nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒03‒28
sixteen papers chosen by
Daniel Houser
George Mason University

  1. Saliency of Outside Options in the Lost Wallet Game By James C. Cox; Maroš Servátka; Radovan Vadovic
  2. Social Preferences under Risk - An Experimental Analysis By Christiane Bradler
  3. Can intentions spoil the kindness of a gift? - An experimental study By Strassmair, Christina
  4. Measuring Trust : Experiments and Surveys in Contrast and Combination By Michael Naef; Jürgen Schupp
  5. Efficiency benefits of choice model experimental design updating: a case study By Kerr, Geoffrey; Sharp, Basil
  6. Generosity, Greed and Gambling: What difference does asymmetric information in bargaining make? By Charlotte Klempt; Kerstin Pull
  7. Testing the TASP: An Experimental Investigation of Learning in Games with Unstable Equilibria By Timothy N. Cason; Daniel Friedman; Ed Hopkins
  8. Individual Heterogeneity, Group Interaction, and Co-operative Behaviour: Evidence from a Common-Pool Resource Experiment in South Africa and Namibia By Bernd Hayo; Björn Vollan
  9. Portfolio diversification: an experimental study By Zulia Gubaydullina; Markus Spiwoks
  10. An Experimental Analysis of Parallel Multiple Auctions By Tim Hoppe
  11. Just a small delay? Bidding Behavior and Efficiency in overlapping multiple auctions By Tim Hoppe
  12. Shedding Light into Preference Heterogeneity: Why Players of Traveller’s Dilemma Depart from Individual Rationality? By Leonardo Becchetti; Giacomo Degli Antoni; Marco Faillo
  13. How a Mandatory Activation Program Reduces Unemployment Durations; the Effects of Distance By Krogh Graversen, Brian; van Ours, Jan C
  14. Predicting the performance of conservation tenders when information on bidders's costs is limited By Schilizzi, Steven; Latacz-Lohmann, Uwe
  15. Neural correlates for price involvement in purchase decisions with regards to fast-moving-consumer-goods By Franziska Rumpel; Michael Knuth; Micheal Schaefer
  16. Experiments with regulations & markets linking upstream tree plantations with downstream water users By Nordblom, Tom; Reeson, A.; Finlayson, J.; Hume, I.H.; Whitten, S.; Kelly, J.A.

  1. By: James C. Cox; Maroš Servátka (University of Canterbury); Radovan Vadovic
    Abstract: This paper reports an experiment designed to shed light on an empirical puzzle observed by Dufwenberg and Gneezy (2000) that the size of the foregone outside option by the first mover does not affect the behavior of the second mover in a lost wallet game. Our conjecture was that the original protocol may not have made the size of the forgone outside option salient to second movers. Therefore, we change two features of the Dufwenberg and Gneezy protocol: (i) instead of the strategy method we implement a direct response method (sequential play) for the decision of the second mover; and (ii) we use paper money certificates that are passed between the subjects rather than having subjects write down numbers representing their decisions. We observe that our procedure yields qualitatively the same result as the Dufwenberg and Gneezy experiment, i.e., the second movers do not respond to the change in the outside option of the first movers.
    Keywords: Experimental economics; Lost wallet game; Outside option
    JEL: C70 C91
    Date: 2009–01–10
  2. By: Christiane Bradler (Friedrich-Schiller-University Jena)
    Abstract: The literature on social preferences provides overwhelming evidence of departures from pure self-interest of individuals. Experiments show that people care about others' well-being and their relative standing. This paper investigates whether this type of behavior persists when risk comes into play. I devise an experiment which sheds light on the interrelation of risk and social preferences by measuring (1) individual risk preferences, (2) interpersonal risk preferences, and (3) social preferences under certainty. The results reveal that a large share of subjects choose to accept more risk or less potential gain than individually preferred in order to increase another subject’s payoff. Further, the willingness to do so appears to be influenced by the "need" of the other person and her potential relative standing. Surprisingly, the results do not suggest that a subject’s social behavior under risk is related to his exhibited social concerns exhibited under certainty.
