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on Experimental Economics |
| By: | Eriksson, Tor (Aarhus School of Business); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | Assuming that people care not only about what others do but also on what others think, we study respect as a non-monetary source of motivation in a context where the length of the employment relationship is endogeneous. In our three-stage gift-exchange experiment, the employer can express respect by giving the employee costly symbolic rewards after observing his level of effort. This experiment sheds light on the extent to which symbolic rewards are used, how they affect employees’ further effort, the duration of relationships, and the profits of employers. Furthermore, we study whether employers’ decisions to give symbolic rewards are driven by strategic considerations, by manipulating the bargaining power of employers and employees. We find that employers make use of symbolic rewards and chiefly to express their satisfaction with the employee. Indeed, symbolic rewards are more frequently used when there is excess supply of labor in the market while they are used in almost the same proportion when the market is balanced and when there is excess demand of labor. They are associated with higher profits and increased probability of continuing employment relationships. Overall, however, the opportunity of expressing respect does not improve efficiency compared with an environment in which it does not exist, possibly due to a crowding-out of extrinsic incentives by the availability of non-monetary incentives. |
| Keywords: | respect, symbolic rewards, incentives, labor market, experiment |
| JEL: | C91 J32 J64 M52 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5200&r=exp |
| By: | Loukas Balafoutas; Martin G. Kocher; Louis Putterman; Matthias Sutter |
| Abstract: | We devise a new experimental game by nesting a voluntary contributions mechanism in a broader spectrum of incentive schemes. With it, we study tensions between egalitarianism, equity concerns, self-interest, and the need for incentives. In a 2x2 design, subjects either vote on or exogenously encounter incentive settings while assigned unequal incomes that are either task-determined or random. We find subjects’ voting to be mainly self-interested but also influenced by egalitarian and equity concerns, which sometimes cut in opposite directions. Contributions, which seem mainly determined by boundedly rational responses to incentives, are influenced by egalitarian, equity and strategic considerations. |
| Keywords: | equality, efficiency, voluntary contribution mechanism, incentives, experiment |
| JEL: | C91 C92 D31 D63 H41 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2010-26&r=exp |
| By: | Masclet, David (University of Rennes); Noussair, Charles N. (Tilburg University); Villeval, Marie Claire (CNRS, GATE) |
| Abstract: | Experimental studies of social dilemmas have shown that while the existence of a sanctioning institution improves cooperation within groups, it also has a detrimental impact on group earnings in the short run. Could the introduction of pre-play threats to punish have enough of a beneficial impact on cooperation, while not incurring the cost associated with actual punishment, so that they increase overall welfare? We report an experiment in which players can issue non-binding threats to punish others based on their contribution levels to a public good. After observing others’ actual contributions, they choose their actual punishment level. We find that threats increase the level of contributions significantly. Efficiency is improved, but only in the long run. However, the possibility of sanctioning differences between threatened and actual punishment leads to lower threats, cooperation and welfare, restoring them to levels equal to or below the levels attained in the absence of threats. |
| Keywords: | threats, cheap talk, sanctions, public good, experiment |
| JEL: | C92 H41 D63 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5206&r=exp |
| By: | David Hugh-Jones (Max Planck Institute of Economics, Jena); Martin A. Leroch (University of Hamburg) |
| Abstract: | People exhibit group reciprocity when they retaliate, not against the person who harmed them, but against somebody else in that person's group. Group reciprocity may be a key motivation behind intergroup conflict. We investigated group reciprocity in a laboratory experiment. After a group identity manipulation, subjects played a Prisoner's Dilemma with others from different groups. Subjects then allocated money between themselves and others, learning the group of the others. Subjects who knew that their partner in the Prisoner's Dilemma had defected became relatively less generous to people from the partner's group, compared to a third group. We use our experiment to develop hypotheses about group reciprocity and its correlates. |
| Keywords: | reciprocity, groups, conflict |
| JEL: | D74 C92 |
| Date: | 2010–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-066&r=exp |
| By: | Goette, Lorenz (University of Lausanne); Huffman, David (Swarthmore College); Meier, Stephan (Columbia University); Sutter, Matthias (University of Innsbruck) |
