nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒11‒20
twenty-one papers chosen by
Daniel Houser
George Mason University

  1. Make Him an Offer He Can’t Refuse: Avoiding Conflicts through Side Payments By Erik O. Kimbrough; Roman Sheremeta
  2. Do I really want to know? A cognitive dissonance-based explanation of other-regarding behavior By Astrid Matthey; Tobias Regner
  3. Do Investors Trust or Simply Gamble? By Roman Sheremeta; Timothy Shields
  4. Pre-play communication in Cournot competition: An experiment with students and managers By Waichman, Israel; Requate, Till; Siang, Ch'ng Kean
  5. BSocial preferences during childhood and the role of gender and age – An experiment in Austria and Sweden By Peter Martinsson; Katarina Nordblom; Daniela Rützler; Matthias Sutter
  6. Corruption and culture: An Experimental Analysis.. By Barr, Abigail; Serra, Danila
  7. Visibility of Contributions and Cost of Information: An Experiment on Public Goods By Anya Savikhin; Roman Sheremeta
  8. Inconsistency Pays?: Time-inconsistent subjects and EU violators earn more By Berg, Nathan; Eckel, Catherine; Johnson, Cathleen
  9. Moral Judgments in Social Dilemmas: How Bad is Free Riding? By Robin P. Cubitt; Michalis Drouvelis; Simon Gaechter; Ruslan Kabalin
  10. Revealed Preferences for Risk and Ambiguity By Donald J. Brown; Chandra Erdman; Kirsten Ling; Laurie Santos
  11. Democracy under uncertainty: The ‘wisdom of crowds’ and the free-rider problem in group decision making By Kameda, Tatsuya; Tsukasaki, Takafumi; Hastie, Reid; Berg, Nathan
  12. ARE GOOD-LOOKING PEOPLE MORE EMPLOYABLE? By Bradley J. Ruffle; Ze’ev Shtudiner
  13. The Truth, the Whole Truth, and Nothing but the Truth A Multiple Country Test of an Oath Script By Fredrik Carlsson; Mitesh Kataria; Alan Krupnick; Elina Lampi; Asa Löfgren; Ping Qin; Thomas Sterner; Susie Chung
  14. Can sickness absence be affected by information meetings? Evidence from a social experiment By Johansson, Per; Lindahl, Erica
  16. Role Induced Bias in Court: An Experimental Analysis By Andreas Glöckner; Christoph Engel
  17. The message framing of health communications : how to elicit higher intention to get an annual pap test ? By L. Balbo
  18. Does the Endowment of Contributors Make a Difference in Threshold Public Good Games? By Federica Alberti; Edward J. Cartwright
  19. The Financial Bubble Experiment: Advanced Diagnostics and Forecasts of Bubble Terminations, Volume III By Ryan Woodard; Didier Sornette; Maxim Fedorovsky
  20. Re-examining coherent arbitrariness for the evaluation of common goods and simple lotteries By Drew Fudenberg; David K. Levine; Zacharias Maniadis
  21. Punishment and cooperation: the "old" theory By Ortona, Guido

  1. By: Erik O. Kimbrough (Department of Economics (AE1), School of Business and Economics, Maastricht University); Roman Sheremeta (Argyros School of Business and Economics, Chapman University)
    Abstract: The equilibrium of a two-stage conflict game with side-payments predicts that with binding stage-one offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30% of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 98% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 49% of gains come from avoided conflicts and 51% from reduced conflict expenditures.
    Keywords: contest, conflict resolution, side payments, experiments
    JEL: C72 C91 D72
    Date: 2010
  2. By: Astrid Matthey (Max Planck Institute of Economics, Jena, Germany); Tobias Regner (Max Planck Institute of Economics, Jena, Germany)
    Abstract: We investigate to what extent genuine social preferences can explain observed other-regarding behavior. In a dictator game variant subjects can choose whether to learn about the consequences of their choice for the receiver. We find that a majority of subjects showing other-regarding behavior when the payoffs of the receiver are known, choose to ignore these consequences if possible. This behavior is inconsistent with preferences about outcomes. Other-regarding behavior may also be explained by avoiding cognitive dissonance as in Konow (2000). Our experiment's choice data is in line with this approach. In addition, we successfully relate individual behavior to proxies for cognitive dissonance.
