nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒03‒14
sixteen papers chosen by
Daniel Houser
George Mason University

  1. Engineering Trust - Reciprocity in the Production of Reputation Information By Gary Bolton; Ben Greiner; Axel Ockenfels
  2. Choosing to Compete: How Different Are Girls and Boys? By Booth, Alison L.; Nolen, Patrick J.
  3. Career concerns incentives: An experimental test By Alexander K. Koch; Albrecht Morgenstern; Philippe Raab
  4. Gender Differences in Risk Behaviour: Does Nurture Matter? By Booth, Alison L.; Nolen, Patrick J.
  5. Social welfare versus inequality aversion in an incomplete contract experiment By Marco Faravelli; Oliver Kirchkamp; Helmut Rainer
  6. Does Participating in a Collective Decision Affect the Levels of Contributions Provided? An Experimental Investigation By Francesca Bortolami; Luigi Mittone
  7. One Step at a Time: Do Threshold Patterns Matter in Public Good Provision? By Asher, Sam; Casaburi, Lorenzo; Nikolov, Plamen; Ye, Maoliang
  8. Age Effects and Heuristics in Decision Making By Sudipta Sarangi; Tibor Besedes; Cary Deck; Mikhael Shor
  9. Heterogeneity in Risky Choice Behavior in a Broad Population By Gaudecker, H.M. von; Soest, A.H.O. van; Wengstrom, E.
  10. Assessing trust through social capital? A possible experimental answer. By Migheli, Matteo
  11. The Value of Fiat Money with an Outside Bank: An Experimental Game By Juergen Huber; Martin Shubik; Shyam Sunder
  12. Can Contracts Solve the Hold-Up Problem? Experimental Evidence By Hoppe, Eva I.; Schmitz, Patrick W.
  13. The Economics of Credence Goods: On the Role of Liability, Verifiability, Reputation and Competition By Uwe Dulleck; Rudolf Kerschbamer; Matthias Sutter
  14. Psychology and Economics rather than Psychology versus Economics: Cultural differences but no barriers! By Hermann Brandstätter; Werner Güth; Hartmut Kliemt
  15. Changing the Probability versus Changing the Reward By David M. Bruner
  16. Neuroeconomics: A Critique of ‘Neuroeconomics: A Critical Reconsideration’ By Stanton, Angela A.

  1. By: Gary Bolton; Ben Greiner; Axel Ockenfels
    Abstract: Reciprocal feedback distorts the production and content of reputation information, hampering trust and trade efficiency. Data from eBay and other sources combined with laboratory data provide a robust picture of how reciprocity can be guided by changes in the way feedback information flows through the system, leading to more accurate reputation information, more trust and more efficient trade.
    Keywords: market design, reputation, trust, reciprocity, eBay
    JEL: C73 C9 D02 L14
    Date: 2009–02–24
  2. By: Booth, Alison L. (Australian National University); Nolen, Patrick J. (University of Essex)
    Abstract: Using a controlled experiment, we examine the role of nurture in explaining the stylized fact that women shy away from competition. Our subjects (students just under 15 years of age) attend publicly-funded single-sex and coeducational schools. We find robust differences between the competitive choices of girls from single-sex and coed schools. Moreover, girls from single-sex schools behave more like boys even when randomly assigned to mixed-sex experimental groups. Thus it is untrue that the average female avoids competitive behaviour more than the average male. This suggests that observed gender differences might reflect social learning rather than inherent gender traits.
    Keywords: competitive behaviour, experiment, gender, piece-rate, tournament
    JEL: C91 C92 J16 J33
    Date: 2009–02
  3. By: Alexander K. Koch; Albrecht Morgenstern; Philippe Raab (School of Economics and Management, University of Aarhus, Denmark)
    Abstract: Holmström’s (1982/99) career concerns model has become a workhorse for analyzing agency issues in many fields. The underlying signal jamming argument requires players to use information in a Bayesian way, which is difficult to directly test with field data: typically little is known about the information that individuals base their decisions on. Our laboratory experiment provides prima facie evidence: i) the signal jamming mechanism successfully creates incentives on the labor supply side; ii) decision errors take time to decrease; iii) while subjects’ average beliefs are remarkably consistent with play, a mild winner’s curse arises on the labor demand side.
    Keywords: Incentives, Reputation, Career concerns, Signal jamming, Experiments
    JEL: C91 D83 L14
    Date: 2009–01–09
  4. By: Booth, Alison L. (Australian National University); Nolen, Patrick J. (University of Essex)
    Abstract: Women and men may differ in their propensity to choose a risky outcome because of innate preferences or because their innate preferences are modified by pressure to conform to gender-stereotypes. Single-sex environments are likely to modify students’ risk-taking preferences in economically important ways. To test this, our controlled experiment gave subjects an opportunity to choose a risky outcome − a real-stakes gamble with a higher expected monetary value than the alternative outcome with a certain payoff − and in which the sensitivity of observed risk choices to environmental factors could be explored. The results show that girls from single-sex schools are as likely to choose the real-stakes gamble as much as boys from either coed or single sex schools, and more likely than coed girls. Moreover, gender differences in preferences for risk-taking are sensitive to the gender mix of the experimental group, with girls being more likely to choose risky outcomes when assigned to all-girl groups. This suggests that observed gender differences in behaviour under uncertainty found in previous studies might reflect social learning rather than inherent gender traits.
