nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒04‒05
nine papers chosen by
Daniel Houser
George Mason University

  1. Voting on Punishment Systems Within a Heterogeneous Group By Noussair, C.N.; Tan, F.
  2. Cooperation and Competition in Intergenerational Experiments in the Field and in the Laboratory By Gary Charness; Marie-Claire Villeval
  3. Towards an understanding of the endogenous nature of identity in games By Bezrukova, Katerina; Smith, John
  4. Can Sanctions Induce Pessimism? An Experiment By Roberto Galbiati; Karl Schlag; Joël van der Weele
  5. Revisiting Strategic versus Non-strategic Cooperation By Reuben, E.; Suetens, S.
  6. Patents versus Subsidies – A Laboratory Experiment By Donja Darai; Jens Grosser; Nadja Trhal
  7. How a Mandatory Activation Program Reduces Unemployment Durations: The Effects of Distance By Graversen, B.K.; Ours, J.C. van
  8. Multiple-bidding in auctions as bidders become confident of their private valuations By Christopher Cotton
  9. Teaching the Tax Code: Earnings Responses to an Experiment with EITC Recipients By Raj Chetty; Emmanuel Saez

  1. By: Noussair, C.N.; Tan, F. (Tilburg University, Center for Economic Research)
    Abstract: We consider a voluntary contributions game, in which players may punish others after contributions are made and observed. The productivity of contributions, as captured in the marginal-per-capita return, differs among individuals, so that there are two types: high and low productivity. Every two or eight periods, depending on the treatment, individuals vote on a punishment regime, in which certain individuals are permitted, but not required, to have punishment directed toward them. The punishment system can condition on type and contribution history. The results indicate that the most effective regime, in terms of contributions and earnings, is one that allows punishment of low contributors only, regardless of productivity. Nevertheless, only a minority of sessions converge to this system, indicating a tendency for the voting process to lead to suboptimal institutional choice.
    Keywords: Voting;Punishment;Voluntary Contributions;Heterogeneity;Experiment
    JEL: C92 D74 H41
    Date: 2009
  2. By: Gary Charness (Department of Economics - University of California, Santa Barbara); Marie-Claire Villeval (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: There is economic pressure towards the postponement of the retirement age, but employers are still reluctant to employ older workers. We investigate the comparative behavior of juniors and seniors in experiments conducted both onsite with the employees of two large firms and in a conventional laboratory environment with students and retirees. We show that seniors are no more risk averse than juniors and are typically more cooperative; both juniors and working seniors respond strongly to competition. The implication is that it may be beneficial to define additional incentives near the end of the career to motivate and retain older workers.
    Keywords: Age; performance; diversity; stereotypes; cooperation; competition; inter-generational games; experiments
    Date: 2009
  3. By: Bezrukova, Katerina; Smith, John
    Abstract: We test the assumption that preferences are unchanged throughout a strategic game in the absence of feedback. To do so, we study the relationship between the strategic nature of a game and players' identification in social groups. We present evidence that the strategic nature of the game affects the strength of identity. We also present evidence regarding the timing of the change in identity and what causes this change. In our experiment, the subjects play one of two versions of the Prisoner's Dilemma game where the attractiveness of the uncooperative action is manipulated. We refer to the version with a relatively attractive uncooperative action as the "Mean Game" and the other as the "Nice Game." We place each subject into one of two groups. Throughout the experimental procedure we measure identity, as standard in the psychology literature, in order to assess the extent to which subjects identify with their group. First, we find evidence of an interaction between the strategic nature of the game and the action selected in the game as affecting the identity of the subject. We find that in the Mean Game, there is little difference in the change in identification of those playing cooperatively against an ingroup member and those playing uncooperatively. However, in the Nice Game, those playing cooperatively against an ingroup member exhibit a significantly stronger change in identification than those playing uncooperatively. We find that the opposite is true for outgroup matches. Also, we show that the change in identity does not occur after initial inspection of the game but rather largely after the action choice has been made. Finally, we present evidence of an explanation of the effect: identity is enhanced by actions which are perceived to be less competitive and more cooperative.
    Keywords: Group Identity; Game Theory; Other-Regarding Preferences; Endogenous Preferences
    JEL: C70 Z13 C91
    Date: 2008–12–03
  4. By: Roberto Galbiati; Karl Schlag; Joël van der Weele
