nep-exp New Economics Papers
on Experimental Economics
Issue of 2009‒12‒11
fifteen papers chosen by
Daniel Houser
George Mason University

  1. "Do the Right Thing:" The Effects of Moral Suasion on Cooperation By Ernesto Dal Bó; Pedro Dal Bó
  2. Income Redistribution and Public Good Provision: an Experiment By Jonathan Maurice; Marc Willinger; Agathe Rouaix
  3. A Reexamination of the House Money Effect: Rational Behavior or Irrational Exuberance? By Sugato Chakravarty; Yongjin Ma
  4. Third-party Punishment is more effective on Women: Experimental Evidence By Pablo Brañas-Garza; Stefania Ottone
  5. Adaptive Experimental Design Using the Propensity Score By Hahn, Jinyong; Hirano, Keisuke; Karlan, Dean
  6. Desert and Tangibility: Decomposing House Money Effects in a Charitable Giving Experiment By David Reinstein; Gerhard Reiner
  7. Incentive to discriminate? An experimental investigation of teacher incentives in India By Jain, Tarun; Narayan, Tulika
  8. Interpersonal Comparisons of Utility in Bargaining : Evidence from a Transcontinental Ultimatum Game By Romina Boarini; Jean-François Laslier; Stéphane Robin
  9. Specific Investments and Ownership Structures in Railways – An Experimental Analysis By Thomas Ehrmann; Karl-Hans Hartwig; Torsten Marner; Hendrik Schmale
  10. Outrunning the Gender Gap – Boys and Girls Compete Equally By Dreber, Anna; von Essen, Emma; Ranehill, Eva
  11. What's Advertising Content Worth? Evidence from a Consumer Credit Marketing Field Experiment By Bertrand, Marianne; Karlan, Dean; Mullainathan, Sendhil; Shafir, Eldar; Zinman, Jonathan
  12. Will There Be Blood? Incentives and Substitution Effects in Pro-social Behavior By Lacetera, Nicola; Macis, Mario; Slonim, Robert
  13. Framing effects of risk communication in health-related decision making. Learning from a discrete choice experiment By Florence Nguyen; Marie-Odile Carrère; Nora Moumjid
  14. Underweighting Rare Events in Experience Based Decisions: Beyond Sample Error By Greg Barron; Giovanni Ursino
  15. Common reason to believe and framing effect in the team reasoning theory: an experimental approach By Leonardo Becchetti; Giacomo Degli Antoni; Marco Faillo

  1. By: Ernesto Dal Bó; Pedro Dal Bó
    Abstract: The use of moral appeals to affect the behavior of others is pervasive (from the pulpit to ethics classes) but little is known about the effects of moral suasion on behavior. In a series of experiments we study whether moral suasion affects behavior in voluntary contribution games and mechanisms by which behavior is altered. We find that observing a message with a moral standard according to the golden rule or, alternatively, utilitarian philosophy, results in a significant but transitory increase in contributions above the levels observed for subjects that did not receive a message or received a message that advised them to contribute without a moral rationale. When players have the option of punishing each other after the contribution stage the effect of the moral messages on contributions becomes persistent: punishments and moral messages interact to sustain cooperation. We investigate the mechanism through which moral suasion operates and find it to involve both expectation- and preference-shifting effects. These results suggest that the use of moral appeals can be an effective way of promoting cooperation.
    JEL: C9 H41
    Date: 2009–12
  2. By: Jonathan Maurice; Marc Willinger; Agathe Rouaix
    Abstract: We provide a new experimental investigation of the neutrality theorem of Warr (1983), who states ”when a single public good is provided at positive levels by private individuals, its provision is unaffected by a redistribution of income”. Instead of comparing different income distributions across groups as Chan et al. (1996), in our experiment the total group endowment is redistributed after a 10 rounds sequence. We compare an unequalizing redistribution (EI) and an equalizing redistribution (IE), to two benchmark treatments for which the 10 rounds sequence is repeated, either with an equal distribution (EE) or an unequal distribution (II). The constituent game has a unique interior dominant strategy equilibrium. Our data support the neutrality theorem (after controlling for the restart effect): redistribution has no effect on the total amount of public good in none of the tested treatments. However, the analysis of individual behavior shows that ”poor” subjects over-contribute with respect to their Nash-contribution, while ”rich” subjects tend to play their Nash-contribution or under-contribute slightly. Furthermore, after a redistribution, subjects react asymetrically: subjects who get poorer reduce their contribution of a larger amount than the amount of contribution added by subjects who become richer. And it is shown that the latter do not react enough to the redistribution.