    Keywords: gender identity, controlled experiment, risk aversion, risk attitudes,
    JEL: C9 C91 C92 J16
    Date: 2009–02
  5. By: Marco Faravelli (School of Economics and Finance, University of St. Andrews); Oliver Kirchkamp (Department of Economics, University of Jena, Germany); Helmut Rainer (School of Economics and Finance, University of St. Andrews)
    Abstract: We explore experimentally how power asymmetries between partners affect relationship-specific investments. We find that on average players’ investments are larger than equilibrium investments. In contrast to social dilemma experiments, in our experiment preferences for social welfare and those for equality call for different actions. Surprisingly, even disadvantaged players care more for social welfare and less for equality. As a result social welfare increases but so does inequality. We then study conditions under which power-advantaged players give up power. Power-sharing can be successful in the experiment, even when it is not in a selfish world.
    Keywords: Experiments, Incomplete Contracts, Relationship-Specific Investment, Allocation of Power, Social Preferences
    JEL: C91 D23 D86
    Date: 2009–02–25
  6. By: Francesca Bortolami; Luigi Mittone
    Abstract: From a purely theoretical perspective, there is no reason to expect that different levels of contributions in public goods games are associated with the same sanctioning/rewarding rule. The efficiency of a norm should be independent of its enactment procedure. On the contrary, multidisciplinary and empirical considerations suggest that individuals may behave differently, according to the level of their direct involvement. The question whether participation in norm enactment results in more contributory gap than when the same norm is received, has not been addressed in public good literature so far. Our three experiments show a behavioural regularity: participating in a normative enactment generates different contributory effects, with respect to the case when the sanctioning norm is merely received.
    Keywords: participation, public good games, free riding
    Date: 2009
  7. By: Asher, Sam; Casaburi, Lorenzo; Nikolov, Plamen; Ye, Maoliang
    Abstract: There is a substantial literature examining coordination in public goods games. We conducted an experiment to explore how varying patterns of thresholds affect the willingness of subjects to contribute to a public good. We had subjects play a multiperiod game where each subject was allocated an initial point endowment, told a threshold for the group and had to choose how much to contribute to the common pot. Each period is identical, except for the possibility of having a different threshold, which is always stated before the players make their contributions. We found that while contributions are similar for the increasing and decreasing threshold group types when thresholds were low, a sizeable gap opens up around the average threshold size. We found that for nearly every threshold, it is more profitable to be in an increasing than in a decreasing threshold group type. Early cooperation seems to facilitate the achievement of harder-to-reach thresholds, which require considerable contributions from all members of the group. These findings are also very robust in the regression specifications. Our findings shed light on the role of past cooperative success and threshold patterns on subsequent willingness to cooperate.
    Keywords: Experimental economics, public goods decision making
    JEL: C91 C92 D81 G14 H41
    Date: 2009
  8. By: Sudipta Sarangi; Tibor Besedes; Cary Deck; Mikhael Shor
    Abstract: We examine in controlled experiments how individuals make choices when faced with multiple options. The choice tasks mimic the selection of health insurance, prescription drug, or retirement savings plans. However, in our experiment, the available options can be objectively ranked. We find that the probability of a person selecting the optimal option declines as the number of options increases, with the decline more pronounced for older subjects. Heuristics seem to differ by age with older subjects relying more on suboptimal decision rules. Behavior consistent with the estimated decision rules is observed in an out-of-sample experiment.
  9. By: Gaudecker, H.M. von; Soest, A.H.O. van; Wengstrom, E. (Tilburg University, Center for Economic Research)
    Abstract: We analyse risk preferences using an experiment with real incentives in a representative sample of 1,422 Dutch respondents. Our econometric model incorporates four structural parameters that vary with observed and unobserved characteristics: Utility curvature, loss aversion, preferences towards the timing of uncertainty resolution, and the propensity to choose randomly rather than on the basis of preferences. We find that all four parameters contribute to explaining choice behaviour. The structural parameters are significantly associated with socio-economic variables, but it is essential to incorporate unobserved heterogeneity in each of them to match the rich variety of choice patterns in the data.
