nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒12‒11
seventeen papers chosen by
Daniel Houser
George Mason University

  1. On the construction of social preferences in lab experiments By Borgloh, Sarah; Dannenberg, Astrid; Aretz, Bodo
  2. Fairness in Risky Environments: Theory and Evidence By Vitezslav Babicky; Andreas Ortmann; Silvester Van Koten
  3. Collusion and the Choice of Auction: An Experimental Study By Jeroen Hinloopen; Sander Onderstal
  4. Overcoming Consumer Biases in the Choice of Pricing Schemes: A Lab Experiment By Natalia Shestakova
  5. Tacit Lobbying Agreements: An Experimental Study By Großer, Jens; Reuben, Ernesto; Tymula, Agnieszka
  6. Networks and Workouts: Treatment Size and Status Specific Peer Effects in a Randomized Field Experiment By Philip S. Babcock; John L. Hartman
  7. Risk Preferences Under Extreme Poverty: A Field Experiment By Gustavo Adolfo Caballero Orozco
  8. Is Regulation by Milestones Efficiency Enhancing? - An Experimental Study of Environmental Protection - By Andreas Freytag; Werner Güth; Hannes Koppel; Leo Wangler
  9. Handedness predicts Social Preferences: Evidence connecting the Lab to the Field By Thomas Buser
  10. Aging and decision making: How aging affects decisions under uncertainty By Sproten, Alec; Diener, Carsten; Fiebach, Christian; Schwieren, Christiane
  11. Eliciting Beliefs: Proper Scoring Rules, Incentives, Stakes and Hedging By Armantier, Olivier; Treich, Nicolas
  12. Risk Attitudes and Well-being in Latin America By Juan Camilo Cárdenas; Jeffrey Carpenter
  13. It pays to pay - Big Five personality influences on co-operative behaviour in an incentivized and hypothetical prisoner's dilemma game By Jan-Erik Lönnqvist; Markku Verkasalo; Gari Walkowitz
  14. Gender Differences in Competitiveness and Risk Taking: Comparing Children in Colombia and Sweden By Juan Camilo Cárdenasl; Anna Dreber; Emma von Essen; Eva Ranehill
  15. Single and Multiple Interruptions Increase Task Completion Time, But Don’t Affect Stress, Pressure or Flow By Conard, Maureen; Marsh, Robert
  16. Do environmental benefits matter? A choice experiment among house owners in Germany By Achtnicht, Martin
  17. ICT Skills and Employment: A Randomized Experiment By Blanco, Mariana; López Bóo, Florencia

  1. By: Borgloh, Sarah; Dannenberg, Astrid; Aretz, Bodo
    Abstract: This paper studies the construction of social preferences in the lab. Experimental subjects have the opportunity to donate to a charity and to allocate money in a conventional dictator game. The results show that charitable donations and dictator game allocations are positively correlated. The correlation is only significant, however, if the dictator game follows the donation decision. Furthermore, while donation behavior is independent from the order of play, dictator game behavior is not. In line with the constructive-preference approach, we argue that preferences are instable and sensitive to outside influences when subjects are confronted with a new decision situation, while in a well-known situation preferences are more stable. --
    Keywords: social preferences,charitable donations,dictator game,experiment
    JEL: C91 C93 D01 D64
    Date: 2010
  2. By: Vitezslav Babicky; Andreas Ortmann; Silvester Van Koten
    Abstract: Theories of fairness have typically used the assumption of ex-ante known pie size. Pie size, however, is rarely known ex ante. Using three simple allocation problems generally known as dictator, ultimatum and trust games, we explore the influence of ex-ante unknown pie size of varying degrees of risk on individual behavior. We derive theoretical predictions for two of these games using utility functions that capture additively separable constant relative risk aversion and inequity aversion. We test the theoretical predictions experimentally on two different subject pools: students of Czech Technical University and employees of Prague City Hall. We control for the risk attitude of our subjects through a variant of the Holt-Laury assessment instrument. We find statistically significant differences in giving behavior as a function of the degree of risk, and the degree of risk aversion, across individuals. We also find differences across the two subject pools but show that, once we control for various socio-demographic and cognitive characteristics, these differences evaporate. We discuss the policy and methodological implications of the results of our artefactual field experiment, as well as the implications for theories of fairness of reciprocity and their experimental test.
    Keywords: fairness, risk aversion, subject pool effects, economics experiments.
