nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒11‒07
twelve 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. Learning to Play Nash from the Best By Robert S. Gazzale
  3. Robustness of Level-k Reasoning in Generalized Beauty Contest Games By Dmitry Shapiro; Xianwen Shi; Artie Zillante
  4. Gender and Generosity: Does Degree of Anonymity or Group Gender Composition Matter? By C. Bram Cadsby; Maroš Servátka; Fei Song
  5. Microfoundations of Social Capital By Christian Thöni; Jean-Robert Tyran; Erik Wengström
  6. Microinsurance, Trust and Economic Development: Evidence from a Randomized Natural Field Experiment By Hongbin Cai; Yuyu Chen; Hanming Fang; Li-An Zhou
  7. An experimental study into the influence of works council advice on managerial decision-making By Saraï Sapulete; Arjen van Witteloostuijn; Wesley Kaufmann
  8. A Dynamic Ellsberg Urn Experiment By Dominiak, Adam; Dürsch, Peter; Lefort, Jean-Philippe
  9. On Price Data Elicitation: a Laboratory Investigation By Morone, Andrea
  10. Strategies in Social Network Formation By Anna Conte; Daniela Di Cagno; Emanuela Sciubba
  11. Discrimination in a Low-Wage Labor Market: A Field Experiment By Pager, Devah; Western, Bruce; Bonikowski, Bart
  12. The Financial Bubble Experiment: advanced diagnostics and forecasts of bubble terminations By Didier Sornette; Maxim Fedorovsky; Stefan Riemann; Hilary Woodard; Ryan Woodard; Wei-Xing Zhou

  1. By: Ralph-C Bayer; Elke Renner (School of Economics, University of Nottingham, United Kingdom); 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: 2009–10
  2. By: Robert S. Gazzale (Williams College)
    Abstract: I experimentally investigate the effects of the ability to imitate successful others on convergence to the one-shot Nash equilibrium. I study a two-player game (Potters and Suetens Forthcoming) in which a single parameter determines the existence of strategic complementarities. I generally confirm previous findings when learning from others is not possible: games with strategic complementarities converge more robustly to the Nash equilibrium than those without. However, I find the reverse with the ability to learn from successful others as this information significantly improves convergence in games without strategic complementarities but has no effect and possibly a negative effect on games with complementarities.
    JEL: C90 D70
    Date: 2009–06
  3. By: Dmitry Shapiro; Xianwen Shi; Artie Zillante
    Abstract: We study how the predictive power of level-k models changes as we perturb the classical beauty contest setting along two dimensions: the strength of the coordination motive and the information symmetry. We use the Morris and Shin (2002) model as the unified framework for our study, and find that the predictive power of level-k models varies considerably along these two dimensions. Level-k models are successful in predicting subject behavior in settings with symmetric information and a strong coordination motive. When we introduce private information or weaken the strength of the coordination motive, the predictive power of level-k models decreases significantly.
    Keywords: level-k models, beauty contest, coordination
    JEL: C72 C92 D83
    Date: 2009–10–28
  4. By: C. Bram Cadsby; Maroš Servátka (University of Canterbury); Fei Song
    Abstract: Employing a two-by-two factorial design that manipulates whether dictator groups are single or mixed-sex and whether procedures are single or double-blind, we examine gender effect in a standard dictator game. No gender effect was found in any of the experimental treatments. Moreover, neither single- versus mixed-sex groups nor level of anonymity had any impact on either male or female behavior.
    Keywords: Anonymity; dictator game; experiment; gender; generosity; group composition; other-regarding; selfish
    JEL: C91 D64
    Date: 2009–10–23
  5. By: Christian Thöni (University of St. Gallen); Jean-Robert Tyran (Department of Economics, University of Copenhagen); Erik Wengström (Department of Economics, University of Copenhagen)
    Abstract: We show that the standard trust question routinely used in social capital research is importantly related to cooperation behavior and we provide a microfoundation for this relation. We run a large-scale public goods experiment over the internet in Denmark and find that the trust question is a proxy for cooperation preferences rather than beliefs about others’ cooperation. To disentangle the preference and belief channels, we run a (standard) public goods game in which beliefs matter for cooperation choices and one (using the strategy method) in which they do not matter. We show that the “fairness question”, a recently proposed alternative to the “trust question”, is also related to cooperation behavior but operates through beliefs rather than preferences.
    Keywords: Social capital; Trust; Fairness; Public goods; Cooperation; Experiment
    JEL: H41 C91 C72
    Date: 2009–10
  6. By: Hongbin Cai (Department of Applied Economics, Guanghua School of Management, Peking University); Yuyu Chen (Department of Applied Economics, Guanghua School of Management, Peking University); Hanming Fang (Department of Economics, University of Pennsylvania); Li-An Zhou (Department of Applied Economics, Guanghua School of Management, Peking University)
    Abstract: We report results from a large randomized natural field experiment conducted in southwestern China in the context of insurance for sows. Our study sheds light on two important questions about microinsurance. First, how does access to formal insurance affect farmers' production decisions? Second, what explains the low takeup rate of formal insurance, despite substantial premium subsidy from the government? We find that providing access to formal insurance significantly increases farmers' tendency to raise sows. We argue that this finding also suggests that farmers are not previously insured efficiently through informal mechanisms. We also provide several pieces of evidence suggesting that trust, or lack thereof, for government-sponsored insurance products is a significant barrier for farmers' willingness to participate in the insurance program.
