nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒05‒15
sixteen papers chosen by
Daniel Houser
George Mason University

  1. The Effect of Payoff Tables on Experimental Oligopoly Behavior By Gürerk, Özgür; Selten, Reinhard
  2. ‘Let me dream on!’ Anticipatory Emotions and Preference for Timing in Lotteries By Martin Kocher; Michal Krawczyk; Frans van Winden
  3. An experimental analysis of team production in networks By Enrique Fatas; Miguel A. Melendez Jimenez; Hector Solaz
  4. Auctioning Incentive Contracts: An Experimental Study By Sander Onderstal; Arthur Van de Meerendonk
  5. Do People Make Strategic Commitments? Experimental Evidence on Strategic Information Avoidance By Anders Poulsen; Michael Roos
  6. Social Preferences and Perceived Intentions. An experiment with Normally Developing and Autistic Spectrum Disorders Subjects By V.Pelligra; A.Isoni; R.Fadda; I.Doneddu
  7. Do religious contexts elicit more trust and altruism? An experiment on Facebook By Bradley J. Ruffle; Richard Sosis
  8. Social Comparison and Risky Choices By Jona Linde; Joep Sonnemans
  9. Grosswage illusion in a real effort experiment By Martin Fochmann; Joachim Weimann; Kay Blaufus; Jochen Hundsdoerfer; Dirk Kiesewetter
  10. Reconciling Pro-Social vs. Selfish Behavior - Evidence for the Role of Self-Control By Martinsson, Peter; Myrseth, Kristian Ove R.; Wollbrant, Conny
  11. Reining in Excessive Risk Taking by Executives : Experimental Evidence By Mathieu Lefebvre; Ferdinand M. Vieider
  12. Gender at work: Productivity and incentives By Migheli, Matteo
  13. Coordination and Critical Mass in a Network Market: An Experimental Investigation By Bradley J. Ruffle; Avi Weiss; Amir Etziony
  14. Investment Behavior and the Biased Perception of Limited Loss Deduction in Income Taxation By Martin Fochmann; Dirk Kiesewetter; Abdolkarim Sadrieh
  15. Brand, Knowledge and False Sense of Security By Wendy Hui
  16. Bounding Preference Parameters under Different Assumptions about Beliefs: a Partial Identification Approach By Charles Bellemare; Luc Bissonnette; Sabine Kröger

  1. By: Gürerk, Özgür; Selten, Reinhard
    Abstract: We explore the effects of the provision of an information-processing instrument - payoff tables - on behavior in experimental oligopolies. In one experimental setting, subjects have access to payoff tables whereas in the other setting they have not. It turns out that this minor variation in presentation has non-negligible effects on participants' behavior, particularly in the initial phase of the experiment. In the presence of payoff tables, subjects tend to be more cooperative. As a consequence, collusive behavior is more likely and quickly to occur.
    Keywords: Collusion; Cournot oligopoly; payoff tables; bounded rationality; framing; presentation effect
    JEL: L13 C92 C72
    Date: 2010–04–29
  2. By: Martin Kocher (University of Munich); Michal Krawczyk (Warsaw University); Frans van Winden (CREED, University of Amsterdam)
    Abstract: We analyze one of the explanations why people participate in lotteries. Our hypothesis stipulates that part of the value that a unit of money buys in lotteries is consumed before the actual resolution in the form of emotions such as hope. In other words, a person holding a lottery ticket may prefer a delayed resolution of risk due to positive anticipatory emotions. This conjecture is tested in an experiment with real lottery tickets. We show that our theoretical considerations may contribute to explaining empirical puzzles associated with lottery participation, timing of resolution and the spreading of drawings. More specifically, we find that a substantial number of participants prefer delayed resolution, that anticipated thrill is the main variable explaining this choice, that emotions actually experienced during the waiting period are indeed predominantly positive and correlated with predictions. Finally, we find that a great majority prefers to 'spread' chances, that is, to obtain one ticket for each of two drawings rather than two for the same drawing.
    Keywords: lotteries; anticipation; experiment
    JEL: C93 D81
    Date: 2009–11–12
  3. By: Enrique Fatas (ERI-CES); Miguel A. Melendez Jimenez (University of Malaga); Hector Solaz (ERI-CES)
    Abstract: Experimental and empirical evidence highlights the role of networks on social outcomes. In this paper we test the properties of exogenously fixed networks in team production. Subjects make the same decisions in a team-work environment under four different organizational networks: The line, the circle, the star, and the complete network. In all the networks, links make information available to neighbors. This design allows us to analyze decisions across networks and a variety of subjects’ types in a standard linear team production game. Contribution levels differ significantly across networks and the star is the most efficient incomplete one. Moreover, our results suggest that subjects act as conditional cooperators with respect to the information received from the network.
    Keywords: public goods, networks, experiments
    JEL: H41 C92
    Date: 2010–05
  4. By: Sander Onderstal (University of Amsterdam); Arthur Van de Meerendonk (Maastricht University)
    Abstract: In this note, we experimentally examine the relative performance of price-only auctions and multi-attribute auctions. We do so in procurement settings where the buyer can give the winning bidder incentives to exert effort on non-price dimensions after the auction. Both auctions theoretically implement the surplus maximizing mechanism. Our experiment confirms this result. Moreover, we observe that the “pie” is shared the same in both auctions between buyer and suppliers both in theory and in the lab (after accounting for learning effects).
