nep-exp New Economics Papers
on Experimental Economics
Issue of 2011‒01‒30
thirteen papers chosen by
Daniel Houser
George Mason University

  1. Is the Endowment Effect a Reference Effect? By Ori Heffetz; John A. List
  2. Decision costs in legislative bargaining: An experimental analysis By Luis Miller; Christoph Vanberg
  3. An Experimental Study of Bubble Formation in Asset Markets Using the Tâtonnement Trading Institution By Volodymyr Lugovskyy; Daniela Puzzello; Steven Tucker
  4. Envy in Othello. Can effort explain such a tragic issue? By Jérémy Celse
  5. Group Identity and Relation-Specific Investment: An Experimental Investigation By Hodaka Morita; Maroš Servátka
  6. Cognitive abilities and behavior in strategic-form games.* By Ralph-C. Bayer; Ludovic Renou
  7. Using or Hiding Private Information ? An experimental Study of Zero-Sum Repeated Games with Incomplete Information. By Nicolas Jacquemet; Frédéric Koessler
  8. Avoiding the Curves: Direct Elicitation of Time Preferences By Susan K. Laury; Melayne Morgan McInnes; J. Todd Swarthout; Erica Von Nessen
  9. Trust, Salience and Deterrence: Evidence from an Antitrust Experiment By Bigoni, Maria; Fridolfsson, Sven-Olof; Le Coq, Chloe; Spagnolo, Giancarlo
  10. Effects of Adult Education Vouchers on the Labor Market: Evidence from a Randomized Field Experiment By Schwerdt, Guido; Messer, Dolores; Woessmann, Ludger; Wolter, Stefan
  11. Dominance and Submission: Social Status Biases Economic Sanctions By von Essen, Emma; Ranehill, Eva
  12. Indirect Effects of a Policy Altering Criminal Behaviour: Evidence from the Italian Prison Experiment By Drago, Francesco; Galbiati, Roberto
  13. Panel Attrition: How Important is it to Keep the Same Interviewer? By Lynn P; Kaminska O; Goldstein H

  1. By: Ori Heffetz; John A. List
    Abstract: This paper is aimed to assess, with two lab experiments, to what extent Kőszegi and Rabin's (2006) model of expectations-based reference-dependent preferences can explain Knetsch's (1989) endowment effect. Departing from past work, we design an experiment that treats the two goods (a mug and a pen) symmetrically in all but in the probabilities with which they are expected to be owned. Thus, our "endowmentless" endowment effect experiment shuts down all alternative mechanisms while leaving expectations the only difference between treatments. We find no evidence that expectations alone can reproduce any of the original effect.
    JEL: C9 D11 Q26
    Date: 2011–01
  2. By: Luis Miller (Centre for Experimental Social Sciences, Nuffield College, University of Oxford); Christoph Vanberg (Department of Economics, University of Cambridge)
    Abstract: We conduct an experiment to assess the effects of different decision rules on the costs of decision making in a multilateral bargaining situation. Specifically, we compare the amount of costly delay observed in an experimental bargaining game under majority and unanimity rule. Our main finding is that individual subjects are more likely to reject offers under unanimity rule. This increased rejection rate, as well as the requirement that all subjects agree, leads to more costly delay. This result provides empirical support for a classic argument in favor of less-than-unanimity decision rules put forth by Buchanan and Tullock (1962).
    Keywords: Collective decision-making, Majority rule, Unanimity, Legislative bargaining, Experimental economics
    JEL: C78 C92 D71 D72
    Date: 2011–01
  3. By: Volodymyr Lugovskyy; Daniela Puzzello; Steven Tucker (University of Canterbury)
    Abstract: We report the results of an experiment designed to study the role of institutional structure in the formation of bubbles and crashes in laboratory asset markets. In a setting employing double auctions and call markets as trading institutions, bubbles and crashes are a quite robust phenomenon. The only factor appearing to reduce bubbles is experience across markets. In this study, we employ the tâtonnement trading institution, which has not been previously explored in laboratory asset markets, despite its historical and contemporary relevance. The results show that bubbles are significantly reduced, suggesting that the trading institution plays a crucial role in the formation of bubbles.
