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on Experimental Economics |
| By: | Timothy N. Cason; Roman M. Sheremeta; Jingjing Zhang |
| Abstract: | Costless pre-play communication has been found to effectively facilitate coordination and enhance efficiency by increasing individual payoffs in games with Pareto-ranked equilibria. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. Allowing group members to communicate before choosing efforts leads to more aggressive competition and greater coordination, but also results in substantially lower payoffs than a control treatment without communication. Our experiment thus provides evidence that communication can reduce efficiency in competitive coordination games. This contrasts sharply with experimental findings from public goods and other coordination games, where communication enhances efficiency and often leads to socially optimal outcomes. |
| Keywords: | Contest; Between-group Competition; Within-group Competition; Cooperation; Coordination; Free-riding; Experiments |
| JEL: | C71 C72 C91 C92 D72 H41 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2009-09&r=exp |
| By: | Fong, Christina M. (Carnegie Mellon University); Luttmer, Erzo F. P. (Harvard University) |
| Abstract: | We present a dictator game experiment where the recipients are local charities that serve the poor. Donors consist of approximately 1000 participants from a nationally representative respondent panel that is maintained by a private survey research firm, Knowledge Networks. We randomly manipulate the perceived race and worthiness of the charity recipients by showing respondents an audiovisual presentation about the recipients. The experiment yields three main findings. First, we find significant racial bias in perceptions of worthiness: respondents rate recipients of their own racial group as more worthy. Second, respondents give significantly more when the recipients are described as more worthy. These findings may lead one to expect that respondents would also give more generously when shown pictures of recipients belonging to their own racial group. However, our third result shows that this is not the case; despite our successfully manipulating perceptions of race, giving does not respond significantly to recipient race. Thus, while our respondents do seem to rate ingroup members as more worthy, they appear to overcome this bias when it comes to giving. |
| JEL: | C93 D63 D64 H41 J71 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp09-014&r=exp |
| By: | Tran, Anh (Indiana University); Zeckhauser, Richard (Harvard University) |
| Abstract: | Money is the prime incentive in economic models. Recent evidence makes it clear that people are also greatly concerned about how their incomes compare with those of others, suggesting that rank may be a strong motivator as well. Three experiments in Vietnam assessed whether students in real-world learning environments were concerned with their performance rankings. The results showed that concern with rank, even when rankings were not publicly revealed, strongly motivated performance on academic tests. Moreover, rank was able to outweigh money as a motivator. |
| JEL: | D01 D83 I21 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp09-019&r=exp |
| By: | Sophia Chong; Pablo Guillen |
| Abstract: | This paper compares individual with collective contracts using modified repeated gift exchange games. The game had two variations, both following a partner design. In the individual variation different workers in the same firm can receive separate wages, and in the collective variation all workers in the same firm receive the same wage. These two variations are played altering the order. Thus the experiment has four treatments, two within subjects (regarding the games played) and two between subjects (regarding the order in which the games are played). We did not find significant differences between the two variations of the game when subjects had no experience. However, individual agreements turned out to be more efficient when subjects have previously experienced collective agreements. This result suggests subjects learned to reciprocate when they played the collective variation followed by the individual variation of the gift exchange game. |
| Keywords: | laboratory experiments, gift exchange, collective contracts. |
| JEL: | C92 |
| Date: | 2009–09–14 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:09/05&r=exp |
| By: | Luigi Bosco |
| Abstract: | The paper analyzes the trade-off between power and altruism by using an experimental framework which involved a group of experimental agents, undergraduate students of the University of Siena. The results show that the introduction into the experimental structure of a tournament for the power appreciably altered the behaviour of agents. More specifically the degree of altruism, measured by the dictator offers, significantly decreased when the agents were able to trade altruism for power. The results were more clear-cut and robust in the case of the dictator game, but also in the case of the ultimatum game the introduction of the tournament for power altered the behavior of subjects. A significant gender effect emerged |
