nep-exp New Economics Papers
on Experimental Economics
Issue of 2011‒01‒16
twelve papers chosen by
Daniel Houser
George Mason University

  1. Patience, cognitive skill and coordination in the repeated stag hunt By Al-Ubaydli, Omar; Jones, Garett; Weel, Jaap
  2. A Novel Computerized Real Effort Task Based on Sliders By Gill. D., Prowse; V.,
  3. Learning (Not) To Yield: An Experimental Study of Evolving Ultimatum Game Behavior By Judith Avrahami; Werner Güth; Ralph Hertwig; Yaakov Kareev; Hironori Otsubo
  4. Subject-specific Performance Information can worsen the Tragedy of the Commons: Experimental Evidence By Villena, Mauricio G.; Zecchetto, Franco
  5. The lion’s share. An experimental analysis of polygamy in Northern Nigeria. By Alistair Munro; Bereket Kebede; Marcela Tarazona-Gomez; Arjan Verschoor
  6. Conveniently Upset: Avoiding Altruism by Distorting Beliefs About Others By Rafael Di Tella; Ricardo Pérez-Truglia
  7. A theory of unstructured bargaining using distribution-valued solution concepts By David H. Wolpert; James Bono
  8. Does Management Matter? Evidence from India By Nicholas Bloom; Benn Eifert; Aprajit Mahajan; David McKenzie; John Roberts
  9. Barriers to household risk management : evidence from India By Cole, Shawn; Gine, Xavier; Tobacman, Jeremy; Topalova, Petia; Townsend, Robert; Vickery, James
  10. Internet Auctions with a Temporary Buyout Option By Che, XiaoGang
  11. Methods of household consumption measurement through surveys : experimental results from Tanzania By Beegle, Kathleen; De Weerdt, Joachim; Friedman, Jed; Gibson, John
  12. On the Crowding-Out Effects of Tax-Financed Charitable Contributions by the Government By Alan Krause

  1. By: Al-Ubaydli, Omar; Jones, Garett; Weel, Jaap
    Abstract: Coordination games have become a critical tool of analysis in fields such as development and institutional economics. Understanding behavior in coordination games is an important step towards understanding the differing success of teams, firms and nations. This paper investigates the relationship between personal attributes (cognitive ability, risk-aversion, patience) and behavior and outcomes in coordination games, an issue that, to the best of our knowledge, has never been studied before. For the repeated coordination game that we consider, we find that: (1) cognitive ability has no bearing on any aspect of behavior or outcomes; (2) pairs of players who are more patient are more likely to coordinate well and earn higher payoffs; and (3) risk-aversion has no bearing on any aspect of behavior or outcomes. These results are robust to controlling for personality traits and demographic characteristics.
    Keywords: Coordination; IQ; personality; discount rate; patience; risk-aversion
    JEL: D23 D02 O12
    Date: 2010–12–29
  2. By: Gill. D., Prowse; V.,
    Abstract: In this note, we present a novel computerized real effort task based on moving sliders across a screen which overcomes many of the drawbacks of existing real effort tasks. The task was first developed and used by us in Gill and Prowse (forthcoming). We outline the design of our “slider task”, describe its advantages compared to existing real effort tasks and provide a statistical analysis of the behaviour of subjects undertaking the task. We believe that the task will prove valuable to researchers in designing future real effort experiments, and to this end we provide z-Tree code and guidance to assist researchers wishing to implement the slider task. <br><br> Keywords; Real effort task, Slider task, Design of laboratory experiments, Learning and time effects, Individual heterogeneity. <br><br> JEL Classification: C90, C91
    Date: 2011–01–01
  3. By: Judith Avrahami (The Hebrew University of Jerusalem, Center for the Study of Rationality and School of Education); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Ralph Hertwig (University of Basel, Department of Psychology); Yaakov Kareev (The Hebrew University of Jerusalem, Center for the Study of Rationality and School of Education); Hironori Otsubo (Max Planck Institute of Economics, Strategic Interaction Group, Jena)
    Abstract: Whether behavior converges toward rational play or fair play in repeated ultimatum games depends on which player yields first. If responders concede first by accepting low offers, proposers would not need to learn to offer more, and play would converge toward unequal sharing. By the same token, if proposers learn fast that low offers are doomed to be rejected and adjust their offers accordingly, pressure would be lifted from responders to learn to accept such offers. Play would converge toward equal sharing. Here we tested the hypothesis that it is regret-both material and strategic-which determines how players modify their behavior. We conducted a repeated ultimatum game experiment with random strangers, in which one treatment does and another does not provide population feedback in addition to informing players about their own outcome. Our results show that regret is a good predictor of the dynamics of play. Specifically, we will turn to the dynamics that unfold when players make repeated decisions in the ultimatum game with randomly changing opponents, and when they learn not only about their own outcome in the previous round but also find out how the population on average has adapted to previous results (path dependence).