    Keywords: social preferences, risk, other-regarding behavior, inequality aversion
    JEL: D81 D63 C91
    Date: 2009–03–23
  3. By: Strassmair, Christina
    Abstract: Consider a situation where person A undertakes a costly action that benefits person B. This behavior seems altruistic. However, if A expects a reward in return from B, then A's action may be motivated by the expected rewards rather than by pure altruism. The question we address in this experimental study is how B reacts to the intentions of A. We vary the probability, with which the second mover in a trust game can reciprocate, and analyze effects on second mover behavior. Our results suggest that the perceived kindness and its rewards are not spoiled by expected rewards.
    Keywords: social preferences; intentions; beliefs; psychological game theory; experiment
    JEL: D02 C91 D64
    Date: 2009–03–20
  4. By: Michael Naef; Jürgen Schupp
    Abstract: Trust is a concept that has attracted - significant attention in economic theory and research within the last two decades: it has been applied in a number of contexts and has been investigated both as an explanatory and as a dependent variable. In this paper, we explore the questions of what exactly is measured by the diverse survey-derived scales and experiments claiming to measure trust, and how these different measures are related. Using nationally representative data, we test a commonly used experimental measure of trust for robustness to a number of interferences, finding it to be mostly unsusceptible to stake size, the extent of strategy space, the use of the strategy method, and the characteristics of the experimenters. Inspired by criticism of the widespread trust question used in many surveys, we created a new, improved survey trust scale consisting of three short statements. We show that the dimension of this scale is distinct from trust in institutions and trust in known others. Our new scale is a valid and reliable measure of trust in strangers. The scale is valid in the sense that it correlates with trusting behaviour in the experiment. Furthermore, we demonstrate that the test-retest reliability of six weeks is high. The experimental measure of trust is, on the other hand, not significantly correlated with trust in institutions nor with trust in known others. We therefore conclude that the experimental measure of trust refers not to trust in a general sense, but specifically to trust in strangers.
    Keywords: Trust, experiment, survey, representativity, SOEP
    JEL: C91 D63 Z13
    Date: 2009
  5. By: Kerr, Geoffrey; Sharp, Basil
    Abstract: Efficient experimental designs offer the potential to reduce confidence intervals for parameters of interest in choice models, or to reduce required sample sizes. C-efficiency recognises the salience of willingness to pay estimates rather than utility function parameters. This study reports on a choice model application that incorporated updated statistical designs based on initial responses in order to maximise C-efficiency. The revised design delivered significant improvements.
    Keywords: experimental design, choice experiment, efficiency,
    Date: 2009
  6. By: Charlotte Klempt (Max Planck Institute of Economics, Jena); Kerstin Pull (University of Tübingen, Faculty of Economics and Business Administration)
    Abstract: We analyze the effects of asymmetric information concerning the size of a pie on proposer behavior in three different bargaining situations: the ultimatum game, the Yes-No-game and the dictator game. Our data show that (a) irrespective of the information condition, proposer generosity increases with responder veto power, (b) informed proposers in the ultimatum game try to exploit their superior information and hide their greed by a seemingly fair offer, and (c) uninformed proposers in the dictator game exhibit gambling behavior by asking for more than potentially is at stake. While the results of our experimental analysis are interesting as such, they may also yield interesting practical implications.
    Keywords: Bargaining, Information, Experimental Games
    JEL: C72 C91
    Date: 2009–03–23
  7. By: Timothy N. Cason; Daniel Friedman; Ed Hopkins
    Abstract: We report experiments designed to test between Nash equilibria that are stable and unstable under learning. The “TASP” (Time Average of the Shapley Polygon) gives a precise prediction about what happens when there is divergence from equilibrium under fictitious play like learning processes. We use two 4 x 4 games each with a unique mixed Nash equilibrium; one is stable and one is unstable under learning. Both games are versions of Rock-Paper-Scissors with the addition of a fourth strategy, Dumb. Nash equilibrium places a weight of 1/2 on Dumb in both games, but the TASP places no weight on Dumb when the equilibrium is unstable. We also vary the level of monetary payoffs with higher payoffs predicted to increase instability. We find that the high payoff unstable treatment differs from the others. Frequency of Dumb is lower and play is further from Nash than in the other treatments. That is, we find support for the comparative statics prediction of learning theory, although the frequency of Dumb is substantially greater than zero in the unstable treatments.
