nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒10‒02
thirteen papers chosen by
Daniel Houser
George Mason University

  1. Fairness and Cheating By Daniel Houser; Stefan Vetter; Joachim Winter
  2. Risk attitude, beliefs, and information in a corruption game: An experimental analysis By Berninghaus, Siegfried; Haller, Sven; Krüger, Tyll; Neumann, Thomas; Schosser, Stephan; Vogt, Bodo
  3. Eliciting Beliefs: Proper Scoring Rules, Incentives, Stakes and Hedging By Armantier, Olivier; Treich, Nicolas
  4. Unequal Opportunities and Distributive Justice By Urs Fischbacher; Gerald Eisenkopf; Franziska Föllmi-Heusi
  5. Ambiguous Information and Market Entry: An Experimental Study By Brandts, Jordi; Yao, Lan
  6. An Experimental Analysis of Compliance in Dynamic Emissions Markets By John K. Stranlund; James J. Murphy; John M. Spraggon
  7. Stability of Risk Preference Measures: Results from a Field Experiment on French Farmers By Couture, Stéphane; Reynaud, Arnaud
  8. Envy and Altruism in Children By Kirsten Häger
  9. The Framing of Games and the Psychology of Play By Martin Dufwenberg; Simon Gaechter; Heike Hennig-Schmidt
  10. Small is beautiful: Experimental evidence of donors' preferences for charities By Borgloh, Sarah; Dannenberg, Astrid; Aretz, Bodo
  11. Demographic change, growth and agglomeration By Gerlinde Fellner; Yoshio Iida; Sabine Kröger; Erika Seki
  12. The limited power of voting to limit power By Hong Geng; Arne Robert Weiss; Irenaeus Wolff
  13. Health and Access Effects of New Drugs: Combining Experimental and Non-Experimental Data By Pierre-Carl Michaud; Darius Lakdawalla; Dana Goldman; Neeraj Sood; Ze Cong

  1. By: Daniel Houser (George Mason University); Stefan Vetter (University of Munich); Joachim Winter (University of Munich)
    Abstract: We present evidence from a laboratory experiment showing that individuals who believe they were treated unfairly in an interaction with another person are more likely to cheat in a subsequent unrelated game. Specifically, subjects first participated in a dictator game. They then flipped a coin in private and reported the outcome. Subjects could increase their total payoff by cheating, i.e., lying about the outcome of the coin toss. We found that subjects were more likely to cheat in reporting the outcome of the coin flip when: 1) they received either nothing or a very small transfer from the dictator; and 2) they claimed to have been treated unfairly. This is consistent with the view that experiencing a norm violation is sufficient to justify the violation of another norm at the expense of a third party. This result extends the growing literature on social norms.
    Keywords: cheating; social norms; experimental design
    JEL: C91 D63
    Date: 2010–09
  2. By: Berninghaus, Siegfried; Haller, Sven; Krüger, Tyll; Neumann, Thomas; Schosser, Stephan; Vogt, Bodo
    Abstract: For our experiment on corruption we designed a coordination game to model the influence of risk attitudes, beliefs, and information on behavioral choices and determined the equilibria. We observed that the participants' risk attitudes failed to explain their choices between corrupt and non-corrupt behavior. Instead, beliefs appeared to be a better predictor of whether or not they would opt for the corrupt alternative. Furthermore, varying the quantity of information available to players (modeled by changing the degree of uncertainty) provided additional insight into the players' propensity to engage in corrupt behavior. The experimental results show that a higher degree of uncertainty in the informational setting reduces corruption. --
    Keywords: Corruption,game theory,experiment,risk attitude,beliefs
    JEL: D73 K42 C91 C92
    Date: 2010
  3. By: Armantier, Olivier; Treich, Nicolas
    Abstract: Accurate measurements of probabilistic beliefs have become increasingly important both in practice and in academia. Introduced by statisticians in the 1950s to promote truthful reports in simple environments, Proper Scoring Rules (PSR) are now arguably the most popular incentivized mechanisms to elicit an agent's beliefs. This paper generalizes the analysis of PSR to richer environments relevant to economists. More speci…cally, we combine theory and experiment to study how beliefs reported with a PSR may be biased when i) the PSR payments are increased, ii) the agent has a financial stake in the event she is predicting, and iii) the agent can hedge her prediction by taking an additional action. Our results reveal complex distortions of reported beliefs, thereby raising concerns about the ability of PSR to recover truthful beliefs in general economic environments.
