nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒10‒16
twenty papers chosen by
Daniel Houser
George Mason University

  1. The role of training in experimental auctions By Andreas C. Drichoutis; Rodolfo M. Nayga, Jr.; Panagiotis Lazaridis
  2. Warm glow in charitable auctions: Are the WEIRDos driving the results? By Remoundou, Kyriaki; Drichoutis, Andreas; Koundouri, Phoebe
  3. The Effects of Induced Mood on Preference Reversals and Bidding Behavior in Experimental Auction Valuation By Drichoutis, Andreas; Nayga, Rodolfo; Klonaris, Stathis
  4. Are Consumers Fooled by Discounts? An Experimental Test in a Consumer Search Environment By Ralph-C Bayer; Changxia Ke
  5. Bargaining or Searching for a Better Price? - An Experimental Study By Francesco Feri; Anita Gantner
  6. Gender Differences in Economic Experiments By Selim Jürgen Ergun; Teresa García-Muñoz; M.Fernanda Rivas
  7. Field and Online Experiments on Procrastination and Willpower By Nicholas Burger; Gary Charness
  8. Do Religious Beliefs Explain Preferences for Income Redistribution? Experimental Evidence By Ilja Neustadt
  9. The lottery-panel task for bi-dimensional parameter-free elicitation of risk attitudes By Aurora García-Gallego; Nikolaos Georgantzís; Ainhoa Jaramillo-Gutiérrez; Melanie Parravano
  10. The neural basis of bounded rational behavior By Giorgio Coricelli; Rosemarie Nagel
  11. The Easterlin Paradox and Another Anatomy of Income Comparisons: Evidence from Hypothetical Choice Experiments By Katsunori Yamada; Masayuki Sato
  12. Confusion and Learning in the Public Goods Game By Ralph-C Bayer; Elke Renner; Rupert Sausgruber
  13. Discounts and Consumer Search Behavior: The Role of Framing By Ralph-C Bayer; Changxia Ke
  14. How Does Voice Matter? Evidence from the Ultimatum Game By Qiyan Ong; Steven M. Sheffrin
  15. Time discounting (d) and pain anticipation: Experimental evidence By Pablo Brañas-Garza; María Paz Espinosa; María Repolles
  16. Identification strategy : a field experiment on dynamic incentives in rural credit markets By Gine, Xavier; Goldberg, Jessica; Yang, Dean
  17. The Price for Information about Probabilities and its Relation with Capacities By Attanasi, Giuseppe; Montesano, Aldo
  18. Strategic Interaction and Conventions By María Paz Espinosa; Jaromír Kovárík; Giovanni Ponti
  19. A Reason for Unreason: Returns-Based Beliefs in Game Theory By Velu, C.; Iyer, S.; Gair, J.R.
  20. Effectiveness of in-store displays in a virtual store environment. By Breugelmans, Els; Campo, Katia

  1. By: Andreas C. Drichoutis (Department of Economics, University of Ioannina); Rodolfo M. Nayga, Jr. (Department of Agricultural Economics & Agribusiness, University of Arkansas); Panagiotis Lazaridis (Department of Agricultural Economics & Rural Development, Agricultural University of Athens)
    Abstract: In this paper we examine the role of providing extensive training to subjects in the context of experimental auctions. We conducted an experiment where we auctioned several lotteries with varying payoffs. One group of subjects was extensively trained while another group of subjects was only minimally trained. We find that subjects in the extensive training treatment, were submitting bids significantly higher than subjects in the minimal training treatment, suggesting that subjects without proper training may underreport their WTP.
    Keywords: lottery,training, Vickrey auctions
    JEL: D81 D0
    Date: 2010
  2. By: Remoundou, Kyriaki; Drichoutis, Andreas; Koundouri, Phoebe
    Abstract: Running conventional laboratory experiments (i.e., with a standard student subject pool) is common practice in economic experiments especially when methodological issues are explored. However, generalization of the results from such experiments to the entire population is subject to severe critique. In this study we investigate warm glow in charitable auctions in a conventional lab experiment and an artefactual field experiment (i.e., lab experiment using subjects from the general population). The auction is constructed in a way to isolate warm glow by donating the sum of revenues by highest bidders to an environmental charity of subjects’ choice. Contributions motivated by pure altruism were eliminated by keeping constant the total amount the charity would receive. Results for the two subject pools are at complete odds. There is ample evidence of warm glow in the student subject pool but none in the consumer subject pool. Our findings suggest that conclusions from conventional lab experiments may not be immediately transferable to the general population.
