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on Experimental Economics |
| By: | Timothy N Cason; Vai-Lam Mui |
| Abstract: | This paper presents a laboratory collective resistance (CR) game to study how different forms of repeated interactions, with and without communication, can help coordinate subordinates’ collective resistance to a “divide-and-conquer†transgression against their personal interests. In the one-shot CR game, a first–mover (the “leaderâ€) decides whether to transgress against two responders. Successful transgression increases the payoff of the leader at the expense of the victim(s) of transgression. The two responders then simultaneously decide whether to challenge the leader. The subordinates face a coordination problem in that their challenge against the leader’s transgression will only succeed if both of them incur the cost to do so. The outcome without transgression can occur in equilibrium with standard money-maximizing preferences with repeated interactions, but this outcome is not an equilibrium with standard preferences when adding non-binding subordinate “cheap talk†communication in the one-shot game. Nevertheless, we find that communication (in the one-shot game) is at least as effective as repetition (with no communication) in reducing the transgression rate. Moreover, communication is better than repetition in coordinating resistance, because it makes it easier for subordinates to identify others who have social preferences and are willing to incur the cost to punish a violation of social norms. |
| Keywords: | Communication, Cheap Talk, Collective Resistance, Divide-and-Conquer, Laboratory Experiment, Repeated Games, Social Preferences |
| JEL: | C92 D74 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2008-16&r=exp |
| By: | Dmitry Ryvkin (Department of Economics, Florida State University) |
| Abstract: | Employee overwork and fatigue are a concern of managers in many organizations, as they may increase health and safety risks and decrease productivity. The problem is especially severe in competitive environments where compensation and promotions are awarded, explicitly or implicitly, on the basis of relative performance. In this paper, we propose a theory for, and study experimentally, the phenomenon of fatigue in dynamic contests aimed to mimic such settings. Theoretically, we find that if managers wish to avoid overwork, for example due to its negative impact on productivity, they should let their employees compete for promotion longer, with multiple intermediate performance evaluation stages. Experimentally, we find that subjects react strongly to changes in the environment related to fatigue and follow the comparative statics of equilibrium predictions. At the same time, within a given environment subjects behave as if they are unaware of the deteriorating effect of fatigue on their competitiveness. The results suggest that nonspecific information on consequences of fatigue is more effective than targeted information on how fatigue affects an employee’s chances of winning the competition. |
| Keywords: | overwork, fatigue, dynamic contest, experiment |
| JEL: | C73 C90 D21 I10 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:fsu:wpaper:wp2009_06_03&r=exp |
| By: | Hopfensitz, Astrid |
| Abstract: | When investment is repeated, previous outcomes (winning/losing) as well as the current budget level (gain/loss domain) influence decisions. The first is related to the so-called "gamblers fallacy". The second to value function relative to some reference point. Both effects have been extensively studied, however not their interaction. We present a meta-study of five experiments initially conducted to investigate myopic-loss-aversion. We observe that investment is related to the number of previous winning rounds as well as to the current budget position relative to a reference point. These effects persist when the analysis is extended to settings with restricted flexibility concerning investment. |
| Keywords: | reference point; gamblers fallacy; meta study; experiment; risk taking; myopic loss aversion |
| JEL: | D81 G11 C91 |
| Date: | 2009–06–25 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:16096&r=exp |
| By: | Ananish Chaudhuri; Lata Gangadharan; Pushkar Maitra |
| Abstract: | We study the relationship between group size and the extent of risk sharing in an insurance game played over a number of periods with random idiosyncratic and aggregate shocks to income in each period. Risk sharing is attained via agents that receive a high endowment in one period making unilateral transfers to agents that receive a low endowment in that period. The complete risk sharing allocation is for all agents to place their endowments in a common pool, which is then shared equally among members of the group in every period. Theoretically, the larger the group size, the smaller the per capita dispersion in consumption and greater is the potential value of insurance. Field evidence however suggests that smaller groups do better than larger groups as far as risk sharing is concerned. Results from our experiments show that the extent of mutual insurance is significantly higher in smaller groups, though contributions to the pool are never close to what complete risk sharing requires. |
| Keywords: | Reciprocity, Risk Sharing, Group Size, Experiments. |
| JEL: | O12 C92 D81 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2006-02&r=exp |
| By: | Ananish Chaudhuri; Pushkar Maitra; Susan Skeath |
| Abstract: | We study the efficacy of horizontal versus vertical social learning processes in a public goods game. In one treatment, subjects about to play the game can make nonbinding common knowledge announcements about their intentions while, in another, subjects do not communicate directly with group members but receive common knowledge advice from the previous generation of players. A third treatment has subjects play with neither communication nor advice. We find that groups that engage in peer communication achieve much lower levels of contribution to the public good than do groups that receive advice. We attribute this finding in part to the fact that some subjects in the communication treatment opted to make no announcement during the communication phase of play. |
