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on Experimental Economics |
| By: | Bart J. Wilson (Economic Science Institute, Chapman University); David W. Findlay (Department of Economics, Colby College); James W. Meehan, Jr. (Department of Economics, Colby College); Charissa P. Wellford (Independent Researcher); Karl Schurter (Undergraduate, Department of Economics, University of Virginia) |
| Abstract: | The payday loan industry is one of the fastest growing segments of the consumer financial services market in the United States. The purpose of our study is to design an environment similar to the one that payday loan customers face. We then conduct a laboratory experiment to examine what effect, if any, the existence of payday loans has on individuals’ abilities to manage and to survive financial setbacks. Our primary objective is to examine whether access to payday loans improves or worsens the likelihood of financial survival in our experiment. We also test the degree to which people’s use of payday loans affects their ability to survive financially. We find that payday loans help the subjects to absorb expenditure shocks and, therefore, survive financially. However, subjects whose demand for payday loans exceeds a certain threshold level are at a greater risk than a corresponding subject in the treatment in which payday loans do not exist. |
| JEL: | D14 C9 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:10-13&r=exp |
| By: | Bart J. Wilson (Economic Science Institute, Chapman University); Taylor Jaworski (Department of Economics, University of Arizona); Karl Schurter (Department of Economics, University of Virginia); Andrew Smyth (Department of Economics, Florida State University) |
| Abstract: | This paper uses a laboratory experiment to probe the proposition that property emerges anarchically out of social custom. We test the hypothesis that whalers in the 18th and 19th century developed rules of conduct that minimized the sum of the transaction and production costs of capturing their prey, the primary implication being that different ecological conditions lead to different rules of capture. Holding everything else constant, we find that simply imposing two different types of prey is insufficient to observe two different rules of capture. Another factor is essential, namely that the members of the community are civil-minded. |
| Keywords: | property rights, endogenous rules, whaling, experimental economics |
| JEL: | C92 D23 K11 N50 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:10-12&r=exp |
| By: | Peter DeScioli (Economic Science Institute, Chapman University); Bart J. Wilson (Economic Science Institute, Chapman University) |
| Abstract: | Research shows that many animal species have morphological and cognitive adaptations for fighting with others to gain resources, but it remains unclear how humans make fighting decisions. Non-human animals often adaptively calibrate fighting behavior to ecological variables such as resource quantity and whether the resource is distributed uniformly or clustered in patches. Also, many species use strategies to reduce fighting costs such as resolving disputes based on power asymmetries or conventions. Here we show that humans apply an ownership convention in response to the problem of severe fighting. We designed a virtual environment where ten participants, acting as avatars, could forage and fight for electronic food items (convertible to cash). In the patchy condition, we observed an ownership convention—the avatar who arrives first is more likely to win—but in the uniform condition, where severe fighting is rare, the ownership convention is absent. |
| Date: | 2010–03 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:10-11&r=exp |
| By: | Curtis R. Price (Department of Economics & Finance, College of Business, University of Southern Indiana); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University) |
| Abstract: | We design an experiment to test if the manner in which subjects receive the endowment has any bearing on the amount of overbidding in contests. We find that overbidding is significantly higher when subjects are given a large per-experiment endowment rather than when the endowment is given per-period. Risk-aversion and non-monetary utility of winning play important roles in explaining our findings. |
| Keywords: | rent-seeking, contest, experiments, overbidding, endowment |
| JEL: | C72 C91 D72 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:09-07&r=exp |
| By: | Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University); Jingjing Zhang (Department of Economics, McMaster University) |
| Abstract: | This study reports an experiment that examines whether groups can better comply with theoretical predictions than individuals in contests. Our experiment replicates previous findings that individual players significantly overbid relative to theoretical predictions, incurring substantial losses. There is high variance in individual bids and strong heterogeneity across individual players. The new findings of our experiment are that groups make 25% lower bids, their bids have lower variance, and group bids are less heterogeneous than individual bids. Therefore, groups receive significantly higher and more homogeneous payoffs than individuals. We elicit individual and group preferences towards risk using simple lotteries. The results indicate that groups make less risky decisions, which is a possible explanation for lower bids in contests. Most importantly, we find that groups learn to make lower bids from communication and negotiation between group members. |
