nep-exp New Economics Papers
on Experimental Economics
Issue of 2011‒02‒12
eighteen papers chosen by
Daniel Houser
George Mason University

  1. Did We Overestimate the Role of Social Preferences? The Case of Self-Selected Student Samples By Falk, Armin; Meier, Stephan; Zehnder, Christian
  2. Memory Lane and Morality: How Childhood Memories Promote Prosocial Behavior By Francesca Gino; Sreedhari D. Desai
  3. Driven by Social Comparisons: How Feedback about Coworkers’ Effort Influences Individual Productivity By Francesca Gino; Bradley R. Staats
  4. Threat and Punishment in Public Good Experiments By David Masclet; Charles N. Noussair; Marie-Claire Villeval
  5. Competitive Preferences and Status as an Incentive: Experimental Evidence By Gary Charness; David Masclet; Marie-Claire Villeval
  6. Reference Point Effects in Antisocial Preferences By Klaus Abbink; David Masclet; Matthijs van Veelen
  7. State or Nature? Formal vs. Informal Sanctioning in the Voluntary Provision of Public Goods By Kenju Kamei; Louis Putterman; Jean-Robert Tyran
  8. Self-Organization for Collective Action: An Experimental Study of Voting on Formal, Informal, and No Sanction Regimes By Thomas Markussen; Louis Putterman; Jean-Robert Tyran
  9. Ellsberg Paradox and Second-order Preference Theories on Ambiguity: Some New Experimental Evidence By Yang, Chun-Lei; Yao, Lan
  10. Repeated Rounds with Price Feedback in Experimental Auction Valuation: An Adversarial Collaboration By Corrigan, Jay; Drichoutis, Andreas; Lusk, Jayson; Nayga, Rodolfo; Rousu, Matt
  11. Experimentally-validated survey evidence on individual risk attitudes in rural Thailand By Hardeweg, Bernd; Menkhoff, Lukas; Waibel, Hermann
  12. Cooperating to Resist Coercion: An Experimental Study By Lucy F. Ackert; Ann B. Gillette; Mark Rider
  13. Extrapolation in Games of Coordination and Dominance Solvable Games By Friederike Mengel; Emanuela Sciubba
  14. An Experimental Investigation of Intrinsic Motivations for Giving By Tonin, Mirco; Vlassopoulos, Michael
  16. Public-private partnerships versus traditional procurement: An experimental investigation By Eva I. Hoppe; David J. Kusterer; Patrick W. Schmitz
  17. Workplace Democracy in the Lab By Mellizo, Philip; Carpenter, Jeffrey P.; Matthews, Peter Hans
  18. On the origin of the wta-wtp divergence in public good valuation By Emmanuel Flachaire; Guillaume Hollard; Jason Shogren

  1. By: Falk, Armin (University of Bonn); Meier, Stephan (Columbia University); Zehnder, Christian (University of Lausanne)
    Abstract: Social preference research has received considerable attention among economists in recent years. However, the empirical foundation of social preferences is largely based on laboratory experiments with self-selected students as participants. This is potentially problematic as students participating in experiments may behave systematically different than non-participating students or non-students. In this paper we empirically investigate whether laboratory experiments with student samples misrepresent the importance of social preferences. Our first study shows that students who exhibit stronger prosocial inclinations in an unrelated field donation are not more likely to participate in experiments. This suggests that self-selection of more prosocial students into experiments is not a major issue. Our second study compares behavior of students and the general population in a trust experiment. We find very similar behavioral patterns for the two groups. If anything, the level of reciprocation seems higher among non-students suggesting that results from student samples might be seen as a lower bound for the importance of prosocial behavior.
    Keywords: methodology, selection, experiments, prosocial behavior
    JEL: C90
    Date: 2011–02
  2. By: Francesca Gino (Harvard Business School, Negotiation, Organizations & Markets Unit); Sreedhari D. Desai (Harvard Law School; Harvard Kennedy School)
    Abstract: Four experiments demonstrated that recalling memories from one's own childhood lead people to experience feelings of moral purity and to behave prosocially. In Experiment 1, participants instructed to recall memories from their childhood were more likely to help the experimenter with a supplementary task than were participants in a control condition, and this effect was mediated by self-reported feelings of moral purity. In Experiment 2, the same manipulation increased the amount of money participants donated to a good cause, and self-reported feelings of moral purity mediated this relationship. In Experiment 3, participants who recalled childhood memories judged the ethically-questionable behavior of others more harshly, suggesting that childhood memories lead to altruistic punishment. Finally, in Experiment 4, compared to a control condition, both positively-valenced and negatively-valenced childhood memories led to higher empathic concern for a person in need, which, in turn increased intentions to help.
    Keywords: Childhood, Ethics, Memories, Morality, Prosocial Behavior, Purity
    Date: 2011–02
  3. By: Francesca Gino (Harvard Business School, Negotiation, Organizations & Markets Unit); Bradley R. Staats (University of North Carolina at Chapel Hill)
    Abstract: Drawing on theoretical insights from research on social comparison processes, this article explores how managers can use performance feedback to sustain employees' motivation and performance in organizations. Using a field experiment at a Japanese bank, we investigate the effects of valence (positive versus negative), type (direct versus indirect), and timing of feedback (one-shot versus persistent) on employee productivity. Our results show that direct negative feedback (e.g., an employee learns her performance falls in the bottom of her group) leads to improvements in employees' performance, while direct positive feedback does not significantly impact performance. Furthermore, indirect negative feedback (i.e., the employee learns she is not in the bottom of her group) worsens productivity while indirect positive feedback (i.e., the employee learns she is not in the top of her group) does not affect it. Finally, both persistently positive and persistently negative feedback lead to improvements in employees' performance. Together, our findings offer insight into the role of performance feedback in motivating productivity in repetitive tasks.
