nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒05‒02
fifteen papers chosen by
Daniel Houser
George Mason University

  1. The Effect of Negotiator Creativity on Negotiation Outcomes in a Bilateral Negotiation By De Pauw, A.; Venter, D.; Neethling,K.
  2. Preference Intensities and Risk Aversion in School Choice: A Laboratory Experiment By Flip Klijn; Joana Pais; Marc Vorsatz
  3. Reputation and Influence in Charitable Giving: An Experiment By David Reinstein; Gerhard Riener
  4. Other-Regarding Preferences with Peer Workers in Labor Markets: An Experimental Investigation. By Mark F. Owens
  5. The Benefit of Anonymity in Public Goods Games By David Reinstein; David Hugh-Jones
  6. Which Words Bond? An Experiment on Signaling in a Public Good Game By Serra Garcia, M.; Damme, E.E.C. van; Potters, J.J.M.
  7. Income Aspirations and Cooperation: Experimental Evidence By Dalton, P.S.
  8. Choosing your object of benevolence: a field experiment on donation options By Aretz, Bodo; Kube, Sebastian
  9. Impure Altruism in Dictators’ Giving By Korenok Oleg; Edward L. Millner; Laura Razzolini
  10. Decision Making in the Pension Fund Board Room: An Experiment With Dutch Pension Fund Trustees By Dalen, H.P. van; Henkens, K.; Koedijk, C.G.; Slager, A.M.H.
  11. Measuring the Willingness to Pay to Avoid Guilt: Estimation using Equilibrium and Stated Belief Models By Charles Bellemare; Alexander Sebald; Martin Strobel
  12. Is the Welfare State Sustainable? Experimental Evidence on Citizens' Preferences for Redistribution By Neustadt, Ilja; Zweifel, Peter
  13. Why do people give less weight to advice the further it is from their initial opinion? By Francesco Ravazzolo; Øistein Røisland
  14. The Effects of Competition and Information on Racial Discrimination: Evidence from a Field Experiment. By John M. Nunley; Mark F. Owens; R. Stephen Howard
  15. On the Complete Information First--Price Auction and its Intuitive Solution By Alcalde, Jose; Dahm, Matthias

  1. By: De Pauw, A.; Venter, D.; Neethling,K. (Vlerick Leuven Gent Management School)
    Abstract: The potential implication of creativity upon negotiation remains to date ill researched. The aim of this study is to fill this gap by examining if creative negotiators are able to achieve more successful outcomes in a negotiation context with integrative potential. As such we want to contribute to the unlocking of the ‘black box’ of bargaining behaviours. We obtained creativity scores from 70 participants, who performed a two-party, multi-issue negotiation in 35 dyads. This negotiation led to economic and relational negotiation outcomes. The use of creative skills by negotiators was hypothesised to positively affect both classes of negotiation outcomes. Results indicated no significant effect of negotiators’ creativity on economic negotiation outcomes. We observed a negative effect of negotiators’ creativity on relational negotiation outcome for the buyer, whereby creativity of the seller added significantly more to the variance in relational outcome than creativity of the buyer. For the relational negotiation outcome of the seller, we found the same negative tendency, though no significant effect of negotiators’ creativity. Our findings extend the understanding of the relationship between negotiators’ creativity and negotiation outcomes, which is highly underemphasized in current research. Further research should identify which aspects of creativity are crucial to negotiators and determine how they can be adequately measured. The issue of interaction between negotiator’s creativity and situational variables should also be addressed, as it likely determines the effect of creativity on negotiation outcomes.
    Keywords: creativity, dyads, negotiation outcomes
    Date: 2010–03–05
  2. By: Flip Klijn; Joana Pais; Marc Vorsatz
    Abstract: We experimentally investigate in the laboratory two prominent mechanisms that are employed in school choice programs to assign students to public schools. We study how individual behavior is influenced by preference intensities and risk aversion. Our main results show that (a) the Gale-Shapley mechanism is more robust to changes in cardinal preferences than the Boston mechanism independently of whether individuals can submit a complete or only a restricted ranking of the schools and (b) subjects with a higher degree of risk aversion are more likely to play "safer" strategies under the Gale-Shapley but not under the Boston mechanism. Both results have important implications for the efficiency and the stability of the mechanisms.
    Keywords: school choice, risk aversion, preference intensities, laboratory experiment, Gale-Shapley mechanism, Boston mechanism, efficiency, stability, constrained choice.
    JEL: C78 C91 C92 D78 I20
    Date: 2010–04–20
  3. By: David Reinstein; Gerhard Riener
    Abstract: Abstract Previous experimental and observational work suggests that people act more generously when they are observed and observe others in social settings. But the explanation for this is unclear. An individual may want to send a signal of her generosity in order to improve her own reputation. Alternately (or additionally) she may value the public good or charity itself and, believing that contribution levels are strategic complements, give more in order to influence others to give more. We perform the first series of laboratory experiments that can separately estimate the impact of these two social effects, and test whether realized influence is consistent with the desire to influence, and whether either of these are consistent with anticipated influence. We find that “leaders” are influential only when their identities are revealed along with their donations, and female leaders are more influential then males. Identified leader’s predictions suggest that are aware of their influence. They respond to this by giving more than either the control group or the unidentified leaders. We find mixed evidence for “reputation-seeking.”