| Keywords: | rent-seeking, contest, experiments, risk, over-dissipation, group decision-making |
| JEL: | C72 C91 C92 D72 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:09-09&r=exp |
| By: | Timothy N. Cason (Department of Economics, Krannert School of Management, Purdue University); Anya Savikhin (The University of Chicago); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University) |
| Abstract: | Motivated by problems of coordination failure observed in weak-link games, we experimentally investigate behavioral spillovers for order-statistic coordination games. Subjects play the minimum- and median-effort coordination games simultaneously and sequentially. The results show the precedent for cooperative behavior spills over from the median game to the minimum game when the games are played sequentially. Moreover, spillover occurs even when group composition changes, although the effect is not as strong. We also find that the precedent for uncooperative behavior does not spill over from the minimum game to the median game. These findings suggest guidelines for increasing cooperative behavior within organizations. |
| Keywords: | coordination, order-statistic games, experiments, cooperation, minimum game, behavioral spillover |
| JEL: | C72 C91 |
| Date: | 2009–11 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:09-06&r=exp |
| By: | Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University) |
| Abstract: | This article experimentally studies a two-stage elimination contest and compares its performance with a one-stage contest. Contrary to the theory, the two-stage contest generates higher revenue than the equivalent one-stage contest. There is significant over-dissipation in both stages of the two-stage contest and experience diminishes over-dissipation in the first stage but not in the second stage. Our experiment provides evidence that winning is a component in a subject’s utility. A simple behavioral model that accounts for a non-monetary utility of winning can explain significant over-dissipation in both contests. It can also explain why the two-stage contest generates higher revenue than the equivalent one-stage contest. |
| Keywords: | rent-seeking, contest, contest design, experiments, risk aversion, over-dissipation |
| JEL: | C72 C91 D72 |
| Date: | 2009–07 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:09-04&r=exp |
| By: | Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University); Jingjing Zhang (Department of Economics, McMaster University) |
| Abstract: | This experiment studies the internal and external effects of communication in a multilevel trust game. In this trust game, the first player can send any part of his endowment to the second player. The amount sent gets tripled. The second player decides how much to send to the third player. The amount is again tripled, and the third player then decides the allocation among the three players. The baseline treatment with no communication shows that the first and second players send significant amounts and the third player reciprocates. When we allow communication only between the second and third players, the amounts sent and returned between these two increase. The new interesting finding is that there are external effects of communication: the first player who is outside communication sends 60% more and receives 140% more than in the no communication treatment. As a result, social welfare and efficiency increase from 48% to 73%. |
| Keywords: | multi-level trust games, experiments, reciprocity, communication |
| JEL: | C72 C91 D72 |
| Date: | 2009–09 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:09-08&r=exp |
| By: | Anya Savikhin (The University of Chicago); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University) |
| Abstract: | MWe experimentally investigate simultaneous decision-making in two contrasting environments: a competitive environment (a contest) and a cooperative environment (a voluntary contribution mechanism). We find that the cooperative nature of the voluntary contribution mechanism spills over to the contest, decreasing sub-optimal overbidding in the contest. However, contributions to the public good are not affected by simultaneous participation in the contest. There is a significant negative correlation between decisions made in competitive and cooperative environments, i.e. more cooperative subjects tend to be less competitive and vice versa. This correlation can be rationalized by heterogeneous social preferences towards inequality but not by bounded rationality theory. |
| Keywords: | cooperation, competition, public goods, contests, experiments, behavioral spillover |
| JEL: | C72 C91 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:10-09&r=exp |
| By: | Timothy N. Cason (Department of Economics, Krannert School of Management, Purdue University); William A. Masters (Department of Agricultural Economics, Purdue University); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University) |
