nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒01‒10
twenty papers chosen by
Daniel Houser
George Mason University

  1. Preferences and Beliefs in a Sequential Social Dilemma: A Within-Subjects Analysis By Blanco, Mariana; Engelmann, Dirk; Koch, Alexander K.; Normann, Hans-Theo
  2. Car Mechanics in the Lab - Investigating the Behavior of Real Experts on Experimental Markets for Credence Goods By Adrian Beck; Rudolf Kerschbamer; Jianying Qiu,; Matthias Sutter
  3. The Impact of Distributional Preferences on (Experimental) Markets for Expert Services By Rudolf Kerschbamer; Matthias Sutter; Uwe Dulleck
  4. Inequity and Risk Aversion in Sequential Public Good Games By Sabrina Teyssier
  5. Social Comparisons and Reference Group Formation: Some Expermental Evidence By Ian McDonald; Nikos Nikiforakis; Nilss Olekalns; Hugh Sibly
  6. Creditworthiness as a signal of trustworthiness: field experiment in microfinance and consequences on causality in impact studies. By Leonardo Becchetti; Pierluigi Conzo
  7. Will Joe the Plumber envy Bill Gates? By Jérémy Celse
  8. On the Channels of Pro-Social Behavior Evidence from a natural field experiment By Hannes Koppel; Günther G. Schulze
  9. Risk attitude, beliefs updating and the information content of trades: an experiment By Lovo, Stefno; Bisière, Christophe; Décamps, Jean-Paul
  10. Relative Earnings and Giving in a Real-Effort Experiment By Nisvan Erkal; Lata Gangadharan; Nikos Nikiforakis
  11. Horizontal and Vertical Social Preferences in Tournaments By Gerald Eisenkopf; Sabrina Teyssier
  12. Do Spouses Cooperate? And If Not: Why? By Cochard François, Couprie Helene, Hopfensitz Astrid
  13. On the attribution of externalities By Verena Utikal; Urs Fischbacher
  14. Dealing with the aversion to the sucker’s payoff in public goods game By Douadia Bougherara; Sandrine Costa; Gilles Grolleau; Lisette Ibanez
  15. Social Preferences-Literature Survey. By Jaromir Kovarik
  16. Mediation and Conflict Management By Gerald Eisenkopf
  17. Predatory Pricing, Recoupment, and Consumers’ Reaction By Lisa Bruttel; Jochen Glöckner
  18. From Experience to Experiments in South African Water Management: Defining the Framework By Mathieu Désolé; Stefano Farolfi; Fioravante Patrone; Patrick Rio
  19. On Approval and Disapproval: Theory and Experiments By López-Pérez, Raúl; Vorsatz, Marc
  20. Design of stated preference surveys: Is there more to learn from behavioral economics? By Carlsson, Fredrik

  1. By: Blanco, Mariana (Universidad del Rosario); Engelmann, Dirk (Royal Holloway, University of London); Koch, Alexander K. (University of Aarhus); Normann, Hans-Theo (Goethe University Frankfurt)
    Abstract: Within-subject data from sequential social dilemma experiments reveal a correlation of first-and second-mover decisions for which two channels may be responsible, that our experiment allows to separate: i) a direct, preference-based channel that influences both first- and second-mover decisions; ii) an indirect channel, where second-mover decisions influence beliefs via a consensus effect, and the first-mover decision is a best response to these beliefs. We find strong evidence for the indirect channel: beliefs about second-mover cooperation are biased toward own second-mover behavior, and most subjects best respond to stated beliefs. But when first movers know the true probability of second-mover cooperation, subjects' own second moves still have predictive power regarding their first moves, suggesting that the direct channel also plays a role.
    Keywords: experimental economics, consensus effect, social dilemmas
    JEL: C72 C90
    Date: 2009–12
  2. By: Adrian Beck; Rudolf Kerschbamer; Jianying Qiu,; Matthias Sutter
    Abstract: We compare the behavior of car mechanics and college students as sellers in experimental credence goods markets. Finding largely similar behavior, we note much more overtreatment by car mechanics, probably due to decision heuristics they learned in their professional training.
