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on Experimental Economics |
| By: | Charness, Gary (University of California, Santa Barbara); Masclet, David (University of Rennes); Villeval, Marie Claire (CNRS, GATE) |
| 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 |
| JEL: | C91 C92 M54 D63 J28 J31 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5034&r=exp |
| By: | Kosfeld, Michael (Goethe University Frankfurt); Neckermann, Susanne (ZEW Mannheim) |
| Abstract: | We study the impact of status and social recognition on worker performance in a field experiment. In collaboration with an international non-governmental organization we hired students to work on a database project. Students in the award treatment were offered a congratulatory card from the organization honoring the best performance. The award was purely symbolic in order to ensure that any behavioral effect is driven by non-material benefits. Our results show that students in the award treatment outperform students in the control treatment by about 12 percent on average. Our results provide strong evidence for the motivating power of status and social recognition in labor relations with major implications for theory and applications. |
| Keywords: | award, non-monetary incentives, status, social recognition, field experiment |
| JEL: | C93 M52 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5040&r=exp |
| By: | Francisco Alpizar (Environment for Development Center, Tropical Agricultural and Higher Education Center); Fredrik Carlsson (Göteborg University); Maria Naranjo (Environment for Development Center, Tropical Agricultural and Higher Education Center) |
| Abstract: | The risk of losses of income and productive means due to adverse weather associated to climate change can significantly differ between farmers sharing a productive landscape. It is important to learn more about how farmers react to different levels of risk, under measurable and unmeasurable uncertainty. Moreover, the costs associated to investments in reduced vulnerability to climatic events are likely to exhibit economies of scope. We explore these issues using a framed field experiment that captures realistically the main characteristics of production, and the likely weather related losses of premium coffee farmers in Tarrazu, Costa Rica. Given that the region recently was severely hit by an extreme, albeit very infrequent, climatic event, we expected to observe, and found high levels of risk aversion, but we do observe farmers making trade-offs under different risk levels. Although hard to disentangle at first sight given the high level of risk aversion, we find that farmers opt more frequently for safe options in a setting characterized by unknown risk. Finally, we find that farmers to a large extent are able to coordinate their decisions in order to achieve a lower cost of adaptation, and that communication among farmers strongly facilitates coordination. |
| Keywords: | Risk Aversion, Ambiguity Aversion, Technology Adoption, Climate change, Field Experiment |
| JEL: | C93 D81 H41 Q16 Q54 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.81&r=exp |
| By: | Orazio Attansio; Abigail Barr; Juan Camilo Cardenas; Garance Genicot; Costas Mehgir |
| Abstract: | Using date from a field experiment conducted in seventy Colombian municipalities, we investigate who pools risk with whom when risk pooling arrangements are not formally enforced. We explore the roles played by risk attitudes and network connections both theoretically and empirically. We find that pairs of participants who share a bond of friendship or kinship are more likely to (1) join the same risk pooling group and to (2) group assortatively with respect to risk attitudes. Also, consistent with our theoretical finding that when there is a problem of trust the process of pooling assortativley with respect to risk preferences is perturbed, we find (3) only weak evidence of such assorting among unfamiliar individuals. |
| Keywords: | Field experiment; risk sharing; social sanctions; Insurance; Group formation: matching. |
| JEL: | C93 D71 D81 O12 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:09-20&r=exp |
| By: | Kontek, Krzysztof |
| Abstract: | This paper presents a nonparametric approach to classification of data from lottery experiments. Using very basic mathematical tools the paper endeavors to answer the questions: How to determine the “average” subject in a group? How to find a subject presenting the most similar behavior to a given one? How to detect outlier subject(s)? How to classify behaviors by their dissimilarity from the perfectly rational decision making? How to rank subjects by risk attitudes? How to cluster subjects? This paper demonstrates that the answer to all of these questions may be found non-parametrically, without the use of any specific model. |
| Keywords: | Lottery experiments, Certainty Equivalents, Risk Attitude, Cluster Analysis, Nonparametric Methods, Relative Utility Function. |
| JEL: | D81 C14 C02 C81 C91 |
| Date: | 2010–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:23845&r=exp |
| By: | Jose Apesteguia; Ghazala Azmat; Nagore Iriberri |
| Abstract: | We investigate whether the gender composition of teams affect their economic performance. We study a large business game, played in groups of three, where each group takes the role of a general manager. There are two parallel competitions, one involving undergraduates and the other involving MBAs. Our analysis shows that teams formed by three women are significantly outperformed by any other gender combination, both at the undergraduate and MBA levels. Looking across the performance distribution, we find that for undergraduates, three women teams are outperformed throughout, but by as much as 10pp at the bottom and by only 1pp at the top. For MBAs, at the top, the best performing group is two men and one woman. The differences in performance are explained by differences in decision-making. We observe that three women teams are less aggressive in their pricing strategies, invest less in R&D, and invest more in social sustainability initiatives, than any other gender combination teams. Finally, we find support for the hypothesis that it is poor work dynamics among the three women teams that drives the results. |
