nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒06‒26
sixteen papers chosen by
Daniel Houser
George Mason University

  1. Sequential vs. Simultaneous Schelling Models: Experimental Evidence By Juan Miguel Benito; Pablo Brañas-Garza; Penelope Hernandez; Juan A. Sanchis
  2. Imperfect Recall and Time Inconsistencies: An experimental test of the absentminded driver "paradox" By Vittoria M. Levati; Matthias Uhl; Ro'i Zultan
  3. On the Prevalence of Framing Effects Across Subject-Pools in a Two- Person Cooperation Game By Sebastian J. Goerg; Gari Walkowitz
  4. At the Mercy of the Prisoner Next Door. Using an Experimental Measure of Selfishness as a Criminological Tool By Thorsten Chmura; Christoph Engel; Markus Englerth; Thomas Pitz
  5. Social preferences in childhood and adolescence – A large-scale experiment By Matthias Sutter; Francesco Feri; Martin G. Kocher; Peter Martinsson; Katarina Nordblom; Daniela Rützler
  6. Inducing Strategic Bias: and its implications for Choice Modelling design By Michael Burton
  7. An Experimental Contribution to the Theory of Customary (International) Law By Christoph Engel
  8. Behavioral Effects in Individual Decisions of Network Formation: Complexity Reduces Payoff Orientation and Social Preferences By Harmsen - van Hout, Marjolein J.W.; Dellaert, Benedict G.C.; Herings, P. Jean-Jacques
  9. Gender differences in competition emerge early in life By Matthias Sutter; Daniela Rützler
  10. Preferences for Short-Term Versus Long-Term Bonuses for Stock Investments By Hedesström, Martin; Andersson, Maria; Gärling, Tommy; Biel, Anders
  11. Are Happiness and Productivity Lower among University Students with Newly-Divorced Parents? An Experimental Approach By Sgroi, Daniel; Proto, Eugenio; Oswald, Andrew J.
  12. Implicit Contracts, Unemployment, and Labor Market Segmentation By Altmann, Steffen; Falk, Armin; Huffman, David
  13. Is it Live or is it Internet? Experimental Estimates of the Effects of Online Instruction on Student Learning By David N. Figlio; Mark Rush; Lu Yin
  14. Restricted versus unrestricted choice in labelled choice experiments: exploring the tradeoffs of expanding choice dimensions By Jill Windle; John Rolfe
  15. Preference for Randomization: Ambiguity Aversion and Inequality Aversion By Kaito Sato
  16. Auction Design with Loss Averse Bidders: The Optimality of All Pay Mechanisms By Eisenhuth, Roland

  1. By: Juan Miguel Benito (Universidad Publica de Navarra); Pablo Brañas-Garza (GLOBE: Universidad de Granada); Penelope Hernandez (ERI-CES); Juan A. Sanchis (ERI-CES)
    Abstract: This paper shows the results of experiments where subjects play the Schelling's spatial proximity model (1969, 1971a). Two types of experiments are conducted; one in which choices are made sequentially, and a variation of the first where the decision-making is simultaneous. The results of the sequential experiments are identical to Schelling's prediction: subjects finish in a segregated equilibrium. Likewise, in the variant of the simultaneous decision experiment the same result is reached: segregation. Subjects’ heterogeneity generates a series of focal points in the first round. In order to locate themselves, subjects use these focal points immediately, and as a result, the segregation takes place again. Furthermore, simultaneous experiments with commuting costs allow us to conclude that introducing positive moving costs does not affect segregation.
    Keywords: Schelling models, economic experiments, segregation
    Date: 2010–06
  2. By: Vittoria M. Levati (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Matthias Uhl (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany); Ro'i Zultan (Max Planck Institute of Economics, Strategic Interaction Group, Jena, Germany)
    Abstract: Absentmindedness is a special case of imperfect recall which according to Piccione and Rubinstein (1997a) leads to time inconsistencies. Aumann, Hart and Perry (1997a) question their argument and show how dynamic inconsistencies can be resolved. The present paper explores this issue from a descriptive point of view by examining the behavior of absentminded individuals in a laboratory environment. Absentmindedness is manipulated in two ways. In one treatment, it is induced by cognitively overloading participants. In the other, it is imposed by randomly matching decisions with decision nodes in the information set. The results provide evidence for time inconsistencies in all treatments. We introduce a behavioral principal, which best explains the data.