    Date: 2010–04–15
  4. By: Urs Fischbacher; Gerald Eisenkopf; Franziska Föllmi-Heusi
    Abstract: There is well established empirical evidence that more redistribution occurs when luck rather than performance determines the earnings. We provide experimental evidence on how unequal access to performance enhancing education affects demand for redistribution. In this experiment, we can control the information about the role of luck and effort. We find that unequal opportunities evoke a preference for redistribution that is comparable to the situation when luck alone determines the allocation rather than performance. Furthermore, unequal opportunities reduce performance incentives.
    Keywords: Distribution, Inequality of opportunities, Negotiation, Education, Experiment
    Date: 2010
  5. By: Brandts, Jordi; Yao, Lan
    Abstract: We study experimentally how entry into a market with uncertain capacity is affected by the type of information potential entrants have available. Our focus is on behavior in a two-market entry game. In the risky information market there are two possible market capacities, both known to occur with probability 1/2. In the ambiguous information market the two possible market capacities effectively occur with probability 1/2 but participants are only told that there is uncertainty about capacities. We find that average entry is higher under ambiguous information than under risky information. To control for comparison effects and the effects of strategic interaction in the two market environment we also study a two-lottery individual decision problem and one market entry games with ambiguous and risky information. For these two cases the experimental results show no difference between information conditions. Our results are consistent with the notion that complex strategic interaction leads to higher market entry under ambiguous information.
    Keywords: Market entry games; Experiment; Risk; Ambiguity.
    JEL: D81 C92 M2 L1 C72
    Date: 2010–08–14
  6. By: John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); James J. Murphy (Department of Economics, University of Alaska Anchorage); John M. Spraggon (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: Two important design elements for emission trading programs are whether and to what extent firms are able to bank emissions permits, and how these programs are to be enforced. In this paper we present results from laboratory emissions markets designed to investigate enforcement and compliance when these markets allow permit banking. Banking is motivated by a decrease in the aggregate permit supply in the middle of multi-period trading sessions. Consistent with theoretical insights, our experiments suggest that high permit violation penalties have little deterrence value in dynamic emissions markets, and that the main challenge of enforcing these programs is to motivate truthful self-reports of emissions.
    Keywords: compliance, enforcement, emissions trading, laboratory experiments, permit markets, permit banking
    JEL: C91 L51 Q58
    Date: 2010–08
  7. By: Couture, Stéphane; Reynaud, Arnaud
    Abstract: We compare three different elicitation methods for measuring risk attitudes of French farmers in a field experiment setting. We consider two experiments based on the lottery choices initially proposed by Holt and Laury (2002) and by Eckel and Grossman (2002,2008), a risk-taking psychological questionnaire and a self-reporting of perceived risk attitudes for different domains. The main empirical results from this within-subject study are the following. First, within the class of lottery choices, risk preference measures are affected by the type of mechanism used. In particular, farmers appear to be more risk averse using the Eckel and Grossman lottery than using the Holt and Laury one. However attitudes towards risk are significantly correlated across lotteries which means that the ranking of risk preferences seems to be preserved. Second, risk preferences appear to be context-dependent. French farmers are highly risk averse for decisions belonging to financial and ethical domains. They report a higher willingness to take risk for professional decisions. Lastly, using the psychological questionnaire, we find that the risk attitude elicited through lottery choices often correlates with risk attitude toward investments. These findings contribute to the literature which addresses the stability of risk preferences across elicitation methods.