    Keywords: risk aversion;loss aversion;uncertainty resolution;field experiments
    JEL: C90 D81
    Date: 2009
  10. By: Migheli, Matteo
    Abstract: Trust is an important variable in economics, as several transactions are based on it; unfortunately it is difficult to measure. The recent economic literature on social capital shows a positive association between this concept and trust. As social capital is easier to measure than trust is, this paper analyzes the possibility of assessing trust measuring social capital using experimental economics. A basic trust game is played in three Western European countries with undergraduate students; a questionnaire measures their level of social capital, as time spent within social networks. This measure is stronger and more precise than the ones generally used. In particular this paper firstly measures social capital as the intensity of a membership to a voluntary organization, while the extant literature generally considers only the membership per se. Secondly the use of an experiment instead of a questionnaire allows for constructiong a measure of trust which is in principle continuous. Thirdly to play an experiment allows for observing the behaviour of the participants better than by the means of a survey. The results are supportive of the fact that trust can be assessed through social capital, although the presence of a strong geographical effect has to be accounted for.
    Keywords: generalized trust, social capital, gender effect
    JEL: C72 C93
    Date: 2009–02
  11. By: Juergen Huber; Martin Shubik; Shyam Sunder
    Date: 2009–02–27
  12. By: Hoppe, Eva I.; Schmitz, Patrick W.
    Abstract: In the contract-theoretic literature, there is a vital debate about whether contracts can mitigate the hold-up problem when renegotiation cannot be prevented. Ultimately, the question has to be answered empirically. As a first step in that direction, we have conducted a laboratory experiment with 490 participants. We consider "cooperative" investments that directly benefit the non-investing party. While according to standard theory, contracting would be useless if renegotiation cannot be ruled out, we find that option contracts significantly improve investment incentives compared to a no-contract treatment. This finding can be explained by Hart and Moore’s (2008) notion that contracts may serve as reference points.
    Keywords: Experiment; Hold-up problem; Option contracts; Renegotiation
    JEL: C72 C91 D86
    Date: 2009–03
  13. By: Uwe Dulleck; Rudolf Kerschbamer; Matthias Sutter
    Abstract: Credence goods markets are characterized by asymmetric information between sellers and consumers that may give rise to inefficiencies, such as under- and overtreatment or market break-down. We study in a large experiment with 936 participants the determinants for efficiency in credence goods markets. While theory predicts that either liability or verifiability yields efficiency, we find that liability has a crucial, but verifiability only a minor effect. Allowing sellers to build up reputation has little influence, as predicted. Seller competition drives down prices and yields maximal trade, but does not lead to higher efficiency as long as liability is violated.
    Keywords: Credence goods, Experiment, Liability, Verifiability, Reputation, Competition
    JEL: C72 C91 D40 D82
    Date: 2009–02
  14. By: Hermann Brandstätter (University of Linz); Werner Güth (Max Planck Institute of Economics, Jena, Germany); Hartmut Kliemt (Frankfurt School of Finance & Management, Frankfurt am Main, Germany)
    Abstract: During the last three decades the ascent of behavioral economics clearly helped to bring down artificial disciplinary boundaries between psychology and economics. Noting that behavioral economics seems still under the spell of the rational choice tradition - and, indirectly, of behaviorism - we scrutinize in an exemplary manner how the development of some kind of "cognitive economics" might mirror the rise of "cognitive psychology" without endangering the advantages of the division of labor and of disciplinary specialization.
    Keywords: bounded rationality, game theory, satisficing, interdisciplinary research, experimental economics, economic psychology
    JEL: B31 B41 C72 C73 C78 D63
    Date: 2009–03–04
  15. By: David M. Bruner
    Abstract: There are two means of changing the expected value of a risk: changing the probability of a reward or changing the reward. Theoretically, the former produces a greater change in expected utility for risk averse agents. This paper uses two formats of a risk preference elicitation mechanism under two decision frames to test this hypothesis. After controlling for decision error, probability weighting, and order effects, subjects, on average, are slightly risk averse and prefer an increase in the expected value of a risk due to increasing the probability over a compensated increase in the reward. There is substantial across-format inconsistency but very little within-format inconsistency at the individual level. Key Words: risk, uncertainty, experiments
    JEL: C91 D81
    Date: 2009
  16. By: Stanton, Angela A.
    Abstract: Some economists believe that neuroeconomists threatens the theory of economics. Glenn Harrison’s paper “Neuroeconomics: A Critical Reconsideration” (2008) provides some support for this view, though some of the points he makes are somewhat disguised. The field of neuroeconomics is barely into its teenage years; and it is trying to do what? Criticize and redesign the field of economics developed over hundreds of years? But that is not what neuroeconomics is trying to do, in spite of all the efforts of some economists trying to place it into that shoebox (see the argument in great detail in Andrew Caplin, Andrew Schotter 2008). Neuroeconomics is a Mendelian-Economics of sort; it is a science that is able to generate data by fixing the environment to some degree, varying a single independent variable for its affects, and is able to see each individual’s choices from initiation of the decision-making process to its outcome. Mainstream (standard) economics, on the other hand, looks at the average of the outcomes of many individuals and proposes how people chose those outcomes, retroactively. The two fields, neuroeconomics and standard economics, are evaluating two sides of the same coin: one with and the other without ceteris paribus; they are not in conflict with one another.
    Keywords: Neuroeconomics; Standard Economics; Ceteris Paribus; Hormones
    JEL: D01 C91 D87
    Date: 2008

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