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on Experimental Economics |
| By: | Cappelen, Alexander W; Konow, James; Sorensen, Erik O; Tungodden, Bertil |
| Abstract: | Choices involving risk significantly affect the distribution of income and wealth in society. This paper reports the results of the first experiment, to our knowledge, to study fairness views about risk-taking, specifically whether such views are based chiefly on ex ante opportunities or on ex post outcomes. We find that, even though many participants focus exclusively on ex ante opportunities, most favor some redistribution ex post. Many participants also make a distinction between ex post inequalities that reflect differences in luck and ex post inequalities that reflect differences in choices. These findings apply to both stakeholders and impartial spectators. |
| Keywords: | fairness; justice; risk |
| JEL: | D63 C91 |
| Date: | 2010–03–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24475&r=exp |
| By: | Catherine Eckel; Cathleen Johnson; Claude Montmarquette |
| Abstract: | The purpose of the study is to collect information that can be used to design a policy to induce the poor to invest in human capital. We use laboratory experimental methodology to measure the preferences and choices of the target population of a proposed government policy. We recruited 256 subjects in Montreal, Canada; 72 percent had income below 120 percent of the Canadian poverty level. The combination of survey measures and actual decisions allows us to better understand individual heterogeneity in responses to different subsidy levels. Two behavioral characteristics, patience and attitude towards risk, are key to understanding the determinants of educational investment for the low-income individuals in this experiment. The decision to save for a family member’s education is somewhat different from that of investing in one’s own education. Again, patient participants were more likely to save for a family member’s education, but in contrast to investing in one’s own education, a subject’s attitude towards risk played no role. <P>Le but de cette étude est de recueillir des informations pour concevoir une politique publique afin d’inciter les pauvres à investir en capital humain. Nous utilisons l’approche expérimentale pour mesurer les préférences et les choix de la population ciblée. Nous avons recruté 256 sujets à Montréal. 72 % avaient un revenu inférieur à 120 % pour cent du seuil de faible revenu de Statistique Canada. La combinaison de mesures d'enquête et les décisions réelles nous permettent de mieux comprendre l'hétérogénéité individuelle dans les réponses aux différents niveaux de subvention. Deux caractéristiques comportementales, la patience (désir d’épargne) et l'attitude envers le risque, sont essentielles à la compréhension des déterminants de l'investissement éducatif pour les personnes à faible revenu dans cette expérience. La décision d’investir dans l'éducation d'un membre de la famille est quelque peu différente de celle d'investir dans sa propre éducation. Encore une fois, les participants les plus patients sont les plus susceptibles d'épargner pour l'éducation d'un membre de la famille, mais au contraire, investir dans sa propre éducation, l'attitude d'un sujet vis-à-vis le risque ne joue aucun rôle. |
| Keywords: | Intertemporal choice, field experiments, risk attitudes, working poor, choix intertemporels, expériences sur le terrain, les attitudes vis-à-vis le risque, travailleurs pauvres |
| JEL: | C93 D91 D81 |
| Date: | 2010–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2010s-33&r=exp |
| By: | Dorra Riahi; Louis Lévy-Garboua; Claude Montmarquette |
| Abstract: | We provide an experimental analysis of competitive insurance markets with adverse selection. Our parameterized version of the lemons’ model (Akerlof 1970) in the insurance context predicts total crowding out of low-risks when insurers offer a single full insurance contract. The therapy proposed by Rothschild and Stiglitz (1976) to solve this major inefficiency consists of adding a partial insurance contract so as to obtain a self-selection of risks. We test the theoretical predictions of these two well-known models in two experiments. A clean test is obtained by matching the parameters of the two experiments and by controlling for the risk neutrality of insurers and the common risk aversion of their clients by means of the binary lottery procedure. The results reveal a partial crowding out of low risks in the first experiment. Crowding out is not eliminated in the second experiment and it is not even significantly reduced. Finally, instead of the predicted separating equilibrium, we find pooling equilibria. We interpret these results by observing that, in any period, some high risks do not purchase full insurance at lower than fair price and some low risks purchase insurance at a price higher than their induced willingness to pay. These robust findings are inconsistent with expected utility maximization. The observed distortion of probabilities leads to a partial homogenization of perceived risks. <P>Ce travail offre une analyse expérimentale des marchés d’assurance avec anti-sélection. Nous nous intéressons particulièrement aux modèles canoniques d’Akerlof [1970] et de Rothschild et Stiglitz [1976]. Selon Alerlof (1970) l’anti-sélection peut aboutir à une éviction complète des agents les moins risqués. Selon Rothschild et Stiglitz (1976), les contrats de franchise permettent de dépasser