nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒03‒20
twelve papers chosen by
Daniel Houser
George Mason University

  1. ‘Expressive’ Obligations in Public Good Games: Crowding-in and Crowding-out Effects. By Michele Bernasconi; Luca Corazzini; Anna Marenzi
  2. Paying the Price of Sweetening Your Donation: Evidence from a Natural Field Experiment By Alpízar, Francisco; Martinsson, Peter
  3. Are bygones bygones? By Robin Cubitt; Maria Ruiz-Martos; Chris Starmer
  4. Social Distance, Cooperation and Other Regarding Preferences: A New Approach Based on the Theory of Relational Goods By Leonardo Becchetti; Giacomo Degli Antoni; Marco Faillo
  5. Analyzing loss aversion and diminishing sensitivity in a freight transport stated choice experiment By Lorenzo Masiero; David A. Hensher
  6. Vendettas By Friedel Bolle; Jonathan H.W. Tan; Daniel John Zizzo
  7. Performance Pay and Multi-dimensional Sorting - Productivity, Preferences and Gender By Dohmen Thomas; Falk Armin
  8. Social psychology and environmental economics : a new look at ex ante corrections of biased preference evaluation By Nicolas Jacquemet; Alexander G. James; Stéphane Luchini; Jason F. Shogren
  9. Choices About Competition: Differences by gender and hormonal fluctuations, and the role of relative performance feedback. By Wozniak, David
  10. Shift of reference point and implications on behavioral reaction to gains and losses By Lorenzo Masiero; David A. Hensher
  11. You get what you pay for: Incentives and Selection in the Education System By Dohmen Thomas; Falk Armin
  12. A comparison of prospect theory in WTP and preference space By John M. Rose; Lorenzo Masiero

  1. By: Michele Bernasconi (Department of Economics, University Of Venice Cà Foscari); Luca Corazzini (Dipartimento di Scienze Economiche, Università di Padova.); Anna Marenzi (Dipartimento di Economia, Università dell'Insubria.)
    Abstract: We study individual behaviour in a repeated linear public good experiment in which, in each period, subjects are required to contribute a minimum level and face a certain probability to be audited. Audited subjects who contribute less than the minimum level are convicted to pay the difference between the obligation required and the voluntary contribution. We study the ‘expressive’ power of the obligations. While at early stages subjects contribute the minimum level, with repetition contributions decline below the required amount indicating that expressive obligations are not capable to sustain cooperation. We observe that expressive obligations exert a rather robust crowding-out effect on voluntary contributions as compared to a standard public good game. The crowding-out is stronger when payments collected by the monitoring activity are distributed to subjects rather than when they are pure dead-weight-loss.
    Keywords: Expressive law, motivation crowding theory, laboratory experiments
    JEL: C91 H26 H41 K40
    Date: 2010
  2. By: Alpízar, Francisco; Martinsson, Peter
    Abstract: Using a natural field experiment in a recreational site, a public good almost fully dependent on voluntary donations, we explored the crowding-out effect of gift rewards. First, we investigated whether receiving a map in appreciation of a donation crowded out prosocial behavior and found no significant effect of giving the map. Second, we explored the effect of adding the map to a treatment designed to increase donations. Interestingly, when the gift was combined with our attempt to trigger reputational and self image motives, the probability of donating decreased significantly, compared to the social reference treatment alone.
    Keywords: crowding-out, donation, natural field experiment, reciprocity
    JEL: C93 D10 D60 Q50
    Date: 2010–02–22
  3. By: Robin Cubitt (School of Economics, University of Nottingham); Maria Ruiz-Martos (Economics Department, University of Warwick); Chris Starmer (School of Economics, University of Nottingham)
    Abstract: The paper reports an experiment which tests the principle of separability, i.e. that behaviour in a dynamic choice problem is independent of history and of unreachable eventualities. Although this is a well-known principle of orthodox decision theory and central to conventional economic modelling, it has been questioned on grounds suggested by non-expected utility models of choice under risk and by the psychology of affective influences on risk-taking. Our experimental design, which provides between-subjects tests of separability using three treatments in which the history preceding a decision is manipulated, is inspired by these concerns. We expose separability to a clean and harsh test, but find no evidence that it is violated.
