nep-exp New Economics Papers
on Experimental Economics
Issue of 2011‒01‒23
nine papers chosen by
Daniel Houser
George Mason University

  1. Signaling Concerns about Fairness: Cooperation under Uncertain Social Preferences By John Duffy; Felix Munoz-Garcia
  2. The Dark Side of Creativity: Original Thinkers Can be More Dishonest By Francesca Gino; Dan Ariely
  3. Inducing Good Behavior: Bonuses versus Fines in Inspection Games By Daniele Nosenzo; Theo Offerman; Martin Sefton; Ailko van der Veen
  4. Self Selection Does Not Increase Other-Regarding Preferences among Adult Laboratory Subjects, but Student Subjects May Be More Self-Regarding than Adults By Jon Anderson; Stephen V. Burks; Jeffrey Carpenter; Lorenz Goette; Karsten Maurer; Daniele Nosenzo; Ruth Potter; Kim Rocha; Aldo Rustichini
  5. Self-Image and Valuation of Moral Goods: Stated versus Real Willingness to Pay By Johansson-Stenman, Olof; Svedsäter, Henrik
  6. Learning, Generalization and the Perception of Information: an Experimental Study By Novarese, Marco; Lanteri, Alessandro; Tibaldeschi, Cesare
  7. Responsibility Effects in Decision Making under Risk By Pahlke, Julius; Strasser, Sebastian; Vieider, Ferdinand M.
  8. Performance forecasts in uncertain environments: Examining the predictive power of the VRIO-framework By Powalla, Christian; Bresser, Rudi K. F.
  9. Voting by Ballots and Feet in the Laboratory By Alessandro Innocenti; Chiara Rapallini

