nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒07‒17
sixteen papers chosen by
Daniel Houser
George Mason University

  1. Competitive Preferences and Status as an Incentive: Experimental Evidence By Gary Charness; David Masclet; Marie-Claire Villeval
  2. Small-scale changes in wealth and attitudes toward risk By Sergio Sousa
  3. The effects of (incentivized) belief elicitation in public goods experiments By Simon Gaechter; Elke Renner
  4. Gender Differences and Dynamics in Competition: The Role of Luck By Gill, David; Prowse, Victoria L.
  5. 'The Way in Which an Experiment is Conducted is Unbelievably Important': On the Experimentation Practices of Economists and Psychologists By Andreas Ortmann
  6. Assessing elicitation task bias in time preference using experiments with articial subjects By Oksana Tokarchuk; Roberto Gabriele
  7. Unwillingness to Pay for Privacy: A Field Experiment By Beresford, Alastair R.; Kübler, Dorothea; Preibusch, Sören
  8. On the formation of coalitions to provide public goods: Experimental evidence from the lab By Dannenberg, Astrid; Lange, Andreas; Sturm, Bodo
  9. Are They Watching You and Does It Matter? - Evidence from a Natural Field Experiment By Alpízar, Francisco; Martinsson, Peter
  10. Imperfect Recall and Time Inconsistencies: An experimental test of the absentminded driver "paradox" By Vittoria M. Levati; Matthias Uhl; Ro'i Zultan
  11. Social preferences in childhood and adolescence - A large-scale experiment By Sutter, Matthias; Feri, Francesco; Kocher, Martin G.; Martinsson, Peter; Nordblom, Katarina; Rützler, Daniela
  12. Nonparametric Learning Rules from Bandit Experiments: The Eyes have it! By Yingyao Hu, Yutaka Kayaba, and Matt Shum
  13. Strategic sophistication of adolescents – Evidence from experimental normal-form games By Simon Czermak; Francesco Feri; Daniela Rützler; Matthias Sutter
  14. Performance Appraisals and the Impact of Forced Distribution: An Experimental Investigation By Berger, Johannes; Harbring, Christine; Sliwka, Dirk
  15. Efficiency of Individual Transferable Quotas (ITQs) when Fishers are able to Choose Vessel Sizes: An experimental approach By HIGASHIDA Keisaku; MANAGI Shunsuke
  16. Testing Forbearance Experimentally - Duopolistic Competition of Conglomerate Firms By Werner Güth; Kirtsen Häger; Oliver Kirchkamp; Joachim Schwalbach

  1. By: Gary Charness (Department of Economics, University of California - University of California, Santa Barbara); David Masclet (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - Ecole Normale Supérieure Lettres et Sciences Humaines)
    Abstract: In this paper, we investigate individuals' investment in status in an environment where no monetary return can possibly be derived from reaching a better relative position. We use a real-effort experiment in which we permit individuals to learn and potentially improve their status (rank). We find that people express both intrinsic motivation and a taste for status. Indeed, people increase their effort when they are simply informed about their relative performance, and people pay both to sabotage others' output and to artificially increase their own relative performance. In addition, stronger group identity favors positive rivalry and discourages sabotage among peers.
    Keywords: Status seeking ; rank ; competitive preferences ; experiment
    Date: 2010
  2. By: Sergio Sousa (University of Nottingham)
    Abstract: This paper reports on an experiment designed to examine the effects of small-scale changes in wealth on risk attitudes. We find that the money given prior to risky choices does not induce a change of subjects' risk preferences. This result supports a key assumption in a recent literature over calibration critique of decision theories. Furthermore, as the money given to subjects in our experiment is administered in between risky tasks and framed as a reward rather than a windfall gain, our result suggests that experimental findings reporting that a prior monetary gain induces individuals to take more risks (house-money effect) may be more sensitive to prior experience with the risk-elicitation task or framing of the money than previously thought.
    Keywords: risk aversion, wealth effects, risk-elicitation, house-money effect, narrow framing
    JEL: C91 D01 D81
    Date: 2010–06
  3. By: Simon Gaechter (University of Nottingham); Elke Renner (University of Nottingham)
    Abstract: Belief elicitation is an important methodological issue for experimental economists. There are two generic questions: 1) Do incentives increase belief accuracy? 2) Are there interaction effects of beliefs and decisions? We investigate these questions in the case of finitely repeated public goods experiments. We find that belief accuracy is significantly higher when beliefs are incentivized. The relationship between contributions and beliefs is slightly steeper under incentives. However, we find that incentivized beliefs tend to lead to higher contribution levels than either non-incentivized beliefs or no beliefs at all. We discuss the implications of our results for the design of public good experiments.