    Keywords: social preferences, other-regarding behavior, experiments, social dilemma, cognitive dissonance
    JEL: C72 D01 C91 D80
    Date: 2010–11–11
  3. By: Roman Sheremeta (Argyros School of Business and Economics, Chapman University); Timothy Shields (Argyros School of Business and Economics, Chapman University)
    Abstract: We design an experiment to study individual behavior in a strategic information setting where the sender has economic incentives to deceive and the receiver has economic incentives to avoid deception. To ascertain whether subjects in the role of receiver glean information content from the sender’s message, we elicit choices from risky gambles constructed to be mathematically equivalent to the information setting if the sender’s message lacks information content. In the experiment subjects act simultaneously as a sender and receiver in a one-shot interaction. The findings of our experiment indicate that (i) subjects tend to act deceptively as senders but trusting as receivers, and (ii) as receivers, subjects glean information content from the senders’ messages. Thus, we find investors (receivers) trust and investment cannot be rationalized solely by subjects’ attitudes towards risk.
    Keywords: experiment, level-k thinking, strategic communication, risk preference, beliefs
    Date: 2010
  4. By: Waichman, Israel; Requate, Till; Siang, Ch'ng Kean
    Abstract: This study investigates the impact of pre-play communication on the outcomes in Cournot duopoly and triopoly experiments, using both students and managers as subjects. Communication is implemented by two different devices, a 'standardized-communication' and a free-communication device. We find that the effect of communication on collusion is larger in duopoly than in triopoly. Moreover, managers behave in a similar way under the two communication devices, while students are more influenced by the free-communication than by the standardized-communication device. In addition, managers select lower aggregate quantities than students, and communication enhances the difference between the subject pools in duopoly but reduces this difference in triopoly. Inspecting individual behavior, in all treatments the output adjustment is significantly correlated with the previous round's best response strategy. In the treatments with communication, the effect of imitation becomes larger and crowds out the effect of myopic best response. Finally, in all treatments duopoly results in more collusion than triopoly. --
    Keywords: artefactual field experiment,subject pools,Cournot oligopoly,managers,cheap talk
    JEL: L13 C93 C72 D43 D21
    Date: 2010
  5. By: Peter Martinsson; Katarina Nordblom; Daniela Rützler; Matthias Sutter
    Abstract: We examine social preferences of Swedish and Austrian children and adolescents using the experimental design of Charness and Rabin (2002). We find that difference aversion decreases while social-welfare preferences increase with age.
    Keywords: social preferences; children; adolescents; distributional experiment; Austria; Sweden.
    JEL: C91 D63 D64
    Date: 2010–11
  6. By: Barr, Abigail; Serra, Danila
    Abstract: Why do some people choose corruption over honesty and others not? Do the social norms and values prevailing in the societies in which they grew up affect their decisions? In 2005, we conducted a bribery experiment and found that, among undergraduates, we could predict who would act corruptly with reference to the level of corruption in their home country. Among graduate students we could not. In 2007, we replicated our result and also found that time spent in the UK was associated with a decline in the propensity to bribe, although this does not explain our inability to predict graduate behaviour. We conclude that, while corruption may, in part, be a cultural phenomenon, individuals should not be prejudged with reference to their country of origin.
    JEL: D73 C91 Z13
    Date: 2010
  7. By: Anya Savikhin (Becker Center on Chicago Price Theory, The University of Chicago); Roman Sheremeta (Argyros School of Business and Economics, Chapman University)
    Abstract: We experimentally investigate the impact of visibility of information about contributors on contributions in the public goods game. We systematically consider several treatments that are similar to a wide range of situations in practice. First, we vary the cost of viewing identifiable information about contributors. Second, we vary recognizing all, top or bottom contributors. We find that recognizing all contributors significantly increases contributions relative to the baseline. Recognizing only the top contributors is not significantly different from not recognizing contributors, but recognizing only the bottom contributors is as effective as recognizing all contributors. When viewing information about contributors is costly, there is no significant difference in contributions as compared to the case where all contributors are displayed by default. This effect holds even though the identities of contributors are viewed less than ten percent of the time.
