nep-exp New Economics Papers
on Experimental Economics
Issue of 2010‒12‒18
fourteen papers chosen by
Daniel Houser
George Mason University

  1. Equilibrium in Evolutionary Games: Some Experimental Results By Dan Friedman
  2. Do biases in probability judgement matter in markets: experimental evidence By Colin Camerer
  3. The Behavioural Consequences of Unfair Punishment By Michalis Drouvelis
  4. Social learning increases the acceptance and the efficiency of punishment institutions in social dilemmas By Gürerk, Özgür
  5. Social preferences during childhood and the role of gender and age - An experiment in Austria and Sweden By Martinsson, Peter; Nordblom, Katarina; Rützler, Daniela; Sutter, Matthias
  6. Animal Spirits and Informational Externalities in an Endogenous-Timing Investment Game: an Experimental Study By Asen Ivanov; Dan Levin; James Peck
  7. Best-of-Three Contests: Experimental Evidence By Shakun D. Mago; Roman Sheremeta; Andrew Yates
  8. Subjective beliefs formation and elicitation rules : experimental evidence By Guillaume Hollard; Sébastien Massoni; Jean-Christophe Vergnaud
  9. Trust among the Avatars: A Virtual World Experiment, with and without Textual and Visual Cues By Stephen Atlas; Louis Putterman
  10. Gender at Work: Productivity and Incentives By Migheli, Matteo
  11. Creditworthiness as a signal of trustworthiness By Becchetti, Leonardo; Conzo, Pierluigi
  12. What is the Nature and Social Norm within the Context of In-Group Favouritism? By Harris, D.; Herrmann, B.; Kontoleon, A.
  13. Equilibrium notions and framing effects By Christian Hilbe
  14. Behavioral Economics By Berg, Nathan

  1. By: Dan Friedman
    Date: 2010–12–09
  2. By: Colin Camerer
    Date: 2010–12–08
  3. By: Michalis Drouvelis
    Abstract: Experimental evidence from public good games with punishment suggests that punishment works when subjects assign it fairly by sanctioning non-cooperators. This paper reports an experiment in which punishment is assigned unfairly in the sense that it is not linked to individual behaviour and is melted out to all group members (irrespective of their prior behaviour). We test whether unfair punishment generates different contribution and punishment behaviour relative to the standard punishment game. Our findings suggest different dynamics of average contributions in the presence of unfair punishment relative to the standard punishment game. Contribution levels are significantly different only when subjects have obtained experience from both games. We also find that, although the assignment of punishment is unaffected after the experience of an environment with unfair punishment, a history of unfair punishment makes a difference regarding reactions to alleviation, reward and punishment received.
    Keywords: Recriprocity, Unfair punishment, Public good experiments
    JEL: C92 H41
    Date: 2010–11
  4. By: Gürerk, Özgür
    Abstract: Endogenously chosen punishment institutions perform well in increasing contributions and long-term payoffs in social dilemma situations. However, they suffer from (a) initial reluctance of subjects to join the punishment institution and (b) initial efficiency losses due to frequent punishment. Here, we investigate the effects of social learning on the acceptence and the efficiency of a peer punishment institution in a community choice experiment. Subjects choose between communities with and without the possibility to punish peers before interacting in a repeated social dilemma situation. We find that providing participants with a social history - presenting the main results of an identical previous experiment conducted with dierent subjects - decreases the initial reluctance towards the punishment institution signicantly. Moreover, with social history, cooperative groups reach the social optimum more rapidly and there is lower efficiency loss due to reduced punishment. Our findings shed light on the importance of social learning for the acceptance of seemingly unpopular but socially desirable mechanisms.
    Keywords: Social dilemmas; Social history; Social learning; Community choice; Punishment; Institution choice
    JEL: C92 H41
    Date: 2010–11
  5. By: Martinsson, Peter (Department of Economics, School of Business, Economics and Law, Göteborg University); Nordblom, Katarina (Department of Economics, School of Business, Economics and Law, Göteborg University); Rützler, Daniela (Department of Public Economics, University of Innsbruck, Austria); Sutter, Matthias (Department of Public Economics, University of Innsbruck, Austria)
    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.<p>
    Keywords: social preferences; children; adolescents; distributional experiment; Austria; Sweden.