    Keywords: Incentives, beliefs, experimental methodology, public goods
    JEL: C90
    Date: 2010–06
  4. By: Gill, David (University of Southampton); Prowse, Victoria L. (University of Oxford)
    Abstract: We present experimental evidence which sheds new light on why women may be less competitive than men. Specifically, we observe striking differences in how men and women respond to good and bad luck in a competitive environment. Following a loss, women tend to reduce effort, and the effect is independent of the monetary value of the prize that the women failed to win. Men, on the other hand, reduce effort only after failing to win large prizes. Responses to previous competitive outcomes explain about 11% of the variation that we observe in women's efforts, but only about 4% of the variation in the effort of men, and differential responses to luck account for about half of the gender performance gap in our experiment. These findings help to explain both female underperformance in environments with repeated competition and the tendency for women to select into tournaments at a lower rate than men.
    Keywords: behavioral preferences, real effort experiment, gender differences, gender gap, competition, competition aversion, tournament, luck, win, loss, narrow framing
    JEL: C91 J16
    Date: 2010–06
  5. By: Andreas Ortmann (School of Economics, University of New South Wales)
    Abstract: To discuss experimental results without discussing how they came about makes sense when the results are robust to the way experiments are conducted. Experimental results, however, are – arguably more often than not – sensitive to numerous design and implementation characteristics such as the use of financial incentives, deception, and the way information is presented. To the extent that economists and psychologists have different experimental practices, this claim is of obvious practical and interpretative relevance. In light of the empirical results summarized below, it seems warranted to say that it does not make sense to report experimental results without reporting the design and implementation choices that were made.
    Keywords: Duhem-Quine problem; experimental design; experimental implementation; financial incentives; deception
    Date: 2010–07
  6. By: Oksana Tokarchuk; Roberto Gabriele
    Abstract: Experimental results in research on time preference are often controversial. We propose a systematic investigation of choice task in multiple price list format (MPL) that is frequently implemented in experiments on time preference, through a computer simulation analysis. We conduct experiments with articial subjects to demonstrate that elicited discount rates are highly dependent on the structure of elicitation task. We verify that implementation of choice task in MPL with nominal structure results in observation of hyperbolic discounting. Choice task in MPL with interest rates structure leads to elicitation of discount rates compatible with exponential discounting. Moreover, we show that the magnitude and intensity of corresponding pattern in data depends on the internal structure of elicitation task. Comparison between discount rates elicited with articial and human subjects suggests that behavior of human subjects in experiments with MPL can be described by two simple rules: positive discounting and anchoring.
    Keywords: elicitation task bias, time preference, choice task, multiple price list, articial agent simulations
    JEL: D91 C63
    Date: 2010–07–09
  7. By: Beresford, Alastair R. (University of Cambridge); Kübler, Dorothea (WZB - Social Science Research Center Berlin); Preibusch, Sören (University of Cambridge)
    Abstract: We measure willingness to pay for privacy in a field experiment. Participants were given the choice to buy a maximum of one DVD from one of two online stores. One store consistently required more sensitive personal data than the other, but otherwise the stores were identical. In one treatment, DVDs were one Euro cheaper at the store requesting more personal information, and almost all buyers chose the cheaper store. Surprisingly, in the second treatment when prices were identical, participants bought from both shops equally often.
    Keywords: privacy, willingness to pay, field experiments
    JEL: C93 D12
    Date: 2010–06
  8. By: Dannenberg, Astrid; Lange, Andreas; Sturm, Bodo
    Abstract: The provision of public goods often relies on voluntary contributions and cooperation. While most of the experimental literature focuses on individual contributions, many real-world problems involve the formation of institutions among subgroups (coalitions) of players. International agreements serve as one example. This paper experimentally tests theory on the formation of coalitions in different institutions and compares those to a voluntary contribution mechanism. The experiment confirms the rather pessimistic conclusions from the theory: only few players form a coalition when the institution prescribes the full internalization of mutual benefits of members. Contrary to theory, coalitions that try to reduce the freeriding incentives by requiring less provision from their members, do not attract additional members. Substantial efficiency gains occur, however, both along the extensive and intensive margin when coalition members can each suggest a minimum contribution level with the smallest common denominator being binding. The experiment thereby shows that the acceptance of institutions depends on how terms of coalitions are reached. --
    Keywords: public goods,institutions,coalition formation,cooperation
    JEL: C72 C92 D71 H41
    Date: 2010
  9. By: Alpízar, Francisco (Environment for Development Program, CATIE); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University)