| Keywords: | Altruism, Dictator game, Ultimatum game, Hierarchy |
| JEL: | C91 D64 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:562&r=exp |
| By: | Roman M. Sheremeta; Jingjing Zhang |
| Abstract: | This experimental study explores how communication influences efficiency, trust and trustworthiness in a small group when one member is left out of communication. To study this problem, we introduce a novel three-player trust game where player 1 can send any portion of his endowment to player 2. The amount sent gets tripled. Player 2 decides how much to send to player 3. The amount is again tripled, and player 3 then decides the allocation among the three players. The baseline treatment with no communication shows that on average players 1 and 2 send significant amounts and player 3 reciprocates even though all players are randomly regrouped every period. When we add communication between players 2 and 3, the amounts sent and returned between these two increase. The interesting finding is that there are external effects of communication: player 1 who is outside communication sends 60% more and receives 140% more than in the no communication treatment. As a result, social welfare and efficiency increase from 48% to 73%. |
| Keywords: | Multi-level Trust Games; Experiments; Reciprocity; Communication |
| JEL: | C72 C91 D72 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2009-07&r=exp |
| By: | Jingjing Zhang; Marco Casari |
| Abstract: | This paper studies how groups resolve disagreement when they must reach unanimity after submitting individual proposals and exchanging text-form messages via a chat window in lottery choice experiments. We find that the majority proposal does not always prevail. The minority proposal prevails sometimes, especially when it is closer to risk neutrality. About one third of the groups disagrees after communication and would have got zero payoffs if disagreement remains after two more attempts without communication. In these groups, extrovert subjects are more likely to lead the group outcome than confused or conscientious subjects. Overall group choices are more coherent and closer to risk neutrality than individualsÕ. Checking the recorded messages, we find that the chat activity is intense, growing with the level of disagreement and aims at finding consensus. The amount and timing of chat messages help us to predict which choice prevails in the group. |
| Keywords: | Risk Attitude, Group Decision Making, Communication, Experiments |
| JEL: | C92 D81 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2009-08&r=exp |
| By: | Roman M. Sheremeta; Jingjing Zhang |
| Abstract: | This paper reports an experiment that examines whether groups can make better decisions than individuals in contests. Our experiment replicates previous findings that individual players significantly overbid relative to theoretical predictions, incurring substantial losses. There is high variance in individual bids and strong heterogeneity across individual players. The new findings of our experiment are that groups make bids that are 25% lower, bids have less variance, and there is less heterogeneity across groups than across individuals. Therefore, groups receive significantly higher and more homogeneous payoffs than individuals. We elicit individual and group preferences towards risk using simple lotteries. The results indicate that groups make less risky decisions, which is a possible explanation for lower bids in contests. Most importantly, we find that groups learn to make lower bids from communication and negotiation between group members. |
| Keywords: | Rent-seeking; Contest; Experiments; Risk; Over-dissipation; Group Decision-making |
| JEL: | C72 C91 C92 D72 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2009-05&r=exp |
| By: | Beshears, John (Harvard University); Choi, James (Yale University); Laibson, David (Harvard University); Madrian, Brigitte C. (Harvard University) |
| Abstract: | We use an experiment to estimate the effect of the SEC's Summary Prospectus, which simplifies mutual fund disclosure. Our subjects chose an equity portfolio and a bond portfolio. Subjects received either statutory prospectuses or Summary Prospectuses. We find no evidence that the Summary Prospectus affects portfolio choices. Our experiment sheds new light on the scope of investor confusion about sales loads. Even with a one-month investment horizon, subjects do not avoid loads. Subjects are either confused about loads, overlook them, or believe their chosen portfolio has an annualized log return that is 24 percentage points higher than the load-minimizing portfolio. |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp09-016&r=exp |
| By: | Thomas Astebro; José Mata; Luis Santos-Pinto |
| Abstract: | Using a laboratory experiment we investigate how skew inuences choices under risk. We find that subjects make significantly riskier choices when the distribution of payoffs is positively skewed, these choices being driven in part by the shape of the utility function but also by subjective distortion of probabilities. A utility model with probability distortion calibrated on laboratory data is able to explain why most gamblers in public lotteries buy only a small number of tickets. |
