nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒02‒14
fifteen papers chosen by
Daniel Houser
George Mason University

  1. Equilibrium Selection in Static and Dynamic Entry Games By John Duffy; Jack Ochs
  2. The Relationship of Economic Theory to Experiments By David K Levine
  3. Living in Two Neighborhoods – Social Interaction Effects in the Lab By Armin Falk; Urs Fischbacher; Simon Gaechter
  4. Peer Pressure, Incentives, and Gender: an Experimental Analysis of Motivation in the Workplace By Charles Bellemare; Patrick Lepage; Bruce Shearer
  5. Common Fate, Game Harmony and Contributions to Public Goods: Experimental Evidence. By Luca Corazzini, Robert Sugden.
  7. Exploring the effects of real effort in a weak-link experiment By Stefania Bortolotti; Giovanna Devetag; Andreas Ortmann
  8. Relating the two Dimensions of Risk Attitudes: An Experimental Analysis By Jianying Qiu; Eva-Maria Steiger
  9. Self-serving Dictators By Asheim, Geir B.; Helland, Leif; Hovi, Jon; Hoyland, Bjorn
  10. How do third parties matter? Theory and evidence in a dynamic psychological game By Loukas Balafoutas
  11. Outrunning the Gender Gap – Boys and Girls Compete Equally By Dreber, Anna; von Essen, Emma; Ranehill, Eva
  12. Fighting Income Tax Evasion with Positive Rewards: Experimental Evidence By Cécile Bazart; Michael Pickhardt
  13. Trigger Happy or Gun Shy? Dissolving Common-Value Partnerships with Texas Shootouts By Brooks, Richard; Landeo, Claudia; Spier, Kathryn
  14. Sick of Your Colleagues' Absence? By Hesselius, Patrik; Johansson, Per; Nilsson, Peter
  15. Vacancy Referrals, Job Search, and the Duration of Unemployment: A Randomized Experiment By Engström, Per; Hesselius, Patrik; Holmlund, Bertil

  1. By: John Duffy; Jack Ochs
    Abstract: We experimentally examine equilibrium selection concepts in static and dynamic binary choice games of complete information with strategic complementarities known as “entry” games. Examples include speculative attacks, bank runs and refinancing decisions by multiple lenders. We explore behavior when the value of a state variable is known to all players in advance of making their action choices. Such games give rise to multiple equilibria and coordination problems. Our specific aim is to assess the predictive power of two different equilibrium selection principles. In static entry games, we test the theory of global games as an equilibrium selection device. This theory posits that players play games of complete information as if they were playing a related global game of incomplete information. In dynamic entry games, individuals decide not only whether to enter but also when to enter. Once entry occurs it is irreversible. The number of people who have already entered is part of the state description, and individuals can condition their decisions on that information. If the state variable does not indicate that entry is dominated, the efficient subgame perfect equilibrium prediction calls for all players to immediately choose to enter, thereby resolving the coordination problem. This subgame perfect entry threshold in the dynamic game will generically differ from the global game threshold in static versions of the same entry game. Our experimental findings suggest that entry thresholds in both static and dynamic versions of the same entry game are surprisingly similar. The mean entry threshold in the static game lies below the global game equilibrium threshold while the mean entry threshold in the dynamic game lies above the efficient subgame perfect equilibrium threshold. An important implication of this finding is that if one were to observe only the value of the state variable and the number of people who enter by the end of the game one could not determine whether the static or the dynamic game had been played.
    JEL: C72 C73 D82 D83
    Date: 2009–01
  2. By: David K Levine
    Date: 2009–02–03
  3. By: Armin Falk (University of Bonn); Urs Fischbacher (University of Konstanz); Simon Gaechter (University of Nottingham)
    Abstract: Field evidence suggests that people belonging to the same group often behave similarly, i.e., behavior exhibits social interaction effects. We conduct a laboratory experiment that avoids the identification problem present in the field and allows us to study the behavioral logic of social interaction effects. Our novel design feature is that each subject is simultaneously a member of two randomly assigned and identical groups where only members (‘neighbors’) are different. We study behavior in a coordination game with multiple equilibria and a public goods game, which has only one equilibrium in material payoffs. We speak of social interactions if the same subject at the same time makes group-specific decisions that depend on their respective neighbors’ decisions. We find that a majority of subjects exhibits social interaction effects both when the game has multiple equilibria in material payoffs and when it only has one equilibrium.
