nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒10‒03
ten papers chosen by
Daniel Houser
George Mason University

  1. Do People Plan? By John Bone; John D Hey; John Suckling
  2. An experimental study of auctions versus grandfathering to assign pollution permits By Jacob K. Goeree; Charles A. Holt; Karen Palmer; William Shobe; Dallas Burtraw
  3. Wise crowds or wise minorities? By Christoph Brunner; Jacob K. Goeree
  4. An experimental study of jury deliberation By Jacob K. Goeree; Leeat Yariv
  5. How Certain Is the Uncertainty Effect? By Ondrej Rydval; Andreas Ortmann; Sasha Prokosheva; Ralph Hertwig
  6. When a risky prospect is valued more than its best possible outcome By Andreas C. Drichoutis; Rodolfo M. Nayga, Jr.; Jayson L. Lusk; Panagiotis Lazaridis
  7. Keep it Down: An Experimental Test of the Truncated Uniform Price Auction By Maurice Doyon; Daniel Rondeau; Richard Mbala
  8. Demand reduction and preemptive bidding in multi-unit license auctions By Jacob K. Goeree; Theo Offerman; Randolph Sloof
  9. Can Co-Management Improve the Governance of A Common- Pool Resource? Lessons From A Framed Field Experiment in A Marine Protected Area in the Colomb By Rocío del Pilar Moreno Sánchez; Jorge Higinio Maldonado
  10. What triggers multiple job holding? An experimental investigation. By Dickey, Heather; Watson, Verity; Zangelidis, Alexandros

  1. By: John Bone; John D Hey; John Suckling
    Abstract: We report the results of an experimental investigation of a key axiom of economic theories of dynamic decision making – namely, that agents plan. Inferences from previous investigations have been confounded with issues concerning the preference functionals of the agents. Here, we present an innovative experimental design which is driven purely by dominance- if preferences satisfy dominance, we can infer whether subjects are planning or not. We implement three sets of experiments: the first two (the Individual Treatments) in which the same player takes decisions both in the present and the future; and the third (the Pairs Treatment) in which different players take decisions at different times. The two Individual treatments differed in that, in one, the subjects played sequentially, while, in the other, the subjects had to pre-commit to their future move. In all contexts, according to economic theory, the players in the present should anticipate the decision of the player in the future. We find that over half the participants in all three experimental treatments do not appear to be planning ahead; moreover, their ability to plan ahead does not improve with experience, except possibly when we force subjects to pre-commit to their future decision. These findings identify an important lacuna in economic theories, both for individual behaviour and for behaviour in games.
    Date: 2007–11
  2. By: Jacob K. Goeree; Charles A. Holt; Karen Palmer; William Shobe; Dallas Burtraw
    Abstract: We experimentally study auctions versus grandfathering in the initial assignment of pollution permits that can be traded in a secondary spot market. Low and high emitters compete for permits in the auction, while permits are assigned for free under grandfathering. In theory, trading in the spot market should erase inefficiencies due to initial mis-allocations. In the experiment, high emitters exercise market power in the spot market and permit holdings under grandfathering remain skewed towards high emitters. Furthermore, the opportunity costs of “free” permits are fully “passed through.” In the auction, the majority of permits are won by low emitters, reducing the need for spot-market trading. Auctions generate higher consumer surplus and slightly lower product prices in the laboratory markets. Moreover, auctions eliminate the large “windfall profits” that are observed in the treatment with free, grandfathered permit allocations.
    Keywords: Pollution permits, auctions, grandfathering, experiments
    JEL: C92 D43 D44 Q58
    Date: 2009–09
  3. By: Christoph Brunner; Jacob K. Goeree
    Abstract: This paper reports results from social learning experiments where subjects choose between two options and each subject has a small chance of being perfectly informed about which option is correct. In treatment "sequence", subjects observe the entire sequence of predecessors' choices while in treatment "no-sequence" they only observe the number of times each option has been chosen. The theoretical predictions are that subjects follow their immediate predecessors in treatment sequence and follow the minority in treatment no-sequence (Callander and Hörner, 2009). The former prediction is borne out in the data, but subjects tend to follow the majority in treatment no-sequence. We observe substantial heterogeneity in levels of strategic thinking, as predicted by level-k and Cognitive Hierarchy. While these models reproduce some features of our data, their fit is poor because of the assumed best-response behavior. Allowing for some degree of "trembling" improves the fit significantly, especially if subjects are aware that others tremble, as in logit-QRE. The "noisy introspection" model proposed by Goeree and Holt (2004), which combines different levels of thinking with error-prone behavior, best describes the data.