| Keywords: | risk; skew; gambling; lab experiment |
| JEL: | D81 C91 |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:09.09&r=exp |
| By: | Edward Cartwright; Joris Gillet; Mark Van Vugt |
| Abstract: | We analyze a coordination game characterised by varying degrees of conflict of interest, incentive to coordinate and information asymmetry. The primary objective is to question whether endogenous leadership better enables coordination. A secondary objective is to question whether preference and information asymmetries cue who should lead. Both experimental and theoretical results are provided. We find that in theory leadership should allow coordination, whether or not preferences are common knowledge. In practice we found that leadership did enable coordination but information about others preferences also helped. This was explained as due to some participants being too eager to lead. Which may be surprising given that we find, both in theory and in practice, leaders get relatively low payoffs, particularly when preferences are private information. |
| Keywords: | Coordination game; Conflict of interest; leadership |
| JEL: | C72 D11 D80 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:ukc:ukcedp:0913&r=exp |
| By: | Hayat Khan |
| Abstract: | Taking note of the wide variety and growing list of models in the literature to explain patterns of behavior observed in laboratory experiments, this paper identifies two tests, the Variety Test (ability of a model to explain outcomes under variety or alternative scenarios) and the Psychological Test (ability of a model to conform to psychological intuition), that can be used to judge any model of other-regarding behavior. It is argued that for a mathematical model to qualify as a social welfare function, it must simultaneously pass the two tests. It is shown that none of the models proposed to date passes these two tests simultaneously. The paper proposes a generalized model of inequity aversion which parsimoniously explains interior solution in the dictator game and dynamics of outcomes in other games. The paper postulates that one’s idea of equitable distribution is state-dependent, where the state is determined by psychological and structural parameters. The state could be fair, superior or inferior. Individuals in a fair state have zero equity-bias and split the pie evenly. Those in a superior (inferior) state have positive (negative) equity-bias and value more (less) than fair distribution as equitable distribution. Given psychological tendencies of an individual, every experimental design/structure assigns one of the three states to players which lead to individual-specific valuation of equity. Prediction about outcomes across different experiments and designs can be made through predicting their impact on equity-bias. All aspects of an individual’s behavior, such as altruism, fairness, reciprocity, self-serving bias, kindness, intentions etc, manifest themselves in the equity-bias. The model therefore is all-encompassing. |
| Keywords: | Experimental Economics, Social Preferences, Other-regarding Preferences, Inequity aversion. |
| JEL: | B4 C9 D8 O1 |
| Date: | 2009–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:eei:rpaper:eeri_rp_2009_21&r=exp |
| By: | MOINAS, Sophie; POUGET, Sébastien |
| Date: | 2009–05 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:9600&r=exp |
| By: | Jingjing Zhang |
| Abstract: | This paper examines whether and how communication can help groups solve coordination and free-rider problems when they compete with another group for a public-good prize. We find that when group members make an anonymous individual decision on whether or not to contribute to the group success, within-group cheap talk communication significantly reduces miscoordination and free-riding. To measure how much miscoordination remains when communication is allowed, we employ a control treatment where we remove coordination and free-riding incentives by having group members reach a unanimous group decision on how much to contribute. We find that group level contributions are not significantly different in the two cases. Communication therefore completely eliminates miscoordination and free-riding within groups and leads group members to act as one agent in making decisions. Content analysis of group communication reveals that groups explicitly designate specific contributors following a rotation scheme and they understand the essence of implementing mixed strategy equilibrium. |
| Keywords: | Group contests; Threshold public goods; Coordination; Cheap talk Communication; Content analysis; Experiments |
| JEL: | C72 C91 C92 D72 H41 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:mcm:deptwp:2009-06&r=exp |
| By: | Charles Bellemare; Bruce Shearer |