    Keywords: Risk preferences, psychological economics, field experiment, experimental economics
    JEL: C91 D8 J16 Q12
    Date: 2010–05–03
  8. By: Kirsten Häger (School of Economics and Business Administration, Friedrich Schiller University Jena)
    Abstract: Envy and altruism have been studied extensively in adults. Here, we report data from an experiment studying envious and altruistic behavior in children. We study a sample of German school children aged seven to ten in a natural setting. We run two treatments. One treatment investigates envy, the other one studies altruism. Additionally, we collect data on the children's cognitive and social skills, and on their socio-demographic background. Controlling for these factors, we find that older children are significantly more altruistic. Boys care more about their relative position than girls. Socio-demographic information have limited predictive power in both treatments.
    Keywords: artefactual field experiment, children, envy, altruism
    JEL: C91 C99
    Date: 2010–09–17
  9. By: Martin Dufwenberg; Simon Gaechter; Heike Hennig-Schmidt
    Abstract: Psychological game theory can provide rational-choice-based framing effects; frames influence beliefs, beliefs influence motivations. We explain this theoretically and explore empirical relevance experimentally. In a 2×2 design of one-shot public good games we show that frames affect subject’s first- and second-order beliefs, and contributions. From a psychological gametheoretic framework we derive two mutually compatible hypotheses about guilt aversion and reciprocity under which contributions are related to second- and first-order beliefs, respectively. Our results are consistent with either.
    Keywords: framing, psychological game theory, guilt aversion, reciprocity, public good games, voluntary cooperation
    JEL: C91 C72 D64 Z13
    Date: 2010–09
  10. By: Borgloh, Sarah; Dannenberg, Astrid; Aretz, Bodo
    Abstract: This paper studies the effect of information about a charity's size on individuals' donations to that charity. We conducted a framed field experiment with a non-student sample, in which subjects had the opportunity to donate for various charitable purposes. The results show that if subjects are to choose between large organizations with high annual revenues and small organizations with low revenues, they prefer the small organizations. We also provide insights why donors prefer the small organizations and discriminate between different theoretical approaches. -- Die vorliegende Arbeit untersucht, inwieweit die Größe einer gemeinnützigen Organisation die Bereitschaft, an diese Organisation zu spenden, beeinflusst. Wenn sich Personen in der Realität für oder gegen eine Spende an eine gemeinnützige Organisation entscheiden, wissen sie üblicherweise nicht, wie sich die Einnahmen dieser Organisation genau zusammensetzen. Sie wissen nicht, wie viel ihr Nachbar oder andere Personen aus ihrem sozialen Umfeld an die Organisation spenden oder in welcher Höhe die Organisation staatliche Subventionen erhält. Die Spender haben vielmehr einen Eindruck von der Größe der Organisation in Form ihrer jährlichen Gesamteinnahmen, das heißt sie wissen, ob eine Organisation eher groß oder eher klein ist. Die verschiedenen theoretischen Ansätze, die für diese Fragestellung relevant sind, deuten nicht alle in die gleiche Richtung. Einige gehen von einem positiven Zusammenhang zwischen Einnahmen einer Organisation und der Bereitschaft, an diese Organisation zu spenden, aus, während andere einen negativen Zusammenhang vermuten. Experimentelle Studien haben bislang entweder nur die Wirkung staatlicher Subventionen oder nur die Wirkung sozialer Information über die privaten Beiträge anderer Spender untersucht, nicht jedoch den Nettoeffekt. Ziel der vorliegenden Arbeit ist es, diese Lücke zu schließen. Wir haben dazu ein Experiment durchgeführt, in dem nicht-studentische Versuchspersonen eine reale Spendenentscheidung getroffen haben. Die Hälfte der Versuchspersonen konnte sich dabei zwischen einer relativ kleinen Organisation mit geringen Jahreseinnahmen und einer relativ großen Organisation mit hohen Jahreseinnahmen entscheiden. Unsere Resultate zeigen einen negativen Zusammenhang zwischen der Organisationsgröße und der Spendenbereitschaft, wobei wir bewusst von Reputationseffekten abstrahiert haben. Die Studie zeigt außerdem, warum Spender kleine Organisationen bevorzugen. Sie kann damit zwischen verschiedenen theoretischen Ansätzen diskriminieren und liefert wichtige Informationen für die effektive Mitteleinwerbung von Fundraisern. Für die Mehrheit der Spender sind die geringeren Verwaltungsaufwendungen, das höhere Gewicht der eigenen Spende und die Bedürftigkeit der Einrichtung ausschlaggebend für die Wahl der kleinen Organisation.