    Keywords: Procurement; Price-only auctions; Multi-attribute auctions; Incentive Contracts; Laboratory Experiment
    JEL: C91 D44 D86
    Date: 2009–11–13
  5. By: Anders Poulsen (School of Economics, University of East Anglia); Michael Roos (Ruhr-Universitaet Bochum; School of Economics, University of East Anglia)
    Abstract: Game theory predicts that players make strategic commitments that may appear counter-intuitive. We conducted an experiment to see if people make a counter-intuitive but strategically optimal decision to avoid information. The experiment is based on a sequential Nash demand game in which a responding player can commit ahead of the game not to see what a proposing player demanded. Our data show that subjects do, but only after substantial time, learn to make the optimal strategic commitment. We find only weak evidence of physical timing effects.
    Keywords: Strategic commitment, commitment, bargaining, strategic value of information, physical timing effects, endogenous timing, experiment
    JEL: J3 J6 M5
    Date: 2010–04–23
  6. By: V.Pelligra; A.Isoni; R.Fadda; I.Doneddu
    Abstract: Models of social preferences explain departures from pure self-interest as a consequence of either outcome-based or intention-based other-regarding motives. Various experimental studies lend support to the conclusion that subjects behave as if they conditioned their behaviour on the perceived intentions of others. We present a new experiment that explores this as if clause by making the ability to detect intentions a treatment variable. We compare normally developing children with autistic children – typically unable to perceive intentions – and find differences consistent with the hypothesis that behaviour responds to intentions, especially if unkind.
    Keywords: Social Preferences; Theory of Mind; Intentionality; Autism
    JEL: C72 C91
    Date: 2010
  7. By: Bradley J. Ruffle (Department of Economics, Ben-Gurion University of the Negev); Richard Sosis (Department of Anthropology, University of Connecticut)
    Abstract: We design a decision-making scenario experiment on Facebook to measure subjects’ altruism and trust toward attendees of a religious service, a fitness class and a local music performance. Secular and religious subjects alike display significantly more altruism and trust toward the synagogue attendees than participants at the other two venues. By all measures of religiosity, even the most secular subjects behave more prosocially in the religious venue than in the comparable non-religious settings. We also find that secular subjects are just as altruistic toward synagogue and prayer group members as religious subjects are. These findings support recent theories that emphasize the pivotal role of religious context in arousing high levels of prosociality among those who are religious. Finally, our results offer startlingly little evidence for the widely documented religious-secular divide in Israel.
    Keywords: religion, trust, altruism, religious context, religious-secular conflict
    Date: 2010
  8. By: Jona Linde (University of Amsterdam); Joep Sonnemans (University of Amsterdam)
    Abstract: This study attempts to combine two traditional fields in microeconomics: individual decision making under risk and decision making in an interpersonal context. The influence of social comparison on risky choices is explored in an experiment in which participants make a series of choices between lotteries with only positive outcomes. Three kinds of choice situations are employed. In the loss and gain context the social referent receives a fixed payoff that is respectively higher and lower than all possible payoffs of the decision maker. In the neutral context social referent and decision maker will always earn the same amount. In the gain and loss contexts the decision maker has no influence on the earnings of the social referent so strategic behavior or social preferences can play no role. We find that decision makers are more risk-averse in the loss context than in the gain context, with the behavior in the neutral context in between. This result is in opposition to the predictions of prospect theory extrapolated to a social context.
    Keywords: Social comparison; social preferences; decision making under risk; experiment
    JEL: C91 C92 D63
    Date: 2009–11–11
  9. By: Martin Fochmann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Joachim Weimann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Kay Blaufus (Free University of Frankfurt (Oder)); Jochen Hundsdoerfer (Free University Berlin); Dirk Kiesewetter (Faculty of Economics and Management, JUlius-Maximilians University Würzburg)
    Abstract: In a controlled laboratory experiment, subjects had to fold letters in order to earn money. While the net income per letter was the same in the three treatments, the gross income varied and the tax rate was 0, 25% and 50%. Although work incentives should be the same in all treatments, subjects worked harder and longer when they were taxed. We conclude that this is due to a ‘gross-wage illusion effect’. The existence of this effect demonstrates that not only the tax rate and the tax base are of importance for work incentives, but also the perception of a tax.
    JEL: H2 C91
    Date: 2010–02
  10. By: Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Myrseth, Kristian Ove R. (ESMT European School of Management and Technology); Wollbrant, Conny (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: We test the proposition that individuals may experience a self-control conflict between short-term temptation to be selfish and better judgment to act pro-socially. Using a dictator game and a public goods game, we manipulated the likelihood that individuals identified self-control conflict, and we measured their trait ability to implement self-control strategies. Consistent with our hypothesis, we find that trait self-control exhibits a positive and significant correlation with pro-social behavior in the treatment that raises likelihood of conflict identification, but not in the treatment that reduces likelihood of conflict identification.<p>
    Keywords: self-control; pro-social behavior; altruism; experiment.