    Keywords: public-goods, information, competition
    JEL: C72 C91
    Date: 2010
  8. By: Berg, Nathan; Eckel, Catherine; Johnson, Cathleen
    Abstract: Experimental choice data from 881 subjects based on 40 time-tradeoff items and 32 risky choice items reveal that most subjects are time-inconsistent and most violate the axioms of expected utility theory. These inconsistencies cannot be explained by well-known theories of behavioral inconsistency, such as hyperbolic discounting and cumulative prospect theory. Aggregating expected payoffs and the risk associated with each subjects’ 72 choice items, the statistical links between inconsistency and total payoffs are reported. Time-inconsistent subjects and those who violate expected utility theory both earn substantially higher expected payoffs, and these positive associations survive largely undiminished when included together in total payoff regressions. Consistent subjects earn lower than average payoffs because most of them are consistently impatient or consistently risk averse. Positive payoffs from inconsistency cannot, however, be fully explained by greater risk taking. Controlling for the total risk of each subject’s risk choices as well as for socio-economic differences among subjects, time inconsistent subjects earn significantly more money, in statistical and economic terms. So do expected utility violators. Positive returns to inconsistency extend outside the domain in which inconsistencies occurs, with time-inconsistent subjects earning more on risky choice items, and expected utility violators earning more on time-tradeoff items. The results seem to call into question whether axioms of internal consistency—and violations of these axioms that behavioral economists frequently focus on—are economically relevant criteria for evaluating the quality of decision making in human populations.
    Keywords: behavioral economics; hyperbolic discounting; hypobolic; normative; coherence; correspondence; consistency; irrationality; rationality
    Date: 2010
  9. By: Robin P. Cubitt (University of Nottingham); Michalis Drouvelis (University of Birmingham); Simon Gaechter (University of Nottingham); Ruslan Kabalin (University of Lancaster)
    Abstract: In the last thirty years, economists and other social scientists have investigated people’s normative views on distributive justice. Here we study people’s normative views in social dilemmas, which underlie many situations of economic and social significance. Using insights from moral philosophy and psychology we provide an analysis of the morality of free riding. We use experimental survey methods to investigate people’s moral judgments empirically. We vary others’ contributions, the framing (“give-some” vs. “take-some”) and whether contributions are simultaneous or sequential. We find that moral judgments of a free rider depend strongly on others’ behaviour; and that failing to give is condemned more strongly than withdrawing all support.
    Keywords: moral judgments, moral psychology, framing effects, public goods experiments, free riding
    Date: 2010–10
  10. By: Donald J. Brown (Department of Economics, Yale University); Chandra Erdman (U.S. Bureau of the Census); Kirsten Ling (Office of the Controller of the Currency); Laurie Santos (Department of Psychology, Yale University)
    Abstract: We replicate the essentials of the Huettel et al. (2006) experiment on choice under uncertainty with 30 Yale undergraduates, where subjects make 200 pair-wise choices between risky and ambiguous lotteries. Inferences about the independence of economic preferences for risk and ambiguity are derived from estimation of a mixed logit model, where the choice probabilities are functions of two random effects: the proxies for risk-aversion and ambiguity-aversion. Our principal empirical finding is that we cannot reject the null hypothesis that risk and ambiguity are independent in economic choice under uncertainty. This finding is consistent with the hypothesized independence of the neural mechanisms governing economic choices under risk and ambiguity, suggested by the double dissociation-fMRI study reported in Huettel et al.
    Keywords: Mixed logit, Risk-aversion, Ambiguity-aversion
    JEL: C14 C25 C91 D81
    Date: 2010–11
  11. By: Kameda, Tatsuya; Tsukasaki, Takafumi; Hastie, Reid; Berg, Nathan
    Abstract: We introduce a game theory model of individual decisions to cooperate by contributing personal resources to group decisions versus by free-riding on the contributions of other members. In contrast to most public-goods games that assume group returns are linear in individual contributions, the present model assumes decreasing marginal group production as a function of aggregate individual contributions. This diminishing marginal returns assumption is more realistic and generates starkly different predictions compared to the linear model. One important implication is that, under most conditions, there exist equilibria where some, but not all members of a group contribute, even with completely self-interested motives. An agent-based simulation confirms the individual and group advantages of the equilibria in which behavioral asymmetry emerges from a game structure that is a priori perfectly symmetric for all agents (all agents have the same payoff function and action space, but take different actions in equilibria). And a behavioral experiment demonstrates that cooperators and free-riders coexist in a stable manner in groups performing with the non-linear production function. A collateral result demonstrates that, compared to a ―dictatorial‖ decision scheme guided by the best member in a group, the majority-plurality decision rules can pool information effectively and produce greater individual net welfare at equilibrium, even if free-riding is not sanctioned. This is an original proof that cooperation in ad hoc decision-making groups can be understood in terms of self-interested motivations and that, despite the free-rider problem, majority-plurality decision rules can function robustly as simple, efficient social decision heuristics.