    JEL: C90 C91 C92 D81
    Date: 2010–10
  3. By: Jeroen Hinloopen (University of Amsterdam); Sander Onderstal (University of Amsterdam)
    Abstract: We experimentally examine the collusive properties of two commonly used auctions: the English auction (EN) and the first-price sealed-bid auction (FPSB). In theory, both tacit and overt collusion are always incentive compatible in EN while both can be incentive compatible in FPSB if the auction is repeated and bidders are patient enough. We find that the auctions do not differ in subjects’ propensity to collude overtly and in the likelihood that subjects defect from a collusive agreement. Moreover, the average winning bid does not differ between the auctions unless subjects can collude overtly. Under overt collusion, stable cartels buy at a lower price in EN than in FPSB resulting in a lower average winning bid in EN.
    Keywords: Collusion; English auction; First-price sealed-bid auction; Laboratory experiments
    JEL: C92 D44 L41
    Date: 2010–11–30
  4. By: Natalia Shestakova
    Abstract: This paper uses experimental data to investigate possible biases in consumers' choice of pricing schemes when their demand is perfectly inelastic but uncertain. I consider threepart pricing schemes (i.e. fixed fee, included units, extra-unit price). The analysis suggests a strong bias towards the pricing scheme with the number of included units equal to the expected demand. I interpret this bias as an “anchoring effect” of the expected demand on consumer decisions. Interestingly, subjects invest less effort into the choice problem when the opportunity cost of a mistake is higher. Still, the higher opportunity cost of a mistake helps subjects overcome the bias.
    Keywords: heuristics; price discrimination; experiment.
    JEL: D42 D83
    Date: 2010–09
  5. By: Großer, Jens (Florida State University); Reuben, Ernesto (Columbia University); Tymula, Agnieszka (New York University)
    Abstract: We experimentally study the common wisdom that money buys political influence. In the game, one lobbyist has the opportunity to influence redistributive tax policies in her favor by transferring money to two competing candidates. The success of the lobbying investment depends on whether or not the candidates are willing to respond and able to collude on low-tax policies that do not harm their relative chances in the elections. In the experiment, we find that lobbying is never successful when the lobbyist and candidates interact just once. By contrast, it yields substantially lower redistribution in about 40% of societies with finitely-repeated encounters. However, lobbying investments are not always profitable, and profit-sharing between the lobbyist and candidates depends on prominent equity norms. Our experimental results shed new light on the complex process of buying political influence in everyday politics and help explain why only relatively few corporate firms do actually lobby.
    Keywords: lobbying, redistribution, elections, bargaining, collusion
    JEL: D72 H10 K42
    Date: 2010–11
  6. By: Philip S. Babcock; John L. Hartman
    Abstract: This paper estimates treatment size and status specific peer effects that are not detected by widely-used approaches to the estimation of spillovers. In a field experiment using university students, we find that subjects who have been incentivized to exercise increase gym usage more if they have more treated friends. However, control subjects are not influenced by their peers. Findings demonstrate that fraction treated has a large influence on outcomes in this environment, and spillovers vary greatly by treatment status. Results highlight subtle effects of randomization and document a low-cost method for improving the generalizability of controlled interventions in networked environments.
    JEL: A13 C21 C93
    Date: 2010–12
  7. By: Gustavo Adolfo Caballero Orozco
    Abstract: Until now, the dominant belief concerning the relationship between poverty and risk aversion is that the poor are more risk averse. If the poor are more risk averse, then they will choose “low risk–low return” activities that trap them in poverty. However, both empirical and experimental evidence show no clear pattern such as would suggest that the poor are somehowmore averse to risk than others; at times, they even seem to embrace risk, while at other times, there seems to be no difference. Focus has tended to be on extreme behaviors, as these are related to sub-optimal decisions such as have even raised questions whether an individual can be simultaneously both poor and rational. Amongst all the available empirical evidence, there is one bit of evidence of special interest—changes in behavior whenever subsistence is at risk. This paper emerges from the fact that recent experimental evidence in both psychology and economics suggests that certain decisions made under risk respond to reference points.We develop a theory within the traditional streamof rational choices, whereby the references are set by only observable variables, such as prices and family size. According to this theory, extremely poor individuals respond to the income reference that guarantees the consumption of the necessary calories so as to ensure a healthy and longer life. Being in the neighborhood of this reference can incentivize both the seeking of high risk, whenever below the reference, and an aversion to high risk, when above. An experimental exercise was conducted involving 92 individuals from households living in poverty and extreme poverty wherein they participated in a baseline risk experiment that was the one we analyzed. Inasmuch as the treatment was not randomly assigned, but instead was determined based on households’ per-capita incomes, a quasi-experimental approach was used to analyze the results. We use a regression discontinuity design, andfind evidence suggesting that being presented with the opportunity of avoiding undernourishmentsignificantly decreases a household’s risk aversion.