    Keywords: Ultimatum bargaining game, Reputation, Regret, Learning, Experiment
    JEL: C78 C92
    Date: 2010–12–15
  4. By: Villena, Mauricio G.; Zecchetto, Franco
    Abstract: The main aim of this article is to investigate the behavioral consequences of the provision of subject-specific information in the group effort levels chosen by players in an experimental CPR game. We examine two basic treatments, one with incomplete information and the other with complete information. In the former, subjects are informed only about their own individual payoffs and the aggregate extraction effort level of the group, and in the latter they are also informed about the individual effort levels and payoffs of each subject. Given this setting, the basic question we attempt to answer is: Will the provision of subject-specific performance information (i.e. individual’s effort levels and payoffs) improve or worsen the tragedy of the commons (i.e. an exploitation effort level greater than the socially optimum level)? In order to motivate our hypotheses and explain our experimental results at the individual level, we make use of the theory of learning in games, which goes beyond standard non-cooperative game theory, allowing us to explore the three basic benchmarks in the commons context: Nash equilibrium, Pareto efficient, and open access outcomes. We use several learning and imitation theoretical models that are based on contrasting assumptions about the level of rationality and the information available to subjects, namely: best response, imitate the average, mix of best response and imitate the average, imitate the best and follow the exemplary learning rules. Finally, in order to econometrically test the hypotheses formulated from the theoretical predictions we use a random-effects model to assess the explanatory power of the different selected behavioral learning and imitation rules.
    Keywords: Common Property Resources; Information; Learning and Imitation; Experimental Economics.
    JEL: D83 C72 C91 Q2
    Date: 2010–01–09
  5. By: Alistair Munro (National Graduate Institute for Policy Studies); Bereket Kebede (School of Development Studies, University of East Anglia); Marcela Tarazona-Gomez (School of Development Studies, University of East Anglia); Arjan Verschoor (School of Development Studies, University of East Anglia)
    Abstract: Using samples of polygamous and non-polygamous households from villages in rural areas south of Kano, Northern Nigeria we test basic theories of household behaviour. Husbands and wives play two variants of a voluntary contributions game in which endowments are private knowledge, but contributions are public. In one variant, the common pool is split equally. In the other treatment the husband allocates the pool (and wives are forewarned of this). Most partners keep back at least half of their endowment from the common pool, but we find no evidence that polygynous households are less efficient than their monogamous counterparts. We also reject a strong form of Bergstrom’s model of polygyny in which all wives receive an equal allocation. In our case, senior wives often receive more from their husbands, no matter what their contribution. Thus the return to contributions is higher for senior wives compared to their junior counterparts. When they control the allocation, polygynous men receive a higher payoff than their monogamous counterparts. We speculate on the implications of this pattern of investment and reward for the sustainability of polygynous institutions.
    Keywords: Polygyny, Polygamy, Experiment, Household, Nigeria
    Date: 2010–12
  6. By: Rafael Di Tella; Ricardo Pérez-Truglia
    Abstract: In this paper we present the results from a “corruption game” (a dictator game modified so that the second player can accept a side payment that reduces the overall size of the pie). Dictators (silently) treated to have the possibility of taking a larger proportion of the recipient’s tokens, take more of them. They were also more likely to report believing that the recipient would accept a low price in exchange for a side payment; and selected larger numbers as their best guess of the likely proportion of recipients acting “unfairly”. The results favor the hypothesis that people avoid altruistic actions by distorting beliefs about others.
    JEL: E62 P16
    Date: 2010–12
  7. By: David H. Wolpert; James Bono
    Abstract: In experiments it is typically found that many joint utility outcomes arise in any given unstructured bargaining game. This suggests using a positive unstructured bargaining concept that maps a bargaining game to a probability distribution over outcomes rather than to a single outcome. We show how to "translate" Nash's bargaining axioms to apply to such distributional bargaining concepts. We then prove that a subset of those axioms forces the distribution over outcomes to be a power-law. Unlike Nash's original result, our result holds even if the feasible set is finite. When the feasible set is convex and comprehensive, the mode of the power law distribution is the Harsanyi bargaining solution, and if we require symmetry it is the Nash bargaining solution. However in general these modes of the joint utility distribution are not Bayes-optimal predictions for the joint uitlity, nor are the bargains corresponding to those outcomes the most likely bargains. We then show how an external regulator can use distributional solution concepts to optimally design an unstructured bargaining scenario. Throughout we demonstrate our analysis in computational experiments involving flight rerouting negotiations in the National Airspace System.