| Abstract: | We investigate how group boundaries, and the economic environment surrounding groups, affect altruistic cooperation and punishment behavior. Our study uses experiments conducted with 525 officers in the Swiss Army, and exploits random assignment to platoons. We find that, without competition between groups, individuals are more prone to cooperate altruistically in a prisoner's dilemma game with in-group as opposed to out-group members. They also use a costly punishment option to selectively harm those who defect, encouraging a norm of cooperation towards the group. Adding competition between groups causes even stronger in-group cooperation, but also a qualitative change in punishment: punishment becomes antisocial, harming cooperative and defecting out-group members alike. These findings support recent evolutionary models and have important organizational implications. |
| Keywords: | group membership, competition, punishment, army, experiment |
| JEL: | C72 C91 C93 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp5189&r=exp |
| By: | Andreas Leibbrandt (University of Chicago, Department of Economics); Lauri Sääksvuori (Max Planck Institute of Economics, Jena) |
| Abstract: | Numerous studies suggest that communication may be a universal means to mitigate collective action problems. In this study, we challenge this view and show that the communication structure crucially determines whether communication mitigates or intensifies the problem of collective action. We observe the effect of different communication structures on collective action in the context of finitely repeated intergroup conflict and demonstrate that conflict expenditures are significantly higher if communication is restricted to one's own group as compared to a situation with no communication. However, expenditures are significantly lower if open communication within one's own group and between rivaling groups is allowed. We show that under open communication intergroup conflicts are avoided by groups taking turns in winning the contest. Our results do not only qualify the role of communication for collective action but may also provide insights on how to mitigate the destructive nature of intergroup conflicts. |
| Keywords: | Communication, Conflict, Experiment, Rent-seeking |
| JEL: | C72 C91 C92 D72 D74 |
| Date: | 2010–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-065&r=exp |
| By: | David Hugh-Jones; Ro'i Zultan |
| Abstract: | In experiments, people behave more cooperatively when they are aware of an external threat, while in the field, we observe surprisingly high levels of cooperation and altruism within groups in conflict situations such as civil wars. We provide an explanation for these phenomena. We introduce a model in which different groups vary in their willingness to help each other against external attackers. Attackers infer the cooperativeness of a group from its members' behaviour under attack, and may be deterred by a group which bands together against an initial attack. Then, even self-interested individuals may behave cooperatively when threatened, so as to mimic more cooperative groups. By doing so, they drive away attackers and increase their own future security. We argue that a group's reputation is a public good with a natural weakest-link structure. We test the implications of our model in a laboratory experiment. |
| Keywords: | cooperation, conflict, defence, signaling |
| JEL: | C73 C92 D74 |
| Date: | 2010–09–27 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2010-064&r=exp |
| By: | Pablo Brañas-Garza (Department of Economic Theory and Economic History, University of Granada.); Olusegun A. Oyediran (Department of Economic Theory and Economic History, University of Granada.); M.Fernanda Rivas (University of Granada.) |
| Abstract: | This paper o¤ers two related issues: (i ) an applications of beliefs about the cooperative behavior of others to policy-oriented issues, (ii ) a method of explor- ing prejudices (toward others) where interviewees are oblivious of its purpose. We studied contributions and guesses about others?contributions through an experimental game. Prejudice is examined as an implicitly held belief by a Spanish college student towards any of the speci?ed foreign population groups (i.e. the Asians, the Africans, the Latin Americans and the Westerners). The results show that: at the individual level, there exists some subjects that harbor strong positive (and negative) prejudices toward the foreigners. The prejudice models ?tted also show that: own contributions, femaleness, individual wealth; and beliefs about income status, cultural status, religious intensity, societal co- operation and political orientation have strong in?uences on racial prejudice. |
| Keywords: | Beliefs, Prejudice, Public Goods Game |
| Date: | 2010–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:10/04&r=exp |
| By: | Thomas Epper; Helga Fehr-Duda; Adrian Bruhin |