    Keywords: imperfect recall, absentmindedness, dynamic inconsistency, experiment
    JEL: C72 C91 D81 D83
    Date: 2010–06–16
  3. By: Sebastian J. Goerg (Max Planck Institute for Research on Collective Goods, Bonn); Gari Walkowitz (Department of Management, University of Cologne)
    Abstract: In this experimental study, involving subjects from Abu-Dis (West Bank), Chengdu (China), Helsinki (Finland), and Jerusalem (Israel), we test for a presentation bias in a two-person cooperation game. In the positive frame of the game, a transfer creates a positive externality for the opposite player, and in the negative frame, a negative one. Subjects in Abu-Dis and Chengdu show a substantially higher cooperation level in the positive externality treatment. In Helsinki and Jerusalem, no framing effect is observed. These findings are also reflected in associated first-order beliefs. We argue that comparisons across subject-pools might lead to only partially meaningful and opposed conclusions if only one treatment condition is evaluated. We therefore suggest a complementary application and consideration of different presentations of identical decision problems within (cross-cultural) research on subject-pool differences.
    Keywords: framing of decision problems, methodology, subject-pool differences
    JEL: A13 C72 C91 F51 Z13
    Date: 2010–06
  4. By: Thorsten Chmura (University of Bonn); Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Markus Englerth (Max Planck Institute for Research on Collective Goods, Bonn); Thomas Pitz (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Do criminals maximise money? Are criminals more or less selfish than the average subject? Can prisons apply measures that reduce the degree of selfishness of their inmates? Using a tried and tested tool from experimental economics, we cast new light on these old criminological questions. In a standard dictator game, prisoners give a substantial amount, which calls for more refined versions of utility in rational choice theories of crime. Prisoners do not give less than average subjects, not even than subjects from other closely knit communities. This speaks against the idea that people commit crimes because they are excessively selfish. Finally those who receive better marks at prison school give more, as do those who improve their marks over time. This suggests that this correctional intervention also reduces selfishness.
    Keywords: experiment, Crime, Prison, Dictator Game, Hurdle Model
    JEL: K42 C91 K14 C34
    Date: 2010–06
  5. By: Matthias Sutter; Francesco Feri; Martin G. Kocher; Peter Martinsson; Katarina Nordblom; Daniela Rützler
    Abstract: Social preferences have been shown to be an important determinant of economic decision making for many adults. We present a large-scale experiment with 883 children and adolescents, aged eight to seventeen years. Participants make decisions in eight simple, one-shot allocation tasks, allowing us to study the distribution of social preference types across age and across gender. Our results show that when children and teenagers grow older, inequality aversion becomes a gradually less prominent motivating force of allocation decisions. At the same time, efficiency concerns increase in importance for boys, and maximin-preferences turn more important in shaping decisions of girls.
    Keywords: Social preferences, children, age, gender, experiment
    JEL: C91 D63 D64
    Date: 2010–06
  6. By: Michael Burton (School of Agricultural and Resource Economics, University of Western Australia.)
    Abstract: It has been suggested that the nature of the task within a multi-attribute multi-alternative choice experiment may be sufficiently complex to make it difficult for individuals to develop response strategies to strategically bias their answers. This experiment tested that hypothesis by setting experimental conditions that provide incentives for strategic bias. By changing design parameters one can investigate whether the strategic bias can be reduced. The answer is effectively no: under most circumstances, respondents could find a strategy that achieved significant bias in inferred preferences. The circumstances where this did not occur (involving ranking alternatives, rather than selecting a single preferred alternative) the inferred preferences reflected neither the intended bias, nor their original preferences, making the answers useless to both respondent and researcher.
    Keywords: Strategic bias, choice modeling, complexity
    JEL: Q51 C91
    Date: 2010–05
  7. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: In their majority, public international lawyers postulate that for a new rule of customary law to originate, two conditions must be fulfilled: there must be consistent practice, and it must be shown that this practice is motivated by the belief that such behaviour is required in law. Maurice Mendelson (Recueil des Cours 272 (1998) 155) has challenged this view. He believes that the majority view ignores the fundamentally incomplete nature of public international law. He claims that the new rule emerges because mere practice leads to convergent expectations. This paper uses data from student experiments with a linear public good to show that behaviour con-verges even absent verbal communication; that convergence is guided by mean contributions in the previous round, which serve as an implicit norm; that freeriding on this implicit norm is re-garded as illegitimate; that cooperation can be stabilised at a high level if “reprisals” are permitted. Hence the mechanism of norm formation proposed by Maurice Mendelson is fully borne out by the experimental data.