  1. By: John Duffy; Felix Munoz-Garcia (School of Economic Sciences, Washington State University)
    Abstract: This paper investigates incomplete information and signaling about players?inequity aversion in the simultaneous and sequential-move prisoner?s dilemma game. We ?first evaluate the role of incomplete information according to: (1) whether uncertainty helps select the effcient equilibrium outcome, and (2) whether more cooperation can be sustained under incomplete than under complete information. We then examine the possibility of information transmission among individuals in a signaling game. A separating equilibrium can be supported in which players with high concerns about fairness bear the cost of cooperating in order to reveal their type to opponents, thus promoting cooperation in subsequent periods. We also fi?nd a pooling equilibrium in which a player unconcerned about inequity aversion initially cooperates in order to mislead the uninformed player. This misleading strategy induces cooperation from the uninformed player in the subsequent stage of the game, moment at which the unconcerned player takes the opportunity to defect. This "?backstabbing?" equilibrium helps explain frequently observed behavior in ?finitely-repeated experiments.
    Keywords: Prisoner?s Dilemma; Inequity aversion; Incomplete Information; Signaling
    JEL: C72 C73 D82
    Date: 2010–12
  2. By: Francesca Gino (Harvard Business School, Negotiation, Organizations & Markets Unit); Dan Ariely (Fuqua School of Business, Duke University)
    Abstract: Creativity is a common aspiration for individuals, organizations, and societies. Here, however, we test whether creativity increases dishonesty. We propose that a creative personality and creativity primes promote individuals' motivation to think outside the box and that this increased motivation leads to unethical behavior. In four studies, we show that participants with creative personalities who scored high on a test measuring divergent thinking tended to cheat more (Study 1); that dispositional creativity is a better predictor of unethical behavior than intelligence (Study 2); and that participants who were primed to think creatively were more likely to behave dishonestly because of their creativity motivation (Study 3) and greater ability to justify their dishonest behavior (Study 4). Finally, a field study constructively replicates these effects and demonstrates that individuals who work in more creative positions are also more morally flexible (Study 5). The results provide evidence for an association between creativity and dishonesty, thus highlighting a dark side of creativity.
    Keywords: creativity, creative thinking, dishonesty, intelligence, unethical behavior
    Date: 2011–01
  3. By: Daniele Nosenzo (School of Economics, University of Nottingham); Theo Offerman (CREED, Department of Economics, University of Amsterdam); Martin Sefton (School of Economics, University of Nottingham); Ailko van der Veen (CREED, Department of Economics, University of Amsterdam)
    Abstract: We examine the effectiveness of bonuses and fines in an ‘inspection game’ where an employer can learn the effort of a worker through costly inspection. Standard game theoretic analysis predicts that fines discourage shirking, whereas bonuses encourage shirking. In contrast, ownpayoff effects suggest that both fines and bonuses discourage shirking. In an experiment we find that fines are more effective than bonuses in reducing shirking. However, we do not find that bonuses encourage shirking. Behavioral theories based on Impulse Balance Equilibrium or Quantal Response Equilibrium provide a good account of deviations from Nash equilibrium predictions.
    Keywords: Inspection Games; Costly Monitoring; Rewards and Punishments; Bonuses and Fines; Quantal Response Equilibrium; Impulse Balance Equilibrium; Experiment
    JEL: C70 C72 C92
    Date: 2010–12
  4. By: Jon Anderson (University of Minnesota, Morris); Stephen V. Burks (University of Minnesota, Morris); Jeffrey Carpenter (Middlebury College); Lorenz Goette (University of Lausanne); Karsten Maurer (Iowa State University); Daniele Nosenzo (University of Nottingham); Ruth Potter (University of Minnesota, Morris); Kim Rocha (University of Minnesota, Morris); Aldo Rustichini (University of Minnesota, Twin Cities)
    Abstract: We measure the other-regarding behavior in samples from three related populations in the upper Midwest of the United States: college students, non-student adults from the community surrounding the college, and adult trainee truckers in a residential training program. The first two groups were recruited according to procedures commonly used in experimental economics and therefore subjects self-selected into the experiment. Because the structure of their training program reduced the opportunity cost of participating dramatically, 91% of the solicited trainees participated in the third group, so there was little scope for self-selection in this sample. We find no differences in the elicited other-regarding preferences between the self-selected adults and the adult trainees, suggesting that selection into this type of experiment is unlikely to bias inferences with respect to non-student adult subjects. At the same time, we find a large difference between self-selected students and self-selected adults: the students appear considerably less pro-social.
    Keywords: methodology; selection bias; laboratory experiment; field experiment; other-regarding behavior, social preferences, truckload, trucker
    JEL: C90
    Date: 2010–12
  5. By: Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University); Svedsäter, Henrik (Organisational Behaviour, London Business School, United Kingdom)
    Abstract: Hypothetical bias in stated-preference methods appears sometimes to be very large, and other times non-existent. This is here largely explained by a model where people derive utility from a positive self-image associated with morally commendable behavior. The results of a choice experiment are consistent with the predictions of this model; the hypothetical marginal willingness to pay (MWTP) for a moral good (contributions to a WWF project) is significantly higher than the corresponding real MWTP, whereas no hypothetical bias is present for an amoral good (a restaurant voucher). Moreover, both the theoretical model and the experimental evidence suggest that also the real MWTP for the moral good is biased upwards by being higher within than outside the experimental context.<p>
    Keywords: Stated-preference methods; choice experiment; hypothetical bias; self-image; non-market valuation; warm glow
    JEL: C91 D63 Q50
    Date: 2011–01–13
  6. By: Novarese, Marco; Lanteri, Alessandro; Tibaldeschi, Cesare
    Abstract: This article experimentally explores the way in which human agents learn how to process and manage new information. In an abstract setting, players should perform an everyday task: selecting information, making generalizations, distinguishing contexts. The tendency to generalize is common to all participants, but in a different way. Best players have a stringer tendency to generalise rules. A high score is, in fact, associated with low entropy for mistakes, that is with a tendency to repeat the same mistakes over and over. Though the repetition of mistakes might be considered a failure to properly employ feedback or a bias, it may instead turn out as a viable and successful procedure. This result is connected to the literature on learning.
    Keywords: behavioural entropy; cognitive economics; complexity; experiments; feedback; heuristics; learning
    JEL: A12 D83 C91
    Date: 2010
  7. By: Pahlke, Julius; Strasser, Sebastian; Vieider, Ferdinand M.
    Abstract: We systematically explore decision situations in which a decision maker bears responsibility for somebody else's outcomes as well as for her own in situations of payoff equality. In the gain domain we confirm the intuition that being responsible for somebody else's payoffs increases risk aversion. This is however not attributable to a 'cautious shift' as often thought. Indeed, looking at risk attitudes in the loss domain, we find an increase in risk seeking under responsibility. This raises issues about the nature of various decision biases under risk, and to what extent changed behavior under responsibility may depend on a social norm of caution in situations of responsibility versus naive corrections from perceived biases. To further explore this issue, we designed a second experiment to explore risk-taking behavior for gain prospects offering very small or very large probabilities of winning. For large probabilities, we find increased risk aversion, thus confirming our earlier finding. For small probabilities however, we find an increase of risk seeking under conditions of responsibility. The latter finding thus discredits hypotheses of a social rule dictating caution under responsibility, and can be explained through flexible self-correction models predicting an accentuation of the fourfold pattern of risk attitudes predicted by prospect theory. An additional accountability mechanism does not change risk behavior, except for mixed prospects, in which it reduces loss aversion. This indicates that loss aversion is of a fundamentally different nature than probability weighting or utility curvature. Implications for debiasing are discussed.
    Keywords: risk attitude; other-regarding preferences; prospect theory; agency; social norms
    JEL: D81
    Date: 2010–11–15
  8. By: Powalla, Christian; Bresser, Rudi K. F.
    Abstract: Strategy tools are widely used in the practice of strategic management to yield a good solution with an acceptable problem-solving effort. This paper presents results of an experimental research project that assesses the practical effectiveness of a theory-based decision-making tool, the VRIO-Framework, in predicting the stock-market performance of different companies. The VRIO's predictive power is compared to the predictions derived from Analyst Ratings that are a widespread and commonly used tool in the decision-making context of this study. Our results suggest that the VRIO-Framework is a particularly effective forecasting tool whereas the power of Analyst Ratings is disputable. The results also provide support for the practical usefulness of resource-based theory. --
    Date: 2010
  9. By: Alessandro Innocenti; Chiara Rapallini
    Abstract: This paper provides laboratory evidence on the efficiency-enhancing properties of the Tiebout model as a decentralized system of public goods provision. Tiebout (1956) shows that if a sufficient number of local communities exist to accommodate different types of preferences, individuals sort themselves in a way that provides an efficient allocation of public goods and taxes. Our experiment aims to disentangle the effect of voting participation and is composed of two treatments. In the non-participation treatment, local public good provision is chosen by only one subject, while the other members of the community can only stay in or move to another community. In the participation treatment, all the community members have the right to vote as well as to move to another community and collective decisions are taken by majority rule. Our findings show that social welfare is greater in the participation than in the non-participation treatment. We conclude that voting with one’s feet increases efficiency if all the community members vote and that the influence of voting participation on the allocation of local public goods should be taken into account to assess the viability of the Tiebout model.
    Keywords: Tiebout model, local public goods, voting participation, federalism, experiment.
    JEL: C91 H41 C92 D23
    Date: 2011–01

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