    Keywords: Social interactions, identification, experiments, coordination, cooperation
    JEL: C91 H41 K42 H26
    Date: 2009–01
  4. By: Charles Bellemare; Patrick Lepage; Bruce Shearer
    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
  5. By: Luca Corazzini, Robert Sugden.
    Abstract: We experimentally study the effects of common fate on voluntary contributions to linear public goods. In each period, earnings are assigned to subjects according to the outcome of a lottery. We manipulate the level of common fate across treatments by varying the degree of harmony in the lottery structure. We observe higher contributions and stronger reciprocity in the most harmonious manipulation. Surprisingly, we find a positive relation between contributions and having experienced a favourable lottery outcome in the previous period, with the strength of this effect being inversely associated with the degree of harmony.
    Keywords: Public Goods, Common Fate, Laboratory Experiment.
    JEL: C91 C92 H40 H41
    Date: 2009–02
  6. By: Ahmed, Ali M. (Centre for Labour Market Policy Research (CAFO)); Salas, Osvaldo (Centre for Labour Market Policy Research (CAFO))
    Abstract: This paper examines the supernatural punishment theory. The theory postulates that religion increases cooperation because religious people fear the retributions that may follow if they do not follow the rules and norms provided by the religion. We report results for a public goods experiment conducted in India, Mexico, and Sweden. By asking participants whether they are religious or not, we study whether religiosity has an effect on voluntary cooperation in the public goods game. We found no significant behavioral differences between religious and nonreligious participants in the experiment.
    Keywords: Games; punishment theory; experiments; behavioral economics; religion
    JEL: C71 C90 D01
    Date: 2008–02–01
  7. By: Stefania Bortolotti; Giovanna Devetag; Andreas Ortmann
    Abstract: We report results from a weak-link – often also called minimum-effort – game experiment with multiple Pareto-ranked strict pure-strategy Nash equilibria, using a real-effort rather than a chosen-effort task: subjects have to sort and count coins and their payoff depends on the worst performance in the group. While in the initial rounds our subjects typically coordinate on inefficient outcomes, almost 80 percent of the groups are able to overcome coordination failure in the later rounds. Our results are in stark contrast to results typically reported in the literature.
    Keywords: real effort, weak-link game, coordination, laboratory experiments.
    JEL: C72 C92
    Date: 2009
  8. By: Jianying Qiu (Department of Economics, University of Innsbruck); Eva-Maria Steiger (Stratigic Interaction Group, Max Planck Institute of Economics, Jena, Germany)
    Abstract: In the framework of expected utility theory, risk attitudes are entirely captured by the curvature of the utility function. In cumulative prospect theory (CPT) risk attitudes have an additional dimension: the weighting of probabilities. With this modification, one question arises naturally: since both utility and probability weighting determine the attitude towards risk, what is the relation between them? We ran a controlled laboratory experiment to answer this question. Our ï¬ndings suggest that the two dimensions capture different characteristics of individual risk attitude. Though individuals who are risk averse in one dimension are likely to be risk averse in the other, the two dimensions show no signiï¬cant correlation. Moreover, a signiï¬cant proportion of subjects are risk averse in one dimension but risk seeking in the other.
    Keywords: Risk attitudes, Cumulative prospect theory, Experimental study
    JEL: C91 D81
    Date: 2009–01–30
  9. By: Asheim, Geir B. (Dept. of Economics, University of Oslo); Helland, Leif (BI Norwegian School of Managment); Hovi, Jon (Department of Political Science); Hoyland, Bjorn (Department of Political Science)
    Abstract: We provide experimental evidence of self-serving fairness ideals in a dictator game design that includes treatments where funds can be transferred in two ways to the one player and in one way to the other. Two methods for transferring funds to the recipient produce the same results as the regular dictator game. However, two methods for transferring funds to the dictator reduce her generosity significantly. Hence, the fairness ideal adopted by dictators appears to be equal share per individual in the former case (as in the regular dictator game), and equal share per transfer method in the latter case.
    Keywords: Self-serving Bias; Experimental Economics; Dictator Game
    JEL: C91 D63
    Date: 2008–10–14
  10. By: Loukas Balafoutas
    Abstract: This paper analyses the impact of third party beliefs and payoffs on decision making, in the context of a three person repeated game. Two players can collude and increase their intertemporal payoffs, but doing so generates an externality for an inactive player (third party). The model assumes that some players are guilt averse and conditions their emotional responses on the perceived beliefs of the third party; this leads to a self-fulfilling mechanism, where beliefs tend to be confirmed through their impact on psychological payoffs. The experimental findings reveal that the third party’s beliefs are the dominant factor driving behaviour. On the contrary, third party payoffs do not seem to matter. These results are in line with the predictions of psychological game theory, extending them to third parties. Moreover, they give some insights on the relevant weight of different theories (social preferences, reciprocity, guilt) in the shaping of pro-social behaviour.
