nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒07‒03
fourteen papers chosen by
Daniel Houser
George Mason University

  1. Don't raise the retirement age! An experiment on opposition to pension reforms and East-West differences in Germany By Beatice Scheubel; Daniel Schunk; Joachim Winter
  2. Getting to theTop of Mind: How Reminders Increase Saving By Dean Karlan; Jonathan Zinman; Margaret McConnell; Sendhil Mullainathan
  3. An Experiment on Intercultural Tacit Coordination - Preliminary Report By Abitbol, Pablo
  4. The effects of background music and sound in economic decision making: Evidence from a laboratory experiment By Fujikawa, Takemi; Kobayashi, Yohei
  5. Social Communication and Discrimination: A Video Experiment By Ben Greiner; Werner Güth; Ro'i Zultan
  6. Nominal Price Shocks in Monopolistically Competitive Markets: An Experimental Analysis By Douglas D. Davis; Korenok Oleg
  7. Do social networks prevent bank runs? By Alfonso Rosa García; Hubert Janos Kiss; Ismael Rodríguez Lara
  8. Unraveling Fairness in Simple Games? The Role of Empathy and Theory of Mind By Florian Artinger; Fillipos Exadaktylos; Lauri Sääksvuori; Hannes Koppel
  9. Reducing Status Quo Bias in Choice Experiments – An Application of a Protest Reduction Entreaty By Ole Bonnichsen; Jacob Ladenburg
  10. Tax Evasion as a Global Game (TEGG) in the laboratory By Miguel Sánchez Villalba
  11. Whose impartiality? An experimental study of veiled stakeholders, impartial spectators and ideal observers By Fernando Aguiar; Alice Becker; Luis Miller
  12. Self interest and justice principle By Luis José Blas Moreno Garrido; Ismael Rodríguez Lara
  13. Tournaments and Piece Rates Revisited: A Theoretical and Experimental Study of Premium Incentives By Werner Güth; Rene Levínský; Kerstin Pull; Ori Weisel
  14. Can subjective expectations data be used in choice models? Evidence on cognitive biases By Basit Zafar

  1. By: Beatice Scheubel; Daniel Schunk; Joachim Winter (Mannheim Research Institute for the Economics of Aging (MEA))
    Abstract: For policy reforms to increase a society's welfare, reliable information on people's prefer- ences and expectations is crucial. Representative opinion polls, often involving simpli¯ed questions about the complex topics under debate, are an important source of information for both policy-makers and the public. Do people's answers to these poll questions reliably re°ect their preferences and expec- tations, or does fundamental, undiscriminating opposition to reforms distort them? We address this question in the context of a recent German pension reform which raised the statutory retirement age by two years to age 67. By introducing an experiment into a representative household survey, we are able to disentangle expectations of work ability at retirement and fundamental opposition. Our results show that expected work ability declines substantially with increasing target age (63, 65, or 67 years). Answers from West German respondents re°ect their current life situation as well as individual health and other risk factors. However, a fundamental opposition to reforms of the welfare state appears to strongly affect responses from East German households.
    JEL: J10 H30 H55 D84
    Date: 2009–09–01
  2. By: Dean Karlan; Jonathan Zinman; Margaret McConnell; Sendhil Mullainathan
    Abstract: We develop and test a simple model of limited attention in intertemporal choice. The model posits that individuals fully attend to consumption in all periods but fail to attend to some future lumpy expenditure opportunities. This asymmetry generates some predictions that overlap with models of present-bias. Our model also generates the unique predictions that reminders may increase saving, and that reminders will be more effective when they increase the salience of a specific expenditure. We find support for these predictions in three field experiments that randomly assign reminders to new savings account holders.[Working Paper No. 262]
    Keywords: IntertemporalConsumerChoice,Savings,Attention
    Date: 2010
  3. By: Abitbol, Pablo
    Abstract: This report presents the results of a replication, with 199 culturally-diverse subjects, of Thomas Schelling’s (1957) experiments on tacit coordination. Section 1 introduces the concept of focal point equilibrium selection in tacit one-shot symmetric pure coordination games, as presented by Schelling in his classic article; it then traces its subsequent exploration through experimental research, shows how it has been explained, particularly in terms of culture, and relates that kind of explanation to the experimental and null hypotheses of the present study and its associated predictions. Section 2 describes the design of the intercultural tacit coordination experiment, and section 3 the results. Finally, section 4 presents a very preliminary discussion of the implications of the experiment’s results in terms of the cultural explanation of focal point equilibrium selection.
    Keywords: Culture; cultural diversity; coordination; game theory; Thomas Schelling
    JEL: C72
    Date: 2009–10
  4. By: Fujikawa, Takemi; Kobayashi, Yohei
    Abstract: This paper experimentally studies the effects of background music and sound on the preference of the decision makers for rewards in pairwise intertemporal choice tasks and lottery choice tasks. The participants took part in the current experiment, involving four treatments: (1) the familiar music treatment; (2) the unfamiliar music treatment; (3) the noise treatment and (4) the no music treatment. The experimental results confirm that background noise affects human performance in decision making under risk and intertemporal decision making, though the results do not indicate the significant familiarity effect that is a change of the preference in the presence of familiar background music and sound.