    Keywords: Experimental Asset Markets; Price Bubbles; Trading Institutions; Tâtonnement
    Date: 2011–01–01
  4. By: Jérémy Celse
    Abstract: We aim at disentangling the impact of effort on social emotions and more particularly on envy. Thus we observe the impact of effort on individual well-being and behaviour. In our experiment subjects are paired and receive endowments whether according to their performance in a real-effort task or randomly. We focus on subjects placed in situations of inferiority and ask them to report their satisfaction level before and after being exposed to unflattering social comparison. Finally, subjects can choose to reduce their opponent’s endowment by incurring a personal cost. We convey that the introduction of effort does not affect individual well-being and partially subjects’ decisions to reduce others’ income. Subjects do not reduce more often their opponent’s endowment but they cut a greater portion of their opponent’s endowment when endowments are attributed according to individual performance. Besides we observe that poor performing subjects are more prone to reduce others’ income than high performing ones. We also find evidences suggesting that envy is ought to explain reduction decisions engaged by high performing subjects and disappointment explicates reduction decisions engaged by low performing ones.
    Date: 2010
  5. By: Hodaka Morita; Maroš Servátka (University of Canterbury)
    Abstract: The hold-up problem has played a central role in the study of firm boundaries that originated with the pathbreaking essay by Coase (1937). This paper studies a previously unexplored mechanism through which integration could resolve the hold-up problem. Based on Tajfel and Turner’s (1979) social identification theory, we conjecture that team membership increases the degree of altruism towards another team member, and this in turn helps resolving the hold-up problem. We test this conjecture in a laboratory experiment. Our subjects are randomly divided into two teams and given their respective team uniforms to wear. In Task 1 they answer two trivia questions and can use a chat program to help their team members. In Task 2 the subjects play a standard hold-up game with a member of their own team (representing integration) or with a member of the other team (non-integration). We find that team membership significantly increases the investment rate as well as the share of the surplus offered back to the investor and thus mitigates the hold-up problem.
    Keywords: altruism; experiment; hold-up problem; identity; integration; other-regarding preferences; relation-specific investment; team membership
    JEL: C91 D20 L20
    Date: 2011–01–19
  6. By: Ralph-C. Bayer; Ludovic Renou
    Abstract: This paper investigates the relation between cognitive abilities and behavior in strategic-form games with the help of a novel experiment. The design allows us first to measure the cognitive abilities of subjects without confound and then to evaluate their impact on behaviour in strategic-from games. We find that subjects with better cognitive abilities show more sophisticated behavior and make better use of information on cognitive abilities and preferences of opponents. Although we do not find evidence for Nash behavior, observed behaviour is remarkably sophisticated, as almost 80% of subjects behave near optimal and outperform Nash behavior with respect to expected pay-offs.
    Keywords: cognitive ability; behaviours; strategic-form games; experiments; preferences; sophistication
    JEL: C70 C91
    Date: 2011–01
  7. By: Nicolas Jacquemet (Centre d'Economie de la Sorbonne - Paris School of Economics); Frédéric Koessler (Paris-Jourdan Sciences Economiques)
    Abstract: This paper studies experimentally the value of private information in strictly competitive interactions with asymmetric information. We implement in the laboratory three examples from the class of zero-sum repeated games with incomplete information on one side and perfect monitoring. The stage games share the same simple structure, but differ markedly on how information should be optimally used once they are repeated. Despite the complexity of the optimal strategies, the empirical value of information coincides with the theoretical prediction in most instances. In particular, it is never negative, it decreases with the number of repetitions, and it is nicely bounded below by the value of the infinitely repeated game and above by the value of the one-shot game. Subjects are unable to completely ignore their information when it is optimal to do so, but the use of information in the lab reacts qualitatively well to the type and length of the game being played.
    Keywords: Concavification, laboratory experiments, incomplete information, value of information, zero-sum repeated games.
    JEL: C72 D82
    Date: 2011–01
  8. By: Susan K. Laury; Melayne Morgan McInnes; J. Todd Swarthout; Erica Von Nessen
    Abstract: We propose and test a new method for eliciting curvature-controlled discount rates that are invariant to the form of the utility function. The advantage of this method is that individual discount rates can be obtained without knowledge of risk attitude or parametric assumptions about the form of the utility function. We compare our single elicitation method that does not require estimation of the utility function to the Andersen et al. (2008) double elicitation technique in which the utility function and discount rates are jointly estimated. We use a laboratory experiment to perform a within-subjects comparison of discount rates from these two methods and find consistent results, which is reassuring given the wide range of estimates in the literature. In addition, the estimated discount rates in our study are "plausibly low" in contrast to the vast majority of other discount rate studies. Average discount rates are estimated to be between 12.2 and 14.1 percent. Our results are robust to relaxing the expected utility assumption of linearity in the probabilities, as we find little evidence of probability weighting in our data.