    Keywords: Artefactual field experiment, Car mechanics, Credence goods
    JEL: C91 D82 C72
    Date: 2009–12
  3. By: Rudolf Kerschbamer; Matthias Sutter; Uwe Dulleck
    Abstract: Credence goods markets suffer from inefficiencies arising from informational asymmetries between expert sellers and customers. While standard theory predicts that inefficiencies disappear if customers can verify the quality received, verifiability fails to yield efficiency in experiments with endogenous prices. We identify heterogeneous distributional preferences as the main cause and design a parsimonious experiment with exogenous prices that allows classifying experts as either selfish, efficiency loving, inequality averse, inequality loving or competitive. Results show that most subjects exhibit non-standard distributional preferences, among which efficiency-loving and inequality aversion are most frequent. We discuss implications for institutional design and agent selection in credence goods markets.
    Keywords: Distributional Preferences, Credence Goods, Verifiability, Experiment
    JEL: C72 C91 D82
    Date: 2009–12
  4. By: Sabrina Teyssier
    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 contribution
    Date: 2009
  5. By: Ian McDonald; Nikos Nikiforakis; Nilss Olekalns; Hugh Sibly
    Abstract: We investigate reference group formation and the impact of social comparisons on ultimatum bargaining using a laboratory experiment. Three individuals compete in a real-e¤ort task for the role of the proposer in a three-player ultimatum game. The role of the responder is randomly allocated. The third individual receives a ?fixed payment - our treatment variable - and makes no decision. The existence of a non-responder has a dramatic e¤ect on bargaining outcomes. In the most extreme treatment, more than half of the o¤ers are rejected. Behavior shows individuals exhibit self-serving bias in the way they de?ne their reference groups.
    Keywords: social comparisons; ultimatum bargaining; laboratory experiments; self-serving bias; real-e¤ort
    JEL: C78 C91 D63
    Date: 2009
  6. By: Leonardo Becchetti (University of Rome Tor Vergata); Pierluigi Conzo (University of Rome Tor Vergata)
    Abstract: Creditworthiness and trustworthiness are almost synonyms since the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness-trustworthiness nexus in an investment game experiment on a sample of participants/non participants to a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. Trustees’ first and second order beliefs are also consistent with this picture. Our findings identify a “horizontal trustworthiness externality” which creates a direct (loan-performance) causality nexus since the mere loan provision increases the borrower’s attractiveness as a business partner.
    Keywords: field experiment, microfinance, investment game, trust, trustworthiness
    JEL: O16 C93
    Date: 2009–12
  7. By: Jérémy Celse
    Abstract: We investigate experimentally the impact of unflattering social comparisons on individuals’ behaviour. More precisely, we examine the relationship between the satisfaction subjects derive from social comparisons and subjects’ decisions to reduce others’ income. In our experiment, subjects are randomly paired and receive an endowment. Then subjects have to report their satisfaction level after being informed of their own endowment and of their opponent’s endowment. Then they can choose, or not, to reduce their opponent’s endowment incurring a personal cost. We observe: (1) most people report their satisfaction to be negatively affected by learning others’ endowments; (2) destructive decisions are predominantly undertaken by dissatisfied subjects; (3) satisfaction is negatively affected by absolute difference (difference between subjects’ endowments measured in absolute terms) and (4) relative difference between subjects’ endowments modulates subjects’ negative behaviour.
    Date: 2009–12
  8. By: Hannes Koppel (Max-Planck-Institute of Economics, Jena); Günther G. Schulze (Albert-Ludwigs-University Freiburg)
    Abstract: We conduct a natural field experiment on direct and indirect transfer mechanisms for small donations. Charitable contributions are significantly higher if made indirectly, i.e. if they are tied to the purchase of a good sold at a premium, than if they are made directly. Donations are signficantly higher under both transfer mechanisms if people are given a suggested reference donatio
    Keywords: Tied versus untied transfers, charitable donations, charity, willingness to give, pro social behavior
    JEL: D64 C93 H41
    Date: 2009–12–14
  9. By: Lovo, Stefno; Bisière, Christophe; Décamps, Jean-Paul
    Abstract: In this paper, the authors conduct a series of experiments that simulate trading in financial markets and which allows them to identify the different effects that subjects’ risk attitudes and belief updating rules have on the information content of the order flow. They find that there are very few risk-neutral subjects and that subjects displaying risk aversion or risk-loving tend to ignore private information when their prior beliefs on the asset fundamentals are strong. Consequently, private information struggles penetrating trading prices. The authors find evidence of non-Bayesian belief updating (confirmation bias and under-confidence). This reduces (improves) market efficiency when subjects’ prior beliefs are weak (strong).