| Keywords: | Voluntary contributions mechanism, Advice, Communication, Beliefs, Experiments. |
| JEL: | C92 C33 C34 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:mos:moswps:2006-05&r=exp |
| By: | Aldashev, Gani; Kirchsteiger, Georg; Sebald, Alexander |
| Abstract: | It is a persistent finding in psychology and experimental economics that people's behavior is not only shaped by outcomes but also by decision-making procedures. In this paper we develop a general framework capable of modelling these procedural concerns. Within the context of psychological games we define procedures as mechanisms that influence the probabilities of reaching different endnodes. We show that for such procedural games a sequential psychological equilibrium always exists. Applying this approach within a principal-agent context we show that the way less attractive jobs are allocated is crucial for the effort exerted by agents. This prediction is tested in a field experiment, where some subjects had to type in data, whereas others had to verify the data inserted by the typists. The controllers' wage was 50% higher than that of the typists. In one treatment the less attractive typists' jobs were allocated directly, whereas in the other treatment the allocation was done randomly. As predicted, random allocation led to higher effort levels of the typists than direct appointment. |
| Keywords: | Appointment Procedures; Procedural Concerns; Psychological Game Theory |
| JEL: | A13 C70 C93 D63 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:7365&r=exp |
| By: | Stefan Bauernschuster (University of Jena, Graduate College "The Economics of Innovative Change"; Max Planck Institute for Economics); Oliver Falck (Ifo Institute for Economic Research, Munich); Niels Daniel Grosse (University of Jena, Graduate College "The Economics of Innovative Change") |
| Abstract: | There is extensive literature, both theoretical and empirical, on the effects of social identity on a wide range of economic and non-economic outcomes. However, there is only scarce knowledge about how social identity is affected by policies or market structure. We address the question how competition among suppliers of finance interacts with trust and trustworthiness in a laboratory one-shot trust game. In order to disentangle pure effects of competition and effects of competition that concern social identity, we apply a 2 x 2 treatment design. We induce social identity by letting subjects play coordination games with clear focal points, which leads to higher investments and trustworthiness in the trust game. Our results show that competition has no significant effects on trust and trustworthiness of individuals in a strangers' framework. However, in a framework with competition of in-group and out-group investors we see that competition leads to crowding out of social identity by reducing trustworthiness. We suggest that once competition comes into play, trustees see in-group trustors' investments as the outcomes of a competitive bidding process rather than voluntary trust, which crowds out reciprocity. |
| Keywords: | Trust Game, Social Identity, Competition |
| JEL: | C92 G11 Z13 L14 |
| Date: | 2009–07–08 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2009-052&r=exp |
| By: | Radosveta Ivanova-Stenzel (Department of Economics, Humboldt-University of Berlin); Timothy Salmon (Department of Economics, Florida State University) |
| Abstract: | Most prior theoretical and experimental work involving auction choice has assumed bidders only find out their value after making a choice of which auction to enter. In this paper we examine whether or not subjects knowing their value prior to making an auction choice impacts their choice decision and/or the outcome of the auctions. The results show a strong impact. Subjects with low values choose the first price sealed bid auction more often while subjects with high values choose the ascending auction more often. The average number of bidders in both formats ended up being on average the same, but due to the self-selection bias the ascending auction raised as much revenue on average as the first price sealed bid auction. The two formats also generate efficiency levels that are roughly equivalent though the earnings of bidders are higher in the ascending auction. |
| Keywords: | bidder preferences, private values, sealed bid auctions, ascending auctions, endogenous entry |
| JEL: | C91 D44 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:fsu:wpaper:wp2009_06_02&r=exp |
| By: | Stefan Ambec; Alexis Garapin; Laurent Muller; Arnaud Reynaud; Carine Sebi |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:ler:wpaper:09.18.294&r=exp |
| By: | Javier Rivas |
| Abstract: | We study a setting where players are matched into pairs to play a Prisoners' Dilemma game. In the model presented, players are not rational; they simply imitate the more successful actions they observe. Furthermore, a certain correlation is added to the matching process: players that belong to a pair were both parties cooperate repeat partner next period whilst all other players are randomly matched into pairs. Although cooperation vanishes for any initial interior condition under complete random matching, the correlation in the matching process considered in this paper makes a signi cant amount of cooperation the unique outcome under mild conditions. Furthermore, it is shown that no separating equilibrium, i.e. a situation where cooperators and defectors are not matched together, exits. |
| Keywords: | Cooperation; Correlated Matching; Imitation; Prisoners' Dilemma |
| JEL: | C71 C73 C78 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:lec:leecon:09/12&r=exp |