    JEL: C91 D63 D64
    Date: 2010–12–10
  6. By: Asen Ivanov (Department of Economics, VCU School of Business); Dan Levin (Department of Economics, The Ohio State University); James Peck (Department of Economics, The Ohio State University)
    Abstract: We experimentally test an endogenous-timing herding model in which subjects observe their cost of investing and a signal correlated with the common investment return. Investment exceeds the Nash benchmark in all of our treatments, reminiscent of Keynes’ notion of “animal spirits.” The effect of overinvestment on best-response profits due to the informational externality can be positive or negative, depending on the environment. Subjects are highly heterogeneous in their propensities to invest. Initial overinvestment is followed by underinvestment with the tendency towards overinvestment dominating.
    Date: 2010–10
  7. By: Shakun D. Mago (Department of Economics, Robins School of Business, University of Richmond); Roman Sheremeta (Argyros School of Business and Economics, Chapman University); Andrew Yates (Department of Economics, Robins School of Business, University of Richmond)
    Abstract: We conduct an experimental analysis of a best-of-three Tullock contest. Intermediate prizes lead to higher efforts, while increasing the role of luck (as opposed to effort) leads to lower efforts. Both intermediate prizes and luck reduce the probability of contest ending in two rounds. The patterns of players? efforts and the probability that a contest ends in two rounds is consistent with „strategic momentum?, i.e. momentum generated due to strategic incentives inherent in the contest. We do not find evidence for „psychological momentum?, i.e. momentum which emerges when winning affects players? confidence. Similar to previous studies of contests, we find significantly higher efforts than predicted and strong heterogeneity in effort between subjects.
    Keywords: best-of-three contest, experiments, strategic momentum, psychological momentum
    JEL: C72 C91 D72
    Date: 2010
  8. By: Guillaume Hollard (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Sébastien Massoni (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Jean-Christophe Vergnaud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I)
    Abstract: Since they have been increasingly used in economics, elicitation rules for subjective beliefs are under scrutiny. In this paper, we propose an experimental design to compare the performance of such rules. Contrary to previous works in which elicited beliefs are compared to an objective benchmark, we consider a pure subjective belief framework (confidence in own performance in a cognitive task and a perceptual task). The performances of elicitation rules are assessed according to the accuracy of stated beliefs in predicting success. For the perceptual task we also compare stated beliefs to Signal Detection Theory predictions. We find consistent evidence in favor of the Lottery Rule which provides more accurate beliefs and is not sensitive to risk aversion. Furthermore the Free Rule, a simple rule with no incentives, elicits relevant beliefs and even outperforms the Quadratic Scoring Rule. Beside this comparison, we propose a belief formation model where we distinguish between two stages in the beliefs : beliefs for decision making and confidence beliefs. Our results give support to this model.
    Keywords: Belief elicitation, confidence, Signal Detection Theory, methodology, incentives, experimental economics.
    Date: 2010–11
  9. By: Stephen Atlas; Louis Putterman
    Abstract: We invited “residents” of a virtual world who vary in real-world age and occupation to play a trust game with stakes comparable to “in world” wages. In different treatments, the lab wall was adorned with an emotively suggestive photograph, a suggestive text was added to the instructions, or both a photo and text were added. We find high levels of trust and reciprocity that appear still higher for non-student and older subjects. Variation of results by treatment suggests that both photographic and textual cues influenced the level of trust but not that of trustworthiness.
    Keywords: trust; experiment; internet; virtual world; priming
    Date: 2010
  10. By: Migheli, Matteo (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: This paper analyses the relationship between workers’ gender and monetary incentives in an experimental setting based on a double-tournament scheme. The participants must choose between a piece-rate payment or a performance prize. The results show that women tend to shy away from competition, and are less sensitive than men to the monetary incentives of the tournament. In addition the tournament scheme induces males, but not women, to signal their ability and to select the contract which is more profitable for them.
    Keywords: gender; incentives; work; experiment
    JEL: C91 J16 J41
    Date: 2010–05–18
  11. By: Becchetti, Leonardo (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Conzo, Pierluigi (Associazione Italiana per la Cultura della Cooperazione e del Non Profit)
    Abstract: Creditworthiness and trustworthiness are almost synonyms since the act of conferring a loan has the indirect effect of signaling the trustworthiness of the borrower. We test the creditworthiness-trustworthiness nexus in an investment game experiment on a sample of participants/non participants to a microfinance program in Argentina and find that trustors give significantly more to (and believe they will receive more from) microfinance borrowers. Trustees’ first and second order beliefs are also consistent with this picture. Our findings identify a “horizontal trustworthiness externality” which creates a direct (loan-performance) causality nexus since the mere loan provision increases the borrower’s attractiveness as a business partner.