| Abstract: | This experiment compares the performance of two contest designs: a standard winnertake- all tournament with a single fixed prize, and a novel proportional-payment design in which that same prize is divided among contestants by their share of total achievement. We find that proportional prizes elicit more entry and more total achievement than the winner-take-all tournament. The proportional-prize contest performs better by limiting the degree to which heterogeneity among contestants discourages weaker entrants, without altering the performance of stronger entrants. These findings could inform the design of contests for technological and other improvements, which are widely used by governments and philanthropic donors to elicit more effort on targeted economic and technological development activities. |
| Keywords: | performance pay, tournament, piece rate, tournament design, contest, experiments, risk aversion, feedback, gender |
| JEL: | C72 D72 J33 |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:10-10&r=exp |
| By: | Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University) |
| Abstract: | This laboratory experiment studies two-stage contests between political parties. In the first stage, parties run their primaries and in the second stage the winners of the primaries compete in the general election. The resource expenditures in the first stage by the winning candidates are partially or fully carried over to the second stage. Experimental results support all major theoretical predictions: the first stage expenditures and the total expenditures increase, while the second stage expenditures decrease in the carryover rate. Consistent with the theory, the total expenditures increase in the number of candidates and the number of parties. Contrary to the theory, however, expenditures in both stages of the competition exceed theoretical predictions. Disclosing information about the opponent’s expenditures in the first stage increases the second stage expenditures and decreases the first stage expenditures. |
| Keywords: | political contest, experiments, information uncertainty, over-expenditures |
| JEL: | C72 C91 D72 |
| Date: | 2009–12 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:09-10&r=exp |
| By: | MOLIS, Elena (FacultŽs Universitaires Saint-Louis, CEREC, B-1000 Bruxelles, Belgium; UniversitŽ catholique de Louvain, CORE, B-1348 Louvain-la-Neuve, Belgium); VESZTEG, Robert F. (Departamento de Econom’a, Universidad Carlos III de Madrid, E-28903 Getafe (Madrid), Spain) |
| Abstract: | We use laboratory experiments to analyze decentralized decision-making in one-sided matching markets. We find that subjects tend to make decisions in line with theoretical models, as their offering and accepting decisions are only guided by the objective of improving upon the status quo. However, isolated individual mistakes, that do not disappear with experience or time, often make theoretically-stable matchings unstable in the laboratory. Markets with incomplete infor- mation are especially prone to this problem. |
| Keywords: | convergence, experiments, one-sided matching, stability |
| JEL: | C78 C91 D82 |
| Date: | 2010–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2010011&r=exp |
| By: | Gabriele Esposito; Eric Guerci; Nobuyuki Hanaki; Xiaoyan Lu; Naoki Watanabe |
| Abstract: | We investigate experimentally whether subjects can learn, from their limited experiences, about relationships between the distribution of votes in a group and associated voting powers in weighted majority voting systems (WMV). Subjects are asked to play two-stage games repeatedly. In the second stage of the game, a group of four subjects bargains over how to divide fixed amount of resources among themselves through the WMV determined in the first stage. In the first stage, two out of four subjects in the group, independently and simultaneously, choose from two options that jointly determine the distribution of a given number of votes among four members. These two subjects face a 2 × 2 matrix that shows the distribution of votes, but not associated voting powers, among four members for each outcome. Therefore, to obtain higher rewards, subjects need to learn about the latter by actually playing the second stage. The matrix subjects face in the first stage changes during the experiment to test subjects' understanding of relationships between distribution of votes and voting power. The results of our experiments suggest that although (a) many subjects learn to choose, in the votes apportionment stage, the option associated with a higher voting power, (b) it is not easy for them to learn the underlying relationships between the two and correctly anticipate their voting powers when they face a new distribution of votes. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:tsu:tewpjp:2010-005&r=exp |
