nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒10‒17
eight papers chosen by
Daniel Houser
George Mason University

  1. Confusion and Reinforcement Learning in Experimental Public Goods Games By Ralph-C. Bayer; Elke Renner; Rupert Sausgruber
  2. Risk, Credit, and Insurance in Peru: Field Experimental Evidence By Galarza, Francisco
  3. Strategic Tax Competition: An Experimental Study By Sailesh Gunessee
  4. Inequity and Risk Aversion in Sequential Public Good Games By Sabrina Teyssier
  5. Are Academics Messy? Testing the Broken Windows Theory with a Field Experiment in the Work Environment By João Ramos; Benno Torgler
  6. Testing Enforcement Strategies in the Field: Legal Threat, Moral Appeal and Social Information By Gerlinde Fellner; Rupert Sausgruber; Christian Traxler
  7. How to adapt to changing markets: experience and personality in a repeated investment game By Hopfensitz, Astrid; Wranik, Tanja
  8. Nerves of Steel? Stress, Work Performance and Elite Athletes By David A. Savage; Benno Torgler

  1. By: Ralph-C. Bayer; Elke Renner; Rupert Sausgruber
    Abstract: We use a limited information environment to mimic the state of confusion in an experimental, repeated public goods game. The results show that reinforcement learning leads to dynamics similar to those observed in standard public goods games. However, closer inspection shows that individual decay of contributions in standard public goods games cannot be fully explained by reinforcement learning. According to our estimates, learning only accounts for 41 percent of the decay in contributions in standard public goods games. The contribution dynamics of subjects, who are identified as conditional cooperators, differ strongly from the learning dynamics, while a learning model estimated from the limited information treatment tracks behavior for subjects, who cannot be classified as conditional cooperators, reasonably well.
    Keywords: public goods experiments, learning, limited information, confusion, conditional cooperation
    JEL: C90 D83 H41
    Date: 2009–09
    URL: http://d.repec.org/n?u=RePEc:inn:wpaper:2009-22&r=exp
  2. By: Galarza, Francisco
    Abstract: This paper reports the results of behavioral economic experiments conducted in Peru to examine the relationship amongst risk preferences, loan take-up, and insurance purchase decisions. This area-based yield insurance can help reduce people's vulnerability to large scale covariate shocks, and can also lower the loan default probability under extreme negative covariate shocks. In a context of collateralized formal credit markets, we provide suggestive evidence that insurance may help reduce the fear of losing collateral that prevents potential borrowers from taking loans. Framing these experiments to recreate a real life situation, we started with a Baseline Game where subjects had to choose between a fallback production project and an uninsured loan.We then introduced a third project choice--loan with yield insurance (Insurance Game)--which allows us to measure the effect of introducing insurance on the demand for loans. Overall, more than 50 percent of the subjects are willing to buy insurance in this insurance game. Further, controling for choices made in the baseline game, covariate shocks experienced earlier, and previous rounds' winnings, we find that the decision to take the insured loan (uninsured loan) rather than any of the other two projects is predicted by wealth and lower (higher) levels of risk aversion. Interestingly, this relationship with risk aversion continues to hold when we control for the overweighting of low-probability events observed in the data.
    Keywords: area-yield insurance; credit; covariate risk; idiosyncratic risk; risk aversion; probability weighting; experimental economics; Peru
    JEL: D81 C93
    Date: 2009–08
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:17833&r=exp
  3. By: Sailesh Gunessee (Nottingham University Business School China)
    Abstract: We study the effect of a payoff advantage, symmetric payoff change and policymakers interaction on choices in tax competition games. To examine the first two effects a standard symmetric game is respectively compared to an asymmetric game where one player has a payoff advantage and to another symmetric game where both players have symmetrically higher payoffs. When payoffs are asymmetric, we find that if policymakers have a payoff disadvantage they are more likely to compete. Instead policymakers with a payoff advantage are keener to tax above equilibrium. Our results also show there is a payoff size effect where choices are brought closer to equilibrium when payoffs are symmetrically higher. These two effects are further studied when players interact repeatedly. With repeated interaction cooperation is sustained only in the symmetric games but fail to materialise in the asymmetric game. A regression analysis of our results reveals further differences between these games.
    Keywords: Tax Competition; Experimental Economics; Asymmetry.
    JEL: H21 H73 C92
    Date: 2009–10–08
    URL: http://d.repec.org/n?u=RePEc:bbr:workpa:5&r=exp