    Date: 2010–04–20
  4. By: Mark F. Owens
    Abstract: A peer worker is introduced in a controlled labor market experiment characterized by unobservable effort and incomplete contracts. Workers make decisions independently and without knowledge of each others’ actions in a modified gift exchange experiment. Introducing a peer worker into an ongoing market has a negative and significant effect on effort provided in contrast to prior experimental studies of peer effects which find positive effects with observable effort. This decrease in effort is not driven by other-regarding equity concerns for the manager’s payoffs.
    Keywords: Peer Effects; Incomplete Contracts; Other-Regarding Behavior; Gift Exchange; Experiment
    JEL: C91
    Date: 2010–04
  5. By: David Reinstein; David Hugh-Jones
    Abstract: Previous work has found that in social dilemmas, the selfish always free-ride, while others will cooperate if they expect their peers to do so as well. Outcomes may thus depend on conditional cooperators’ beliefs about the number of selfish types. An early round of the game may be played anonymously, so that contributions cannot be traced back to particular individuals. By protecting low contributors from potential sanctions, this encourages selfish types to reveal their true preferences in their play. We offer a simple model illustrating when revelation of types can increase contributions, and when only an anonymous game can separate types. As a proof of concept, we run a laboratory experiment involving a two-stage public goods game with an exclusion decision between stages. An anonymous first stage led to significantly higher stage-two cooperation than a revealed first stage, a slower decline across the 15 repetitions, unusually high final-stage contributions relative to previous work, and greater profits. Statistical analysis shows that the anonymous first stage reduced uncertainty about types, and this preserved cooperation and led to greater efficiency. Our results suggest that customs such as anonymous church donations may play an important role in building social trust.
    Date: 2010–04–21
  6. By: Serra Garcia, M.; Damme, E.E.C. van; Potters, J.J.M. (Tilburg University, Center for Economic Research)
    Abstract: We compare signaling by words and actions in a one-shot 2-person public good game with private information. The informed player, who knows the exact return from contributing, can signal by contributing first (actions) or by sending a costless message (words). Words can be about the return or about her contribution decision. Theoretically, actions lead to fully e¢ cient contributions. Words can be as influential as actions, and thus elicit the uninformed player's contribution, but allow the informed player to free-ride. The exact language used is not expected to matter. Experimentally, we find that words can be as influential as actions. Free-riding, however, does depend on the language: the informed player free-rides less when she talks about her contribution than when she talks about the returns.
    Keywords: Information transmission;costly signaling;communication;experiment.
    JEL: C72 D82 D83
    Date: 2010
  7. By: Dalton, P.S. (Tilburg University, Center for Economic Research)
    Abstract: This article is the first attempt to study the empirical link between income aspirations and cooperation in a one shot public good game. By combining experimental with survey data, we find evidence that the more frustrated people are with their income, the lower is their propensity to cooperate with foreigners and compatriots. The quantitative effect is remarkable: participants who are most frustrated are 46 percent more likely to free-ride on foreigners than those who are satisfied with their income.
    Keywords: Social Preferences;Aspirations;Cooperation;Maslow
    JEL: D01 D6 H4 C9
    Date: 2010
  8. By: Aretz, Bodo; Kube, Sebastian
    Abstract: In a large natural field experiment, we explore the effect of providing donors with the opportunity to choose the target country for their donations. We find that only a small fraction of donors use the option, which might reflect a reluctance to consider tradeoffs when those concern important, 'protected', values. However, those donors who choose their object of benevolence give significantly more, even when controlling for their donation history. In view of the latest research on identifable-victim effects, our findings underline that less inclusive targets can evoke more intense feelings than more inclusive ones stressing that altruistic motivation seems to be mediated by aroused empathetic emotions. --
    Keywords: charitable giving,identifiable victim,field experiment,altruism,contingent valuation
    JEL: D64 C93
    Date: 2010
  9. By: Korenok Oleg (Department of Economics, VCU School of Business); Edward L. Millner (Department of Economics, VCU School of Business); Laura Razzolini (Department of Economics, VCU School of Business)
    Abstract: We design an experiment to test whether the behavior of dictators can be rationalized by the impurely altruistic utility function. By giving the recipients an endowment of varying levels, we create an environment that allows for observable differences in behavior depending upon whether pure or impure altruism is the primary motivation. We find that the behavior of 66 percent of the dictators can be rationalized by the impurely altruistic utility function, while only 16 percent of the dictators make choices that are consistent with the purely altruistic utility function.