| Abstract: | We investigate the economic relevance and the composition of gifts within a firm where output is contractible. We develop a structural econometric model that identifies workers’ optimal reaction to monetary gifts received from their employer. We estimate the model using data from two separate field experiments, both conducted within a tree-planting firm. We use the estimated structural parameters to generalize beyond the experiment, simulating how workers would react to different gifts on the part of the firm, within different labour-market settings. We find that gifts have a role to play within this firm, increasing in importance when the workers’ outside alternatives deteriorate. Profit-maximizing gifts would increase profits within slack labour markets by up to 10% on average and by up to 17% for certain types of workers. These gifts represent significant increases in worker earnings; the average gift paid to workers attains 22% of average expected earnings in the absence of gifts. We find that gifts should be given by setting piece-rates above the market-clearing level rather than through fixed wages. |
| Keywords: | Gift giving, structural models, field experiments |
| JEL: | J33 M52 C93 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:lvl:lacicr:0932&r=exp |
| By: | Alan S. Gerber; Gregory A. Huber; Ebonya Washington |
| Abstract: | Political partisanship is strongly correlated with attitudes and behavior, but it is unclear from this pattern whether partisan identity has a causal effect on political behavior and attitudes. We report the results of a field experiment designed to investigate the causal effect of party identification. Prior to the February 2008 Connecticut presidential primary, researchers sent a mailing to a random sample of unaffiliated registered voters informing them of the need to register in order to participate in the upcoming primary. Comparing post-treatment survey responses to subjects’ baseline survey responses, we find that those informed of the need to register with a party were more likely to affiliate with a party and subsequently showed stronger partisanship. Further, we find that the treatment group also demonstrated greater concordance than the control group between their pre-treatment latent partisanship and their post-treatment reported voting behavior and intentions and evaluations of partisan figures. Thus our treatment, which caused a strengthening of partisan identity, also caused a shift in subjects’ candidate preferences and evaluations of salient political figures. This finding is consistent with the claim that partisanship is an active force changing how citizens behave in and perceive the political world. |
| JEL: | D72 H0 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15365&r=exp |
| By: | Jeffrey Butler; Paola Giuliano; Luigi Guiso |
| Abstract: | A vast literature has investigated the relationship between trust and aggregate economic performance. We investigate the relationship between individual trust and individual economic performance. We .nd that individual income is hump-shaped in a measure of intensity of trust beliefs available in the European Social Survey. We show that heterogeneity of trust beliefs in the population, coupled with the tendency of individuals to extrapolate beliefs about others from their own level of trustworthiness, could generate the non-monotonic relationship between trust and income. Highly trustworthy individuals think others are like them and tend to form beliefs that are too optimistic, causing them to assume too much social risk, to be cheated more often and ultimately perform less well than those who happen to have a trustworthiness level close to the mean of the population. On the other hand, the low-trustworthiness types form beliefs that are too conservative and thereby avoid being cheated, but give up prfitable opportunities too often and, consequently, underperform. Our estimates imply that the cost of either excessive or too little trust is comparable to the income lost by foregoing college. Furthermore, we find that people who trust more are cheated more often by banks as well as when purchasing goods second hand, when relying on the services of a plumber or a mechanic and when buying food. We complement the survey evidence with experimental evidence showing that own trustworthiness and expectations of others' trustworthiness in a trust game are strongly correlated and that performance in the game is hump-shaped. |
| Keywords: | Trust, trustworthiness, economic performance, culture, false consensus |
| JEL: | A1 A12 D1 O15 Z1 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:eui:euiwps:eco2009/33&r=exp |
| By: | BLAIS, Andre; LASLIER, Jean-François; SAUGER, Nicolas; VAN DER STRAETEN, Karine |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:ide:wpaper:20943&r=exp |
| By: | Alpizar, Francisco (Environment for Development Center, Tropical Agricultural and Higher Education Center (CATIE)); Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University); Naranjo, Maria (Environment for Development Center, Tropical Agricultural and Higher Education Center (CATIE)) |