    Keywords: group decision making under uncertainty; free-rider problem; majority-plurality rules; marginally-diminishing group returns; evolutionary games; behavioral experiment
    Date: 2010
  12. By: Bradley J. Ruffle (Department of Economics, Ben-Gurion University of the Negev, Israel); Ze’ev Shtudiner (Department of Economics, Ariel University Center, Israel)
    Abstract: Job applicants in Europe and in Israel increasingly imbed a headshot of them- selves in the top corner of their CVs. We sent 5312 CVs in pairs to 2656 advertised job open- ings. In each pair, one CV was without a picture while the second, otherwise almost identical CV contained a picture of either an attractive male/female or a plain-looking male/female. Employer callbacks to attractive men are significantly higher than to men with no picture and to plain-looking men, nearly doubling the latter group. Strikingly, attractive women do not enjoy the same beauty premium. In fact, women with no picture have a significantly higher rate of callbacks than attractive or plain-looking women. We explore a number of explanations and provide evidence that female jealousy of attractive women in the workplace is a primary reason for the punishment of attractive women.
    Keywords: beauty, discrimination, experimental economics.
    JEL: C93 J71
    Date: 2010
  13. By: Fredrik Carlsson (Department of Economics, University of Gothenburg); Mitesh Kataria (Max Planck Institute of Economics, Jena); Alan Krupnick (Resources for the Future, Washington); Elina Lampi (Department of Economics, University of Gothenburg); Asa Löfgren (Department of Economics, University of Gothenburg); Ping Qin (Peking University, College of Environmental Sciences and Engineering); Thomas Sterner (Department of Economics, University of Gothenburg); Susie Chung (Resources for the Future, Washington)
    Abstract: Hypothetical bias is one of the main issues bedeviling the field of nonmarket valuation. The general criticism is that survey responses reflect how people would like to behave, rather than how they actually behave. In our study of climate change and emissions reductions, we took advantage of the increasing bulk of evidence from psychology and economics that addresses the effects of making promises, in order to investigate the effect of an oath script in a contingent valuation survey. The survey was conducted in Sweden and China, and its results indicate that an oath script has significant effects on respondent behavior in answering willingness-to-pay (WTP) questions, some of which vary by country. In both countries, the share of zero WTP responses and extremely high WTP responses decreases when an oath script is used, which also results in lower variance. In China, the oath script also reduces the average WTP, cutting it by half in certain instances. We also found that the oath script has different impacts on various respondent groups. For example, without the oath script, Communist party members in China are more likely than others to have a positive WTP for emissions reductions, but with the oath script, there is no longer any difference between the groups.
    Keywords: Oath script, hypothetical bias, willingness to pay
    JEL: D61 Q5
    Date: 2010–11–09
  14. By: Johansson, Per (IFAU - Institute for Labour Market Policy Evaluation); Lindahl, Erica (IFAU - Institute for Labour Market Policy Evaluation)
    Abstract: During the last decade several empirical studies have stressed the importance of norms and social interactions for explaining sickness absence behavior. In this context public discussions about the intentions of the insurance, and of the rights and duties of the receivers, may be important for reducing the sickness absence. In this paper we study whether information meetings about the Swedish sickness insurance affect the length of sickness absence spells. The study is based on experimental data on individuals with weak labor market attachments. The displacement of when the call to the meeting was sent out was randomized. Comparing the survival functions of those called immediately with those whose calls were delayed (by about 30 days) makes it possible to study whether the length of sickness absence is affected by receiving the call earlier. The result suggests that the length is reduced by, on average, 20 percent. In the long term (12 months later) there is no effect of the information meeting. This suggests that attendance to the information meeting does not change individuals’ long-term behavior.
    Keywords: monitoring; moral hazard; public social insurance; survival analysis; instrumental variables
    JEL: C93 H51 H55 J22
    Date: 2010–10–28
  15. By: Maria De Poala; Vincenzo Scoppa (Dipartimento di Economia e Statistica, Università della Calabria)
    Abstract: We carry out a randomized experiment involving undergraduate students enrolled at an Italian University attending an introductory economics class to evaluate the impact on achievement of examination frequency and interim feedback provision. Students in the treated group were allowed to undertake an intermediate exam and were informed about the results obtained, while students in the control group could only take the final exam. It emerges that students undertaking the intermediate exam perform better both in terms of probability of passing the exams and of grades obtained. High ability students appear to benefit more from the treatment. The experiment design allows us to disentangle “workload division or commitment” effects from “feedback provision” effects. We find that the estimated treatment impact is due exclusively to the first effect, while the feedback provision has no positive effect on performance. Finally, the better performance of treated students in targeted examinations seems not to be obtained at the expenses of results earned in other examinations.