    Keywords: Social learning, experiments, quantal response equilibrium, level-k models, noisy introspection
    JEL: C92
    Date: 2009–09
  4. By: Jacob K. Goeree; Leeat Yariv
    Abstract: We study the effects of deliberation on collective decisions. In a series of experiments, we vary groups' preference distributions (between common and conflicting interests) and the institutions by which decisions are reached (simple majority, two-thirds majority, and unanimity). When deliberation is prohibited, different institutions generate significantly different outcomes, tracking the theoretical comparative statics. Deliberation, however, significantly diminishes institutional differences and uniformly improves efficiency. Furthermore, communication protocols exhibit an array of stable attributes: messages are public, consistently reveal private information, provide a good predictor for ultimate group choices, and follow particular (endogenous) sequencing.
    Keywords: Jury decision making, deliberative voting, strategic voting
    JEL: C92 D02 D72
    Date: 2009–09
  5. By: Ondrej Rydval; Andreas Ortmann; Sasha Prokosheva; Ralph Hertwig
    Abstract: We replicate three pricing tasks of Gneezy, List and Wu (2006) for which they document the so-called uncertainty effect, namely, that people value a binary lottery over non-monetary outcomes less than other people value the lottery’s worse outcome. While the authors implemented a verbal lottery description, we use a physical lottery format which makes misinterpretation of the lottery structure highly unlikely. We also provide subjects with complete information about the goods they are to value (book gift certificates and one-year deferred payments). Contrary to Gneezy et al. (2006), we observe for all three pricing tasks that subjects’ willingness to pay for the lottery is significantly higher than other subjects’ willingness to pay for the lottery’s worse outcome.
    Keywords: Decision under risk, framing, experiments, task ambiguity.
    JEL: C81 C91 C93 D83
    Date: 2009–07
  6. By: Andreas C. Drichoutis (Department of Agricultural Economics & Rural Development, Agricultural University of Athens); Rodolfo M. Nayga, Jr. (Department of Agricultural Economics & Agribusiness, University of Arkansas); Jayson L. Lusk (Department of Agricultural Economics, Oklahoma State University); Panagiotis Lazaridis (Department of Agricultural Economics & Rural Development, Agricultural University of Athens)
    Abstract: In this paper, we document a violation of normative and descriptive models of decision making under risk. In contrast to uncertainty effects found by Gneezy, List and Wu (2006), some subjects in our experiments valued certain lotteries more than the best possible outcome. We show that the likelihood of observing this effect is positively related to the probability of winning the lottery and negatively related to the value of the maximum outcome. We also demonstrate that this effect can be partially attributed to subjects’ competitiveness and level of comprehension of the lottery mechanism; the competitiveness effects far outweighing comprehension effects.