| Abstract: | The risk of loses of income and productive means due to adverse weather associated to climate change can significantly differ between farmers sharing a productive landscape. It is important to learn more about how farmers react to different levels of risk, under measurable and unmeasurable uncertainty. Moreover, the costs associated to investments in reduced vulnerability to climatic events are likely to exhibit economies of scope. We explore these issues using a framed field experiment that captures realistically the main characteristics of production, and the likely weather related loses of premium coffee farmers in Tarrazu, Costa Rica. Given that the region recently was severely hit by an extreme, albeit very infrequent, climatic event, we expected to observe, and found high levels of risk aversion, but we do observe farmers making trade offs under different risk levels. Although hard to disentangle at first sight given the high level of risk aversion, we find that farmer’s opt more frequently for safe options in a setting characterized by unknown risk. Finally, we find that farmers to a large extent are able to coordinate their decisions in order to achieve a lower cost of adaptation, and that communication among farmers strongly facilitates coordination.<p> |
| Keywords: | Risk aversion; ambiguity aversion; technology adoption; climate change; field experiment |
| JEL: | C93 D81 H41 Q16 Q54 |
| Date: | 2009–09–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0382&r=exp |
| By: | Bohnet, Iris (Harvard University); Hermann, Benedikt (European Commission); Zeckhauser, Richard (Harvard University) |
| Abstract: | Why is private investment so low in Gulf compared to Western countries? We investigate cross-regional differences in trust and reference points for trustworthiness as possible factors. Experiments controlling for cross-regional differences in institutions and beliefs about trustworthiness reveal that Gulf citizens pay much more than Westerners to avoid trusting, and hardly respond when returns to trusting change. These differences can be explained by subjects' gain/loss utility relative to their region's reference point for trustworthiness. The relation-based production of trust in the Gulf induces higher levels of trustworthiness, albeit within groups, than the rule-based interactions prevalent in the West. |
| Date: | 2009–06 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp09-015&r=exp |
| By: | Manuel Baques; Maria Jose Perez-Villadoniga |
| Abstract: | In this paper we examine the potential existence of a similar-to-me effect in terms of skills between recruiters and applicants. Using evidence from entry exams to the Spanish Judiciary, where applicants are randomly assigned across evaluation committees, we find that committee members tend to be more demanding at those stages where they are more knowledgeable. As a result, applicants who excel in the same dimensions as recruiters are more likely to be hired |
| Keywords: | Hiring, Randomized experiment, Similar-to-me effect |
| JEL: | M51 J45 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:cte:wbrepe:wb090562&r=exp |
| By: | David A. Savage; Benno Torgler |
| Abstract: | There is a notable shortage of empirical research directed at measuring the magnitude and direction of stress effects on performance in a controlled environment. One reason for this is the inherent difficulties in identifying and isolating direct performance measures for individuals. Additionally most traditional work environments contain a multitude of exogenous factors impacting individual performance, but controlling for all such factors is generally unfeasible (omitted variable bias). Moreover, instead of asking individuals about their self-reported stress levels we observe workers’ behavior in situations that can be classified as stressful. For this reason we have stepped outside the traditional workplace in an attempt to gain greater controllability of these factors using the sports environment as our experimental space. We empirically investigate the relationship between stress and performance, in an extreme pressure situation (football penalty kicks) in a winner take all sporting environment (FIFA World Cup and UEFA European Cup competitions). Specifically, we examine all the penalty shootouts between 1976 and 2008 covering in total 16 events. The results indicate that extreme stressors can have a positive or negative impact on individuals’ performance. On the other hand, more commonly experienced stressors do not affect professionals’ performances. |
| Keywords: | Performance, Stressors, Sport, Behavioural Economics, Work-related stress |
| JEL: | D80 D81 J81 Z13 |
| Date: | 2009–09–24 |
| URL: | http://d.repec.org/n?u=RePEc:qut:dpaper:251&r=exp |
| By: | Ian Ayres; Sophie Raseman; Alice Shih |
| Abstract: | By providing feedback to customers on home electricity and natural gas usage with a focus on peer comparisons, utilities can reduce energy consumption at a low cost. We analyze data from two large-scale, random-assignment field experiments conducted by utility companies providing electricity (the Sacramento Municipal Utility District (SMUD)) and electricity and natural gas (Puget Sound Energy (PSE)), in partnership with a private company, Positive Energy/oPower, which provides monthly or quarterly mailed peer feedback reports to customers. We find reductions in energy consumption of 1.2% (PSE) to 2.1% percent (SMUD), with the decrease sustained over time (seven months (PSE) and twelve months (SMUD)). |
| JEL: | O13 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:15386&r=exp |