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on Experimental Economics |
| By: | John Duffy; Huan Xie; Yong-Ju Lee |
| Abstract: | How do norms of trust and reciprocity arise? We investigate this question by examining behavior in an experiment where subjects play a series of indefinitely repeated trust games. Players are randomly and anonymously matched each period. The parameters of the game are chosen so as to support trust and reciprocity as a sequential equilibrium when no reputational information is available. The main questions addressed are whether a social norm of trust and reciprocity emerges under the most extreme information restriction (community-wide enforcement) or whether trust and reciprocity require additional, individual-specific information about a player’s past history of play and how long that history must be. In the absence of such reputational information, we find that a social norm of trust and reciprocity is difficult to sustain. The provision of reputational information on past individual decisions significantly increases trust and reciprocity, with longer histories yielding the best outcomes. Importantly, we find that making reputational information available at a small cost may also lead to a significant improvement in trust and reciprocity, despite the fact that most subjects do not choose to purchase this information. |
| JEL: | C72 C91 C92 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:pit:wpaper:384&r=exp |
| By: | Hägglund, Pathric (Swedish Institute for Social Research, Stockholm University) |
| Abstract: | This paper uses experimental data to study the effects of participation in intensified placement efforts on subsequent job chances and earnings. Five small-scale experiments were performed in four different regions of Sweden in 2004 and the control groups were offered the PES regular services. Due to small samples, many of the impact estimates were imprecise and insignificant. However, the services generally reduced unemployment among the treated. I find significantly enhanced exits to either jobs or other activities (or both) in four of the experiments. Three of the experiments also report positive effects on employment probability and earnings in the years following the programme. Finally, combining job-search assistance and monitoring of job search generated significantly better results than monitoring alone in one of the experiment locations. |
| Keywords: | Active labour market policy evaluation; randomised social experiment; placement efforts |
| JEL: | C93 J64 |
| Date: | 2009–06–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2009_016&r=exp |
| By: | Nguyen, Quang |
| Abstract: | We combine an artefactual field experiments and household survey data to investigate whether involvement in a unique occupation such as fishery makes the fishermen exhibit different risk and time preferences than those in other occupations. Using a structural model approach, we integrate prospect theory and hyperbolic time discounting into a single framework to simultaneously estimate and correlate the parameters of both risk and time preferences with other demographic variables. The key finding is that fishermen are found to be less risk-averse and more patient than others. |
| Keywords: | Experimental Economics; Prospect Theory; Hyperbolic Discounting; Risk Behavior; Vietnam fishermen |
| JEL: | D81 C93 Q22 |
| Date: | 2009–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16012&r=exp |
| By: | Luca Corazzini; Sebastian Kube; Michel André Maréchal; Antonio Nicoló |
| Abstract: | The virtue of democratic elections has traditionally been seen in their role as a means of screening and sanctioning shirking public officials. This paper proposes a novel rationale for elections and political campaigns by considering heterogeneity in candidates' aversion to lying. We analyze theoretically and experimentally how democratic elections and campaigns influence the behavior of voters and their representatives. Our main insight is that candidates behave more benevolently when democratically elected than when exogenously appointed. Moreover, the results show that candidates feel more obliged to serve the public interest the higher their approval ratings are. Together, our results suggest that electoral competition and campaigns confer benefits beyond their function as a screening and sanctioning device. |
| Keywords: | Costs of Lying, Electoral Competition, Laboratory Experiment |
| JEL: | D72 C92 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:421&r=exp |
| By: | Tanaka, Tomomi; Camerer, Colin; Nguyen, Quang |
| Abstract: | This paper compares the social norms of distributive transfers within village communities in the north and south of Vietnam by analyzing household survey and experimental data. The results of household data analysis show private transfers flow from high-income households to low-income households in the south where social safety net is limited. In contrast, private transfers do not correlate with pre-transfer income in the north where public transfers are more widespread. In addition, public transfers crowd out private transfers in the north. We conducted trust game in both regions and found consistent results. People in the south are more altruistic toward the poor: they send more to the poor without expecting higher repayment. This pattern is consistent with the idea that private norms of redistribution from rich to poor are active in the south but are crowded out in the north, possibly by communist public institutions, although we observe a strong overall positive effect of communism on reciprocity in the north. |
| Keywords: | Field experiment; Trust; Vietnam |
| JEL: | D81 D64 C93 |
| Date: | 2009–07–07 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16119&r=exp |
| By: | Hauge, Karen Evelyn (Department of Economics, Oslo University); Brekke, Kjell Arne (Department of Economics, Oslo University); Johansson, Lars-Olof (Department of Psychology, University of Gothenburg); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University); Svedsäter, Henrik (Organisational Behaviour, London Business School) |