| Keywords: | Gender; Teams; Performance; Decision-Making. |
| JEL: | D21 J16 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1225&r=exp |
| By: | Boris Maciejovsky; Matthias Sutter; David V. Budescu; Patrick Bernau |
| Abstract: | We study the impact of team decision making on market behavior and its consequences for subsequent individual performance in the Wason selection task, the single-most studied reasoning task. We reformulated the task in terms of “assets” in a market context. Teams of traders learn the task’s solution faster than individuals and achieve this with weaker, less specific, performance feedback. Some teams even perform better than the best individuals. The experience of team decision-making in the market also creates positive knowledge spillovers for post–market individual performance in solving new Wason tasks, implying that team experiences enhance individual problem-solving skills. |
| Keywords: | Wason selection task, rationality, team decision making, individual decision making, auction |
| JEL: | C91 C92 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2010-17&r=exp |
| By: | Jeffrey Carpenter; Tyler Williams |
| Abstract: | Given the substantial amount of resources currently invested in microcredit programs, it is more important than ever to accurately assess the extent to which peer monitoring by borrowers faced with group liability contracts actually reduces moral hazard. We conduct a field experiment with women about to enter a group loan program in Paraguay and then gather administrative data on the members' repayment behavior in the six-month period following the experiment. In addition to the experiment which is designed to measure individual propensities to monitor under incentives similar to group liability, we collect a variety of the other potential correlates of borrowing behavior and repayment. Controlling for other factors, we find a very strong causal relationship between the monitoring propensity of one's loan group and repayment. Our lowest estimate suggests that borrowers in groups with above median monitoring are 36 percent less likely to have a problem repaying their portion of the loan. Besides confirming a number of previous results, we also find some evidence that risk preferences, social preferences, and cognitive skills affect repayment. |
| Keywords: | Loans ; Credit ; Human behavior |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:10-6&r=exp |
| By: | Siddiqi, Hammad |
| Abstract: | People tend to think by analogies. We investigate whether thinking-by-analogy matters for investors’ willingness to pay for a risky asset in a laboratory experiment. We find that thinking-by-analogy has a strong influence when the assets in question have similar (but not identical) payoffs. The hypothesis of thinking-by-analogy or coarse thinking clearly outperforms other hypotheses including the hypothesis of arbitrage-free or rational pricing. When the similarity between the payoffs is reduced, the risk neutral hypothesis outperforms the hypothesis of thinking-by-analogy. Regardless of the similarity between the payoffs, the arbitrage-free or rational pricing remains the hypothesis with the worst performance. |
| Keywords: | Coarse Thinking; Thinking-by-Analogy; Asset Pricing; Call Option |
| JEL: | G12 G11 C90 G00 G13 C91 |
| Date: | 2010–07–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:23924&r=exp |
| By: | Paloma Ubeda (ERI-CES) |
| Abstract: | In the last two decades, experimental papers on distributive justice have abounded. Two main results have been replicated Firstly, there is a multiplicity of fairness rules. Secondly, fairness decisions differ depending on the context. This paper studies individual consistency in the use of fairness rules, as well as the structural factors that lead people to be inconsistent. We use a within-subject design, which allows us to compare individual behavior when the context changes. In line with the literature, we find a multiplicity of fairness rules. However, when we control for consistency, the set of fairness rules is considerably smaller. Only selfishness and strict egalitarianism seem to survive the stricter requirement of consistency. We observe that this result is mainly explained by a self-serving bias. Participants select the rule that is individually optimal in each situation. |
| Keywords: | Justice, Fairness, Laboratory Experiments, Self-serving bias, Consistency |
| JEL: | D63 C91 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:dbe:wpaper:1010&r=exp |
| By: | Bruce I. Carlin; Shimon Kogan |
| Abstract: | We perform an experimental study of complexity to assess its effect on trading behavior, price volatility, liquidity, and trade efficiency. Subjects were asked to deduce the value of a particular asset from information they were given about the composition and price of several portfolios. Following that, subjects traded with each other anonymously in a well-defined, simple bargaining process. Portfolio problems ranged from requiring simple analysis to more complicated computation. Complexity altered subjects' bidding strategies, decreased liquidity, increased price volatility, and decreased trade efficiency. Female subjects were affected more by complexity (e.g., lower trade frequency), although they achieved higher payoffs in the complex treatment. Our analysis suggests that complexity may be a driver of volatility and liquidity in financial markets and provides novel testable empirical predictions. |
| JEL: | C92 G12 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:16187&r=exp |
| By: | Ozdenoren, Emre; Salant, Stephen (Resources for the Future); Silverman, Dan |