    Keywords: Allais-type preferences; choice under risk; intertemporal choice; the familiarity effect
    JEL: C91
    Date: 2010–04–06
  5. By: Ben Greiner (University of New South Wales, School of Economics, Sydney, Australia); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Ro'i Zultan (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: We report on an experiment using video technology to manipulate pre-play communication protocols in the lab and to study purely social effects of communication on donations and discrimination between potential receivers. The experimental design eliminates strategic factors by allowing two receivers to unilaterally communicate with an anonymous dictator before the latter decides on her gifts. Through the use of three communication setups (none, audio, and audio-visual) we show and analyze the existence of purely social effects of communication. We find that a silent channel leads to discrimination between potential receivers based on impression formation, but does not affect average levels of donations. When the auditory channel is added, average donations increase. The social processes invoked are heterogeneous and communicator- specific but not unsystematic.
    Keywords: bargaining, communication, discrimination, n-person dictator game, video experiment
    JEL: C72 C91 D64
    Date: 2010–06–23
  6. By: Douglas D. Davis (Department of Economics, VCU School of Business); Korenok Oleg (Department of Economics, VCU School of Business)
    Abstract: We report a price-setting market experiment conducted to examine the capacity of price and information frictions to explain real responses to nominal price shocks. As predicted by the standard dynamic models of adjustment in monopolistically competitive markets, we find that both price and information frictions impede the response to a nominal shock. Results deviate from predictions, however, in that the observed adjustment delays far exceed predicted levels. We suggest that another factor - bounded rationality – exerts a predominating effect. A variant of the standard analysis in which a subset of agents price adaptively better organizes our results.
    Keywords: Market Experiments, Price Rigidities, Information Rigidities, Bounded Rationality
    JEL: C9 E42 E47
    Date: 2010–06
  7. By: Alfonso Rosa García (Universidad de Murcia); Hubert Janos Kiss (Universidad Autónoma de Madrid); Ismael Rodríguez Lara (Universidad de Alicante)
    Abstract: We develop, both theoretically and experimentally, a stereotypical environment that allows for coordination breakdown, leading to a bank run. Three depositors are located at the nodes of a network and have to decide whether to keep their funds deposited or to withdraw. One of the depositors has immediate liquidity needs, whereas the other two depositors do not. Depositors act sequentially and observe others actions only if connected by the network. Theoretically, a link connecting the first two depositors to decide is sufficient to avoid a bank run. However, our experimental evidence shows that subjects¿ choice is not affected by the existence of the link per se. Instead, being observed and the particular action that is observed determine subjects¿ choice. Our results highlight the importance of initial decisions in the emergence of a bank run. In particular, Bayesian analysis reveals that subjects clearly depart from predicted behavior when observing a withdrawal.
    Keywords: bank runs, coordination failures, experimental evidence, networks
    JEL: C70 C90 D85 G21
    Date: 2009–10
  8. By: Florian Artinger (Max Planck Institute for Human Development, Berlin); Fillipos Exadaktylos (University of Granada); Lauri Sääksvuori (Max Planck Institute of Economics, Jena); Hannes Koppel (Max Planck Institute of Economics, Jena)
    Abstract: Economists have been theorizing that other-regarding preferences influence decision making. Yet, what are the corresponding psychological mechanisms that inform these preferences in laboratory games? Empathy and Theory of Mind (ToM) are dispositions considered to be essential in social interaction. We investigate the connection between an individual's preference type and her disposition to engage in empathy and ToM in neutrally framed Dictator and Ultimatum Game. For that purpose, cognitive and emotional psychometric scales are applied to infer the dispositions of each subject. We find that a disposition for empathy does not influence the behavior in the games. ToM positively correlates with offers in the Dictator Game. Integral to ToM are beliefs about others. Both, other-regarding and selfish types, show a strong correlation between what they belief others do and their own action. These results indicate that expectations about the prevalent social norm might be central in informing behavior in one-shot games.
    Keywords: Altruism, Inequality, Empathy, Theory of Mind, Behavioral Economics
    JEL: C91 C72 D01 D64
    Date: 2010–06–23
  9. By: Ole Bonnichsen (Institute of Food and Resource Economics, University of Copenhagen); Jacob Ladenburg (Danish Institute of Governmental Research)
    Abstract: In stated preference literature, the tendency to choose the alternative representing the status quo situation seems to exceed real life status quo effects. Accordingly, status quo bias can be a problem. In Choice Experiments, status quo bias is found to be strongly correlated with protest attitudes toward the cost attribute. If economic values are to be elicited, this problem is difficult to remedy. In a split sample framework we test a novel ex-ante entreaty aimed specifically at the cost attribute and find that it effectively reduces status quo bias and improves the internal validity of the hypothetical preferences.