    Keywords: warm glow; charitable auctions; lab experiment; WEIRDos
    JEL: Q52 C92 D44
    Date: 2010–09
  3. By: Drichoutis, Andreas; Nayga, Rodolfo; Klonaris, Stathis
    Abstract: This article contributes to the research agenda of accommodating psychological insights in conventional lab experiments. We specifically test whether inducing subjects into different mood states has a significant effect on subjects rationality (in the form of preference reversals) and on bidding behavior in homegrown value auctions. We find that mood states can significantly affect the rate of preference reversal and bidding behavior in experimental auction valuation. Specifically we find that subjects exhibit more rational behavior under a positive mood state than under a negative mood state. Subjects in a positive mood provide lower bid values than others. Regardless of mood states, males tend to commit a higher rate of preference reversal than females in mixed gender sessions. However, females tend to commit higher rate of preference reversal in female only sessions than in mixed sessions while males tend to commit a lower rate of preference reversal when in male only sessions than in mixed sessions.
    Keywords: mood; affect; rationality; Vickrey auction; preference reversals; gender differences
    JEL: C91
    Date: 2010–10
  4. By: Ralph-C Bayer (School of Economics, University of Adelaide); Changxia Ke (Max Planck Institute)
    Abstract: In this paper we investigate experimentally if people search optimally and how price promotions influence search behavior. We implement a sequential search task with exogenous price dispersion in a baseline treatment and introduce discounts in two experimental treatments. We find that search behavior is roughly consistent with optimal search but also observe some discount biases. If subjects don't know in advance where discounts are offered the purchase probability is increased by 19 percentage points in shops with discounts, even after controlling for the benefit of the discount and for risk preferences. If consumers know in advance where discounts are given then the bias is only weakly significant and much smaller (7 percentage points).
    Keywords: Consumer Search Theory, Search Cost, Price Promotion
    JEL: D82 D83 C91
    Date: 2010
  5. By: Francesco Feri; Anita Gantner
    Abstract: This experimental study investigates two bargaining games with twosided incomplete information between a seller and a buyer. In the first game with no outside options many subjects do not use the incomplete information to their advantage as predicted. We find that a model with adjusting priors better explains observed behavior. The second game gives the buyer the option to buy via search or return to bargaining. Here many buyers choose a bargaining agreement when a search outcome is predicted. For those who opt out, search outcomes are overall efficient and behavior is relatively close to the optimal search policy.
    Keywords: Bargaining Experiment, Outside Option, Search
    JEL: C91 C78 D83 D82
    Date: 2010–10
  6. By: Selim Jürgen Ergun (Middle East Technical University - Northern Cyprus Campus. Economics Program and GLOBE); Teresa García-Muñoz (Departamento de Métodos Cuantitativos para la Economía y la Empresa - Universidad de Granada); M.Fernanda Rivas (Middle East Technical University - Northern Cyprus Campus. Economics Program and GLOBE)
    Abstract: This paper reviews the experimental economics literature on gender differences concerning four subjects: risk aversion, trust, deception and leadership. The vast majority of the articles we have revised document gender differences in behavior; differences which could be explained by sex-role stereotypes and/or hormonal differences
    Date: 2010–10–01
  7. By: Nicholas Burger (Rand Corporation); Gary Charness (University of California at Santa Barbara, Econonmics Department)
    Abstract: Self-control problems have recently received considerable attention from economic theorists. We conducted two studies to test the benefits of externally imposed deadlines and how willpower depletion affects behavior, providing some of the first data in these areas. Each study involved a behavioral intervention designed to affect performance. We find that for a lengthy task, regular deadlines neither reduce procrastination nor increase completion rates. Second, a willpower-depleting task reduces initial effort but increases overall task-completion rates. Our results help to inform ongoing efforts to understand and model procrastination, willpower and commitment mechanisms.
    Keywords: Experiment, Behavioral Interventions, Procrastination, Willpower
    JEL: A13 B49 C91 C93 D00
    Date: 2010–05–18
  8. By: Ilja Neustadt (Institute for Future Energy Consumer Needs and Behavior (FCN), RWTH Aachen University)
    Abstract: Due to the mixed empirical evidence bearing on the economic determinants, beliefs have been at the center of attention of research into preferences for income redistribution. We elicit preferences for income redistribution through a Discrete Choice Experiment performed in 2008 in Switzerland and relate them to several behavioral determinants, in particular to religious beliefs. Estimated marginal willingness to pay (WTP) is positive among those who do not belong to a religious denomination, and negative otherwise. However, the marginal WTP is shown to increase with a higher degree of religiosity. Moreover, those who state that luck or connections play a crucial role in determining economic success exhibit significantly higher WTP values than those who deem e?ort to be decisive.