    JEL: D01 D64 D70
    Date: 2010–05–10
  11. By: Mathieu Lefebvre (University of Liège, CREPP; Boulevard du Rectorat, 7 Bâtiment 31, boîte 39, 4000 Liège, Belgium); Ferdinand M. Vieider (GATE, CNRS UMR 5824 - Université de Lyon, 93 Chemin des Mouilles - B.P. 167, 69131 Ecully Cedex, France)
    Abstract: Compensation of executives by means of equity has long been seen as a means to tie executives? income to company performance, and thus as a solution to the principal-agent dilemma created by the separation of ownership and management in publicly owned companies. The overwhelming part of such equity compensation is currently provided in the form of stock-options. Recent events have however revived suspicions that the latter may induce excessive risk taking by executives. In an experiment, we find that subjects acting as executives do indeed take risks that are excessive from the perspective of shareholders if compensated through options. Comparing compensation mechanisms based on stock-options to long-term stock-ownership plans, we find that the latter significantly reduce the uptake of excessive risks by aligning the executives? interests with those of shareholders. Introducing an institutionalized accountability mechanism consisting in the requirement for executives to justify their choices in front of a shareholder reunion also reduces excessive risk taking, and appears to be even more effective than long-term stock-ownership plans. A combination of long-term stock-ownership plans and increased accountability thus seem a promising direction for reining in excessive risk taking by executives.
    Keywords: executive compensation; stock-options; incentives; accountability; risk taking
    JEL: G28 G32 J33 L22
    Date: 2010
  12. By: Migheli, Matteo
    Abstract: This paper analyses the relationship between workers' gender and monetary incentives in an experimental setting based on a double-tournament scheme. The participants must choose between a piece-rate payment or a performance prize. The results show that women tend to shy away from competition, and are less sensitive than men to the monetary incentives of the tournament. In addition the tournament scheme induces males, but not women, to signal their ability and to select the contract which is more profitable for them.
    Keywords: gender, incentives, work, experiment
    JEL: C91 J16 J41
    Date: 2010–05
  13. By: Bradley J. Ruffle (Department of Economics, Ben-Gurion University of the Negev); Avi Weiss (Department of Economics Bar-Ilan University); Amir Etziony (Hewlett-Packard)
    Abstract: A network market is a market in which the benefit each consumer derives from a good is an increasing function of the number of consumers who own the same or similar goods. A major obstacle that plagues the introduction of a network good is the ability to reach critical mass, namely, the minimum number of buyers required to render purchase worthwhile. This can be likened to a coordination game with multiple Pareto-ranked equilibria. We introduce an experimental paradigm to study consumers' ability to coordinate on purchasing the network good. Our results highlight the central importance of the level of the critical mass.
    Keywords: experimental economics, network goods, coordination game, critical mass
    JEL: C92 L19
    Date: 2010
  14. By: Martin Fochmann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Dirk Kiesewetter (Faculty of Economics and Management, JUlius-Maximilians University Würzburg); Abdolkarim Sadrieh (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: We use a laboratory experiment to study the extent to which investors’ choices are affected by limited loss deduction in income taxation. We first compare investment behavior in the no tax baseline to a tax control setting, in which the income from investments is taxed. We find that investors significantly reduce their risk-taking as predicted by theory. Next we compare the baseline investment choices to choices under three different types of income taxation. We observe that risk-taking is significantly increased with partial and with capped loss deduction, but is unaffected by a tax system that allows no loss deduction. Since in all these treatments the after tax outcomes of the prospects were identical, we conjecture that investors have a positively biased perception of partial and capped loss deduction that promotes their willingness to take risks.
    Keywords: risk-taking behavior, distorting taxation, tax perception
    JEL: C91 D14 H24
    Date: 2010–01
  15. By: Wendy Hui (Nottingham University Business School Ningbo, China)
    Abstract: A 2x2 experiment was used to study the effects of brand name and knowledge on the adoption of antivirus software. Subjects were randomly assigned to groups and presented with different brands and product choice sets. It was found that (1) brand name affects product choice, (2) a strong brand may tend to induce a false sense of security and lead to poor produce choice, and (3) knowledge can reduce consumers’ reliance on brand name in security technology adoption decision.
    Keywords: Brand, Knowledge, Experiment, Consumer Market, Technology Adoption
    Date: 2010–05–06
  16. By: Charles Bellemare; Luc Bissonnette; Sabine Kröger
    Abstract: We show how bounds around preferences parameters can be estimated under various levels of assumptions concerning the beliefs of senders in the investment game. We contrast these bounds with point estimates of the preference parameters obtained using non-incentivized subjective belief data. Our point estimates suggest that expected responses and social preferences both play a significant role in determining investment in the game. Moreover, these point estimates fall within our most reasonable bounds. This suggests that credible inferences can be obtained using non-incentivized beliefs.
    Keywords: Partial identification, preferences, beliefs, decision making under uncertainty
    JEL: C81
    Date: 2010

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.