    Date: 2010–11–15
  8. By: Andreas Freytag (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Hannes Koppel (Max Planck Institute of Economics, Jena); Leo Wangler (School of Economics and Business Administration, Friedrich-Schiller-University Jena)
    Abstract: Viewing individual contributions as investments in emission reduction we rely on the familiar linear public goods- game to set global reduction targets which, if missed, imply that all payoffs are destroyed with a certain probability. Regulation by milestones does not only impose a final reduction target but also intermediate ones. In our leading example the regulating agency is Mother Nature but our analysis can, of course, be applied to other regulating agencies as well. We are mainly testing for milestone effects by varying the size of milestones in addition to changing the marginal productivity of individual contributions and the probability to lose.
    Keywords: Cumulative Public Goods, Milestones, Climate Change, Experiment.
    JEL: C92 D78 H41 Q54
    Date: 2010–12–02
  9. By: Thomas Buser (University of Amsterdam)
    Abstract: It is now generally accepted that some people are more altruistic, more trusting, or more reciprocal than others, but it is still unclear whether these differences are innate or a consequence of nurture. We analyse the correlation between handedness and social preferences in the lab and find that left-handed men are significantly more generous when recipients have the possibility to reciprocate and exhibit stronger positive reciprocity themselves. Left-handed women are significantly less altruistic. We test the external validity of these findings by connecting them to large-scale survey data from the Netherlands and the US covering altruistic behaviour and reciprocity outside the lab. The results largely carry over. We argue that our findings demonstrate that social preferences are at least partially determined by nature and help to shed light on their neural origins.
    Keywords: social preferences; handedness; external validity of lab experiments
    JEL: D87 C91
    Date: 2010–11–30
  10. By: Sproten, Alec; Diener, Carsten; Fiebach, Christian; Schwieren, Christiane
    Abstract: In an aging society, it becomes more and more important to understand how aging affects decision making. Older adults have to face many situations that require consequential financial decisions. In the present study, we examined the effects of aging on decisions in two domains of uncertainty: risk and ambiguity. For this purpose, a group of young and older adults played a card game which was composed of risky and ambiguous conditions. In the risk condition, participants knew the probabilities to win or loose the game (i.e. full information), whereas in the ambiguous condition, these probabilities were unknown (thus, there was lack of information). When confronted with risky decisions, the behaviour of older and young adults (measured by the number of times participants chose a gamble instead of a sure amount of money) did not differ. In contrast, under ambiguity, there were significant age-effects in decision making: older people were less ambiguity-averse than young subjects. We conclude that there exist differences in uncertainty-processing between young and older adults, and discuss possible explanations of these differences.
    Keywords: Age differences; experiment; risk and uncertainty
    JEL: J14 C91
    Date: 2010–12–03
  11. 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
  12. By: Juan Camilo Cárdenas; Jeffrey Carpenter
    Abstract: A common premise in both the theoretical and policy literature on development is that people remain poor because they are too impatient to save and too risk averse to take the sort of chances needed to accumulate wealth. The empirical literature, however, suggests that this assumption is far from proven. We report on field experiments designed to address many of the problems confounding previous analyses of the links between risk preferences and well-being. Our sample includes more than 3,000 participants who were drawn representatively from six Latin American cities: Bogotá, Buenos Aries, Caracas, Lima, Montevideo, San José. In addition to the experiment which reveals interesting cross-country differences, participants completed an extensive survey that provides data on a variety of well-being indicators and a number of important controls. Focusing on risk preferences, we find little evidence of robust links between risk aversion and wellbeing. However, when we analyze the results of three treatments that add elements of reality to the decision problem, we see that these, more subtle, instruments correlate better with well-being, even after controlling for a variety of other important factors like the accumulation of human capital and access to credit.
    Date: 2010–11–22
  13. By: Jan-Erik Lönnqvist (Faculty of Behavioural Sciences, University of Helsinki, Finland); Markku Verkasalo (Faculty of Behavioural Sciences, University of Helsinki, Finland); Gari Walkowitz (Department of Management, University of Cologne, Germany)
    Abstract: The authors investigated how the presence or absence of monetary incentives in a prisoner's dilemma game may influence research outcomes. Specifically, the predictive power of the Big Five personality traits on decisions in an incentivized (N = 60) or hypothetical (N = 60) prisoner's dilemma game was investigated. Participants were less generous in the incentivized game. More importantly, personality predicted decisions only in the incentivized game, with low Neuroticism and high Openness to Experience predicting more cooperative transfers. The influence of Neuroticism on behaviour in the incentivized game was mediated by risk attitude. The results are consistent with other results suggesting that the Big Five are relevant predictors of moral behaviour, and with results suggesting that the determinants of hypothetical decisions are different from the determinants of real decisions, with the latter being more revealing of one's true preferences. The authors argue that psychologists, contrary to prevailing praxis, should consider making their participants' decisions more real. This could allow psychologists to more convincingly generalize laboratory findings into contexts outside of the laboratory.