    Keywords: Income redistribution, beliefs, religiosity, welfare state, preferences, willingness to pay, discrete choice experiments
    JEL: C35 C93 D63 H29
    Date: 2010–09
  9. 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: Decision-making; Lotteries; Risk aversion
    Date: 2010–10–01
  10. By: Giorgio Coricelli (University of Southern California and Centre of Cognitive Neuroscience, Bron (Lyon), France.); Rosemarie Nagel (Universitat Pomepu Fabra)
    Abstract: Bounded rational behaviour is commonly observed in experimental games and in real life situations. Neuroeconomics can help to understand the mental processing underlying bounded rationality and out-of-equilibrium behaviour. Here we report results from recent studies on the neural basis of limited steps of reasoning in a competitive setting – the beauty contest game. We use functional magnetic resonance imaging (fMRI) to study the neural correlates of human mental processes in strategic games. We apply a cognitive hierarchy model to classify subject’s choices in the experimental game according to the degree of strategic reasoning so that we can identify the neural substrates of different levels of strategizing. We found a correlation between levels of strategic reasoning and activity in a neural network related to mentalizing, i.e. the ability to think about other’s thoughts and mental states. Moreover, brain data showed how complex cognitive processes subserve the higher level of reasoning about others. We describe how a cognitive hierarchy model fits both behavioural and brain data.
    Keywords: Game theory, Bounded rationality, Neuroeconomics
    Date: 2010–10–01
  11. By: Katsunori Yamada; Masayuki Sato
    Abstract: This paper provides evidence from Internet-based, large-scale survey data of hypothetical choice experiment on the relative utility hypothesis. The methodology exploited here complements previous empirical results from happiness studies, incentivized choice experiment studies, and neuroscience studies in sucha way that methodological problems among previous studies within these fields are resolved. We show that not only the intensity but also the distribution of relative utility are different across specific comparison benchmarks (internal reference group), and across types of reference groups people are facing in the experiments (external reference group). The relative utility effect among Japanese respondents, while shown to exist in the form of jealousy, is found to be not as strong as can validate the Easterlin paradox. Comparison benchmark with daily contacts is related to stronger jealousy. We also provide empirical evidence, which nuances that the reference group is chosen endogenously.
    Date: 2010–09
  12. By: Ralph-C Bayer (School of Economics, University of Adelaide); Elke Renner (University of Nottingham); Rupert Sausgruber (University of Copenhagen)
    Abstract: We test if confusion and learning could potentially explain all the decay of contributions in the repeated public goods games by implementing a limited information environment to mimic the state of confusion. A comparison shows that the rate of decline is more than twice as high in a standard public goods game. Furthermore, we find that simple learning cannot generate the contribution dynamics, which are commonly attributed to the existence of conditional cooperators. We conclude that cooperative behavior observed in public goods games is not a pure artefact of confusion and learning.
    Keywords: public goods experiments, learning, limited information, confusion, conditional cooperation
    JEL: C90 D83 H41
    Date: 2010–10
  13. By: Ralph-C Bayer (School of Economics, University of Adelaide); Changxia Ke (Max Planck Institute)
    Abstract: We implement a simple two-shop search model in the laboratory with the aim to investigate if consumers behave differently in equivalent situations, where prices are displayed either as net prices or as gross prices with discounts. We compare treatments, where we either depict the known price of the first shop or the initially uncertain price of the second shop as a gross price with a discount, with treatments without discounts. We ind that subjects search less in both treatments with discounts. Hence, we conclude that retailers can use this framing effect in order to reduce the competitiveness in their market, since decreased search intensities dampen competitive pressure.
    Keywords: Consumer Search, Price Framing, Price discounts, Competition
    JEL: D82 D83 C91 L13
    Date: 2010–10
  14. By: Qiyan Ong; Steven M. Sheffrin (Department of Economics, Tulane University)
    Abstract: Prior research in economics and psychology has shown that process can matter in determining outcomes in many social situations. In particular, the opportunity to express ones opinion-voice-has been found to be highly influential. However, little is known about the channels through which voice may operate. In this paper, we develop a simple economic model of voice to explore these channels. We show that individuals value voice for: 1) its effect on outcomes, 2) its inherent value, or 3) its role in signalling one's social standing. Through the introduction of a hypothetical round in the standard ultimatum game, we were able to test the channels of voice directly by observing recipients' responses to offers which are lower than what they asked for. Our experimental results suggest that voice works primarily through its inherent value which appears to exceed its contribution to the perception of procedural fairness. Further, unlike voice which softens the impact of an unfair outcome, the possibility for voice may have dichotomous effects.