| Abstract: | A large body of experimental research has demonstrated that, on average, people violate the axioms of expected utility theory as well as of discounted utility theory. In particular, aggregate behavior is best characterized by probability distortions and hyperbolic discounting. But is it the same people who are prone to these behaviors? Based on an experiment with salient monetary incentives we demonstrate that there is a strong and significant relationship between greater departures from linear probability weighting and the degree of decreasing discount rates at the level of individual behavior. We argue that this relationship can be rationalized by the uncertainty inherent in any future event, linking discounting behavior directly to risk preferences. Consequently, decreasing discount rates may be generated by people's proneness to probability distortions. |
| Keywords: | Time preferences, risk preferences, hyperbolic discounting, probability weighting, institutionally generated uncertainty |
| JEL: | D01 D81 D91 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:zur:iewwpx:510&r=exp |
| By: | Aurora García-Gallego (GLOBE-Economics Dpt., U. Granada & LEE-Ec. Dpt., U. Jaume I (Spain)); Nikolaos Georgantzís (GLOBE-Economics Dpt., Universidad de Granada (Spain) & BELIS, Murat Sertel Center for Advanced Economic Studies, Istanbul Bilgi University (Turkey)); Ainhoa Jaramillo-Gutiérrez (Economics & Finance Dpt., Universidad Castilla la Mancha (Spain)); Melanie Parravano (LEE-Economics Dpt., Universitat Jaume I (Spain)) |
| Abstract: | We propose a simple task for the elicitation of risk attitudes, initially used in Sabater-Grande and Georgantzís (2002) [SGG], capturing two dimensions of individual decision making: subjects’ average willingness to choose risky projects and their sensitivity towards variations in the return to risk. We report results from a large dataset obtained from the test and discuss regularities and the desirability of its bi-dimensionality when used to explain behaviour in other contexts. |
| Keywords: | Psychometric Tests, Decision-making; Lotteries; Risk aversion. |
| Date: | 2010–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:10/07&r=exp |
| By: | Dan Kovenock (Department of Economics, The University of Iowa); Brian Roberson (Department of Economics, Krannert School of Management, Purdue University); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University) |
| Abstract: | This paper experimentally examines behavior in a two-player game of attack and defense of a weakest-link network of targets, in which the attacker's objective is to successfully attack at least one target and the defender's objective is diametrically opposed. We apply two benchmark contest success functions (CSFs): the auction CSF and the lottery CSF. Consistent with the theoretical prediction, under the auction CSF, attackers utilize a stochastic “guerilla warfare” strategy — in which a single random target is attacked — more than 80% of the time. Under the lottery CSF, attackers utilize the stochastic guerilla warfare strategy almost 45% of the time, contrary to the theoretical prediction of an equal allocation of forces across the targets. |
| Keywords: | Colonel Blotto, conflict resolution, weakest-link, best-shot, multi-dimensional resource allocation, experiments. |
| JEL: | C72 C91 D72 D74 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:10-14&r=exp |
| By: | Hellerstein, Daniel; Higgins, Nathaniel |
| Abstract: | Conservation programs faced with limited budgets often use a competitive enrollment mechanism. Goals of enrollment might include minimizing program expenditures, encouraging broad participation, and inducing adoption of enhanced environmental practices. We use experimental methods to evaluate an auction mechanism that incorporates bid maximums and quality adjustments. We examine this mechanism’s performance characteristics when opportunity costs are heterogeneous across potential participants, and when costs are only approximately known by the purchaser. We find that overly stringent maximums can increase overall expenditures, and that when quality of offers is important, substantial increases in offer maximums can yield a better quality-adjusted result. |
| Keywords: | conservation auctions; Conservation Reserve Program; CRP; bid caps; experimental economics |
| JEL: | D44 C91 Q58 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:25268&r=exp |
| By: | Subhasish Dugar (Department of Economics, University of Calgary); Quazi Shahriar (Department of Economics, San Diego State University) |
| Abstract: | We examine, experimentally, how real group identities of parties (principal and agent), contemplating to form a partnership while facing a moral hazard problem (as treated in the contract theory), may attenuate the problem and thereby implement the socially desirable efficient outcome. We find that when both parties share the same real group identity, the proportion of play of the efficient outcome is significantly higher than when the parties share two different real group identities. However, when we induce a substantially weaker form of group identity or increase the saliency of the outside-option payoff of the principal, the incidence of play of the efficient outcome diminishes considerably, even when the parties’ identities align perfectly. Our results have important implications for organizational design. |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:sds:wpaper:0036&r=exp |
