nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒01‒23
twelve papers chosen by
Daniel Houser
George Mason University

  1. The behavioral validity of the strategy method in public good experiments By Urs Fischbacher; Simon Gaechter
  2. On Probation. An Experimental Analysis By Christoph Engel; Heike Hennig-Schmidt; Bernd Irlenbusch; Sebastian Kube
  3. An Exploration of the Content of Social Norms using Simple Games By López-Pérez, Raúl; Vorsatz, Marc
  4. Can intentions spoil the kindness of a gift? - An experimental study By Christina Strassmair
  5. The High/Low Divide: Self-Selection by Values in Auction Choice By Timothy C. Salmon; Radosveta Ivanova-Stenzel
  6. Sticks and Carrots in Procurement By Maria Bigoni; Giancarlo Spagnolo; Paola Valbonesi
  7. The effects of enforced reflection in three simple experiments By Björn Frank
  8. Do wage cuts damage work morale? Evidence from a natural field experiment By Sebastian Kube; Michel André Maréchal; Clemens Puppe
  9. Free-riding on altruistic punishment? An experimental comparison of third-party-punishment in a stand-alone and in an in-group environment. By Lewisch Peter; Ottone, Stefania; Ponzano, Ferruccio
  10. Buy-It-Now prices in eBay Auctions - The Field in the Lab By Tim Grebe; Radosveta Ivanova-Stenzel; Sabine Kröger
  11. Public Goods and Voting on Formal Sanction Schemes: An Experiment By Louis Putterman; Jean-Robert Tyran; Kenju Kamei
  12. Social Preferences and Competition By Klaus M. Schmidt

  1. By: Urs Fischbacher (University of Konstanz); Simon Gaechter (University of Nottingham)
    Abstract: We compare the strategy method and the direct response method in public good experiments in a within-subject design. This comparison is interesting because the strategy method is frequently used to investigate preference heterogeneity. We find that people identified by the strategy method as conditional cooperators also behave as conditional cooperators under the direct response method. Free-rider types contribute systematically less than all others but show the most systematic deviation from the predicted contributions, because they contribute in the first half of the direct response experiment. Overall, our results support the behavioral validity of the strategy method in public good experiments.
    Keywords: Public goods experiments, strategy method, direct response method, voluntary cooperation, conditional cooperators, free riders
    JEL: C91 C72 H41 D64
    Date: 2009–12
  2. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Heike Hennig-Schmidt (University of Bonn, Dept. of Economics); Bernd Irlenbusch (London School of Economics and Max Planck Institute for Research on Collective Goods); Sebastian Kube (University of Bonn, Dept. of Economics and Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Does probation pay a double dividend? Society saves the cost of incarceration, and convicts preserve their liberty. But does probation also reduce the risk of recidivism? In a meta-study we show that the field evidence is inconclusive. Moreover it struggles with an identification problem: those put on probation are less likely to recidivate in the first place. We therefore complement the field evidence by a lab experiment that isolates the definitional feature of probation: the first sanction is conditional on being sanctioned again during the probation period. We find that probationers contribute less to a joint project; punishment cost is higher; efficiency is lower; inequity is higher. While experimental subjects are on probation, they increase their contributions to a joint project. However, once the probation period expires, they reduce their contributions. While in the aggregate these two effects almost cancel out, critically those not punished themselves do trust the institution less if punishment does not become effective immediately.
    Keywords: probation, recidivism, public goods, punishment, experimental economics
    JEL: C91 H41 K14 K42
    Date: 2009–11
  3. 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: The literature on social norms stresses that compliance with norms is approved while deviance is disapproved. Based on this, we explore the content of social norms using experimental data from five dictator games with a feedback stage. Our data suggests that subjects either care about a reciprocity or an efficiency norm.
    Keywords: approval; disapproval; dictator game; experiment; social Norms.