| Abstract: | We study the impact of cognitive load in dictator games to test two conflicting views of moral behavior. Are social preferences skindeep in the sense that they are the result of humans’ cognitive reasoning while the natural instinct is selfish, or is rather the natural instinct to share fairly while our cognitive capacities are able to adjust moral principles in a selfserving manner? Some previous studies in more complex settings give conflicting answers, and to disentangle different possible mechanisms we use simple games. We study both charitable giving and the behavior of dictators under high and low cognitive load, where high cognitive load is assumed to reduce the impact of cognitive processes on behavior. In the dictator game we use both a give frame, where the dictator is given an amount and may share some or all of it to a partner, and a take frame, where dictators may take from an amount initially allocated to the partner. The results from four different studies indicate that the effect of cognitive load is small if at all existing.<p> |
| Keywords: | Social Preferences; experiments; dictator game; cognitive load |
| JEL: | C91 |
| Date: | 2009–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0371&r=exp |
| By: | Abeler, Johannes (University of Nottingham); Altmann, Steffen (IZA); Kube, Sebastian (Max Planck Institute for Research on Collective Goods); Wibral, Matthias (University of Bonn) |
| Abstract: | We study how different payment modes influence the effectiveness of gift exchange as a contract enforcement device. In particular, we analyze how horizontal fairness concerns affect performance and efficiency in an environment characterized by contractual incompleteness. In our experiment, one principal is matched with two agents. The principal pays equal wages in one treatment and can set individual wages in the other. We find that the use of equal wages elicits substantially lower efforts. This is not caused by monetary incentives per se since under both wage schemes it is profit-maximizing for agents to exert high efforts. The treatment difference instead seems to be driven by the fact that the norm of equity is violated far more frequently in the equal wage treatment. After having suffered from violations of the equity principle, agents withdraw effort. These findings hold even after controlling for the role of intentions, as we show in a third treatment. Our results suggest that adherence to the norm of equity is a necessary prerequisite for successful establishment of gift-exchange relations. |
| Keywords: | reciprocity, gift exchange, equity, wage equality, wage setting, incomplete contracts |
| JEL: | J33 D63 M52 C92 J41 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4262&r=exp |
| By: | Bauer, Michal (Charles University, Prague); Chytilová, Julie (Charles University, Prague) |
| Abstract: | In this paper we study the link between women's responsibility for children and their preferences. We use a large random sample of individuals living in rural India, incentive compatible measures of patience and risk aversion, and detailed survey data. We find more patient choices among women who have a higher number of children. The age of children matters: The link with patience is specific for children below 18 years old, and the highest level of patience is associated with having three children. We do not observe this link among men. Taken together, we find significant gender differences in patience that are predicted by a higher number of children. The results are robust to controlling for age, education, income constraints, and individual and location characteristics. These findings suggest an important context when the spending preferences of spouses diverge, and support the view that empowering women in developing countries should lead to more future-oriented choices of households. |
| Keywords: | time discounting, gender, children, experiment, India |
| JEL: | C93 D13 D91 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4241&r=exp |
| By: | Shawn Cole; Xavier Giné; Jeremy Tobacman; Petia Topalova; Robert Townsend; James Vickery |
| Abstract: | Financial engineering offers the potential to significantly reduce the consumption fluctuations faced by individuals, households, and firms. Yet much of this potential remains unfulfilled. This paper studies the adoption of an innovative rainfall insurance product designed to compensate low-income Indian farmers in the event of insufficient rainfall during the primary monsoon season. We first document relatively low adoption of this new risk management product: Only 5-10 percent of households purchase the insurance, even though they overwhelmingly cite rainfall variability as their most significant source of risk. We then conduct a series of randomized field experiments to test theories of why product adoption is so low. Insurance purchase is sensitive to price, with an estimated extensive price elasticity of demand ranging between -.66 and -0.88. Credit constraints, identified through the provision of random liquidity shocks, are a key barrier to participation, a result also consistent with household self-reports. Several experiments find that trust plays an important role in the decision to purchase insurance. We find mixed evidence that subtle psychological manipulations affect purchases and no evidence that modest attempts at financial education change households' decisions to participate. Based on our experimental results, we suggest preliminary lessons for improving the design of household risk management contracts. |
| Keywords: | Households - Economic aspects ; Insurance ; Risk management |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:373&r=exp |
| By: | David Hugh-Jones (Max Planck Institute for Economics, Jena); David Reinstein (Department of Economics, Essex University) |
| Abstract: | Costly signaling of commitment to a group has been proposed as an explanation for participation in religion and ritual. But if the signal's cost is too small, freeriders will send the signal and behave selflshly later. Effective signaling may then be prohibitively costly. If the average level of signaling in a group is observable, but individual effort is not, then freeriders can behave selflshly without being detected, and group members will learn about the average level of commitment among the group. We develop a formal model, and give examples of institutions that enable anonymous signaling, including ritual, religion, music and dance, voting, charitable donations, and military institutions. We explore the value of anonymity in the laboratory with a repeated two-stage public goods game with exclusion. When first-stage contributions are anonymous, subjects are better at predicting second-stage behavior, and maintain a substantially higher level of cooperation. |
| Keywords: | signaling, anonymity, public goods |
| JEL: | H41 |
| Date: | 2009–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-048&r=exp |