nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒06‒18
fourteen papers chosen by
Daniel Houser
George Mason University

  1. Price Discovery in Emissions Permit Auctions By Burtraw, Dallas; Goeree, Jacob; Holt, Charles; Myers, Erica; Palmer, Karen; Shobe, William
  2. Airport slot allocation in Europe: economic efficiency and fairness By Lorenzo Castelli; Paola Pellegrini; Raffaele Pesenti
  3. Designing a Procurement Auction for Reducing Sedimentation: A Field Experiment in Indonesia By Beria Leimona; Brooke Kelsey Jack; Betha Lusiana; Rachman Pasha
  4. The endogenous nature of the measurement of social preferences By Smith, John
  5. Priming Cooperation in Social Dilemma Games By Drouvelis, Michalis; Metcalfe, Robert; Powdthavee, Nattavudh
  6. Embedding a Field Experiment in Contingent Valuation to Measure Context-Dependent Risk Preferences: Does Prospect Theory Explain Individual Responses for Wildfire Risk? By Kimberly Rollins; Mimako Kobayashi
  7. Gender, Competition and the Efficiency of Policy Interventions By Balafoutas, Loukas; Sutter, Matthias
  8. Social identity, group composition and public good provision: an experimental study By Chakravarty, Surajeet; Fonseca, Miguel A.
  9. THE IMPACT OF SOCIAL COMPARISONS ON RECIPROCITY By Simon Gaechter; Daniele Nosenzo; Martin Sefton
  10. Culture and Cooperation By Simon Gaechter; Benedikt Herrmann; Christian Thoeni
  11. A comparison of responses to single and repeated discrete choice questions By McNair, Ben J.; Bennett, Jeff; Hensher, David A.
  12. Does Racial and Ethnic Discrimination Vary Across Minority Groups? Evidence from a Field Experiment By Booth, Alison L.; Leigh, Andrew; Varganova, Elena
  13. The Effects of Lottery Prizes on Winners and their Neighbors: Evidence from the Dutch Postcode Lottery By Kuhn, Peter J.; Kooreman, Peter; Soetevent, Adriaan R.; Kapteyn, Arie
  14. Referenda under Oath By Nicolas Jacquemet; Alexander James; Stephane Luchini; Jason Shogren

  1. By: Burtraw, Dallas (Resources for the Future); Goeree, Jacob; Holt, Charles; Myers, Erica; Palmer, Karen (Resources for the Future); Shobe, William
    Abstract: Auctions are increasingly being used to allocate emissions allowances (“permits”) for cap and trade and common-pool resource management programs. These auctions create thick markets that can provide important information about changes in current market conditions. This paper reports a laboratory experiment in which half of the bidders experienced unannounced increases in their willingness to pay for permits. The focus is on the extent to which the predicted price increase due to the demand shift is reflected in sales prices under alternative auction formats. Price tracking is good for uniform-price, sealed-bid auctions and for multiround clock auctions, with or without end-of-round information about excess demand. Price inertia is observed for “pay as bid” (discriminatory) auctions, especially for a continuous discriminatory format in which bids could be changed at will during a prespecified time window, in part because “sniping” in the final moments blocked the full effect of the demand shock.
    Keywords: auction, greenhouse gases, price discovery, cap-and-trade, emissions allowances, laboratory experiment
    JEL: C92 D44 Q5
    Date: 2010–06–03
  2. By: Lorenzo Castelli (DEEI, University of Trieste); Paola Pellegrini (Dept. of Applied Mathematics, University of Venice); Raffaele Pesenti (Dept. of Applied Mathematics, University of Venice)
    Abstract: We propose a mechanism for solving the airport slot allocation problem in Europe. We consider the interdependence of the slots at different airports, and we maximize the efficiency of the system. Through an experimental analysis we quantitatively assess the cost imposed by grandfather rights, which constitute one of the main principles of the current slot allocation mechanism. Moreover, we introduce the possibility to fairly redistribute costs among airlines through monetary compensations. Our results suggest that it is possible to remove grandfather rights without significantly penalizing airlines.
    Keywords: Air Traffic Management; Airport slot allocation; Compensation mechanism; SESAR.
    JEL: C61 C44
    Date: 2010–06
  3. By: Beria Leimona (The World Agroforestry Center); Brooke Kelsey Jack (The World Agroforestry Center); Betha Lusiana (The World Agroforestry Center); Rachman Pasha (The World Agroforestry Center)
    Abstract: The setting of this study is a watershed in Lampung, Indonesia where soil erosion has broad implications for both on-site and off-site environmental damage. The strategy to engage farmers in environmental protection initiative is through the Payment for Environmental Services (PES) scheme. A key condition of PES is transparency regarding the conditions under which incentives or rewards can be granted. Balanced information and the power of transaction are the basis for any environmental service (ES). A contract procurement auction is an alternative mechanism for extracting information from ES providers on levels of payments or incentives that will cover their costs when joining a conservation program. This study tested the application of a procurement auction method to reveal hidden information on the opportunity costs of supplying environmental services. The result show that a seal-bid, multiple round second-price Vickrey auction with a uniform price can be applied where most of the auction participants have a low education level, low asset endowment, small plot size and where market-based competitiveness is not common. It reveals too that farmers' bids to be involved in conservation contracts is more dependent on their learning process during the auction than observable factors such as their socioeconomic background, their awareness of conservation and their social capital state. Finally, it shows that introducing procurement auction as a market-based approach to rural communities does not harm their social relationships and is an applicable method in a rural setting.