    Keywords: Microinsurance; Trust, Natural Field Experiment
    JEL: C93 O12 O16
    Date: 2009–09–24
  7. By: Saraï Sapulete; Arjen van Witteloostuijn; Wesley Kaufmann
    Abstract: This paper experimentally studies the potential effect of works councils on managerial decision-making. Empirical evidence on the influence of works councils in organizations is still mixed. Therefore, this experimental study tries to gain more insights into the mechanisms that may underlie the impact of works council advice. First, we try to explain whether advice given by a works council influences the decision managers make. Second, we attempt to explain whether works councils delay the decision-making process. In order to answer these questions, we conducted experiments with undergraduate students, who played a two-player Prisoner's Dilemma price-setting game. One group received advice from a works council, whilst the other group did not. As expected, advice does have an influence on decision-making: receiving advice for setting a low price leads to a higher likelihood to set a low price as well, and receiving advice to set a high price leads to a high price decision. Female managers are more likely to take the works council advice into account. Subjects with an other-regarding orientation tend to choose a high price, even when they are advised to opt for a low price. Further, decisionmaking is not delayed by the advice, but there is an interaction effect with gender: female managers receiving advice tend to think longer about their decision.
    Keywords: works council advice, experimental economics, managerial decisionmaking
    JEL: J53 C91 L29
    Date: 2009–10
  8. By: Dominiak, Adam; Dürsch, Peter; Lefort, Jean-Philippe
    Abstract: Two rationality arguments are used to justify the link between conditional and unconditional preferences in decision theory: dynamic consistency and consequentialism. Dynamic consistency requires that ex ante contingent choices are respected by updated preferences. Consequentialism states that only those outcomes which are still possible can matter for updated preferences. We test the descriptive validity of these rationality arguments with a dynamic version of Ellsberg's three color experiment and find that subjects act more often in line with consequentialism than with dynamic consistency.
    Keywords: Non expected utility preferences; ambiguity; updating; dynamic consistency; consequentialism
    JEL: C91 D81
    Date: 2009–09–21
  9. By: Morone, Andrea
    Abstract: There is abundant literature in experimental research on decision making under risk, which compares, and ranks subjects’ preferences on the basis of some elicitation method. The present paper performs a similar analysis in order to compare them. Since pricing data lead in many cases to some anomalies (i.e. status quo bias endowment effect) we examine three mechanisms to elicit price preferences: willingness-to-pay in a second price auction, willingness-to-accept in a second price auction, and certainty equivalent elicited with BDM. A Bayesian interpretation of our results suggests that it is not possible to state ex-ante the more appropriate elicitation method for a particular subject: for 1/3 of our sample WTP is preferred for 1/3 of our sample WTA is preferred and for the remaining 1/3 BDM is preferred.
    Keywords: willingness-to-pay; willingness-to-accept; BDM; second price auction
    JEL: D81
    Date: 2009–10
  10. By: Anna Conte; Daniela Di Cagno; Emanuela Sciubba (School of Economics, Mathematics & Statistics, Birkbeck)
    Abstract: We run a computerised experiment of network formation where all connections are beneficial and only direct links are costly. Players simultaneously submit link proposals; a connection is made only when both players involved agree. We use both simulated and experimentally generated data to test the determinants of individual behaviour in network formation. We find that approximately 40% of the network formation strategies adopted by the experimental subjects can be accounted for as best responses. We test whether subjects follow alternative patterns of behaviour and in particular if they: propose links to those from whom they have received link proposals in the previous round; propose links to those who have the largest number of direct connections. We find that together with best response behaviour, these strategies explain approximately 75% of the observed choices. We estimate individual propensities to adopt each of these strategies, controlling for group effects. Finally we estimate a mixture model to highlight the proportion of each type of decision maker in the population.
    Date: 2009–06
  11. By: Pager, Devah (Princeton University); Western, Bruce (Harvard University); Bonikowski, Bart (Princeton University)
    Abstract: Decades of racial progress have led some researchers and policymakers to doubt that discrimination remains an important cause of economic inequality. To study contemporary discrimination we conducted a field experiment in the low-wage labor market of New York City. The experiment recruited white, black, and Latino job applicants, called testers, who were matched on demographic characteristics and interpersonal skills. The testers were given equivalent resumes and sent to apply in tandem for hundreds of entry-level jobs. Our results show that black applicants were half as likely to receive a callback or job offer relative to equally qualified whites. In fact, black and Latino applicants with clean backgrounds fared no better than a white applicant just released from prison. Additional qualitative evidence from our testers' experiences further illustrates the multiple points at which employment trajectories can be deflected by various forms of racial bias. Together these results point to the subtle but systematic forms of discrimination that continue to shape employment opportunities for low-wage workers.
    Keywords: discrimination, field experiment, race, labor markets
    JEL: J7
    Date: 2009–10
  12. By: Didier Sornette (The Financial Crisis Observatory); Maxim Fedorovsky (The Financial Crisis Observatory); Stefan Riemann (The Financial Crisis Observatory); Hilary Woodard (The Financial Crisis Observatory); Ryan Woodard (The Financial Crisis Observatory); Wei-Xing Zhou (The Financial Crisis Observatory)
    Abstract: This is the first delivery of the Financial Bubble Experiment that our group has recently launched within the Financial Crisis Observatory (FCO) at ETH Zurich (\url{})
    Date: 2009–11

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.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.