    Keywords: experiment, customary international law, opinio iuris, linear public good
    JEL: H41 K33 D23 C91 F53
    Date: 2010–04
  8. By: Harmsen - van Hout, Marjolein J.W. (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Dellaert, Benedict G.C. (Department of Business Economics / Marketing Section, Erasmus School of Economics, Erasmus University Rotterdam); Herings, P. Jean-Jacques (Department of Economics, School of Business and Economics, Maastricht University)
    Abstract: Network formation constitutes an important part of many social and economic processes, but relatively little is known about how individuals make their linking decisions in networks. This article provides an experimental investigation of behavioral effects in individual decisions of network formation. Our findings demonstrate that the inherent complexity of the network setting makes individuals’ choices systematically less payoff-guided and also strongly reduces their social orientation. Furthermore, we show that specific network complexity features aggravate the former effect. These behavioral effects have important implications for researchers and managers working in areas that involve network formation.
    Keywords: network formation; individual decision making; behavioral effects; network complexity; payoff orientation; social preferences; choice experiments; mixed logit
    JEL: A14 C91 D85
    Date: 2010–05
  9. By: Matthias Sutter; Daniela Rützler
    Abstract: We study gender differences in the willingness to compete in a large-scale experiment with 1,035 children and teenagers, aged three to eighteen years. Using an easy math task for children older than eight years and a running task for the younger ones we find that boys are much more likely to enter a tournament than girls across the whole age spectrum considered here. This gender gap is observed already with three-year olds, indicating that gender differences in competitiveness emerge very early in life. The gap is robust to controlling for gender differences in risk attitudes and overconfidence.
    Keywords: Competition, gender gap, experiment, children, teenagers
    JEL: C91
    Date: 2010–06
  10. By: Hedesström, Martin (Department of Psychology, University of Gothenburg); Andersson, Maria (Department of Psychology, University of Gothenburg); Gärling, Tommy (Department of Psychology, University of Gothenburg); Biel, Anders (Department of Psychology, University of Gothenburg)
    Abstract: Performance-related bonuses in the finance sector are considered important tools to provide incentives. An example is that stock portfolio managers are awarded bonuses conditionally on their portfolios producing superior returns either relative to an index or equivalent funds. Concerns are however expressed that bonuses to portfolio managers are based on too short time intervals, which may impact negatively on the degree to which environmental and social factors are taken into account in investment decisions. The question addressed in this article is how bonus schemes can be designed so that delayed payouts will be equally motivating as short-term payouts. We have conducted two experiments to investigate preference for bonus payments that are paid out either frequently of infrequently. In Experiment 1 employing 27 undergraduates, preferences were measured for one certain long-term bonus versus four certain bonuses evenly distributed across time. A majority chose the short-term bonuses, and in order for a long-term bonus to be equally preferred the results showed that it needs to be approximately 40 percent higher than the four combined short-term bonuses. Experiment 2 employing another 36 undergraduates introduced uncertainty of outcomes which more accurately reflects the setting faced by stock investors. A four-year bonus is compared to four one-year bonuses. Uncertainty was the same, decreasing or increasing over the four years. The results showed that decreasing uncertainty made a majority prefer the four-year bonus to the added one-year bonuses. In conclusion, introducing uncertainty in choices concerning future outcomes is shown to reduce the extent to which future bonus outcomes are discounted relative to immediate bonus outcomes.
    Keywords: Portfolio management; Performance-related bonus; Time discounting
    Date: 2010–06–18
  11. By: Sgroi, Daniel (Department of Economics, University of Warwick); Proto, Eugenio (Department of Economics, University of Warwick); Oswald, Andrew J. (Department of Economics, University of Warwick and and Warwick Business School)
    Abstract: We live in a high-divorce age. Parents worry about the possibility of negative effects upon their children. This paper tests whether recent parental-divorce has deleterious consequences for grown children. Under controlled conditions, it measures students’ happiness with life, and their productivity in a standardized laboratory task. No negative effects from divorce can be detected. If anything, happiness and productivity are greater, particularly among males, if they have experienced parental divorce. Using longitudinal BHPS data -- to control for fixed effects -- we cross-check this result on happiness. Again, the evidence suggests that young people’s mental well-being improves after parental divorce.