    Keywords: watershed, Indonesia
    Date: 2010–04
  4. By: Smith, John
    Abstract: Measures of preferences are primarily useful in that they are helpful in predicting behavior. We perform an experiment which demonstrates that the timing of the measurement of social preferences can affect such a measure. Researchers often measure social preferences by posing a series of dictator game allocation decisions; we use a particular technique, Social Value Orientation (SVO). We vary the order of the SVO measurement and a lager stakes dictator game. In our first study, we find that subjects with prosocial preferences act even more prosocially when the SVO measurement is administered first, whereas those with selfish preferences are unaffected by the order. In our second study we vary the order of the SVO measurement and a nonstandard dictator game. We do not find the effect found in the first study. This suggests that the effect found in the first study is driven by choices involving the size of surplus.
    Keywords: experimental economics; social values; dictator game; social value orientation
    JEL: D64 Z13 C91
    Date: 2010–06–13
  5. By: Drouvelis, Michalis (University of York); Metcalfe, Robert (University of Oxford); Powdthavee, Nattavudh (University of York)
    Abstract: Research on public goods mainly focuses its attention on the ability of incentives, beliefs and group structure to affect behaviour in social dilemma interactions. This paper investigates the pure effects of a rather subtle mechanism on social preferences in a one-shot linear public good game. Using priming techniques from social psychology, we activate the concept of cooperation and explore the extent to which this intervention brings about changes in people’s voluntary contributions to the public good and self-reported emotional responses. Our findings suggest that priming cooperation increases contribution levels, controlling for subjects' gender. Our priming effect is much stronger for females than for males. This difference can be explained by a shift in subjects' beliefs about contributions. We also find a significant impact of priming on mean positive emotional responses.
    Keywords: priming, contributions, beliefs, emotional responses, public goods experiments
    JEL: C92 D01 H41
    Date: 2010–05
  6. By: Kimberly Rollins (Department of Resource Economics, University of Nevada, Reno); Mimako Kobayashi (Department of Resource Economics, University of Nevada, Reno)
    Abstract: This paper contributes towards the development of an empirical approach applicable to contingent valuation to accommodate non-expected utility risk preferences. Combining elicitation approaches used in field experiments with contingent valuation, we embed an experimental design that systematically varies probabilities and losses across a survey sample in a willingness to pay elicitation format. We apply the proposed elicitation and estimation approaches to estimate the risk preferences of a representative homeowner who faces probabilistic wildfire risks and an investment option that reduces losses due to wildfire. Based on prospect theory, we estimate parameters of probability weighting, risk preferences and use individual characteristics as covariates for these parameters and as utility shifters. We find that risk preferences are consistent with prospect theory. We find that probability weighting may offer an explanation for respondents’ observed under investment in measures to reduce losses due to wildfire.
    Keywords: Prospect theory; Contingent valuation; Field experiment, Wildfire risk
    JEL: Q51 C93 D81
    Date: 2010–05
  7. By: Balafoutas, Loukas (University of Innsbruck); Sutter, Matthias (University of Innsbruck)
    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
  8. By: Chakravarty, Surajeet; Fonseca, Miguel A.
    Abstract: Social fragmentation has been identified as a potential cause for the under-provision of public goods in developing nations, as well as in urban communities in developed countries such as the U.S. We study the effect of social fragmentation on public good provision using laboratory experiments. We create two artificial social groups in the lab and we assign subjects belonging to both groups to a public good game. The treatment variable is the relative size of each social group, which is a proxy for social fragmentation. We find that while higher social fragmentation leads to lower public good provision, this effect is short-lived. Furthermore, social homogeneity does not lead to higher levels of contributions.
    Keywords: Social Identity; Public Goods; Social Fragmentation; Experiments.
    JEL: C92 D02 H41
    Date: 2010–06–07
  9. By: Simon Gaechter (University of Nottingham); Daniele Nosenzo (University of Nottingham); Martin Sefton (University of Nottingham)
    Abstract: This paper investigates how social comparison information about referent others (i.e. learning what similar others do and how they are treated) affects reciprocal relationships. Using a three-person gift-exchange game we study how employees’ reciprocity towards an employer is affected by exposure to pay comparison information (what co-workers earn) and effort comparison information (how co-workers perform). We find that pay comparison information does not affect reciprocity. Effort comparison information, however, influences reciprocal relationships in important ways: the ability to observe reciprocal behavior on the part of others strongly affects employees’ reciprocity towards the employer. While our data show that social information in principle may either erode or amplify reciprocal relationships, we find that, on average, social comparisons have a detrimental impact on reciprocity.