    Keywords: risk attitude; financial market; information; belief; risk-neutral information
    JEL: F16 F17 F18
    Date: 2009–05–19
  10. By: Nisvan Erkal; Lata Gangadharan; Nikos Nikiforakis
    Abstract: This paper investigates the relationship between relative earnings and giving in a twostage, real-effort experiment. In the first stage, four players compete in a tournament that determines their earnings. In the second stage, they decide whether they wish to transfer part of their earnings to one or more of their group members. Our main finding is that those who are ranked first are significantly less likely to give than those who are ranked second. This non-monotonic relationship between earnings and likelihood of giving disappears if individual earnings are randomly determined or if individuals learn about the second (transfer) stage only after they earn their income. These results suggest that the non-monotonic relationship detected may be driven by differences in individuals’ expectations about others’ behavior in the second stage, which are correlated with their own willingness to give.
    Keywords: Relative income; Altruism; Real effort; Self-selection; Luck
    JEL: C91 D3 D64 I3
    Date: 2009
  11. By: Gerald Eisenkopf; Sabrina Teyssier
    Abstract: Most studies find no collusion in tournaments. This result suggests that social preferences are irrelevant in this context. We investigate the impact of social preferences in a tournament using data from a laboratory experiment with two treatments. In a conentional tournament, an agent receives either the full prize or no prize at all. The other tournament provides the same incentives but the actual payment of an agent equals her expected payment. In both treatments the principal chooses between a fair and an unfair contract. Standard economic theory predicts the same effort provision in all situations. Our results show instead that envy between agents and the fairness of the principal determine the effectiveness of tournaments. Moreover, we observe that collusion between the agents and reciprocity towards the principal are mutually exclusive.
    Keywords: Tournament, Collusion, Envy, Agency problem, Reciprocity
    Date: 2009
  12. By: Cochard François, Couprie Helene, Hopfensitz Astrid (CRESE, Université de Franche-Comté. THEMA, Université de Cergy Pontoise. GREMAQ, Toulouse School of Economics)
    Abstract: Models of household economics require an understanding of economic interactions in families. Social ties, repetition and reduced strategic uncertainty make social dilemmas in couples a very special case that needs to be empirically studied. In this paper we present results from a large economic experiment with 100 maritally living couples. Participants made decisions in a social dilemma with their partner and with a stranger. We predict behavior in this task with individual and couples' socio-demographic variables, efficiency preferences and couples' marital satisfaction. As opposed to models explaining behavior amongst strangers, the regressions on couples’ decisions highlight clear patterns concerning cooperation behavior which could inspire future household decision-making models.
    Keywords: Noncooperative Games; Laboratory, Individual Behavior; Household Production and Intra-household Allocation
    JEL: C72 C91 D13
    Date: 2009
  13. By: Verena Utikal; Urs Fischbacher
    Abstract: Do people blame or praise others for producing negative or positive externalities? The experimental philosopher Knobe conducted a questionnaire study that revealed that people blame others for foreseen negative externalities but do not praise them for foreseen positive ones. We find that the major determinant of the Knobe effect is the relative distribution of economic power among the agents. We confirm the Knobe effect only in situations where the producer of the externality holds the higher economic status and the positive externalities are small. Switching economic power makes the Knobe effect vanish. The Knobe effect is even reversed in settings with large positive externalities. Our results are in line with theoretical predictions by Levine.
    Keywords: Intentions, Externalities, Experiment
    Date: 2009
  14. By: Douadia Bougherara; Sandrine Costa; Gilles Grolleau; Lisette Ibanez
    Abstract: A usual explanation to low levels of contribution to public goods is the fear of getting the sucker’s payoff (cooperation by the participant and defection by the other players). In order to disentangle the effect of this fear from other motives, we design a public good game where people have an insurance against getting the sucker’s payoff. We show that contributions to the public good under this ‘protective’ design are significantly higher and interact with expectations on other individuals' contribution to the public good. Some policy implications and extensions are suggested.
    Date: 2009–12
  15. By: Jaromir Kovarik (Universidad de Alicante)
    Abstract: This papeer surveys the theories of social preferences. Social preferences are based on that people not only care about their own well-being, but they have a certain concern whith payoffs and/or actions of others. We classify two approaches: distributional and intention-based models, and later discuss models that combine both theories. In order to provide a better illustration of the discussed models, we derive predictions of these models for two classic experimental protocols: ultimatum game and public good game whith punishment. These predictions are compared with the stylized facts of these two games.