    Keywords: games, experiments, TASP, learning, unstable, mixed equilibrium, fictitious play.
    JEL: C72 C73 C92 D83
    Date: 2009–03–16
  8. By: Bernd Hayo (Philipps-University Marburg, Faculty of Business Administration & Economics, Universitaetsstr. 24, D-35037 Marburg, Germany); Björn Vollan (University of Mannheim, Department of Economics, L7, 3-5, D-68131 Mannheim, Germany)
    Abstract: We present econometric evidence on the influence of an individual’s sociodemographic characteristics, economic background, and dynamic personal and group interactions on co-operative behaviour in a social dilemma situation. The data are from a framed common-pool resource experiment conducted in Namibian and South African farming communities. Our paper helps to better understand the discrepancy between the fact that people seem to care about advancing their relative position in real life but tend to act to reduce inequality in a laboratory setting. We analyse the first move in the game, the cumulated amount of resources gained by the players and, by taking into account the temporal dimension of the game in a panel context, each individual move.
    Keywords: Common-pool resources, field experiment, group interaction, relative income position, Southern Africa
    JEL: Q24
    Date: 2009
  9. By: Zulia Gubaydullina (University of Göttingen); Markus Spiwoks (Wolfsburg University of Applied Sciences)
    Abstract: The paper analyses on an experimental basis the phenomenon of non-optimal under-diversification in portfolio choice decisions and investigates the reasons behind it. The most important obstacles for optimal diversification are studied – the correlation neglect hypothesis and the overconfidence which both lead to suboptimal diversification decisions. The investment alternatives are constructed in a way that the Markowitz’ efficiency frontier is reduced to a single point in the return-risk diagram so that unambiguous interpretation of the results is possible: the subjects neglect the correlation between the assets, use naïve diversification strategies and take irrelevant information as a foundation for their investment decisions, the first effect being stronger than the second.
    Keywords: experimental economics; portfolio choice; investment decisions; correlation neglect; overconfidence
    JEL: C91 D81 G11
    Date: 2009–03–20
  10. By: Tim Hoppe (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: At online auction platforms we often observed that substitutable goods are auctioned concurrently with auctions ending at the same time. I introduce an experimental setup of three sellers and four buyers in an ascending second price auction environment where every seller runs one auction with a homogeneous good and the buyers are confronted with single unit demand. I find that sellers revenue is significantly lower than theory predicts due to the fact that some auctions did not receive bids whereas other auctions concentrated the bids of all bidders. Moreover, I observe a statistically higher revenue of sellers setting the minimum starting price. Furthermore, my study shows that the buyers submit bids which are significantly lower than the private valuation every buyer receives. Comparing the efficiency of the parallel multiple auction setup to a double auction control experiment, I find a significant lower efficiency in parallel multiple auctions due to the coordination failure of the buyers.
    Keywords: simultaneous auctions, internet auctions, market design, electronic business
    JEL: D44 C92
    Date: 2008–11
  11. By: Tim Hoppe (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Online auction platforms like eBay provide a wide range of auctions containing substitutable goods. Some of these auctions exhibit parallel elements which means that two or more auctions run side by side for a certain time. Experiments have shown that multiple auctions ending at the same time, result in significantly lower efficiency due to the coordination failure of the buyers. I introduce an experimental setup with three sellers and four buyers in an overlapping multiple second price auction environment, where every seller runs one auction with a homogeneous good and the buyers are confronted with single unit demand. Furthermore, I vary the degree of the overlap between the successive auctions. One main result is that sellers revenue is significantly higher in overlapping multiple auctions than in parallel multiple auctions. Moreover, I observe a lower coordination failure of the buyers in overlapping auctions than in parallel multiple auctions. Due to these results, efficiency in overlapping multiple auctions is higher compared to the efficiency in parallel multiple auctions.