    Keywords: Reciprocity, gift-exchange, social information, social comparisons, pay comparisons
    JEL: A13 C92 J31
    Date: 2010–05
  10. By: Simon Gaechter (Centre of Decision Research and Experimental Economics, School of Economics, University of Nottingham); Benedikt Herrmann (Centre of Decision Research and Experimental Economics, School of Economics, University of Nottingham); Christian Thoeni (University of St. Gallen)
    Abstract: Does the cultural background influence the success with which genetically unrelated individuals cooperate in social dilemma situations? In this paper we provide an answer by analyzing the data of Herrmann et al. (Science 2008, pp. 1362-1367), who study cooperation and punishment in sixteen subject pools from six different world cultures (as classified by Inglehart & Baker (American Sociological Review 2000, pp. 19-51)). We use analysis of variance to disentangle the importance of cultural background relative to individual heterogeneity and group-level differences in cooperation. We find that culture has a substantial influence on the extent of cooperation, in addition to individual heterogeneity and group-level differences identified by previous research. The significance of this result is that cultural background has a substantial influence on cooperation in otherwise identical environments. This is particularly true in the presence of punishment opportunities.
    Keywords: human cooperation; punishment; culture; experimental public good games
    Date: 2010–05
  11. By: McNair, Ben J.; Bennett, Jeff; Hensher, David A.
    Abstract: According to neoclassical economic theory, a stated preference elicitation format comprising a single binary choice between the status quo and one alternative is incentive compatible under certain conditions. Formats typically used in choice experiments comprising a sequence of discrete choice questions do not hold this property. In this paper, the effect on stated preferences of expanding the number of binary choice tasks per respondent from one to four is tested using a split sample treatment in an attribute-based survey relating to the undergrounding of overhead electricity and telecommunications wires. We find evidence to suggest that presenting multiple choice tasks per respondent decreases estimates of expected willingness to pay. Preferences stated in the first of a sequence of choice tasks are not significantly different from those stated in the incentive compatible single binary choice task, but, in subsequent choice tasks, responses are influenced by cost levels observed in past questions. Three behavioural explanations can be advanced – weak strategic misrepresentation, reference point revision and cost-driven value learning. The evidence is contrary to the standard assumption of truthful response with stable preferences.
    Keywords: Choice experiment; willingness-to-pay; incentive compatibility; order effects; undergrounding
    JEL: L94 Q51
    Date: 2010–05
  12. By: Booth, Alison L. (University of Essex); Leigh, Andrew (Australian National University); Varganova, Elena (Australian National University)
    Abstract: We conduct a large-scale audit discrimination study to measure labor market discrimination across different minority groups in Australia – a country where one quarter of the population was born overseas. To denote ethnicity, we use distinctively Anglo-Saxon, Indigenous, Italian, Chinese, and Middle Eastern names, and our goal is a comparison across multiple ethnic groups rather than focusing on a single minority as in most other studies. In all cases, we applied for entry-level jobs and submitted a CV showing that the candidate had attended high school in Australia. We find economically and statistically significant differences in callback rates, suggesting that ethnic minority candidates would need to apply for more jobs in order to receive the same number of interviews. These differences vary systematically across groups, with Italians (a more established migrant group) suffering less discrimination than Chinese and Middle Easterners (who have typically arrived more recently). We also explore various explanations for our empirical findings.
    Keywords: discrimination, field experiments, employment
    JEL: J71 C93
    Date: 2010–05
  13. By: Kuhn, Peter J. (University of California, Santa Barbara); Kooreman, Peter (Tilburg University); Soetevent, Adriaan R. (University of Amsterdam); Kapteyn, Arie (RAND)
    Abstract: Each week, the Dutch Postcode Lottery (PCL) randomly selects a postal code, and distributes cash and a new BMW to lottery participants in that code. We study the effects of these shocks on lottery winners and their neighbors. Consistent with the life-cycle hypothesis, the effects on winners’ consumption are largely confined to cars and other durables. Consistent with the theory of in-kind transfers, the vast majority of BMW winners liquidate their BMWs. We do, however, detect substantial social effects of lottery winnings: PCL nonparticipants who live next door to winners have significantly higher levels of car consumption than other nonparticipants.
    Keywords: social interactions, natural experiments
    JEL: D12 C21
    Date: 2010–05
  14. 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 James (University of Wyoming - Department of Economics and Finance); 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 Shogren (Departement Economy and Finance, University of Wyoming - University of Wyoming)
    Abstract: Herein we explore whether a solemn oath can eliminate hypothetical bias in a voting referenda, a design commonly promoted in nonmarket valuation exercises for its incentive compatibility properties. First, we reject the null hypothesis that a hypothetical bias does not exist. Second, we cannot reject the hypothesis that people who sign an oath are as likely to vote for the public good (e.g., wind energy R&D) in a hypothetical referenda as in a real one. This result opens interesting avenues for improving the elicitation of preferences in the lab.
    Keywords: Dichotomous Choice Mechanism; Hypothetical bias; Oath; Preference revelation
    Date: 2010–06–08

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