| Abstract: | Common intuition and experimental psychology suggest that the ability to self-regulate ("willpower") is a depletable resource. We investigate the behavior of an agent with limited willpower who optimally consumes over time an endowment of a tempting and storable consumption good or "cake". We assume that restraining consumption below the most tempting feasible rate requires willpower. Any willpower not used to regulate consumption may be valuable in controlling other urges. Willpower thus links otherwise unrelated behaviors requiring self-control. An agent with limited willpower will display apparent domain-specific time preference. Such an agent will almost never perfectly smooth his consumption, even when it is feasible to do so. Whether the agent relaxes control of his consumption over time (as experimental psychologists predict) or tightens it (as most behavioral theories predict) depends in our model on the net effect of two analytically distinct and opposing forces. |
| Keywords: | willpower, self-control, hotelling |
| JEL: | Q3 D9 J22 |
| Date: | 2010–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-10-36&r=exp |
| By: | Dean Karlan (Economics Department, Yale University); Margaret McConnell (Center for Population and Development Studies, Harvard University); Sendhil Mullainathan (Department of Economics, Harvard University); Jonathan Zinman (Department of Economics, Dartmouth College) |
| 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. |
| Keywords: | intertemporal consumer choice, savings, attention |
| JEL: | D91 E21 |
| Date: | 2010–07 |
| URL: | http://d.repec.org/n?u=RePEc:egc:wpaper:988&r=exp |
| By: | Abigail Barr; Andrew Zeitlin |
| Abstract: | This paper tests the external validity of a simple Dictator Game as a laboratory analogue for a naturally occurring policy-relevant decision-making context. In Uganda, where teacher absenteeism is a problem, primary school teachers’ allocations to parents in a Dictator Game are positively but weakly correlated with their time allocations to teaching and, so, negatively correlated with their absenteeism. Guided by a simple theoretical model, we find that the correlation can be improved by allowing for (a) variations in behavioural reference points across teachers and schools and (b) the positive effect if some School Management Committees on teacher attendance . |
| Keywords: | Public service, Education, Experiments, Africa, external validity, Methodology |
| JEL: | C91 D64 I29 O15 O17 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:10-11&r=exp |
| By: | Dan Ariely; Anat Bracha; Jean-Paul L'Huillier |
| Abstract: | This paper experimentally examines whether looking at other people's pricing decisions is a type of heuristic - a decisionmaking rule - that people use even when it is not applicable, as in the case of clearly private value goods. We find evidence that this is indeed the case - an individual's valuation of a purely subjective experience under full information, elicited using an incentive compatible mechanism, is highly influence by valuations made by others. This result can shed light on price behavior, price rigidities, and rents. |
| Keywords: | Pricing ; Human behavior |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:fip:fedbwp:10-5&r=exp |
| By: | Anna Alberini (University of Maryland and FEEM); Milan Šcasný, Charles University Prague (Charles University Prague) |
| Abstract: | We report on the results of a survey based on conjoint choice experiments that was specifically designed to investigate the effect of context on the Value of a Statistical Life (VSL), an important input into the calculation of the mortality benefits of environmental policies that reduce premature mortality. We define “context” broadly to include i) the cause of death (respiratory illness, cancer, road traffic accident), ii) the beneficiary of the risk reduction (adult v. child), and iii) the mode of provision of the risk reduction (public program v. private good). The survey was conducted following similar protocols in Italy and the Czech Republic. When do not distinguish for the cause of death, child and adult VSL are not significantly different from one another in Italy, and the difference is weak in the Czech sample. When we distinguish for the cause of death, we find that child and adult VSLs are different at the 1% level for respiratory illnesses and road-traffic accidents, but do not differ for cancer risks. We find evidence of a “cancer premium” and a “public program premium.” In both countries, the marginal utility of income is about 20% lower among wealthier people, which makes the VSL about 20% higher among respondents with incomes above the sample average. The discount rate implicit in people‘s choices is effectively zero. We conclude that there is heterogeneity in the VSL, and that such heterogeneity is primarily driven by risk characteristics and mode of delivery of the risk reduction, rather than by individual characteristics of the respondent (e.g., income and education). For the most part, our results do not disagree with environmental policy analyses that use the same VSL for children and adults, and that apply a cancer premium. |
| Keywords: | VSL, Conjoint Choice Experiments, Mortality Risk Reductions, Cost-benefit Analysis, Forced Choice Questions |
| JEL: | I18 J17 K32 Q51 |
| Date: | 2010–06 |
| URL: | http://d.repec.org/n?u=RePEc:fem:femwpa:2010.66&r=exp |
| By: | Gabriele Esposito (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); Eric Guerci (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); Nobuyuki Hanaki (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, Economics Department - Université de Tsukuba); Xiaoyan Lu (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); Naoki Watanabe (Economics Department - Université de Tsukuba) |
| 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 theWMV 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. |
| Keywords: | experiment, learning, voting power, bargaining |
| Date: | 2010–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:hal:wpaper:halshs-00501840_v1&r=exp |