    Keywords: Labor productivity ; divorce ; well-being ; happiness ; experimental economics JEL Codes: D03 ; J24 ; C91
    Date: 2010
  12. By: Altmann, Steffen (IZA); Falk, Armin (University of Bonn); Huffman, David (Swarthmore College)
    Abstract: We analyze the impact of imperfect contract enforcement on the emergence of unemployment. In an experimental labor market where trading parties can form long-term employment relationships, we compare a work environment where effort is observable, but not verifiable to a situation where explicit contracts are feasible. Our main result shows that unemployment is much higher when third-party contract enforcement is absent. Unemployment is involuntary, being caused by firms' employment and contracting policy. Moreover, we show that implicit contracting can lead to a segmentation of the labor market. Firms in both segments earn similar profits, but workers in the secondary sector face much less favorable conditions than their counterparts in primary-sector jobs.
    Keywords: incentives, implicit contracts, unemployment, fairness, dual labor markets
    JEL: C92 J64 M55
    Date: 2010–06
  13. By: David N. Figlio; Mark Rush; Lu Yin
    Abstract: This paper presents the first experimental evidence on the effects of live versus internet media of instruction. Students in a large introductory microeconomics course at a major research university were randomly assigned to live lectures versus watching these same lectures in an internet setting, where all other factors (e.g., instruction, supplemental materials) were the same. Counter to the conclusions drawn by a recent U.S. Department of Education meta-analysis of non-experimental analyses of internet instruction in higher education, we find modest evidence that live-only instruction dominates internet instruction. These results are particularly strong for Hispanic students, male students, and lower-achieving students. We also provide suggestions for future experimentation in other settings.
    JEL: I20 I23
    Date: 2010–06
  14. By: Jill Windle (Faculty of Business and Informatics at Central Queensland University); John Rolfe (Faculty of Business and Informatics at Central Queensland University Author-Homepage
    Abstract: The main objective of the study outlined in this paper was to examine how the inclusion of an additional labelled alternative, to provide respondents with more choice in a stated preference survey, impacted on choice complexity. The valuation context was to elicit preferences for improvements in the future condition of the Great Barrier Reef, Australia. A split sample experiment was implemented where one survey included four labeled alternatives: a status quo option and three specific policy management options (restricted choice). The other survey provided respondents with an unrestricted choice set by including a fifth alternative choice, labelled as “a combination of management options”. While the additional option improved opportunities to find an attractive choice profile, adding an extra alternative increased the complexity of the survey. The tradeoff between choice flexibility and complexity is examined in terms of changes in respondents’ choice behaviour and the performance of the different models. The results provide some evidence that adding a combination policy alternative did change the ways that respondents viewed tradeoffs, but that choice behaviour and subsequent value estimates were consistent across the two survey formats.
    Keywords: Choice complexity, choice modelling experiments; labelled alternatives; policy management options; multiple alternatives
    Date: 2010–03
  15. By: Kaito Sato
    Abstract: In Anscombe and Aumann’s (1963) domain, there are two types of mixtures. One is an ex–ante mixture, or a lottery on acts. The other is an ex–post mixture, or a state–wise mixture of acts. These two mixtures have been assumed to be indifferent under the Reversal of Order axiom. However, we argue that the difference between these two mixtures is crucial in some important contexts. Under ambiguity aversion, an ex–ante mixture could provide only ex–ante hedging but not ex–post hedging. Under inequality aversion, an ex–ante mixture could provide only ex–ante equality but not ex–post equality. For each context, we develop a model that treats a preference for ex–ante mixtures separately from a preference for ex–post mixtures. One representation is an extensionof Gilboa and Schmeidler’s (1989) Maxmin preferences. The other representation is an extension of Fehr and Schmidt’s (1999) Piecewise–linear preferences. In both representations, a single parameter characterizes a preference for ex–ante mixtures. For the both representations, instead of the Reversal of Order axiom, we propose a weaker axiom, the Indifference axiom, which is a criterion, suggested in Raiffa’s (1961) critique, for evaluating lotteries on acts. These models are consistent with much recent experimental evidence in each context.
    Keywords: Ambiguity; randomization; Ellsberg paradox; other–regarding preferences; inequality; maxmin utility.
    JEL: D81
    Date: 2010–06–16
  16. By: Eisenhuth, Roland
    Abstract: Auctioneers who have an indivisible object for sale and believe that bidders are risk neutral can find the recipe for an optimal auction in Myerson (1981); auctioneers who believe that bidders are loss averse can find it here: An optimal auction is an all pay auction with minimum bid, and any optimal mechanism is all pay.
    Keywords: Auctions; Loss Aversion; All Pay Mechanisms; Mechanism Design; Revenue Equivalence
    JEL: D86 D81 D44 C70
    Date: 2010–06–16

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.