| By: | Alpízar, Francisco (Environment for Development Center for Central America, CATIE); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | We conducted a field experiment in a protected area to explore the effects of conformity to a social reference versus a comparable, but imposed, suggested donation. As observed before, we see visitors conforming to the changing social reference. On the other hand, the treatment in which we suggested a donation resulted in lower shares of visitors donating, compared to the social reference treatment, and lower conditional donations even compared to the control. We concluded that visitors look at their peers as a reference to conform to, but partially reject being confronted with an imposed suggestion on how to behave.<p> |
| Keywords: | Conformity; donation; field experiment |
| JEL: | C93 D10 D60 Q50 |
| Date: | 2010–06–02 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0452&r=exp |
| By: | Loukas Balafoutas; Matthias Sutter |
| Abstract: | Recent research has shown that women shy away from competition more often than men. We evaluate experimentally three alternative policy interventions to promote women in competitions: Quotas, Preferential Treatment, and Repetition of the Competition unless a critical number of female winners is reached. We find that Quotas and Preferential Treatment encourage women to compete significantly more often than in a control treatment, while efficiency in selecting the best candidates as winners is not worse. The level of cooperation in a post-competition teamwork task is even higher with successful policy interventions. Hence, policy measures promoting women can have a double dividend. |
| Keywords: | Competition, gender gap, experiment, affirmative action, teamwork, coordination |
| JEL: | C91 |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2010-12&r=exp |
| By: | Lisa Bruttel; Tim Friehe |
| Abstract: | This paper presents experimental evidence on the way in which the design of law enforcement impacts legal compliance. The experiment includes two law enforcement designs: one in which sanctioning results in victim-compensation and one in which sanctions are rent-seeking devices for the enforcer. We show that in the rent-seeking design (i) potential violators choose non-compliance more often and (ii) the average violator tries to avoid detection less aggressively. |
| Keywords: | norm compliance, law enforcement, avoidance, experiment |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0050&r=exp |
| By: | Moses Shayo; Alon Harel |
| Abstract: | Standard theory assumes that voters' preferences over actions (voting) are induced by their preferences over electoral outcomes (policies, candidates). But voters may also have non-consequentialist (NC) motivations: they may care about how they vote even if it does not a¤ect the outcome. When the likelihood of being pivotal is small, NC motivations can dominate voting behavior. To examine the prevalence of NC motivations, we design an experiment that exogenously varies the probability of being pivotal yet holds constant other features of the decision environment. We find a significant e¤ect, consistent with at least 12.5% of subjects being motivated by NC concerns. |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp545&r=exp |
| By: | Yazhen Gong |
| Abstract: | Measuring trust, a cognitive social capital that can significantly affect cooperation among individuals and groups to take collective actions for joint benefits, is an important empirical research. This study aimed to understand the determinants of social capital with specific focus on the effect of individuals' bonding social capital and bridging social capital. It explored the methods of measuring trust and identified the determining factors affecting trust/trustworthiness among village members in southwestern China's Yunnan province. A survey was done on 600 farmers in 30 administrative villages. A trust game was conducted using the respondents as subjects of the experiments, 300 playing the role of senders and 300 playing the role of receivers. Results showed that education level could positively and significantly predict both players' behaviors. The percentage of expenditure on gift exchange in the sender's total family expenditure and trust measured were robust to the model's specifications and could almost predict the sender's behavior. Meanwhile, there was no significant evidence the surveyed trust could predict the receiver's behavior. The village's openness to the market and outside world also negatively and significantly predicted both players' behaviors. It showed that the receiver's family participation in closed versus opened networks had an opposite impact on receiver's behavior. Hence, social connection variables could play more important roles than individual demographic characteristics in interactions that involve social capital. However, social capital could be eroded when the villages become more open to the outside world and when informal institutions are gradually substituted by modern formal institutions. |
| Keywords: | erosion, China |
| Date: | 2010–04 |
| URL: | http://d.repec.org/n?u=RePEc:eep:report:rr2010043&r=exp |
| By: | Urs Fischbacher; Simon Schudy |