    Abstract: We run an experiment in which two subjects play a two-round minimum effort game in the presence of a third player (principal) who is the only one informed about past effort choices and benefits from a higher minimum effort of the others. Sanctions introduced in the second round by the experimenter lead to more optimistic beliefs and higher efforts. This is not true when sanctions have been imposed by the principal. The possibility that the choice of a sanction is a signal of low effort levels causes players who chose high effort in the first round to be less optimistic.
    Keywords: Sanctions, beliefs, expressive law, deterrence, coordination, minimum effort game
    JEL: C92 D83 K42
    Date: 2009–03
  5. By: Reuben, E.; Suetens, S. (Tilburg University, Center for Economic Research)
    Abstract: We use a novel experimental design to disentangle strategically- and non-strategically-motivated cooperation. By using contingent responses in a repeated sequential prisoners’ dilemma with a known probabilistic end, we differentiate end-game behavior from continuation behavior within individuals while controlling for expectations. This design allows us to determine the extent to which strategically-cooperating individuals are responsible for the so-called endgame effect. Experiments with two different subject pools indicate that the most common motive for cooperation in repeated games is strategic and that the extent to which endgame effects are driven by strategically-cooperating individuals depends on the profitability of cooperation.
    Keywords: reputation building;strong reciprocity;conditional cooperation;strategic cooperation
    JEL: C91 D01 D74
    Date: 2009
  6. By: Donja Darai (Socioeconomic Institute, University of Zurich); Jens Grosser (Departments of Political Science and Economics, Florida State University); Nadja Trhal (Economics Department, University of Cologne)
    Abstract: This paper studies the effects of patents and subsidies on R&D investment decisions. The theoretical framework is a two-stage game consisting of an investment and a market stage. In equilibrium, both patents and subsidies induce the same amount of R&D investment, which is higher than the investment without governmental incentives. In the first stage, the firms can invest in a stochastic R&D project which might lead to a reduction of the marginal production costs and in the second stage, the firms face price competition. Both stages of the game are implemented in a laboratory experiment and the obtained results support the theoretical predictions. Patents and subsidies increase investment in R&D and the observed amounts of investment in the patent and subsidy treatment do not differ significantly across both instruments. However, we observe overinvestment in all three treatments. Observed prices in the market stage converge to equilibrium price levels.
    Keywords: R&D investment, oligopoly, patents, subsidies, experiment
    JEL: C90 L13 O31
    Date: 2009–03
  7. By: Graversen, B.K.; Ours, J.C. van (Tilburg University, Center for Economic Research)
    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: Unemployment insurance;unemployment duration;experiment;activation programs
    JEL: C41 H55 J64 J65
    Date: 2009
  8. By: Christopher Cotton (Department of Economics, Cornell University)
    Abstract: A bidder may increase his bid over the course of an auction when (1) he becomes more certain about his private valuation over time (as he has more time to consider using the item), and (2) there is a positive probability he is unable to return to the auction to submit a bid in a later period. Evidence from a classroom experiment supports the theoretical findings.
    Keywords: auction, eBay, multiple bidding, value discovery
    JEL: D44 D82
    Date: 2008–05
  9. By: Raj Chetty; Emmanuel Saez
    Abstract: This paper tests whether providing information about the Earned Income Tax Credit (EITC) affects EITC recipients' labor supply and earnings decisions. We conducted a randomized experiment with 43,000 EITC recipients at H&R Block in which tax preparers gave simple, personalized information about the EITC schedule to half of their clients. Tracking subsequent earnings, we find substantial heterogeneity in treatment effects across the 1,461 tax professionals who assisted the clients involved in the experiment. Half of the tax professionals, whom we term "compliers", induce treated clients to increase their EITC refunds by choosing an earnings level closer to the peak of the EITC schedule. Clients treated by complying tax professionals are 10% less likely to have very low incomes than control group clients. The remaining tax preparers generate insignificant changes in EITC amounts but increase the probability that their clients have incomes high enough to reach the phase-out region. Treatment effects are larger for the self-employed, but are also substantial among wage earners, suggesting that information provision induced real labor supply responses. When compared with other policy instruments, information has large effects: complying tax preparers generate the same labor supply response along the intensive margin as a 33% expansion of the EITC program, while non-complying tax preparers induce the same response as a 5% tax rate cut.
    JEL: H31 J22
    Date: 2009–04

This nep-exp issue is ©2009 by Daniel Houser. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.