    Date: 2009–11
  3. By: Sugato Chakravarty (Purdue University); Yongjin Ma (Purdue University)
    Abstract: We reexamine the presence of the house money effect (HME) within the context of a dynamic financial experiment. Our specific innovation lies in introducing the Becker-DeGroot-Marschak (1964) bidding mechanism within our experimental design in order to ameliorate, or altogether eliminate, the peer pressure effect. In doing so, we find weak evidence, at best, of the HME. In fact, our results overwhelmingly support rational behavior by our experimental subjects. Our findings stand in contrast to extant research, and one study in particular, that has reported the existence of the HME using Vickrey auctions within a dynamic financial context. Our findings survive robustness tests and imply that subjects are mostly rational in their risk attitudes.
    Keywords: House money effect; expected utility theory; experimental economics; Becker-DeGroot-Marschak procedure; Vickrey auction
    Date: 2009–05
  4. By: Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); Stefania Ottone (Department of Economics, University of Milano-Bicocca)
    Abstract: Existing experimental studies mainly focus on motivations and choices of thirdparty punishers, but only few of them detect sanction efficacy contradictory results. Our paper wants to shed light on this point. In particular, we want to detect whether the threat of being punished for unfair actions is credible and affects subjects’ choices thus, making it rational to behave fairly. To disentangle the effect of expected punishment on behaviour, we implement in the lab two experimental games - the standard Dictator Game, that is used as baseline, and the Third-Party Punishment Game that incorporates a third player who observes and may punish the Dictator. The idea is that, if the Dictator in treatment TPP believes punishment is a credible threat, s/he may decide to change her/his behaviour, that is, to behave generously in order to avoid sanctions. We find a clear gender bias: women reacted to the punishment threat by increasing their transfer to the Recipient, while men did exactly the opposite.
    Date: 2009–11–20
  5. By: Hahn, Jinyong (UCLA); Hirano, Keisuke (U AZ); Karlan, Dean (Yale University and MIT Jameel Poverty Action Lab)
    Abstract: Many social experiments are run in multiple waves, or are replications of earlier social experiments. In principle, the sampling design can be modified in later stages or replications to allow for more efficient estimation of causal effects. We consider the design of a two-stage experiment for estimating an average treatment effect, when covariate information is available for experimental subjects. We use data from the first stage to choose a conditional treatment assignment rule for units in the second stage of the experiment. This amounts to choosing the propensity score, the conditional probability of treatment given covariates. We propose to select the propensity score to minimize the asymptotic variance bound for estimating the average treatment effect. Our procedure can be implemented simply using standard statistical software and has attractive large-sample properties.
    JEL: C10 C13 C14 C90 C93
    Date: 2009–01
  6. By: David Reinstein; Gerhard Reiner
    Abstract: Several papers have documented that when subjects play with standard laboratory “endowments” they make less self-interested choices then when they use money they have either earned through a laboratory task or brought from outside the lab. In the context of a charitable giving experiment we decompose common "house money" effects into two components: the tangibility of cash in hand relative to money (or ecu's) promised on a computer screen, and the desert of earned money relative to random windfall gains. While both components are found to be significant in non-parametric tests, the former effect, which has been neglected in previous studies, has a stronger effect on total donations. These results have clear implications for experimental design, and also suggest that the availability of less tangible payment methods may increase charitable donations.
    Date: 2009–12–04
  7. By: Jain, Tarun; Narayan, Tulika
    Abstract: We address the challenge of designing performance-based incentive schemes for schoolteachers. When teachers specialize in different subjects in the presence of social prejudice, performance based pay which depends on the average of student performance can cause teachers to coordinate their effort in high status students and away from low status students. Laboratory experiments conducted in India with future teachers as subjects show that performance-based pay causes teachers to decrease effort in low caste Hindu students compared to upper caste Hindu or Muslim students. We observe greater effort and lower intra-class variation when teachers are penalized if students receive zero scores.
    Keywords: Teacher incentives; Laboratory experiments; Coordination games; Discrimination
    JEL: I28 J15 C91 I22
    Date: 2009–10–31
  8. By: Romina Boarini (OFCE - Observatoire Français des Conjonctures économiques - Observatoire Français des Conjonctures économiques); Jean-François Laslier (Département d'Economie, Ecole Polytechnique - Ecole Polytechnique); Stéphane Robin (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: This paper presents the experimental results of a “Transcontinental Ultimatum Game” implemented between India and France. The bargaining took the form of standard ultimatum games, but in one treatment Indian subjects made offers to French subjects and, in another treatment, French subjects made offers to Indian subjects. We observed that French→Indian bargaining mostly ended up with unequal splits of money in favour of French, while nearly equal splits were the most frequent outcome in Indian→French interactions. The experimental results are organized through a standard social reference model, modified for taking into account the different marginal value of money for bargainers. In our model bargaining is driven by relative standings comparisons between players, occurring in terms of real earnings (that is monetary earnings corrected for a purchasing power factor) obtained in the game. The norm of equity behind the equalization of real earnings is called local equity norm, and contrasted to a global equity norm which would encompass the wealth of players beyond the game. According to what we observed, no beyond-game concern seems to be relevantly endorsed by subjects.