    Keywords: Separability; history-independence; non-expected utility; risk and affect
    Date: 2010–01
  4. By: Leonardo Becchetti (University of Rome Tor Vergata); Giacomo Degli Antoni (EconomEtica); Marco Faillo (University of Trento - Faculty of Economics)
    Abstract: The paper is divided in six sections. In the second section we provide a short survey of the literature on relational goods. In the third section we describe the experimental design of the two experiments presented in Becchetti et al. (2007) and Becchetti, Degli Antoni and Faillo (2009) (hereafter also B2007 and B2009). In the fourth section we discuss the hypotheses on the effect of relational goods on players’ behaviour in the two experiments. In the fifth section we discuss the main findings. The sixth section concludes.
    Date: 2010–03
  5. By: Lorenzo Masiero (Istituto Ricerche Economiche (IRE), Università della Svizzera Italiana, Svizzera); David A. Hensher (Institute of Transport and Logistics Studies (ITLS), The University of Sydney, Australia)
    Abstract: Choice behaviour might be determined by asymmetric preferences whether the consumers are faced with gains or losses. This paper investigates loss aversion and diminishing sensitivity, and analyzes their implications on willingness to pay and willingness to accept measures in a reference pivoted choice experiment in a freight transport framework. The results suggest a significant model fit improvement when preferences are treated as asymmetric, proving both loss aversion and diminishing sensitivity. The implications on willingness to pay and willingness to accept indicators are particular relevant showing a remarkable difference between symmetric and asymmetric model specifications. Not accounting for loss aversion and diminishing sensitivity, when present, produces misleading results and might affect significantly the policy decisions.
    Keywords: freight transport, choice experiments, willingness to pay, preference asymmetry
    JEL: C25 L91
    Date: 2010–03
  6. By: Friedel Bolle (European University Viadrina); Jonathan H.W. Tan (University of Nottingham); Daniel John Zizzo (University of East Anglia)
    Abstract: Vendettas occur in many real world settings where rivals compete for a prize, e.g., winning an election or a competitive promotion, by engaging in retaliatory aggressive behavior. We present a benchmark experiment where two players have an initial probability of winning a prize. Retaliatory vendettas occur and lead agents to the worst possible outcomes in 60% to 80% of cases, counter to self interest predictions, and regardless of whether initial winning probabilities are equal or unequal. Negative emotions are important and interact with economic settings to produce large social inefficiencies. Venting emotions predicts aggression but also reduces it.
    Keywords: trust, income inequality, market, social capital
    JEL: C91 C72 H41 D64
    Date: 2010–02
  7. By: Dohmen Thomas; Falk Armin (METEOR)
    Abstract: This paper studies the impact of incentives on worker self-selection in a controlled laboratory experiment. Subjects face the choice between a fixed and a variable payment scheme. Depending on the treatment, the variable payment is a piece rate, a tournament or a revenue-sharing scheme. We find that output is higher in the variable pay schemes (piece rate, tournament, and revenue sharing) compared to the fixed payment scheme. Thisdifference is largely driven by productivity sorting. In addition personal attitudes such as willingness to take risks and relative self-assessment as well as gender affect the sorting decision in a systematic way. Moreover, self-reported effort is significantly higher in all variable pay conditions than in the fixed wage condition. Our lab findings are supported by an additional analysis using data from a large and representative sample. In sum, our findings underline the importance of multi-dimensional sorting, i.e., the tendency for different incentive schemes to systematically attract people with different individual characteristics.
    Keywords: microeconomics ;
    Date: 2010
  8. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Alexander G. James (University of Wyoming - Department of Economics and Finance); Stéphane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Jason F. Shogren (University of Wyoming - Department of Economics and Finance)
    Abstract: Environmental economics is now a long standing field of research ; much has been learned on how environmental policy can use incentives to drive individual behaviors. Among the many examples, preference elicitation is the most discussed case in which incentives fail to accurately implement efficient behavior. Using this as our motivating example, herein we explore the cross-fertilization between environmental economics and social psychology. We first review how the lessons drawn from social psychology helped address the hypothetical bias issue. We then turn to the future of this process by focusing on how cheap talk scripts influence preference elicitation. Our experimental results shows CT scripts work through persuasion – i.e. changes mind, but poorly changes actions. in that sense, preference elicitation still lacks a way of making communication binding – i.e. a way to alter intrinsic motivation of subjects to behave truthfully.
    Keywords: Social psychology, commitment, persuasive communication, preference elicitation.