    JEL: A13 C72 D64 Z13
    Date: 2010–01
  4. By: Christina Strassmair (University of Munich)
    Abstract: Consider a situation where person A undertakes acostly action that benefits person B. This behavior seems altruistic. However, if A expects a reward in return from B, then A's action may be motivated by expected rewards rather than by pure altruism. The question we address in this experimental study is how B reacts to A's intentions. We vary the probability that the second mover in a trust game can reciprocate and analyze effects on second mover behavior. Our results suggest that expected rewards do not spoil the perceived kindness of an action and the action's rewards.
    Keywords: social preferences, intentions, beliefs, psychological game theory, experiment
    JEL: C91 D64
    Date: 2009–10
  5. By: Timothy C. Salmon (Department of Economics, Florida State University, Tallahassee, FL); Radosveta Ivanova-Stenzel (Institut für Wirtschaftstheorie I, Humboldt Universität zu Berlin)
    Abstract: Most prior theoretical and experimental work involving auction choice has assumed bidders only find out their value after making a choice of which autcion to en ter. In this paper we examine whether or not subjects knowing their value prior to making an auction choice impacts their choice decision and/or the outcome of the auctions. The results show a strong impact. Subjects with low values choose the first price sealed bid auction more often while subjects with high values choose the ascending auction more often. The average numbers of bidders in both formats ended up being on average the same, but due to the self-selection bias the ascending auction raised as much revenue on average as the first sealed bid auction. The two formats also generate efficiency levels that are roughly equivalent though the earnings of bidders are higher in the ascending auction.
    Keywords: bidder preferences, private values, sealed bid auctions, ascending auctions, endogenous entry
    JEL: C91 D44
    Date: 2010–01
  6. By: Maria Bigoni (University of Padua); Giancarlo Spagnolo; Paola Valbonesi (University of Padua)
    Abstract: We study differently framed incentives in dynamic laboratory buyer-seller relationships with multi-tasking and endogenous matching. The experimental design tries to mitigate the role of social preferences and intrinsic motivation. Absent explicit incentives, effort is low in both tasks. Their introduction boosts efficiency substantially increasing effort in the contractible task, mildly crowding it out in the non-contractible one, and increasing buyer surplus. Bonuses and penalties are equivalent for efficiency and crowding-out, but dierent in distributional effects: sellers' surplus increases with bonuses as buyers' offers become more generous. Buyers tend to prefer penalties, which may explain why they are dominant in procurement.
    Keywords: bonuses, business-to-business, contract choice, experiment, framing, explicit incentives, incomplete contracts, loss-aversion, motivation, penalties, procurement, multi-tasking, relational contracts, rewards.
    JEL: H57 C92 L14 M52
    Date: 2010–01
  7. By: Björn Frank (University of Kassel, Nora-Platiel-Straße 4, D-34127 Kassel)
    Abstract: Rubinstein (2007) has recently found that the frequency of (types of) decisions made in Internet experiments are related to the time taken for these decisions. Other authors have investigated this relationship by exerting some time pressure. In this paper, I report on an attempt to do the opposite, i.e., to enforce a longer reflection time. To ensure that subjects do not just wait but actually think for five minutes, they had to perform a five minutes focused free writing task. Free writing is a standard method adopted from creative writing courses; subjects are asked to write up everything that currently runs through their minds, without pausing. Enforced reflection significantly decreases the number chosen in beauty contest experiments, thus increasing the winning probability, and it increases the amount given in the solidarity game. For women, this increase is economically and statistically significant. The average amount offered in the ultimatum game is not higher for those who had performed the free writing task. However, after free writing, the share of 50:50 offers is significantly higher, which is in conflict with Rubinstein's conjecture that 50:50 offers take less time because they are instinctive (as opposed to cognitive).
    Keywords: free writing, decision time, beauty contest, solidarity game, ultimatum game
    JEL: C90
    Date: 2010
  8. By: Sebastian Kube; Michel André Maréchal; Clemens Puppe
    Abstract: Contractual incompleteness characterizes many employment relations. High work morale is therefore fundamental for sustaining voluntary cooperation within the firm. We conducted a natural field experiment testing to what extent wages affect work morale. The results provide clear-cut evidence showing that wage cuts have a detrimental impact on work morale. An equivalent wage increase, however, does not result in any productivity gains. Theses results highlight a strongly asymmetric response of work morale to wage variations.