    Keywords: Education Production Function, Student Effort, Work Organization, Feedback Provision, Higher Education, Randomized Evaluation
    JEL: I21 J31 D82
    Date: 2010–11
  16. By: Andreas Glöckner (Max Planck Institute for Research on Collective Goods, Bonn); Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Criminal procedure is organized as a tournament with predefined roles. We show that assuming the role of a defense counsel or prosecutor leads to role induced bias even if people are highly motivated to give unbiased judgments. In line with parallel constraint satisfaction models for legal decision making, findings indicate that role induced bias is driven by coherence effects (Simon, 2004), that is, systematic information distortions in support of the favored option. These distortions seem to stabilize interpretations, and people do not correct for this bias. Implications for legal procedure are briefly discussed.
    Date: 2010–09
  17. By: L. Balbo (CERAG - Centre d'études et de recherches appliquées à la gestion - CNRS : UMR5820 - Université Pierre Mendès-France - Grenoble II)
    Abstract: In an online experiment, women (N=209) were randomly exposed to a pamphlet promoting Pap test. The pamphlet was either gain- or loss-framed and emphasized either the prevention or detection function of the Pap. We hypothesized that the fit between framing and function (i.e. gain-prevention and loss-detection) will result in higher intention to follow the recommendation. Moreover, we predicted that under the non-fit condition (i.e. gain-detection and loss-prevention); people higher in perceived vulnerability will have higher intention to follow the recommendation. Analyses revealed that our hypotheses were partially supported
    Keywords: Marketing of health, health communication, message framing
    Date: 2010
  18. By: Federica Alberti; Edward J. Cartwright
    Abstract: We investigate experimentally whether the endowment of potential contributors changes the success rate of providing threshold public goods. We find a U shaped relationship in which the success rate is relatively high when the endowment is either relatively small or large. We also find an inverted U shaped relationship in terms of the variance of contributions. This suggests that people find it hardest to coordinate and provide threshold public goods when endowments are of ‘intermediate’ size. By this we mean that the endowment is small enough that people do need to contribute relatively a lot to fund the good, but is also large enough that no one person is critical in providing the good. Coordinating is difficult in this case because there is an incentive to free ride and the possibility to do so creating a conflict of interest.
    Keywords: Public Good; Threshold; Endowment
    JEL: C72 H41
    Date: 2010–10
  19. By: Ryan Woodard; Didier Sornette; Maxim Fedorovsky
    Abstract: This is the third installment of the Financial Bubble Experiment. Here we provide the digital fingerprint of an electronic document in which we identify 27 bubbles in 27 different global assets; for 25 of these assets, we present windows of dates of the most likely ending time of each bubble. We will provide that document of the original analysis on 2 May 2011.
    Date: 2010–11
  20. By: Drew Fudenberg; David K. Levine; Zacharias Maniadis
    Abstract: The assumption that people make decisions based on a constant set of preferences, so that choices should not depend on context-specific cues (anchors), is one of the cornerstones of economic theory. We reexamined the effects of an anchoring manipulation on the valuation of common market goods that was introduced in Ariely, Lowenstein and Prelec (2003). We found much weaker anchoring effects. We performed the same manipulation on the evaluation of binary lotteries, and we found no anchoring effects. This suggests limits on the robustness of strong anchoring effects. Hence, the evidence that people have "arbitrary preferences" may not be conclusive, and economic theory may still be valid in many cases of interest.
    Keywords: preferences, anchoring, willingness to pay, Becker-DeGroot-Marschak mechanism
    Date: 2010–11
  21. By: Ortona, Guido
    Abstract: The so-called problem of the spontaneous cooperation has been substantially resolved through a mix of biology and economics. All the elements of the solution had been discovered by 1980s, yet they went somehow unnoticed. This "old" solution is the subject of this review. Its most relevant feature was the discovery that the adoption of punishment as an equilibrium-enforcing device makes a cooperative solution in a repeated prisoner's dilemma possible. This opened the way to a biological (or anthropological) explanation otherwise logically inconsistent.
    Keywords: norms, cooperation, punishment
    JEL: A12
    Date: 2010–11

This nep-exp issue is ©2010 by Daniel Houser. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.