    Date: 2010–02
  9. By: Wozniak, David
    Abstract: Economic experiments have shown that when given the choice between piece-rate and winner-take-all tournament style compensation, women are more reluctant than men to choose tournaments. These gender difference experiments have all relied on a similar framework where subjects were not informed of their relative abilities as compared to other potential competitors. I replicate these previous findings and then I show that giving feedback about past relative performance moves high ability females towards more competitive compensation schemes, moves low ability men towards less competitive compensation schemes such as piece-rate and group pay, and removes the gender difference in compensation choices. I then examine between and within-subjects differences in choices for females, across the menstrual cycle. I find that, before receiving relative performance feedback, women in the low-hormone phase of their cycle are less likely to enter tournaments than women in the high-hormone phase. Men are more likely to choose tournaments than females at either stage. There are no significant selection differences between any of these groups after they receive relative performance feedback.
    Keywords: Competition; Hormones; Gender; Menstrual cycle; Information; Performance feedback; Competitive environments; Gender differences
    JEL: D0 D80 C91
    Date: 2009–08
  10. By: Lorenzo Masiero (Istituto Ricerche Economiche (IRE), Università della Svizzera Italiana, Svizzera); David A. Hensher (Institute of Transport and Logistics Studies (ITLS), The University of Sydney, Australia)
    Abstract: It is widely recognized that individual decision making is subject to the evaluation of gains and losses around a reference point. The estimation of discrete choice models increasingly use data from stated choice experiments which are pivoted around a reference alternative. However, to date, the specification of a reference alternative in transport studies is fixed, whereas it is common to observe individuals adjusting their preferences according to a change in their reference point. This paper focuses on individual reactions, in a freight choice context, to a negative change in the reference alternative values, identifying the behavioural implications in terms of loss aversion and diminishing sensitivity. The results show a significant adjustment in the valuation of gains and losses around a shifted reference alternative. In particular, we find an average increase in loss aversion for cost and time attributes, and a substantial decrease for punctuality. These findings are translated to significant differences in the willingness to pay and willingness to accept measures, providing supporting evidence of respondents’ behavioural reaction.
    Keywords: Willingness to pay, gains and losses, freight choice, reference alternative
    JEL: C25 L91
    Date: 2010–03
  11. By: Dohmen Thomas; Falk Armin (ROA rm)
    Abstract: We analyse worker self-selection with a special focus on teachers. The point of the paper is that worker composition is generally endogenous, due to worker self-selection. In a first step we analyse lab experimental data to provide causal evidence on particular sorting patterns. This evidence sets the stage for our field data analysis, which focuses specifically on selection patterns of teachers. We find that teachers are more risk averse than employees in other professions, which indicates that relatively risk averse individuals sort into teaching occupations under the current system. Using survey measures on trust and reciprocity we also find that teachers trust more and are less negatively reciprocal than other employees. Finally, we establish differences in personality based on the Big Five concept.
    Keywords: education, training and the labour market;
    Date: 2010
  12. By: John M. Rose (Institute of Transport and Logistics Studies (ITLS), The University of Sydney, Australia); Lorenzo Masiero (Istituto Ricerche Economiche (IRE), Università della Svizzera Italiana, Svizzera)
    Abstract: The importance of willingness to pay (WTP) and willingness to accept (WTA) measures in the evaluation of policy measures has led to a constant stream of research examining survey methods and model specifications seeking to capture and explain the concept of marginal rates of substitution as much as possible. Stated choice experiments pivoted around a reference alternative allow the specification of discrete choice models to accommodate the prospect theory reference dependence assumption. This permits an investigation of theories related to loss aversion and diminishing sensitivity, and to test the discrepancy between WTP and WTA, widely documented within the literature. With more advanced classes of discrete choice models at our disposal, it is now possible to test different preference specifications that are better able to measure WTP and WTA values. One such model allowing for utility to be directly specified in WTP space has recently shown interesting qualities. This paper compares and contrasts models estimated in preference space to those estimated in WTP space allowing for asymmetry in the marginal utilities by estimating different parameters according to reference, gain and loss values. The results suggest a better model fit for the data estimated in WTP space, contradicting the findings of previous researches. The parameter estimates report significant evidence of loss aversion and diminishing sensitivities even though the symmetric specification outperforms the asymmetric ones. Finally, the analysis of the WTP and WTA measures confirms the higher degree of WTA compared to WTP, and highlights the appeal of the WTP space specification in terms of plausibility of the estimated measures.
    Keywords: choice experiments, willingness to pay space, preference asymmetry
    JEL: C25 L91
    Date: 2010–03

This nep-exp issue is ©2010 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.