| Abstract: | Comprehensive reforms often fail or become piecemeal during preparatory phase of the legislation. A promising candidate to explain the failure of comprehensive reforms is vote trading on a subset of individual bills included in the original comprehensive reform. When legislators expect profitable vote trading on a subset of bills to be possible, they may ex ante strategically block comprehensive reforms. We analyze in a laboratory experiment whether trust and reciprocity among legislators leads to vote trading in sequential bill by bill procedures when commitment devices are missing and whether such vote trading possibilities cause resistance to comprehensive reform. We find that (i) transparent voting procedures facilitate vote trading based on trust in other legislators' reciprocity whereas (ii) secretive procedures reduce trust in others' reciprocity and makes vote trades difficult. (iii) Resistance to comprehensive reform occurs when legislators know that the alternative procedure to voting on the comprehensive reform is a transparent sequential bill by bill voting procedure, whereas (iv) legislators opt for voting on a comprehensive reform when the alternative procedure is a sequential secret ballot. |
| Keywords: | Comprehensive Reform, Sequential Voting, Vote Trading, Experiment |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0051&r=exp |
| By: | Christoph Bühren (University of Kassel); Björn Frank (University of Kassel) |
| Abstract: | In a beauty contest experiment with over 6,000 chess players, ranked from amateur to world class, we found that Grandmasters act very similar to other humans. This even holds true when they play exclusively against players of approximately their own strength. In line with psychological research on chess players' thinking, we argue that they are not more rational in a game theoretic sense per se. Their skills are rather specific for their game. |
| Keywords: | chess, beauty contest, cognitive transfer |
| JEL: | C93 C72 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:mar:magkse:201019&r=exp |
| By: | Ro'i Zultan; Maya Bar-Hillel; Nitsan Guy |
| Abstract: | "Waste not want not" expresses our culture's aversion to waste. "I could have gotten the same thing for less" is a sentiment that can diminish pleasure in a transaction. We study people's willingness to "pay" to avoid this spoiler. In one scenario, participants imagined they were looking for a rental apartment, and had bought a subscription to an apartment listing. If a cheaper subscription had been declined, respondents preferred not to discover post hoc that it would have sufficed. Specifically, they preferred ending their quest for the ideal apartment after seeing more, rather than fewer, apartments. Other scenarios produced similar results. We conclude that people may sometimes prefer to be wasteful in order to avoid feeling wasteful. |
| Date: | 2010–05 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp550&r=exp |
| By: | Ayala Arad; Ariel Rubinstein |
| Date: | 2010–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:661465000000000073&r=exp |
| By: | Joseph E. Harrington, Jr. and Wei Zhao |
| Abstract: | In the context of an infinitely repeated Prisoners’ Dilemma, we explore how cooperation is initiated when players communicate and coordinate through their actions. There are two types of players - patient and impatient - which are private information. An impatient type is incapable of cooperative play, while if both players are patient types - and this is common knowledge - then they can cooperate with a grim trigger strategy. We find that the longer that players have gone without cooperating, the lower is the probability that they’ll cooperate in the next period. While the probability of cooperation emerging is always positive, there is a positive probability that cooperation never occurs. |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:jhu:papers:559&r=exp |
| By: | Sam Allgood; William Bosshardt; Wilbert van der Klaauw; Michael Watts |
| Abstract: | Studies regularly link levels of educational attainment to civic behavior and attitudes, but only a few investigate the role played by specific coursework. Using data collected from students who attended one of four public universities in our study, we investigate the relationship between economics coursework and civic behavior after graduation. Drawing from large samples of students in economics, business, or general majors, we compare responses across the three groups and by the number of undergraduate economics courses completed. We find that undergraduate coursework in economics is strongly associated with political party affiliation and with donations to candidates or parties, but not with the decision to vote or not vote. Nor is studying economics correlated with the likelihood (or intensity of) volunteerism. While we find that the civic behavior of economics majors and business majors is similar, it appears that business majors are less likely than general majors to engage in time-consuming behaviors such as voting and volunteering. Finally, we extend earlier studies that address the link between economics coursework and attitudes on public policy issues, finding that graduates who studied more economics usually reported attitudes closer to those expressed in national surveys of U.S. economists. Interestingly, we find the public policy attitudes of business majors to be more like those of general majors than of economics majors. |
| Keywords: | Education ; Economics - Study and teaching ; Business and education ; Human behavior ; Volunteers |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fednsr:450&r=exp |