    Keywords: JEL Codes:
    Date: 2010–11
  8. By: Nicholas Bloom; Benn Eifert; Aprajit Mahajan; David McKenzie; John Roberts
    Abstract: A long-standing question in social science is to what extent differences in management cause differences in firm performance. To investigate this we ran a management field experiment on large Indian textile firms. We provided free consulting on modern management practices to a randomly chosen set of treatment plants and compared their performance to the control plants. We find that adopting these management practices had three main effects. First, it raised average productivity by 11% through improved quality and efficiency and reduced inventory. Second, it increased decentralization of decision making, as better information flow enabled owners to delegate more decisions to middle managers. Third, it increased the use of computers, necessitated by the data collection and analysis involved in modern management. Since these practices were profitable this raises the question of why firms had not adopted these before. Our results suggest that informational barriers were a primary factor in explaining this lack of adoption. Modern management is a technology that diffuses slowly between firms, with many Indian firms initially unaware of its existence or impact. Since competition was limited by constraints on firm entry and growth, badly managed firms were not rapidly driven from the market.
    JEL: L2 M2 O14 O32 O33
    Date: 2011–01
  9. By: Cole, Shawn; Gine, Xavier; Tobacman, Jeremy; Topalova, Petia; Townsend, Robert; Vickery, James
    Abstract: Why do many households remain exposed to large exogenous sources of non-systematic income risk? This paper uses a series of randomized field experiments in rural India to test the importance of price and non-price factors in the adoption of an innovative rainfall insurance product. The analysis finds that demand is significantly price-elastic, but that even if insurance were offered with payout ratios similar to US, widespread coverage would not be achieved. The paper identifies key non-price frictions that limit demand: liquidity constraints, particularly among poor households, lack of trust, and limited salience. The authors suggest potential improvements in contract design to mitigate these frictions.
    Keywords: Financial Literacy,Debt Markets,Access to Finance,Emerging Markets,Labor Policies
    Date: 2010–12–01
  10. By: Che, XiaoGang
    Abstract: We model an Internet auction with a temporary buyout option. Our main result shows that under certain parameter values, there exist two types of equilibria where offering a temporary buyout option with an appropriate reserve price enables the seller to increase expected revenue.
    Keywords: entry cost; temporary buyout option; Internet auctions
    Date: 2010–12
  11. By: Beegle, Kathleen; De Weerdt, Joachim; Friedman, Jed; Gibson, John
    Abstract: Consumption expenditure has long been the preferred measure of household living standards. However, accurate measurement is a challenge and household expenditure surveys vary widely across many dimensions, including the level of reporting, the length of the reference period, and the degree of commodity detail. These variations occur both across countries and also over time within countries. There is little current understanding of the implications of such changes for spatially and temporally consistent measurement of household consumption and poverty. A field experiment in Tanzania tests eight alternative methods to measure household consumption on a sample of 4,000 households. There are significant differences between consumption reported by the benchmark personal diary and other diary and recall formats. Under-reporting is particularly relevant in illiterate households and for urban respondents completing household diaries; recall modules measure lower consumption than a personal diary, with larger gaps among poorer households and households with more adult members. Variations in reporting accuracy by household characteristics are also discussed and differences in measured poverty as a result of survey design are explored. The study concludes with recommendations for methods of survey based consumption measurement in low-income countries.
    Keywords: Consumption,Regional Economic Development,Rural Poverty Reduction,Poverty Lines
    Date: 2010–12–01
  12. By: Alan Krause
    Abstract: An important question in the literature on charitable contributions is the extent to which tax-financed contributions by the government crowd out private contributions. This paper examines a simple model of charitable contributions in which there exist both warm-glow and public good motives for giving, but where the warm-glow motive is competitive in the sense that individuals evaluate their own contribution relative to that of their peers. It is shown that the competitive element of the warm-glow motive may exacerbate or attenuate the crowding-out effect, depending upon certain preference and income parameters. However, as the warm-glow motive for giving becomes purely competitive, crowding out is exacerbated and is almost dollar-for-dollar.
    Keywords: Charitable contributions, warm-glow, crowding out, public goods
    JEL: H23 H41
    Date: 2011–01

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