| By: | Catherine Tucker (MIT Marketing) |
| Abstract: | This paper investigates how internet users' perception of control over their personal information affects how likely they are to click on online advertising. The paper uses data from a randomized field experiment that examined the relative effectiveness of personalizing ad copy to mesh with existing personal information on a social networking website. The website gave users more control over their personally identifiable information in the middle of the field test. The website did not change how advertisers used anonymous data to target ads. After this policy change, users were twice as likely to click on personalized ads. There was no comparable change in the effectiveness of ads that did not signal that they used private information when targeting. The increase in effectiveness was larger for ads that used less commonly available private information to personalize their message. This suggests that giving users the perception of more control over their private information can be an effective strategy for advertising-supported websites. |
| Keywords: | Social Networks, Privacy, Online Advertising |
| JEL: | M37 |
| Date: | 2010–09 |
| URL: | http://d.repec.org/n?u=RePEc:net:wpaper:1007&r=exp |
| By: | Santiago Budría (Department of Management and Economics, University of Madeira); Juan A. Lacomba (Department of Economic Theory and Economic History, University of Granada, GLOBE); Francisco Lagos (Department of Economic Theory and Economic History, University of Granada, GLOBE) |
| Date: | 2010–09–01 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:10/08&r=exp |
| By: | Thomas Siedler; Bettina Sonnenberg |
| Abstract: | During the last two decades, laboratory experiments have come into increasing prominence and constitute a popular method of research to examine behavioral outcomes and social preferences. However, it has been debated whether results from these experiments can be extrapolated to the real world and whether, for example, sample selection into the experiment might constitute a major shortcoming of this methodology. This note discusses potential benefits of combining experimental methods and representative datasets as a means to overcome some of the limitations of lab experiments. We also outline how large representative surveys can serve as reference data for researchers collecting |
| Keywords: | experiments, survey, representativity |
| JEL: | C01 C52 C8 C9 D0 D6 D81 D84 |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:rsw:rswwps:rswwps146&r=exp |
| By: | Joseph Henrich; Steve J. Heine; Ara Norenzayan |
| Abstract: | Behavioral scientists routinely publish broad claims about human psychology and behavior in the world’s top journals based on samples drawn entirely from Western, Educated, Industrialized, Rich and Democratic (WEIRD) societies. Researchers—often implicitly—assume that either there is little variation across human populations, or that these “standard subjects” are as representative of the species as any other population. Are these assumptions justified? Here, our review of the comparative database from across the behavioral sciences suggests both that there is substantial variability in experimental results across populations and that WEIRD subjects are particularly unusual compared with the rest of the species—frequent outliers. The domains reviewed include visual perception, fairness, cooperation, spatial reasoning, categorization and inferential induction, moral reasoning, reasoning styles, selfconcepts and related motivations, and the heritability of IQ. The findings suggest that members of WEIRD societies, including young children, are among the least representative populations one could find for generalizing about humans. Many of these findings involve domains that are associated with fundamental aspects of psychology, motivation, and behavior—hence, there are no obvious a priori grounds for claiming that a particular behavioral phenomenon is universal based on sampling from a single subpopulation. Overall, these empirical patterns suggests that we need to be less cavalier in addressing questions of human nature on the basis of data drawn from this particularly thin, and rather unusual, slice of humanity. We close by proposing ways to structurally re-organize the behavioral sciences to best tackle these challenges. |
| Keywords: | external validity, population variability, experiments, cross-cultural research, culture, human universals, generalizability, evolutionary psychology, cultural psychology, behavioral economics |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:rsw:rswwps:rswwps139&r=exp |
| By: | Simon Gächter |
| Abstract: | In this comment on Henrich et al. (2010) I argue that the right choice of subject pool is intimately linked to the research question. At least within economics, students are often the perfect subject pool for answering some fundamental research questions. Student subject pools can provide an invaluable benchmark for investigating generalizability across different social groups or cultures. |
| Date: | 2010 |
| URL: | http://d.repec.org/n?u=RePEc:rsw:rswwps:rswwps141&r=exp |