    Keywords: Big Five, Prisoner's dilemma, Social dilemma, Moral behaviour, Incentives, Stake size
    Date: 2010–11
  14. By: Juan Camilo Cárdenasl; Anna Dreber; Emma von Essen; Eva Ranehill
    Abstract: We explore gender differences in preferences for competition and risk among children aged 9-12 in Colombia and Sweden, two countries differing in gender equality according to macro indices. We include four types of tasks that vary in gender stereotyping when looking at competitiveness: running, skipping rope, math and word search. We find that boys and girls are equally competitive in all tasks and all measures in Colombia. Unlike the consistent results in Colombia, the results in Sweden are mixed, with some indication of girls being more competitive than boys in some tasks in terms of performance change, whereas boys are more likely to choose to compete in general. Boys in both countries are more risk taking than girls, with a smaller gender gap in Sweden.
    Date: 2010–11–29
  15. By: Conard, Maureen (College of Arts and Sciences, Sacred Heart University); Marsh, Robert (John F. Welch College of Business, Sacred Heart University)
    Abstract: We compared task performance time and psychological reactions for uninterrupted, single interrupted, and multiple interrupted conditions. For 110 undergraduates, those who were uninterrupted while completing a jigsaw puzzle were 26% faster than the single interruption, and 30% faster than the multiple interruption conditions. Single and multiple interruption conditions were not significantly different. Participants in the multiple interruption condition felt more stress than those in the uninterrupted condition, although stress levels were low in both conditions. Perceptions of time pressure and flow were not different across conditions. Performance on the interrupting task (a word search puzzle) was not significantly different across conditions. An interruption or multiple interruptions significantly and substantially slowed performance although participants were not psychologically bothered by being interrupted.
    Keywords: Interruptions, Flow, Worker Efficiency
    JEL: M00
    Date: 2010–12
  16. By: Achtnicht, Martin
    Abstract: Residential buildings strongly contribute to global CO2 emissions due to the high energy demand for electricity and heating, particularly in industrialised countries. Within the EU, decentralised heat generation is of particular relevance for future climate policy, as its emissions are not covered by the EU ETS. We conducted a choice experiment concerning energy retrofits for existing houses in Germany. In the experiment, the approximately 400 sampled house owners could either choose a modern heating system or an improved thermal insulation for their home. We used standard and mixed logit specifications to analyse the choice data. We found environmental benefits to have a significant impact on choices of heating systems. However, they played no role in terms of insulation choices. Based on the estimated mixed logit model, we further obtained WTP measures for CO2 savings. --
    Keywords: Choice experiment,CO2 emissions,Energy efficiency,Energy saving,Mixed logit,Residential buildings,Willingness to pay
    JEL: C25 D12 Q40 Q51
    Date: 2010
  17. By: Blanco, Mariana (Universidad del Rosario); López Bóo, Florencia (Inter-American Development Bank)
    Abstract: The aim of this paper is to evaluate the impact that the acquisition of Information and Communication Technologies (ICT) skills has on the labor market of two Latin-American cities: Buenos Aires and Bogota. Using cross-sectional data from an experiment that randomly assigned the ICT skills line in the resume, we assess the returns to ICT skills. For that, we submit approximately 11,000 fictitious Curricula Vitae (CVs) for real job vacancies published daily in the main job search engines in both cities. We estimate a binary choice model to identify differences in callbacks depending on ICT skills. We also analyze how gender, place of residence and occupational categories interact with ICT skills. Our econometric analysis supports previous literature suggesting that ICT skills could increase the probabilities of inclusion in the labor market, mainly for those at some level of disadvantage. To the best of our knowledge, this is the first study that quantifies the effect of ICT skills on employment. Our findings suggest that having ICT skills in the resume can increase the probability of receiving a callback by around 1 percent or more. This effect is much stronger in Bogota than in Buenos Aires, which suggests that ICT could be acting differently depending on the characteristics of the labor market.
    Keywords: Information and Communication Technologies, hiring decisions, labor demand
    JEL: J23 J24
    Date: 2010–11

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