    Keywords: field experiment; microfinance; investment game; trust; trustworthiness
    JEL: C93 O16
    Date: 2010–12–07
  12. By: Harris, D.; Herrmann, B.; Kontoleon, A.
    Abstract: In-group favouritism behaviour is observed everywhere around the world and previous research has shown that this behaviour is also easily triggered in a laboratory in various contexts. However, little is known about why different magnitudes of in-group favouritism are observed across societies. In this paper, we use a new allocation experiment to examine the nature of social norms within the context of in-group favouritism behaviour. In this experiment, a decision-maker has to decide only once how to allocate a fixed amount of resource between each of the three members of her own group and each of the three members of the out-group, whilst the decision- maker's own payo is not aected by her decision. Three treatments are implemented: in the first treatment, only the members of the in-group can punish the decision-maker. In the second treatment, only the members of the out-group can punish the decision-maker. Finally, in the third treatment, only an independent third-party observer can punish the decision-maker. The aim of these treatments is to test whether there is a prevailing social norm which dominates the behavioural standard within the context of in-group favouritism and whether this mechanism varies across dierent subject pools, namely Thailand and the UK.<br><br> Compared to a baseline treatment with no punishment opportunity, we observed that among the Thai subjects in-group favouritism significantly increased once the in-group members were given the opportunity to punish the decision-maker. The threat of punishment from a third-party punisher also increased in-group favouritism in Thailand. However, when only the out-group members had the opportunity to punish, no change in in-group favouritism behaviour was observed. On the contrary, within the British subject pool, when the out-group members had the opportunity to punish the decision-maker, we observed a decline in in-group favouritism as well as a marked shift towards an equitable outcome. The threats of punishments from the in-group members and the third-party, on the other hand, did not have any impact on in-group favouritism behaviour in the UK. The results suggest that within the Thai subject pool, there appears to be a prevailing `in-group bias norm' which is strongly enforced within and outside the group. Within the UK subject pool, however, it is less clear what the prevailing norm is. Whilst the threat of punishment from the out-group members who directly lose out from favouritism behaviour appeared to significantly reduce this behaviour, an uninvolved third-party was not willing to incur a cost to punish this behaviour. This interesting result indicates two possible explanations: first, in-group favouritism, in contrast to selfish or opportunistic behaviour, may not considered as a strong enough violation of a social norm; and second, the norm of egalitarianism within the context of favouritism may still be `evolving'.
    Keywords: Social Norms, In-group Favouritism, Group Behaviour, In-group Punishment, Out-group Punishment, Third-party Punishment, Experimental Design
    JEL: D73 C92
    Date: 2010–12–13
  13. By: Christian Hilbe
    Abstract: Experimental economics has repeatedly demonstrated that the Nash equilibrium makes inaccurate predictions for a vast set of games. Instead, several alternative theoretical concepts predict behavior that is much more in tune with observed data, with the quantal response equilibrium as the most prominent example. However, here we show that this equilibrium notion itself, like any other concept that varies smoothly with the payoffs, is necessarily subject to framing effects: If the same economic problem is represented in a different but equivalent way, the predicted results will differ. As a consequence, we argue that tools and methods that are successful in explaining human behavior in laboratory experiments may be unsuitable for doing theory.
    Date: 2010–12
  14. By: Berg, Nathan
    Abstract: This article describes the emerging subfield known as behavioral economics, which borrows from psychology, empirically tests assumptions used elsewhere in economics, and provides theories that aim to be more realistic and closely tied to experimental and field data. Highlights from the experimental findings of behavioral economics are discussed. The article remarks critically on the role of empirical realism and continued use of as-if methodology in behavioral economics. Problems in normative behavioral economics are given special attention as debates arise concerning how to interpret empirical findings that contradict standard definitions of axiomatic rationality. Ecological rationality, methodological pluralism, and Simon's notion of bounded rationality are considered.
    Keywords: bounded rationality; ecological rationality; Herbert Simon; as-if; survey
    Date: 2010

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