    Keywords: charitable contributions,information,framed field experiment,fundraising
    JEL: H41 C91 D83
    Date: 2010
  11. By: Gerlinde Fellner (Department of Economics, Vienna University of Economics & B.A.); Yoshio Iida (Faculty of Economics, Kyoto Sangyo University, Kyoto, Japan); Sabine Kröger (Laval University, Department of Economics, Quebec, Canada); Erika Seki (Department of Economics, University of Aberdeen, Scotland, UK)
    Abstract: This article experimentally examines voluntary contributions when group members' marginal returns to the public good vary. The experiment implements two marginal return types, low and high, and uses the information that members have about the heterogeneity to identify the applied contribution norm. We find that norms vary with the information environment. If agents are aware of the heterogeneity, contributions increase in general. However, high types contribute more than low types when contributions can be linked to the type of the donor but contribute less otherwise. Low types, on the other hand, contribute more than high types when group members are aware of the heterogeneity but contributions cannot be linked to types. Our results underline the importance of the information structure when persons with different abilities contribute to a joint project, as in the context of teamwork or charitable giving.
    JEL: H41
    Date: 2010–07
  12. By: Hong Geng; Arne Robert Weiss; Irenaeus Wolff
    Abstract: In this paper, we experimentally approach the question of which aspects of a voting procedure are able to restrict elected candidates' willingness to use their power in an opportunistic way. For this purpose, we rule out reelection concerns and analyse whether the presence of a vote by itself matters for the exercise of power. We compare two kinds of electoral campaigns: self-descriptions of personality and promises regarding prospective in-office behaviour. We find that social approval as conveyed by a vote does not suffice to induce pro-social choices by elected candidates. On the other hand, when campaigns are promise-based, elected candidates transfer more to their recipients than candidates selected by a random draw even though promises do not differ. This refutes explanations based on a taste for consistency or costs of lying. In contrast, the fact that the correlation between dictators' promises and their beliefs on voter expectations is considerably strengthened in the presence of a vote offers support to a guilt-aversion hypothesis. However, this support is qualified by the correlation between dicators' second-order beliefs and their choices, which is weaker than predicted. Overall, our results suggest the power of voting to limit the self-oriented exertion of power is limited and context-specific.
    Keywords: Elections; Electoral campaigns; Promises; Guilt-aversion; Costs of lying; Dictator game; Social distance; Entitlement; Experiment
    Date: 2010
  13. By: Pierre-Carl Michaud; Darius Lakdawalla; Dana Goldman; Neeraj Sood; Ze Cong
    Abstract: We propose to combine clinical trial and estimates of behavioral responses in the population to quantify the value of new drug innovations when such values cannot be obtained by randomized experiments alone. New drugs are seen as having two distinct effects on patients. First, they can provide better outcomes for patients currently under treatment, due to better clinical efficacy. Second, they can also provide treatment access to more patients, perhaps by reducing side effects or expanding treatment. We compare these “clinical” and “access” effects using claims data, data on the arrival rate of new drugs, and the clinical trials literature on the effectiveness of these drugs. We find that the effect of new drug introductions on the number of patients treated accounts for a substantial majority of the value created by new drugs.
    Keywords: Pharmaceutical innovation, effectiveness, cost-benefit analysis, cancer
    JEL: I10 J14 J18 C23
    Date: 2010

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