    Date: 2009–09–08
  16. By: Gerald Eisenkopf
    Abstract: Mediation is a popular process to manage conflicts, but there is little systematic insight into its mechanisms. This paper discusses the results from an experiment in which a mediator can induce two conflict parties to behave cooperatively. If the mediator recommends cooperative behavior and threatens to punish deviations, she achieves the efficient solution. Similar results even obtain if the mediator is biased towards one party or has no incentive to prevent the conflict. Communication between the mediator and the conflict parties increases cooperation, even if punishment is impossible. However, when cooperation fails, communication without punishment leads to particularly low payouts for the ‘losing’ party.
    Keywords: Mediation, Conflict Prevention, Experiment, Communication, Punishment
    Date: 2009
  17. By: Lisa Bruttel; Jochen Glöckner
    Abstract: This paper tests two basic assumptions underlying court made or statutory provisions prohibiting predatory pricing on the economic grounds that monopolistic pricing likely to occur in the long run will cause harm to competition and consumers. The first assumption under scrutiny is that customers will accept monopolistic prices during the subsequent phase of recoupment, even though they have become accustomed to low prices during the price war. The second assumption is that even in the subsequent phase of recoupment neither any displaced nor any other competitor will (re-)enter the market to undercut the monopolistic prices. We can confirm earlier data according to which predatory pricing occurs rarely in an experimental environment. Moreover, the experiment indicates that both assumptions are not backed up by actual decision making both of consumers and of competitors.
    Keywords: Predatory Pricing, Recoupment, Experiment
    Date: 2009
  18. By: Mathieu Désolé; Stefano Farolfi; Fioravante Patrone; Patrick Rio
    Abstract: A role-playing game (RPG), KatAware, was developed in the Kat River catchment of South Africa to support the negotiation process among water users on the allocation rules of the resource. Playing the RPG with local stakeholders exhibited some regularity in the behaviour of players, particularly on their attitude of defining binding agreements. These regularities were first formalized through a model of cooperative game theory (CGT), and then, to confirm the results of the model, tested by an experimental protocol. Both the model and the protocol were based and calibrated on the results of the RPG. The progressive simplification (decontextualization) required to bring the RPG into the laboratory suggested to explore the role of context (in our case water related issues) on players’ behaviour. The objective of this paper is to illustrate the process that conducted the research team from the experience in the Kat River to the first experiments to test the hypotheses exhibited in the experience and then to analyze the influence of context on players’ behaviour. Terms and concepts are clarified in order to provide a clear research framework in this new field at the border between experiences and experiments in social sciences for commons management.
    Date: 2009–12
  19. By: López-Pérez, Raúl (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Vorsatz, Marc (Fundación de Estudios de Economía Aplicada–FEDEA)
    Abstract: Prior studies have shown that selfish behavior is reduced when co–players have the opportunity to approve/disapprove a player’s choice, even if that has no consequences on the player’s material payoff. Using a prisoner’s dilemma, we experimentally study the causes of this phenomenon, which seems crucial to understand compliance with social norms. Our data is consistent with a model based on the assumption that people feel badly if they expect to be disapproved by others. Furthermore, we find suggestive evidence in line with the following assumptions: (i) People become more aware about the others opinion if feedback is available, and (ii) even if the feedback is ex post and has no effect on their ex ante expectations about disapproval, people prefer not to receive negative feedback.
    Keywords: Approval; disapproval; non–material rewards/sanctions; social norms.
    JEL: A13 C72 D64 Z13
    Date: 2009–12
  20. By: Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We discuss the design of stated preference (SP) surveys in light of findings in behavioral economics such as context dependence of preferences, learning, and differences between revealed and normative preferences. More specifically, we discuss four different areas: (i) revealed and normative preferences, (ii) learning and constructed preferences, (iii) context dependence, and (iv) hypothetical bias. We argue that SP methods would benefit from adapting to some of the findings in behavioral economics, but also that behavioral economics may gain insights from studying SP methods.<p>
    Keywords: stated preferences; behavioral economics
    JEL: C91 H40 Q51
    Date: 2009–12–09

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