    Keywords: Impure Altruism, Axioms of Revealed Preferences, Dictator Game
    JEL: C91 D01 D64 H30 H41
    Date: 2010–04
  10. By: Dalen, H.P. van; Henkens, K.; Koedijk, C.G.; Slager, A.M.H. (Tilburg University, Center for Economic Research)
    Abstract: We ask how pension fund trustees deal with the booms and busts that funds encounter, and to what extent the decisions of pension fund trustees are affected by behavioral biases. We examine these issues by using a vignette-method field experiment among Dutch pension fund trustees. We find that trustees display choices that accord with the phenomenon of loss aversion and that trustees allow their choices to be affected by the forces of social comparison: the reserve position of their fund compared to the position of other funds has a significant influence in choosing a pension fund policy mix.
    Keywords: pension funds;finance;governance;behavioral economics
    JEL: D7 G23 G11
    Date: 2010
  11. By: Charles Bellemare (Département d’économique, Université Laval); Alexander Sebald (Department of Economics, University of Copenhagen); Martin Strobel (Department of Economics, Maastricht University)
    Abstract: We estimate structural models of guilt aversion to measure the population level of willingness to pay (WTP) to avoid feeling guilt by letting down another player. We compare estimates of WTP under the assumption that higher-order beliefs are in equilibrium (i.e. consistent with the choice distribution) with models estimated using stated beliefs which relax the equilibrium requirement. We estimate WTP in the later case by allowing stated beliefs to be correlated with guilt aversion, thus controlling for a possible source of a consensus effect. All models are estimated using data from an experiment of proposal and response conducted with a large and representative sample of the Dutch population. Our range of estimates suggests that responders are willing to pay between 0.40 and 0.80 Euro to avoid letting down proposers by 1 Euro. Furthermore, we find that WTP estimated using stated beliefs is substantially overestimated (by a factor of two) when correlation between preferences and beliefs is not controlled for. Finally, we find no evidence that WTP is significantly related to the observable socio-economic characteristics of players.
    Keywords: guilt aversion; willingness to pay; equilibrium and stated beliefs models
    JEL: C93 D63 D84
    Date: 2010–02
  12. By: Neustadt, Ilja; Zweifel, Peter
    Abstract: The sustainability of the welfare state ultimately depends on citizens' preferences for income redistribution. They are elicited through a Discrete Choice Experiment performed in 2008 in Switzerland. Attributes are redistribution as GDP share, its uses (the unemployed, old-age pensioners, people with ill health etc.), and nationality of beneficiary. Estimated marginal willingness to pay (WTP) is positive among those who deem benefits too low, and negative otherwise. However, even those who state that government should reduce income inequality exhibit a negative WTP on average. The major finding is that estimated average WTP is maximum at 21% of GDP, clearly below the current value of 25%. Thus, the present Swiss welfare state does not appear sustainable.
    Keywords: Income redistribution; welfare state; sustainability; preferences; willingness to pay; discrete choice experiments
    JEL: D63 H31 D12 H29 C35 C93
    Date: 2010–02–28
  13. By: Francesco Ravazzolo (Norges Bank (Central Bank of Norway)); Øistein Røisland (Norges Bank (Central Bank of Norway))
    Abstract: Experimental studies on decision making based on advice received from others find that the weight put on the advice is negatively related to the distance between the advice and the decisionmaker's initial opinion. In this paper, we show that the distance effect can follow from rational signal extraction when the decisionmaker has imperfect knowledge about the advisor's competence. What drives the result is the assumption that the decisionmaker is better informed about her own competence than about the advisor's competence.
    Keywords: Distance effect, Policy decision making, Signal extraction, Uncertainty
    JEL: C11 D78 D82 D83
    Date: 2010–04–16
  14. By: John M. Nunley; Mark F. Owens; R. Stephen Howard
    Abstract: We conduct a field experiment to determine whether racial discrimination can be identified in product-market auctions and, if so, under what conditions it is more likely to emerge. We compare the prices paid for perfectly substitutable products sold on eBay between sellers with distinctively white and distinctively black names. Price differences arise in favor of sellers whose names match the expected racial characteristics of buyers. However, the price differences only emerge in markets characterized by low levels of competition, and eBay's feedback system, which reduces asymmetric information between buyer and seller, is successful at mitigating these differences. The results suggest, rather strongly, that competitive forces and market mechanisms designed to reduce informational asymmetries both can aid in promoting non-discriminatory outcomes in markets.
    Keywords: Racial Discrimination; Statistical Discrimination; Asymmetric Information; Competition; eBay
    JEL: C93 J15 D82
    Date: 2010–04
  15. By: Alcalde, Jose; Dahm, Matthias
    Abstract: Despite the popularity of auction theoretical thinking, it appears that no one has presented an elementary equilibrium analysis of the complete information first-price sealed-bid auction mechanism when the bidding space has a finite grid. This paper aims to remedy that omission. We show that there always exists a "high price equilibrium" which can be considered "the intuitive solution" (an agent with the highest valuation wins the auction bidding at the second-highest valuation). Although there might be other "low price equilibria", we also show that when there are two bidders "the intuitive solution" is the unique limiting equilibrium when the grid size goes to zero and ties are randomly broken.
    Keywords: First-price auctions; undominated Nash equilibria.
    JEL: D44 C72
    Date: 2010–03–14

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