (University of Nottingham)
    Abstract: We examine the effects of social preferences and beliefs about the social preferences of others in a simple leader-follower voluntary contributions game. We find that groups perform best when led by those who are reciprocally oriented. Part of the effect can be explained by a false consensus effect: selfish players tend to think it more likely that they are matched with another selfish player and reciprocators tend to think it more likely that they are matched with another reciprocator. Thus, reciprocators contribute more as leaders partly because they are more optimistic than selfish players about the reciprocal responses of followers. However, even after controlling for beliefs we find that reciprocally-oriented leaders contribute more than selfish leaders. Thus, we conclude that differing leader contributions by differing types of leader must in large part reflect social motivations.
    Keywords: reciprocity, contribution preferences, leadership, leading-by-example, false consensus effect
    JEL: A13 C92
    Date: 2008–12
  9. By: Bandiera, Oriana (London School of Economics); Barankay, Iwan (University of Pennsylvania); Rasul, Imran (University College London)
    Abstract: We present evidence on the effect of social connections between workers and managers on productivity in the workplace. To evaluate whether the existence of social connections is beneficial to the firm's overall performance, we explore how the effects of social connections vary with the strength of managerial incentives and worker's ability. To do so, we combine panel data on individual worker's productivity from personnel records with a natural field experiment in which we engineered an exogenous change in managerial incentives, from fixed wages, to bonuses based on the average productivity of the workers managed. We find that when managers are paid fixed wages, they favor workers to whom they are socially connected irrespective of the worker's ability, but when they are paid performance bonuses, they target their effort towards high ability workers irrespective of whether they are socially connected to them or not. Although social connections increase the performance of connected workers, we find that favoring connected workers is detrimental for the firm's overall performance.
    Keywords: natural field experiment, managerial incentives, favoritism
    JEL: J33 M52 M54
    Date: 2008–12
  10. By: Serra Garcia, M.; Damme, E.E.C. van; Potters, J.J.M. (Tilburg University, Center for Economic Research)
    Abstract: We examine communication in a 2-player sequential public good game in which the leader has private information about the return from contributing to it. The leader decides first and the follower observes the leader's contribution, before de- ciding whether or not to contribute. Without communication, the unique equilib- rium is fully efficient. We study whether the introduction of communication about returns can destroy efficiency. Communication can be precise (about the exact re- turn), or vague. If leaders would communicate precisely and truthfully, they would reveal that followers would do best to free ride, thereby distorting both players' incentives to invest and destroying efficiency. We show that leaders lie in order to avoid these negative consequences. If vague messages are allowed, the extent of lying drops and vague messages are used instead. Overall, followers contribute when the leader does, and the introduction of communication neither increases nor decreases contributions to the public good.
    Keywords: Communication; Efficiency; Lying; Public Goods.
    JEL: C72 C92 D83 H41
    Date: 2008
  11. By: Pascaline Dupas; Jonathan Robinson
    Abstract: This paper presents results from a field experiment designed to test whether savings constraints prevent the self-employed from increasing the size of their businesses. We opened interest-free savings accounts in a local village bank in rural Kenya for a randomly selected sample of poor daily income earners (such as market vendors), and collected a unique dataset constructed from self-reported logbooks that respondents filled on a daily basis. Despite the fact that the savings accounts paid no interest and featured substantial withdrawal fees, take-up and usage was high among women. In addition, we find that the savings accounts had substantial, positive impacts on productive investment levels and expenditures for women, but had no effect for men. These results imply that a substantial fraction of daily income earners face important savings constraints and have a demand for formal saving devices (even for those that offer negative de facto interest rates). We also find some suggestive evidence that female entrepreneurs draw down their working capital in response to health shocks, and that the accounts enabled the treatment group to cope with these shocks without having to liquidate their inventories.
    JEL: G21 L26 O12
    Date: 2009–01
  12. By: Klaus M. Schmidt (Department of Economics, University of Munich, Ludwigstr. 28, D-80539 München(Germany))
    Abstract: Economic experiments interact with economic theories in various ways. First of all they are used to test economic theories. However, they can neither confirm nor falsify them in a strict sense. They rather inform us about the range of applicability, the robustness and the predictive power of a theory. Furthermore, economic experiments discover and isolate phenomena and challenge economic theorists to explain them. Finally, many economic experiments are “material” models. They are used to analyse and predict how changes in the environment affect economic outcomes. However, they cannot offer an explanation for what we observe. This has to be provided by economic theory.
    Keywords: Economic experiments, economic theories, falsification, confirmation, phenomena, models
    JEL: B41 C90
    Date: 2009–01
  13. By: Toepoel, V.; Dillman, D.A. (Tilburg University, Center for Economic Research)
    Abstract: In interpreting questions, respondents extract meaning from how the information in a questionnaire is shaped, spaced, and shaded. This makes it important to pay close attention to the arrangement of visual information on a questionnaire. Respondents follow simple heuristics in interpreting the visual features of questions. We carried out five experiments to investigate how the effect of visual heuristics affected the answers to survey questions. We varied verbal, numerical, and other visual cues such as color. In some instances the use of words helps overcome visual layout effects. In at least one instance, a fundamental difference in visual layout (violating the 'left and top means first' heuristic) influenced answers on top of word labels. This suggests that both visual and verbal languages are important. Yet sometimes one can override the other. To reduce the effect of visual cues, it is better to use fully labeled scales in survey questions.
    Keywords: questionnaire design;layout;visual language;response effects;visual cues
    JEL: C42 C81 C93
    Date: 2008
  14. By: Traxler, Christian; Winter, Joachim
    Abstract: We discuss survey evidence on individuals' willingness to sanction norm violations - such as evading taxes, drunk driving, fare dodging, or skiving o work - by expressing disapproval or social exclusion. Our data suggest that people condition their sanctioning behavior on their belief about the frequency of norm violations. The more commonly a norm violation is believed to occur, the lower the individuals' inclination to punish it. Based on an instrumental variable approach, we demonstrate that this pattern reflects a causal relationship.
    Keywords: Norm Enforcement; Sanctioning; Social Norms; Survey Evidence
    JEL: K42 Z13 D1
    Date: 2009–01–21
  15. By: Kleijnen, J.P.C. (Tilburg University, Center for Economic Research)
    Abstract: Design Of Experiments (DOE) is needed for experiments with real-life systems, and with either deterministic or random simulation models. This contribution discusses the different types of DOE for these three domains, but focusses on random simulation. DOE may have two goals: sensitivity analysis including factor screening and optimization. This contribution starts with classic DOE including 2k-p and Central Composite designs. Next, it discusses factor screening through Sequential Bifurcation. Then it discusses Kriging including Latin Hyper cube Sampling and sequential designs. It ends with optimization through Generalized Response Surface Methodology and Kriging combined with Mathematical Programming, including Taguchian robust optimization.
    Keywords: simulation;sensitivity analysis;optimization;factor screening;Kriging;RSM;Taguchi
    JEL: C0 C1 C9
    Date: 2008

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