    Keywords: Interpersonal Comparisons of Utility; Fairness; Bargaining experiment; Ultimatum Game
    Date: 2009
  9. By: Thomas Ehrmann (Institute of Strategic Management, Muenster); Karl-Hans Hartwig (Institute of Transport Economics, Muenster); Torsten Marner (Institute of Transport Economics, Muenster); Hendrik Schmale (Institute of Strategic Management, Muenster)
    Abstract: We analyze the impact of different organizational structures on incentives to invest in railways: vertical integration, vertical separation, and a hybrid form. Economic theory predicts that vertical integration fosters socially optimal investment, whereas, due to potential hold-up problems, both vertical separation and hybrid forms cause severe underinvestment. We test these theoretical predictions in a laboratory experiment and find evidence that, in a vertically integrated environment, the level of investment in rolling stock and in rail infrastructure is roughly socially optimal. The complete absence of a discrepancy in our experimental results between vertical separation and the hybrid organisational structure, contradicting the predictions of model-theory, is surprising and can be attributed to the relatively high investments in the separated model. This contradiction might also be explained by the existence of social preferences.
    Keywords: game theory, vertical separation, railways, experimental economics
    JEL: C70 C91 L92
    Date: 2009–10
  10. By: Dreber, Anna (Institute for Financial Research); von Essen, Emma (Stockholm University); Ranehill, Eva (Stockholm School of Economics)
    Abstract: Recent studies find that women are less competitive than men. This gender difference in competitiveness has been suggested as a possible explanation for why men occupy the majority of top positions in many sectors. In this study we explore competitiveness in children. A related field experiment on Israeli children shows that only boys react to competition by running faster when competing in a race and that only girls react to the gender of their opponent. Here we test if these results carry over to 7-10 year old Swedish children. Sweden is typically ranked among the most gender equal countries in the world, thus culture could explain a potential difference in our results to those on Israeli children. We also introduce two more “female” sports: skipping rope and dancing, in order to study if reaction to competition is task dependent. Our results extend previous findings in two ways. First, we find no gender difference in reaction to competition in running. In our study, both boys and girls compete. We also find no gender differences in reaction to competition in skipping rope and dancing. Second, we find no clear effect on competitiveness of the opponent’s gender, neither on girls or boys, in any of the tasks. Our findings suggest that the existence of a gender gap in competitiveness among children may be partly cultural, and that the gap found in previous studies on adults may be caused by factors that emerge later in life. It remains to be explored whether these later factors are biological or cultural.
    Keywords: competitiveness; gender differences; field experiment
    JEL: C93 J16
    Date: 2009–10–15
  11. By: Bertrand, Marianne (University of Chicago and Jameel Poverty Action Lab); Karlan, Dean (Yale University and Jameel Poverty Action Lab); Mullainathan, Sendhil (University of Chicago and Jameel Poverty Action Lab); Shafir, Eldar (Princeton University and Innovations for Poverty Action); Zinman, Jonathan (Dartmouth College and Innovations for Poverty Action)
    Abstract: Firms spend billions of dollars each year advertising consumer products in order to influence demand. Much of these outlays are on the creative design of advertising content. Creative content often uses nuances of presentation and framing that have large effects on consumer decision making in laboratory studies. But there is little field evidence on the effect of advertising content as it compares in magnitude to the effect of price. We analyze a direct mail field experiment in South Africa implemented by a consumer lender that randomized creative content and loan price simultaneously. We find that content has significant effects on demand. There is also some evidence that the magnitude of content sensitivity is large relative to price sensitivity. However, it was difficult to predict which particular types of content would significantly impact demand. This fits with a central premise of psychology--context matters--and highlights the importance of testing the robustness of laboratory findings in the field.