    Keywords: Morale, reciprocity, gift exchange, field experiment
    JEL: C93 J30
    Date: 2010–01
  9. By: Lewisch Peter; Ottone, Stefania; Ponzano, Ferruccio
    Abstract: This paper deals with the subject of third-party punishment. The paper compares, by means of an economic experiment, punishment by a third party (Stand-Alone case) with punishment by third parties (In-Group environment). This deliberate introduction of a second potential punisher is neither subtle nor marginal. Shifting punishment choices into this "enlarged environment" allows us to study, in a systematic way, the complex relationship between the punisher's expectations about her/his peer's punishment decisions and her/his own punishment choices. In particular, we aim to examine whether, on average, individual punishment is systematically lower in an In-Group environment compared with the Stand-Alone case.
    Keywords: Third-Party Punishment, Collective Punishment
    JEL: C91 C92 K42
    Date: 2010–01
  10. By: Tim Grebe (Gesellschaft für Innovationsforschung und Beratung mbH); Radosveta Ivanova-Stenzel (Institut für Wirtschaftstheorie I, Humboldt Universität zu Berlin); Sabine Kröger (Département d'économie, Université LavalPavillon J.A.DeSève)
    Abstract: Electronic commerce has grown extraordinarily over the years, with online auctions being extremely successful forms of trade. Those auctions come in a variety of different formats, such as the Buy-It-Now auction format on eBay, that allows sellers to post prices at which buyers can purchase a good prior to the auction. Even though, buyer behavior is well studied in Buy-It-Now auctions, as to this point little is known about how sellers set Buy-It-Now prices. We investigate into this question by analyzing seller behavior in Buy-It-Now auctions. More precisely, we combine the use of a real online auction market (the eBay platform and eBay traders) with the techniques of lab experiments. We find a striking link between the information about agents provided by the eBay market institution and their behavior. Information about buyers is correlated with their deviation from true value bidding. Sellers respond strategically to this information when deciding on their Buy-It-Now prices. Thus, our results highlight potential economic consequences of information publicly available in (online) market institutions.
    Keywords: electronic markets, experience, online auctions, BIN price, buyout price, single item auction, private value, experiment
    JEL: C72 C91 D44 D82
    Date: 2010–01
  11. By: Louis Putterman (Department of Economics, Brown University); Jean-Robert Tyran (Department of Economics, University of Copenhagen); Kenju Kamei (Department of Economics, Brown University)
    Abstract: The burgeoning literature on the use of sanctions to support public goods provision has largely neglected the use of formal or centralized sanctions. We let subjects playing a linear public goods game vote on the parameters of a formal sanction scheme capable both of resolving and of exacerbating the free-rider problem, depending on parameter settings. Most groups quickly learned to choose parameters inducing efficient outcomes. But despite uniform money payoffs implying common interest in those parameters, voting patterns suggest significant influence of cooperative orientation, political attitudes, and of gender and intelligence.
    Keywords: public good; voluntary contribution; formal sanction; experiment; penalty; voting
    JEL: C91 C92 D71 D72 H41
    Date: 2010–01
  12. By: Klaus M. Schmidt (University of Munich)
    Abstract: There is a general presumption that social preferences can be ignored if markets are competitive. Market experiments (Smith 1962) and recent theoretical results (Dufwenberg et al. 2008) suggest that competition forces people to behave as if they were purely self-interested. We qualify this view. Social preferences are irrelevant if and only if two conditions are met: separability of preferences and completeness of contracts. These conditions are often plausible, but they fail to hold when uncertainty is important (financial markets) or when incomplete contracts are traded (labor markets). Social preferences can explain many of the anomalies frequently observed on these markets.
    Keywords: Social preferences, competition, separability, incomplete contracts, asset markets, labor markets.
    JEL: C9 D5 J0
    Date: 2009–12

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