    Abstract: In a natural field experiment, we tested whether being alone or in a group had an effect on prosocial behavior as expressed in donations to a recreational park. We also explored whether the presence of people exogenous to the group at the time of the donation had any behavioral effect. Our first treatment aimed at identifying peer effects, whereas our second treatment was similar to being in the public eye. We found that being in a group significantly increases the share of people acting prosocially. Moreover, we found that only individuals who are part of a group are positively affected by the presence of a third party.<p>
    Keywords: Donation; natural field experiment; prosocial behavior; public disclosure
    JEL: C93 Q28
    Date: 2010–07–07
  10. 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
  11. By: Sutter, Matthias (University of Innsbruck, University of Gothenburg, and IZA Bonn); Feri, Francesco (University of Innsbruck); Kocher, Martin G. (University of East Anglia and University of Innsbruck); Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Rützler, Daniela (University of Innsbruck)
    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.<p>
    Keywords: Social preferences; children; age; gender; experiment
    JEL: C91 D63 D64
    Date: 2010–07–07
  12. By: Yingyao Hu, Yutaka Kayaba, and Matt Shum
    Abstract: How do people learn? We assess, in a distribution-free manner, subjects’ learning and choice rules in dynamic two-armed bandit (probabilistic reversal learning) experiments. To aid in identification and estimation, we use auxiliary measures of subjects’ beliefs, in the form of their eye-movements during the experiment. Our estimated choice probabilities and learning rules have some distinctive features; notably that subjects tend to update in a non-smooth manner following choices made in accordance with current beliefs. Moreover, the beliefs implied by our nonparametric learning rules are closer to those from a (non-Bayesian) reinforcement learning model, than a Bayesian learning model.
    Date: 2010–06
  13. By: Simon Czermak; Francesco Feri; Daniela Rützler; Matthias Sutter
    Abstract: We examine the strategic sophistication of adolescents, aged 10 to 17 years, in experimental normal-form games. Besides making choices, subjects have to state their first- and second-order beliefs. We find that choices are more often a best reply to beliefs if any player has a dominant strategy and equilibrium payoffs are not too unequal. Using a mixture model we can estimate for each subject the probability to be any of eight different strategic and non-strategic types. The econometric estimation reveals that older subjects are more likely to eliminate dominated strategies, and that subjects with good math grades are more strategic.
    Keywords: Strategic thinking, beliefs, experiment, age, adolescents
    JEL: C72 C91
    Date: 2010–07
  14. By: Berger, Johannes (University of Cologne); Harbring, Christine (Karlsruhe Institute of Technology); Sliwka, Dirk (University of Cologne)
    Abstract: A real effort experiment is investigated in which supervisors have to rate the performance of individual workers who in turn receive a bonus payment based on these ratings. We compare a baseline treatment in which supervisors were not restricted in their rating behavior to a forced distribution system in which they had to assign differentiated grades. We find that productivity was significantly higher under a forced distribution by about 8%. But also in the absence of forced distribution, deliberate differentiation positively affected output in subsequent work periods.
    Keywords: performance measurement, forced distribution, motivation, experiment
    JEL: C91 D83 J33 M52
    Date: 2010–06
  15. By: HIGASHIDA Keisaku; MANAGI Shunsuke
    Abstract: Employing an experimental approach, this paper examines whether the efficiency of fishery management can be achieved under@Individual Transferable Quotas regimes. We analyze the situation in which subjects can choose from one of two vessel types: large-scale or small-scale. The fixed cost for large-scale vessels is higher than that for their small-scale counterparts, whereas the variable cost for large-scale vessels is lower. We find that the average trading price (ATP) converges to the theoretical equilibrium price (EQP). We also find that vessels are chosen rationally in the sense that, the greater the ATP, minus the EQP in past periods, the less incentive subjects have to invest in large-scale vessels. Moreover, quota prices in the first period could influence both the quota prices and the numbers of both types of vessels in the ensuing periods, and initial allocation could affect the rational choice of vessels.
    Date: 2010–07
  16. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Kirtsen Häger (Universität Jena); Oliver Kirchkamp (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Joachim Schwalbach (Humboldt-Universität zu Berlin, Institute of Management)
    Abstract: Like Feinberg and Sherman (1985) and Phillips and Mason (1992) we test experimentally whether conglomerate firms, i.e., firms competing on multiple structurally unrelated markets, can effectively limit competition. Our more general analysis assumes differentiated rather than homogeneous products and distinguishes strategic substitutes as well as complements to test this forbearance hypothesis. Rather than only a partners design we also explore a random strangers design to disentangle effects of forbearance and repeated interaction. Surprisingly, conglomerate firms do not limit competition, they rather foster it. More in line with our expectations we find more cooperation in complement markets than in substitute markets and also more cooperation in a partners than in a strangers matching.
    Keywords: Experiment, Forbearance, Competition
    JEL: C91 D43 L41
    Date: 2010–07–01

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