    JEL: C93 D01 D12 D14 D21 D81 D91 M31 M37 O12
    Date: 2009–01
  12. By: Lacetera, Nicola (Case Western Reserve University); Macis, Mario (University of Michigan); Slonim, Robert (University of Sydney)
    Abstract: We examine how economic incentives affect pro-social behavior through the analysis of a unique dataset with information on more than 14,000 American Red Cross blood drives. Our findings are consistent with blood donors responding to incentives in a "standard" way; offering donors economic incentives significantly increases turnout and blood units collected, and more so the greater the incentive's monetary value. In addition, there is no disproportionate increase in donors who come to a drive but are ineligible to donate when incentives are offered. Further evidence from a small-scale field experiment corroborates these findings and confirms that donors are motivated by the economic value of the items offered. We also find that a substantial fraction of the increase in donations due to incentives may be explained by donors substituting away from neighboring drives toward drives where rewards are offered, and the likelihood of this substitution is higher the higher the monetary value of the incentive offered and if neighboring drives do not offer incentives. Thus, extrinsic incentives motivate pro-social behavior, but unless substitution effects are also considered, the effect of incentives may be overestimated.
    Keywords: incentives, altruism, public good provision, pro-social behavior, public health
    JEL: D12 D64 I18
    Date: 2009–11
  13. By: Florence Nguyen (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, Centre Léon Bérard - CRLCC Léon Bérard); Marie-Odile Carrère (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, Centre Léon Bérard - CRLCC Léon Bérard); Nora Moumjid (GATE - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines, Centre Léon Bérard - CRLCC Léon Bérard)
    Abstract: Background How to communicate uncertainty is a major concern in medicine and in health economics. We aimed at studying the framing effects of risk communication on stated preferences in a discrete choice experiment (DCE) performed to elicit women's preferences for Hormone Replacement Therapy. Methods Two versions of the questionnaire were randomly administered to respondents. Multiple risks were expressed as natural frequencies using either a constant reference class (Design 1) or variable reference classes (Design 2). We first tested whether Design 1 would impose a lower cognitive burden than Design 2. We then examined whether the two designs resulted in different utility model estimates. Results Design 1 improved consistency (monotonicity and stability). However, rates of dominance or intransitive responses did not differ across designs. Design 1 decreased women's sensitivity to the risk of fractures and increased their sensitivity to the risk of breast cancer as compared to all other attributes. Discussion Framing effects of risk communication on stated preferences may be a major problem in the design of DCEs. More research is needed to determine whether our findings are replicable and to further investigate the normative question of how to improve risk communication in health-related decision-making.
    Keywords: Framing effects; Risk communication; Discrete choice experiment
    Date: 2009
  14. By: Greg Barron (Harvard Business School); Giovanni Ursino (DISCE, Università Cattolica)
    Abstract: Recent research has focused on the "description-experience gap": While rare events are overweighted in description based decisions, people tend to behave as if they underweight rare events in decisions based on experience. Barron and Erev (2003) and Hertwig, Barron, Weber, and Erev (2004) argue that such findings are substantive and call for a theory of decision making under risk other than Prospect Theory for decisions form experience. Fox and Hadar (2006) suggest that the discrepancy is due to sampling error: people are likely to sample rare events less often than objective probability implies, especially if their samples are small. The current paper examines the necessity of sample error in the underweighting of rare events. The first experiment shows that the gap persists even when people sample the entire population of outcomes and make a decision under risk rather than under uncertainty. A reanalysis of Barron and Erev (2003) further reveals that the gap persists even when subjects observe the expected frequency of rare events. The second experiment shows that the gap exists in a repeated decision making paradigm that controls for sample biases and the "hot stove" effect. Moreover, while underweighting persists in actual choices, overweighting is observed in judged probabilities. The results of the two experiments strengthen the suggestion that descriptive theories of choice that assume overweighting of small probabilities are not useful in describing decisions from experience. This is true even when there is no sample error, for both decisions under risk and for repeated choices.
    Keywords: experience-based decisions, Prospect Theory, rare event, overweighting, underweighting
    JEL: D81 C91
    Date: 2009–10
  15. By: Leonardo Becchetti (University of Rome Tor Vergata); Giacomo Degli Antoni (EconomEtica); Marco Faillo (University of Trento - Faculty of Economics)
    Abstract: The present paper is aimed at empirically verifying the role of the “common reason to believe” (Sugden 2003) and of framing (Bacharach 1999 and 2006) within the theory of team reasoning. The analysis draws on data collected trough a Traveler’s Dilemma experiment. To study the role of the common reason to believe, players’ belief in their counterpart’s choice are elicited and the correlation between the endorsement of team reasoning and beliefs is considered. With respect to the idea of frame proposed by Bacharach, we study the effect of the reduction of social distance on the probability that the “we-frame” comes to players’ mind. Social distance is decreased by introducing a meeting between the two players after the game. It is shown that the common reason to believe appropriately explains the internal logic of team reasoning and that the reduction of social distance makes the “we-frame” more likely.
    Keywords: Team Reasoning, Common Reason to Believe, Framing, Traveler’s Dilemma; Social Distance
    JEL: C72 C91 A13
    Date: 2009–11

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