    Keywords: internet auctions, cross bidding, market design, electronic business
    JEL: D44 C92
    Date: 2008–12
  12. By: Leonardo Becchetti (University of Rome Tor Vergata); Giacomo Degli Antoni (EconomEtica); Marco Faillo (University of Trento - Faculty of Economics)
    Abstract: We analyse the experimental outcome of the Traveller's Dilemma under three different treatments - baseline (BT), compulsory ex post players' meeting (CET) and voluntary ex post players' meeting (VET) - to evaluate the effects of removal of anonymity (without preplay communication) in a typical one shot game in which there is a dilemma between individual rationality and aggregate outcome. We show that deviations from the Nash equilibrium outcome are compatible with the joint presence in the sample of individually rational, team-rational, (gift giving), "irrational" and (opportunistic) "one-shot-cooperator" types. The two main factors affecting deviations from the standard individually rational behaviour are male gender and the interaction of generalised trust with the decision of meeting the counterpart in the VET design.
    Keywords: Traveller’s Dilemma, Team Preferences, Social Distance, Generalised Trust, Relational Goods
    JEL: C72 C91 A13
    Date: 2009–03
  13. By: Krogh Graversen, Brian; van Ours, Jan C
    Abstract: In an experimental setting some Danish unemployed workers were assigned to an activation program while others were not. Unemployed who were assigned to the activation program found a job more quickly. We show that the activation effect increases with the distance between the place of residence of the unemployed worker and the place where the activation took place. We also find that the quality of the post-unemployment jobs was not affected by the activation program. Both findings confirm that activation programs mainly work because they are compulsory and unemployed don't like them.
    Keywords: Activation program; Experiment; Unemployment duration; Unemployment insurance
    JEL: C41 H55 J64 J65
    Date: 2009–03
  14. By: Schilizzi, Steven; Latacz-Lohmann, Uwe
    Abstract: Buying environmental services from private landholders using tendering mechanisms are usually subject to a budget constraint. Auction theory has mostly focused on target-constrained auctions and is not well developed for this type of auction. This paper examines the predictive capacity of a simple model developed for budget-constrained tenders, already used to design new conservation programs, by submitting it to controlled lab experiments. We study the capacity of the model to predict both experimental bids and the performance of the auction institution, based on the kind of limited information typically available to a conservation agency. We conclude there exists an optimal level of information on bidders’ costs, neither too large nor to small, making the tender worth considering as a policy option as well as allowing an ex-ante assessment of its economic performance.
    Keywords: Auctions, procurement, tenders, conservation, learning, economic experiments,
    Date: 2009
  15. By: Franziska Rumpel (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Michael Knuth (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Micheal Schaefer (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Some customers are loyal to their favorite brands, others easily switch between them. A new technique is available to assess differences in brand related behavior. We assume that price and brand-conscious participants show nearly the same activations in emotionally associated brain areas. Price-conscious participants also show an activation of cognitive associated regions. We employed functional magnet resonance imaging during a preference judgment task for fast mov-ing consumer goods. We discuss the results with differences in product and price specific in-volvement and advance that involvement of price-conscious participants is higher because of a higher price interest.
    Keywords: internet Neuro market research, Involvement, Price Interest, Reward Circuitry
    Date: 2008–12
  16. By: Nordblom, Tom; Reeson, A.; Finlayson, J.; Hume, I.H.; Whitten, S.; Kelly, J.A.
    Abstract: Land-use change in upper catchments impact downstream water flows. As trees use large amounts of water the expansion of upstream plantations can substantially reduce water availability to downstream users. There can also be impacts on downstream salinity due to reduced dilution flows. In some jurisdictions afforestation requires the purchase of water rights from downstream holders, while in others it does not, effectively handing the water rights to the upstream landholders. We consider the economic efficiency and equity (profitability and distributional) consequences of upstream land use change in the presence of a water market under alternate property rights regimes and different salinity scenarios.
    Keywords: experimental-economics, tree-plantations, environmental-services, urban, irrigation, stock & domestic, water use, land use,
    Date: 2009

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