cette limite en organisant la sélection des risques : à l’équilibre de marché, les contrats sont spécialisés en fonction des risques individuels. La présente contribution vise à tester ces prédictions théoriques à travers deux expériences de marché d’assurance. Afin de respecter au mieux les hypothèses de base des modèles d’Akerlof et de Rothschild et Stiglitz, nous recourons, dans l’expérimentation, à la technique des loteries binaires. Cette technique génère une neutralité au risque pour les assureurs et une même aversion au risque pour les assurés. Ces expériences sont, à notre connaissance, les premières visant à tester les prédictions des modèles d’assurance avec anti-sélection avec un contrôle des préférences des participants. Les résultats démontrent une éviction partielle des bas risques dans le contexte d’Akerlof (expérience 1). Une éviction qui ne disparaît pas après l’introduction des contrats de franchise (expérience 2). Enfin, à l’opposé de l’équilibre séparateur préconisé par Rothschild et Stiglitz, c’est l’équilibre de pooling qui apparaît (expérience 2). Nous interprétons ces résultats en observant que, dans certaines périodes, certains hauts risques n’achètent pas une assurance complète à un prix inférieur au prix équitable et que certains bas risques achètent une assurance à un prix supérieur à leur volonté induite à payer. Ces résultats robustes sont incompatibles avec la maximisation de l'utilité attendue. La distorsion observée des probabilités conduit à une homogénéisation partielle des risques perçus. |
| Keywords: | experimental economics, insurance markets, adverse selection, binary lottery procedure, expected utility , économie expérimentale, marché d’assurance, anti-sélection, loterie binaire |
| JEL: | C91 D82 G22 |
| Date: | 2010–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:cir:cirwor:2010s-34&r=exp |
| By: | Els Lecoutere (Ghent University); Ben D’Exelle (University of East Anglia); Bjorn Van Campenhout (University of Antwerp) |
| Abstract: | Does water scarcity induce conflict? And who would engage in a water scarcity conflict? In this paper we look for evidence of the relation between water scarcity and conflictive behavior. With a framed field experiment conducted with smallholder irrigators from semi-arid Tanzania that replicates appropriation from an occasionally scarce common water flow we assess what type of water users is more inclined to react in conflictive way to scarcity. On average, water scarcity induces selfish appropriation behavior in the experiment which is regarded conflictive in the Tanzanian irrigator communities where strong noncompetition norms regulate irrigation water distribution. But not all react to water scarcity in the same way. Poor, marginalized, dissocialized irrigators with low human capital and with higher stakes are most likely to react with conflictive appropriation behavior to water scarcity. Viewed a political ecology perspective we conclude that circumstances in Tanzania are conducive to resource scarcity conflicts. Water scarcity and water values are increasing. Water governance institutions entail exclusionary elements. Moreover, a higher likelihood to react in a conflictive way to water scarcity coincides with real economic and political inequalities which could form a basis for mobilization for more violent ways of competing for scarce resources. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:mcn:rwpapr:31&r=exp |
| By: | Tanel Mehine |
| Abstract: | The purpose of this article is to find out the relationship between yellow price tags and consumer reference prices. A laboratory study was conducted among 150 respondents, who were put in an experimental purchase situation and their initial internal reference prices were compared affected reference prices. The results revealed that consumers perceive yellow price tags as presenters of discounts. A comparison of the mean values showed that yellow price tags influence the reference price and, moreover, a yellow price tag increased the reference price. As a practical outcome, the results of the study indicated that companies have the opportunity to increase the consumer’s reference price and thereby to raise revenues by changing the colour of the price tag without offering an actual discount. |
| Keywords: | yellow price tags, consumer behaviour, reference price |
| JEL: | M30 M31 M39 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:mtk:febawb:75&r=exp |
| By: | Hildenbrand, Andreas |
| Abstract: | In this survey, I look into experimental studies on duopolistic quantity competition with homogeneous products and duopolistic price competition with heterogeneous products. The focus is on the sequence of competition. That is, I summarize and analyze experimental studies checking Cournot competition against Stackelberg competition. I find that while Stackelberg equilibrium outcomes are seldom under quantity competition, under price competition, the Stackelberg equilibrium prediction seems to be more appropriate. However, after discussing the experimental setups, I conclude that some methodological problems are present. Moreover, I make recommendations for further research. |
| Keywords: | Cournot competition; simultaneous competition; simultaneous play; Stackelberg competition; sequential competition; sequential play; duopoly; homogeneous products; heterogeneous products; experiemtal economics |
| JEL: | L13 D43 C72 C91 |
| Date: | 2010–08–17 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:24468&r=exp |