  4. By: Sabrina Teyssier (Thurgau Institute of Economics - Universität Konstanz, GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: This paper analyzes which type of intrinsic preferences drive an agent's behavior in a sequential public good game depending on whether the agent is first or second mover. Theoretical predictions are based on heterogeneity of individuals in terms of social and risk preferences. We modelize preferences according to the inequity aversion model of Fehr and Schmidt (1999) and to the assumption of constant relative risk aversion. Risk aversion is significantly and negatively correlated with the contribution decision of first movers. Second movers with sufficiently high advantageous inequity aversion free-ride less and reciprocate more than others. Both results are predicted by our model. Nevertheless, no effect of disadvantageous inequity aversion of first movers is found in the data while theory predicted it. Our results underline the importance of taking into account the order of agents' play to correctly understand which type of preferences influences cooperation in voluntary contribution mechanisms. They suggest that individuals' behavior can be consistent between different experimental games.
    Keywords: inequity aversion ; risk aversion ; public good game ; conditional contribu- tion
    Date: 2009
    URL: http://d.repec.org/n?u=RePEc:hal:journl:halshs-00422669_v1&r=exp
  5. By: João Ramos; Benno Torgler
    Abstract: We study the broken windows theory with a field experiment in a shared area of a workplace in academia (department common room). We explore academics' and postgraduate students' behaviour under an order condition (clean environment) and a disorder condition (messy environment). We find strong support that signs of disorderly behaviour triggers littering. In the disorder treatment 59% of the subjects litter compared to 18% in the order condition. The results remain robust when controlling compared to previous studies for a large set of factors in a multivariate analysis. When academic staff members and postgraduate students observe that others violated the social norm of keeping the common room clean the probability of littering increases ceteris paribus by around 40 percent.
    Keywords: broken windows theory; field experiment; littering
    JEL: Z13 C93 K42
    Date: 2009–09
    URL: http://d.repec.org/n?u=RePEc:cra:wpaper:2009-21&r=exp
  6. By: Gerlinde Fellner; Rupert Sausgruber; Christian Traxler
    Abstract: We run a large-scale natural field experiment to evaluate alternative strategies to enforce compliance with the law. The experiment varies the text of mailings sent to potential evaders of TV license fees. We find a strong alert effect of mailings, leading to a substantial increase in compliance. Among different mailing conditions a legal threat that stresses a high detection risk has a significant and highly robust deterrent effect. Neither appealing to morals nor imparting information about others' behavior enhances compliance. However, the information condition has a positive effect in municipalities where evasion is believed to be common. Overall, the economic model of crime performs remarkably well in explaining our data.
    Keywords: Field experiments; law enforcement; compliance; deterrence
    JEL: K42 C93
    Date: 2009–09
    URL: http://d.repec.org/n?u=RePEc:inn:wpaper:2009-23&r=exp
  7. By: Hopfensitz, Astrid; Wranik, Tanja
    Abstract: Investment behavior is traditionally investigated with the assumption that risky investment is on average advantageous. However, this may not always be the case. In this paper, we experimentally studied investment choices made by students and financial professionals under favorable and unfavorable market conditions in a multi-round investment game. In particular, the probability of winning was set so that investment in one condition was advantageous, and in one condition was disadvantageous. To investigate who is more likely to adapt their investment behaviors to the changing market conditions, we also measured personality and self-efficacy. We expected that investment behavior in changing markets could be predicted by a combination of experience (students, professionals), personality (anxiety, optimism, impulsivity, and Openness to Experience), and self-efficacy (belief in one’s ability to make good decisions in an investment task). Results indicate that professionals do not significantly differ from students in their decisions. Personality and self-efficacy both predicted investment behavior. In particular, we found that optimism and anxiety were a liability in unfavorable markets, leading to unreasonable levels of risk. Impulsivity was a liability in both favorable and unfavorable markets, leading to high risk on unfavorable markets, and low risk in favorable markets. Openness to experience was an asset in unfavorable markets, leading to adjusted risk taking. Finally, self-efficacy was generally related to higher levels of risk.
    Keywords: risk taking; field experiment; personality; unfavorable conditions; professionals
    JEL: D53 D81 G11 C93 C91 D14
    Date: 2009–09–30
    URL: http://d.repec.org/n?u=RePEc:pra:mprapa:17835&r=exp
  8. 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; behavioral economics; work-related stress
    JEL: D80 D81 J81 Z13
    Date: 2009–09
    URL: http://d.repec.org/n?u=RePEc:cra:wpaper:2009-22&r=exp

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