    Date: 2011–01
  9. By: Bigoni, Maria (University of Bologna); Fridolfsson, Sven-Olof (Research Institute of Industrial Economics (IFN)); Le Coq, Chloe (Stockholm School of Economics); Spagnolo, Giancarlo (University of Rome)
    Abstract: We present results from a laboratory experiment identifying the main channels through which different law enforcement strategies deter organized economic crime. The absolute level of a fine has a strong deterrence effect, even when the exogenous probability of apprehension is zero. This effect appears to be driven by distrust or fear of betrayal, as it increases significantly when the incentives to betray partners are strengthened by policies offering amnesty to “turncoat whistleblowers”. We also document a strong deterrence effect of the sum of fines paid in the past, which suggests a significant role for salience or availability heuristic in law enforcement.
    Keywords: Betrayal; Collusion; Corruption; Distrust; Fraud; Organized Crime; Whistleblowers
    JEL: C92 D80 K21 K42 L41
    Date: 2011–01–17
  10. By: Schwerdt, Guido (Ifo Institute for Economic Research); Messer, Dolores (University of Bern); Woessmann, Ludger (Ifo Institute for Economic Research); Wolter, Stefan (University of Bern)
    Abstract: Lifelong learning is often promoted in ageing societies, but little is known about its returns or governments' ability to advance it. This paper evaluates the effects of a large-scale randomized field experiment issuing vouchers for adult education in Switzerland. We find no significant average effects of voucher-induced adult education on earnings, employment, and subsequent education one year after treatment. But effects are heterogeneous: Low- education individuals are most likely to profit from adult education, but least likely to use the voucher. The findings cast doubt on the effectiveness of existing untargeted voucher programs in promoting labor market outcomes through adult education.
    Keywords: adult education, voucher, field experiment, LATE, Switzerland
    JEL: I22 J24 H43 C93 M53
    Date: 2011–01
  11. By: von Essen, Emma (Dept. of Economics, Stockholm University); Ranehill, Eva (Stockholm School of Economics)
    Abstract: Social hierarchy is persistent in all almost all societies. Social norms and their enforcement are part of sustaining hierarchical systems. This paper combines social status and norm enforcement, by introducing status in a dictator game with third party punishment. Status is conveyed by surname; half of the third parties face dictators with a noble name and half face dictators with a common name. Receivers all have common names. We find that social status has an impact on behavior. Our results indicate that low status men are punished to a greater extent than low status women, high status men, or high status women. Interestingly, discrimination occurs only in male to male interaction. For offers below half, or almost half of the allocated resource, male third parties punish male dictators with common names almost twice as much as their noble counterparts. We find no support for female discrimination. This result suggests that social status has important implications for men’s decisions to use economic punishment, and that this holds true in situations where reputation or strategic concerns have no importance.
    Keywords: Status; punishment; discrimination
    JEL: C91
    Date: 2011–01–17
  12. By: Drago, Francesco (University of Naples, Parthenope); Galbiati, Roberto (CNRS)
    Abstract: We exploit the Collective Clemency Bill passed by the Italian Parliament in July 2006 to evaluate the indirect effects of a policy that randomly commutes actual sentences to expected sentences for 40 percent of the Italian prison population. We estimate the direct and indirect impact of the residual sentence – corresponding to a month less time served in prison associated with a month of expected sentence – at the date of release on individual recidivism. Using prison, nationality and region of residence to construct reference groups of former inmates, we find large indirect effects of this policy. In particular, we find that the reduction in the individuals' recidivism due to an increase in their peers’ residual sentence is at least as large as their response to an increase in their own residual sentence. From this result we estimate a social multiplier in crime of 2.
    Keywords: crime, social interactions, indirect effects
    JEL: K00 C90
    Date: 2010–12
  13. By: Lynn P (Institute for Social and Economic Research); Kaminska O (Institute for Social and Economic Research); Goldstein H (University of Bristol)
    Abstract: We assess whether the probability of a sample member participating at a particular wave of a panel survey is greater if the same interviewer is deployed as at the previous wave. Previous research on this topic mainly uses non-experimental data. Consequently, a) interviewer change is generally non-random, and b) continuing interviewers are more experienced by the time of the next wave. We designed a balanced experiment in which both interviewer continuity and experience are controlled. Multilevel multiple membership models are used to explore the effects of interviewer continuity on refusal rate and response rate as well as interactions of interviewer continuity with other variables.
    Date: 2011–01–12

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