    Keywords: Choice Experiment, Status Quo Bias, Entreaty, Stated Preference,
    JEL: C10 C51 C52 C90
    Date: 2010–06
  10. By: Miguel Sánchez Villalba (Dpto. Fundamentos del Análisis Económico)
    Abstract: Sánchez Villalba (2009) claims tax evasion can be modelled as a global game when income shocks are common and prescribes that the tax agency should audit each individual taxpayer with a probability that is a non-decreasing function of every other taxpayer's declarations ("contingent policy rule"). This paper uses experimental data to test the predictions of the model and finds supporting evidence for the hypothesis that the contingent policy rule is superior to the alternative "cut-off" one. It also finds that data fits the qualitative predictions of the global game model, regarding both participants' decisions and the experiment's comparative statics.
    Keywords: Tax Evasion, Global Games, Experimental Economics, Rationality, Information, Beliefs.
    JEL: H26 C91 C72 D82
    Date: 2010–03
  11. By: Fernando Aguiar (Spanish Council for Scientific Research (IESA-CSIC)); Alice Becker (Max Planck Institute for Economics, Jena); Luis Miller (Nuffield Centre for Experimental Social Sciences, University of Oxford)
    Abstract: This article defines in a precise manner three different mechanisms to achieve impartiality in distributive justice and studies them experimentally. We consider a first-person procedure, the Rawlsian veil of ignorance, and two third-party procedures, the impartial spectator and the ideal observer. As a result, we find striking differences in the chosen outcome distributions by the three methods. Ideal observers that do not have a stake in the allocation problem nor information about their position in society propose significantly more egalitarian distributions than veiled stakeholders or impartial spectators. Risk preferences seem to explain why participants that have a stake in the final allocation propose less egalitarian distributions. Impartial spectators that are informed about their position in society tend to favor stakeholders holding the same position.
    Keywords: impartiality, veil of ignorance, impartial spectator, distributive justice
    JEL: C72 C92 D63 A13
    Date: 2010–06–23
  12. By: Luis José Blas Moreno Garrido (Dpto. Fundamentos del Análisis Económico); Ismael Rodríguez Lara (Universidad de Alicante)
    Abstract: We introduce non-enforceable property rights over bargaining surplus in a dictator game with production, in which the effort of the agents is differentially rewarded. Using experimental data we elicit individual preferences over the egalitarian, the accountability and the libertarian principle and provide evidence to support the inability of these justice principles to account for the observed behavior. Although this finding is consistent with the idea of individuals interpreting justice principles differently, we show that dictators behave self-interested concerning redistribution and choose which justice principle best maximizes their own payoff. We interpret this result as the justice norm imposing a constraint on otherwise self-maximizing agents.
    Keywords: dictator game, justice principles, self-interest, self-serving bias.
    JEL: C91 D3 D63 D64 P14
    Date: 2010–03
  13. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Rene Levínský (Max Planck Institute of Economics, Strategic Interaction Group); Kerstin Pull (Eberhard Karls Universität Tübingen, Faculty of Economics and Business Administration); Ori Weisel (The Hebrew University, Center for the Study of Rationality)
    Abstract: Tournaments represent an increasingly important component of organizational compensation systems. While prior research focused on fixed-prize tournaments, i.e., on tournaments where the prize or prize sum to be awarded is set in advance, we introduce a new type of tournament into the literature: premium incentives. While premium incentives, just like fixed-prize tournaments, are based on relative performance, the prize to be awarded is not set in advance but is a function of the firm's success: the prize is high if the firm is successful and low if it is not successful. Relying on a simple model of cost minimization, we are able to show that premium incentives outperform fixed-prize tournaments as well as piece rates. Our theoretical result is qualitatively confirmed by a controlled laboratory experiment and has important practical implications for the design of organizational incentive systems.
    Keywords: Tournaments, Incentives, Economic experiments
    JEL: C72 C91 J33
    Date: 2010–06–23
  14. By: Basit Zafar
    Abstract: A pervasive concern with the use of subjective data in choice models is that the data are biased and endogenous. This paper examines the extent to which cognitive biases plague subjective data, specifically addressing 1) whether cognitive dissonance affects the reporting of beliefs, and 2) whether individuals exert sufficient mental effort when probed about their subjective beliefs. For this purpose, I collect a unique panel data set of Northwestern University undergraduates that contains their subjective expectations about outcomes specific to different majors in their choice set. I do not find evidence of cognitive biases systematically affecting the reporting of beliefs: By analyzing patterns of belief updating, I can rule out cognitive dissonance being a serious concern in the current setting. Moreover, there seems to be no systematic (nonclassical) measurement error in the reporting of beliefs. In the reported beliefs for the various majors, I find no systematic patterns in mental recall of previous responses or in the extent of rounding. Comparison of subjective beliefs with objective measures suggests that students have well-formed expectations. Overall, the results paint a favorable picture for the use of subjective expectations data in choice models.
    Keywords: Bayesian statistical decision theory ; Human behavior ; Social choice ; Universities and colleges
    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.