|
on Experimental Economics |
| By: | Li, Lingfang (Ivy); Xiao, Erte |
| Abstract: | Reputation systems that rely on feedback from traders are important institutions for helping sustain trust in markets, while feedback information is usually considered a public good. We apply both theoretical models and experiments to study how raters' feedback behavior responds to different reporting costs and how to improve market efficiency by introducing a pre-commitment device for sellers in reputation systems. In particular, the pre-commitment device we study here allows sellers to provide rebates to cover buyers' reporting costs before buyers make purchasing decisions. Using a buyer-seller trust game with a unilateral feedback scheme, we find that a buyer’s propensity to leave feedback is more sensitive to reporting costs when the seller cooperates than when the seller defects. The seller’s decision on whether to provide a rebate significantly affects the buyer’s decision to leave feedback by compensating for the feedback costs. More importantly, the rebate decision has a significant impact on the buyer's purchasing decision via signaling the seller's cooperative type. The experimental results show that the rebate mechanism improves the market efficiency. |
| Keywords: | reputation; trust; feedback mechanism; asymmetric information; public goods; experimental economics |
| JEL: | D02 H41 D82 L86 C91 |
| Date: | 2010–04–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:22401&r=exp |
| By: | Ghazala Azmat; Nagore Iriberri |
| Abstract: | This paper studies the effect of providing relative performance feedback information on individual performance and on individual affective response, when agents are rewarded according to their absolute performance. In a laboratory set-up, agents perform a real effort task and when receiving feedback, they are asked to rate their happiness, arousal and feeling of dominance. Control subjects learn only their absolute performance, while the treated subjects additionally learn the average performance in the session. Performance is 17 percent higher when relative performance feedback is provided. Furthermore, although feedback increases the performance independent of the content (i.e., performing above or below the average), the content is determinant for the affective response. When subjects are treated, the inequality in the happiness and the feeling of dominance between those subjects performing above and below the average increases by 8 and 6 percentage points, respectively. |
| Keywords: | relative performance, piece-rate, feedback, social comparison, happiness. |
| JEL: | I21 M52 C30 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1216&r=exp |
| By: | Giorgio Coricelli (ISC - Institut des Sciences Cognitives - CNRS : UMR5015 - Université Claude Bernard - Lyon I); Matteus Joffily (ISC - Institut des Sciences Cognitives - CNRS : UMR5015 - Université Claude Bernard - Lyon I); Claude Montmarquette (CIRANO - Centre interuniversitaire de recherche en analyse des organisations - Université du Québec à Montréal); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines) |
| Abstract: | The economics-of-crime approach usually ignores the emotional cost and benefit of cheating. In this paper, we investigate the relationships between emotions, deception, and rational decision-making by means of an experiment on tax evasion. Emotions are measured by skin conductance responses and self-reports. We show that the intensity of anticipated and anticipatory emotions before reporting positively correlates with both the decision to cheat and the proportion of evaded income. The experienced emotional arousal after an audit increases with the monetary sanctions and the arousal is even stronger when the evader's picture is publicly displayed. We also find that the risk of a public exposure of deception deters evasion whereas the amount of fines encourages evasion. These results suggest that an audit policy that strengthens the emotional dimension of cheating favors compliance. |
| Keywords: | deception ; tax evasion ; emotions ; physiological measures ; experiment |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00462067_v1&r=exp |
| 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); Robert-Vincent Joule (LPS-AIX - Laboratoire de Psychologie Sociale - Université de Provence - Aix-Marseille I : EA849); Stephane 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, Umeå University - Department of Economics) |
| Abstract: | Hypothetical bias is a long-standing issue in stated preference and contingent valuation studies – people generally overstate their preferences when they do not experience the real monetary consequences of their decision. This view, however, has been challenged by recent evidence based on the elicitation of induced values (IV) in the lab and homegrown (HG) demand function from different countries. This paper uses a two experiments design to assess the extent and relevance of hypothetical bias in demand elicitation exercises for both IV and HG values. For testbed purpose, we use a classic second-price auction to elicit preferences. Comparing the demand curve we elicit in both, hypothetical bias unambiguously (i) vanishes in an induced-value, private good context, and (ii) persists in homegrown values elicitation context. This suggests hypothetical bias in preference elicitation appears to be driven by “preference formation” rather than “preference elicitation”. In addition, companion treatments highlight two sources of the discrepancy observed in the HG setting: the hypothetical context leads bidders to underestimate the constraints imposed by their budget limitations, whereas the real context creates pressure leading them to bid “zero” to opt out from the elicitation mechanism. As a result, there is a need for a demand elicitation procedure that helps subjects take the valuation exercise sincerely, but without putting extra pressure on them. |
| Keywords: | Auctions; Demand revelation; Experimental valuation; Hypothetical bias |
| Date: | 2010–01–02 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00443668_v1&r=exp |
| By: | Louis Putterman; Jean-Robert Tyran; Kenju Kamei |
| 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; |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2010-1&r=exp |
| By: | Frijters, Paul (University of Queensland); Barón, Juan D. (Banco de la República de Colombia) |
| Abstract: | Sacrifices to deities occur in nearly all known religions. In this paper, we report on our attempts to elicit this type of religious behaviour towards "Theoi" in the laboratory. The theory we test is that, when faced with uncertainty, individuals attempt to engage in a reciprocal contract with the source of uncertainty by sacrificing towards it. In our experiments, we create the situation whereby individuals face an uncertain economic payback due to "Theoi" and we allow participants to sacrifice towards this entity. Aggregate sacrifices amongst participants are over 30% of all takings, increase with the level of humanistic labelling of Theoi and decrease when participants share information or when the level of uncertainty is lower. The findings imply that under circumstances of high uncertainty people are willing to sacrifice large portions of their income even when this has no discernable effect on outcomes. |
| Keywords: | uncertainty, religion, sacrifice, experiment |
| JEL: | D8 Z12 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp4902&r=exp |
| By: | Tamás Kovács; Marc Willinger |
| Abstract: | We provide new evidence about a positive correlation between the own amount sent and the own amount returned in the investment game. Our analysis relies on experimental data collected under the strategy method for establishing our main result. While the percentage returned is independent of the amount received for most of our subjects, it is strongly correlated to their amount sent as a trustor. Our analysis is based on a two-way classification of subjects : according to their trusting type and according to their reciprocal type. We show the existence of a strong correlation between trusting types and reciprocal types within subjects. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:lam:wpaper:10-03&r=exp |