    Keywords: lottery, risk, competitiveness, Vickrey auctions
    JEL: D81 D44
    Date: 2009
  7. By: Maurice Doyon; Daniel Rondeau; Richard Mbala
    Abstract: The introduction of a centralized institution for trading production rights in quota-regulated agricultural sectors can dramatically improve the flow of information among market pareticipants and increase efficiency. On the other hand, prevailing conditions in these small markets can provide sellers with a market advantage, yielding high quota prices that impose important financial costs on quota holders and limit the entry of new producers into the industry. In this paper, we modify the normal allocation rule of a uniform price auction (UPA) to favor buyers who bid low prices. In laboratory experiments, we test this “Truncated” Uniform Price Auction (T-UPA) against a regular Uniform Price Auction for its ability to decrease equilibrium prices, affect buyer and seller behavior and to assess how it impacts efficiency. The results show that the T-UPA significantly lowers the equilibrium price and results in moderate efficiency losses. Most importantly, the T-UPA effectively counters the market power of oligopolists when demand far outstrips supply. <P>La mise en place d’une enchère centralisée pour l'échange des droits de production dans les secteurs agricoles peut considérablement améliorer le flux d'information parmi les participants au marché, ainsi qu'accroître l'efficacité. Toutefois, les conditions qui règnent dans ces petits marchés peuvent fournir aux vendeurs un avantage de marché, ce qui produit des prix de quotas élevés et limite l'entrée de nouveaux producteurs dans l'industrie. Dans cet article, nous modifions la règle de répartition normale d'une enchère de prix uniforme (UPA) afin de favoriser les acheteurs qui offrent des prix plus faibles. Dans les expériences de laboratoire, nous testons une enchère de prix uniforme «tronquée» (T-UPA) contre une enchère de prix uniforme régulière afin de tester sa capacité de diminuer les prix d'équilibre, d'influencer le comportement de l'acheteur et du vendeur, et d'évaluer son impact sur l'efficacité économique. Les résultats montrent que la T-UPA réduit considérablement le prix d'équilibre et entraîne des pertes d'efficacité modérées. Plus important encore, la T-UPA réussit à contrer le pouvoir de marché des oligopoleurs lorsque la demande dépasse largement l'offre.
    Keywords: Auction, uniform, experimental economics, truncated, efficiency, commodity market , Enchère, uniforme, économie expérimentale, tronquée, efficacité, marché de commodité
    JEL: C9 D4 Q1
    Date: 2009–09–01
  8. By: Jacob K. Goeree; Theo Offerman; Randolph Sloof
    Abstract: Multi-unit ascending auctions allow for equilibria in which bidders strategically reduce their demand and split the market at low prices. At the same time, they allow for preemptive bidding by incumbent bidders in a coordinated attempt to exclude entrants from the market. We consider an environment where both demand reduction and preemptive bidding are supported as equilibrium phenomena of the ascending auction. In a series of experiments, we compare its performance to that of the discriminatory auction. Strategic demand reduction is quite prevalent in the ascending auction even when entry imposes a (large) negative externality on incumbents. As a result, the ascending auction performs worse than the discriminatory auction both in terms of revenue and efficiency, while entrants chances are similar across the two formats.
    Keywords: Multi-license auctions, demand reduction, external effects, preemption
    JEL: D44 D45 C91
    Date: 2009–09
  9. By: Rocío del Pilar Moreno Sánchez; Jorge Higinio Maldonado
    Abstract: Complexities associated with the management of common pool resources (CPR)threaten governance at some marine protected areas (MPA). In this paper, using economic experimental games (EEG), we investigate the effects of both external regulation and the complementarities between internal regulation and non-coercive authority intervention—what we call co-management—on fishermen’s extraction decisions. We perform EEG with fishermen inhabiting the influence zone of an MPA in the Colombian Caribbean. The results show that co- management exhibits the best results, both in terms of resource sustainability and reduction in extraction, highlighting the importance of strategies that recognize communities as key actors in the decision-making process for the sustainable use and conservation of CPR in protected areas.
    Date: 2009–06–09
  10. By: Dickey, Heather; Watson, Verity; Zangelidis, Alexandros
    Abstract: This paper presents an empirical examination of individuals’ motivations for multiple-job holding or moonlighting. Theoretical models of moonlighting suggest that individuals to hold a second job for either financial reasons (they face hours-constraints in their first job) or non-pecuniary motives (heterogeneous jobs). We assess the relative importance of these reasons using a purposefully collected stated preference data set. We find that individuals respond to financial constraints by having multiple-jobs, but these financial motives are not sufficient to explain moonlighting. We also find that individuals are attracted to the non-pecuniary aspects of the second jobs, such as job satisfaction and entrepreneurial opportunities. Furthermore, we find evidence that second job holding may be a hedging strategy against job insecurity in the primary job. Our empirical results contribute to a better understanding of this labour market behaviour.
    Keywords: Multiple-job holding; discrete choice experiment
    JEL: J22
    Date: 2009–09

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.
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