    Keywords: voice, ultimatum game
    JEL: D30 C91
    Date: 2010–09
  15. By: Pablo Brañas-Garza (GLOBE and Universidad de Granada); María Paz Espinosa (Universidad del País Vasco); María Repolles (GLOBE and Universidad de Granada and Virgen de las Nieves Hospital, Granada)
    Abstract: This paper deals with pain anticipation experienced before medical procedures. Our experimental results show that individuals with lower discount factors are more prone to suffer pain in advance. We provide a framework to rationalize the connection between pain anticipation and impatience. In this set up, more impatient subjects, who only value very near events, take into account mainly the negative effects of medical procedures (just the costs) whereas more patient individuals have a net positive valuation of medical events (given that they value both the cost incurred now and all the benefits accrued in the future).
    Date: 2010–10–01
  16. By: Gine, Xavier; Goldberg, Jessica; Yang, Dean
    Abstract: How do borrowers respond to improvements in a lender's ability to punish defaulters? This paper reports the results of a randomized field experiment in rural Malawi that examines the impact of fingerprinting borrowers in a context where a unique identification system is absent. Fingerprinting allows the lender to more effectively use dynamic repayment incentives: withholding future loans from past defaulters while rewarding good borrowers with better loan terms. Consistent with a simple model of borrower heterogeneity and information asymmetries, fingerprinting led to substantially higher repayment rates for borrowers with the highest ex ante default risk, but had no effect for the rest of the borrowers. The change in repayment rates is driven by reductions in adverse selection (smaller loan sizes) and lower moral hazard (for example, less diversion of loan-financed fertilizer from its intended use on the cash crop).
    Keywords: Access to Finance,Debt Markets,Bankruptcy and Resolution of Financial Distress,Microfinance,Economic Theory&Research
    Date: 2010–10–01
  17. By: Attanasi, Giuseppe; Montesano, Aldo
    Abstract: In this paper ambiguity aversion is measured through the maximum price the decision maker is willing to pay in order to know the probability of an event. Two comparative problems are examined in which the decision maker faces an act: in one case buying information implies playing a lottery, while in the other case buying information gives also the option to avoid playing the lottery. In both decision settings, relying on Choquet expected utility model, we study how the decision maker’s risk and ambiguity attitudes affect the reservation price for information. These effects are analyzed for different levels of ambiguity of the act.
    Keywords: Ambiguity aversion; Choquet expected utility; Information about probabilities
    JEL: D81 D83 C91
    Date: 2010–09
  18. By: María Paz Espinosa (Universidad del País Vasco); Jaromír Kovárík (Universidad del País Vasco); Giovanni Ponti (Universidad de Alicante and Università di Ferrara)
    Abstract: The scope of the paper is to review the literature that employs coordination games to study social norms and conventions from the viewpoint of game theory and cognitive psychology. We claim that those two alternative approaches are complementary, as they provide different insights to explain how people converge to a unique system of self-fulfilling expectations in presence of multiple, equally viable, conventions. While game theory explains the emergence of conventions relying on efficiency and risk considerations, the psychological view is more concerned with frame and labeling effects. The interaction between these alternative (and, sometimes, competing) effects leads to the result that coordination failures may well occur and, even when coordination takes place, there is no guarantee that the convention eventually established will be the most efficient.
    Keywords: Behavioral Game Theory, conventions, social norms
    Date: 2010–10–01
  19. By: Velu, C.; Iyer, S.; Gair, J.R.
    Abstract: Players cooperate in experiments more than game theory would predict. We introduce the ‘returns-based beliefs’ approach: the expected returns of a particular strategy in proportion to total expected returns of all strategies. Using a decision analytic solution concept, Luce’s (1959) probabilistic choice model, and ‘hyperpriors’ for ambiguity in players’ cooperability, our approach explains empirical observations in various classes of games including the Prisoner’s and Traveler’s Dilemmas. Testing the closeness of fit of our model on Selten and Chmura (2008) data for completely mixed 2 × 2 games shows that with loss aversion, returns-based beliefs explain the data better than other equilibrium concepts.
    Keywords: Rationality, Subjective Probabilities, Returns-Based Beliefs
    Date: 2010–10–01
  20. By: Breugelmans, Els; Campo, Katia
    Abstract: This article examines the effectiveness of in-store displays (ISD) in an online grocery store and concentrates on two main issues. First, considering the more artificial and functional virtual store environment, we examine whether online ISD produce a similar boost in sales as they do in offline stores. Second, we examine the moderating effect of display characteristics by comparing the effects of different display types. The results show that (1) online ISD can substantially increase brand sales and (2) ISD that preempt competition through a first-order and isolated position outperform ISD that attempt to make the product stand out in the shopping zone.
    Keywords: in-store displays; online retailing; online grocery shopping; market share models;
    Date: 2010–09

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