    Keywords: psychological games, guilt, third party, corruption
    JEL: C73 C91 D73
    Date: 2009–01
  11. By: Dreber, Anna (Dept. of Economics, Stockholm School of Economics); von Essen, Emma (Department of Economics); Ranehill, Eva (Dept. of Economics, Stockholm School of Economics)
    Abstract: Recent studies find that women are less competitive than men. This gender difference in competitiveness has been suggested as a possible explanation for why men occupy the majority of top positions in many sectors. In this study we explore competitiveness in children. A related field experiment on Israeli children shows that only boys react to competition by running faster when competing in a race, and that only girls react to the gender of their opponent. Here we test if these results carry over to 8-10 year old Swedish children. We also include two more "female" sports: skipping rope and dancing. Our results contradict previous findings in two ways. First, we fail to replicate the running result. In our study, both boys and girls compete. We also find no gender differences in competition in skipping rope and dancing. Second, we find no clear effect on competitiveness of the opponent’s gender, neither on girls or boys, in any of the tasks. Our findings suggest that the gender gap in competitiveness found in previous studies on adults may be caused by factors that emerge later in life. It remains to be explored whether these factors are biological or cultural.
    Keywords: competitiveness; gender differences; field experiment
    JEL: C93 J16
    Date: 2009–01–29
  12. By: Cécile Bazart; Michael Pickhardt
    Abstract: This paper provides experimental evidence regarding the influence of positive rewards on income tax evasion behavior. In particular, we experimentally test the impact of positive rewards in form of individual lottery winnings for honest taxpayers. Among other things, we find that these positive rewards lead to a significantly higher rate of tax compliance. Moreover, there are two gender effects. Males not only evade taxes to a much higher extent than females, they also show a stronger positive response to the lottery scheme. This allows us to draw some interesting policy recommendations.
    Date: 2009–01
  13. By: Brooks, Richard (Yale Law School); Landeo, Claudia (University of Alberta, Department of Economics); Spier, Kathryn (Harvard Law School)
    Abstract: The operating agreements of many business ventures include clauses to facilitate the exit of joint owners. In so-called Texas Shootouts, one owner names a single buy-sell price and the other owner is compelled to either buy or sell shares at that named price. Despite their prevalence in real-world contracts, Texas Shootouts are rarely triggered. In our theoretical framework, sole ownership is more efficient than joint ownership. Negotiations are frustrated, however, by the presence of asymmetric information. In equilibrium, owners eschew buy-sell offers in favor of simple offers to buy or to sell shares and bargaining failures arise. Experimental data support these findings.
    Keywords: Exit Mechanisms for Joint Ownership Ventures; Texas Shootout Clauses; Buy-Sell Mechanisms; Shotgun Provisions; Russian Roulette Agreements; Put-Call Options; Cake-Cutting Rule; Bargaining with Common Values; Experiments; Ultimatum Exchange Environments with Endogenous Offer Types
    JEL: C72 C90 D44
    Date: 2009–01–22
  14. By: Hesselius, Patrik (IFAU); Johansson, Per (IFAU); Nilsson, Peter (IFAU)
    Abstract: We utilize a large-scale randomized social experiment to identify how coworkers affect each other's effort as measured by work absence. The experiment altered the work absence incentives for half of all employees living in Göteborg, Sweden. Using administrative data we are able to recover the treatment status of all workers in more than 3,000 workplaces. We first document that employees in workplaces with a high proportion treated coworkers increase their own absence level significantly. We then examine the heterogeneity of the treatment effect in order to explore what mechanisms are underlying the peer effect. While a strong effect of having a high proportion of treated coworkers is found for the nontreated workers, no significant effects are found for the treated workers. These results suggest that pure altruistic social preferences can be ruled out as the main motivator for the behaviour of a nonnegligible proportion of the employees in our sample.
    Keywords: social interactions, employer employee data, work absence, fairness, reciprocal preferences
    JEL: J24
    Date: 2009–01
  15. By: Engström, Per (Department of Economics); Hesselius, Patrik (IFAU); Holmlund, Bertil (Department of Economics)
    Abstract: One goal of the public employment service is to facilitate matching between unemployed job seekers and job vacancies; another goal is to monitor job search so as to bring search efforts among the unemployed in line with search requirements. The referral of job seekers to vacancies is one instrument used for these purposes. We report results from a randomized Swedish experiment where the outcome of referrals is examined. To what extent do unemployed individuals actually apply for the jobs they are referred to? Does information to job seekers about increased monitoring affect the probability of applying and the probability of leaving unemployment? The experiment indicates that a relatively large fraction (one third) of the referrals do not result in job applications. Information about intensified monitoring causes an increase in the probability of job application, especially among young people. However, we find no significant impact on the duration of unemployment.
    Keywords: vacancy referral; job matching; job search; randomized experiment
    JEL: C99 J64 J68
    Date: 2009–02–01

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