    Keywords: Feedback, Framing, Learning, Motivation, Persistence, Productivity, Social comparison
    Date: 2011–02
  4. By: David Masclet; Charles N. Noussair; Marie-Claire Villeval
    Abstract: Experimental studies of social dilemmas have shown that while the existence of a sanctioning institution improves cooperation within groups, it also has a detrimental impact on group earnings in the short-run. Could the introduction of pre-play threats to punish have enough of a beneficial impact on cooperation, while not incurring the cost associated with actual punishment, so that they increase overall welfare? We report an experiment in which players can issue non-binding threats to punish others based on their contribution levels to a public good. After observing others’ actual contributions, they choose their actual punishment level. We find that threats increase the level of contributions significantly. Efficiency is improved, but only in the long run. However, the possibility of sanctioning differences between threatened and actual punishment leads to lower threats, cooperation and welfare, restoring them to levels equal to or below the levels attained in the absence of threats. <P>Les agents n’hésitent pas à sanctionner les resquilleurs dans des situations de dilemmes sociaux et cela a un effet positif sur la coopération. Toutefois, les mécanismes de sanction peuvent également générer des externalités négatives fortes sur les gains. Dans quelle mesure l’introduction de menaces non crédibles est-elle en mesure d’impacter positivement la coopération sans engendrer ces externalités négatives? Afin de répondre à cette question, nous avons réalisé une expérience dans laquelle les agents ont la possibilité d’annoncer combien ils seraient prêts à sanctionner les autres membres de leur groupe pour tous les montants possibles de contribution. Nous observons qu’introduire cette étape de menace a un effet positif sur la coopération. Toutefois, l’efficience en termes de gain n’est pas améliorée à long terme. La possibilité de sanctionner ceux qui punissent moins que ce qu’ils ont annoncé conduit les agents à réduire le niveau de menace et celui de la coopération.
    Keywords: Threats, cheap talk, sanctions, public good, experiment., Menaces, parler à bon marché, sanctions, bien public, expérience.
    JEL: C92 H41 D63
    Date: 2011–01–01
  5. By: Gary Charness; David Masclet; Marie-Claire Villeval
    Abstract: In this paper, we investigate individuals’ investment in status in an environment where no monetary return can possibly be derived from reaching a better relative position. We use a real-effort experiment in which we permit individuals to learn and potentially improve their relative position in terms of performance. We find that people express a taste for status. People increase their effort when they are informed about their relative performance, and some individuals pay to sabotage others’ output or to artificially increase their own performance although they are paid a flat wage. Introducing the opportunity to sabotage others’ output exerts a negative effect on performance. Such effects can be alleviated by inducing group identity that favors positive rivalry but discourages sabotage among peers. <P>Dans cet article, nous étudions la recherche de statut par les agents économiques dans un environnement où un meilleur statut ne procure pas nécessairement un avantage monétaire. Pour cela, nous avons réalisé une expérience en effort réel dans laquelle les agents sont amenés à fournir un niveau d’effort et sont informés de la performance de leurs collègues de travail. Nous observons que la plupart des gens ont un goût élevé pour la compétition et la recherche de statut au sein de leur groupe. Les individus augmentent leur niveau d’effort dès lors qu’ils sont informés de l’effort des autres. Certains sont même disposés à saboter l’effort des autres ou à accroitre artificiellement leur propre effort afin d’accroitre artificiellement leur statut.
    Keywords: Status seeking, rank, competitive preferences, experiment , recherche de statut, classement, préférences compétitives, expérience
    JEL: C91 C92 M54 D63 J28 J31
    Date: 2011–01–01
  6. By: Klaus Abbink; David Masclet; Matthijs van Veelen
    Abstract: We study antisocial preferences in simple money-burning tasks. A decision maker can choose whether or not to reduce another person’s payoff at an own cost. We vary across tasks the initial endowment of the decider and the victim. We find that most conventional expectations are refuted: Subjects burn more when inequality is advantageous than when it is disadvantageous. Equitable distributions are particularly prone to destruction. These effects are reversed, however, when the equivalent tasks are framed as creation instead of destruction. <P>Nous étudions les préférences antisociales à l’aide d’un jeu simple de “money burning”. Dans ce jeu, un agent doit choisir s’il souhaite ou pas réduire, moyennant un cout, le gain d’un autre agent. Nous avons fait varier les gains des deux agents. Nos résultats indiquent que les agents n’hésitent pas à « bruler » l’argent des autres, y compris lorsque les écarts de gains sont à l’avantage du décideur, ce qui réfute clairement l’hypothèse d’aversion à l’inégalité. Les cas où les gains du décideur et de la victime sont identiques sont particulièrement sujets à destruction. Nous observons également que les décisions de destructions sont particulièrement sensibles aux effets de framing.
    Keywords: experiment, money burning, framing effects, preferences anti-sociales, expérience, jeu de « money burning », effets de framing, préférences anti-sociales
    Date: 2011–01–01
  7. By: Kenju Kamei (Brown University); Louis Putterman (Brown University); Jean-Robert Tyran (University of Vienna)
    Abstract: The sanctioning of norm-violating behavior by an effective formal authority is an efficient solution for social dilemmas. It is in the self-interest of voters and is often favorably contrasted with letting citizens take punishment into their own hands. Allowing informal sanctions, by contrast, not only comes with a danger that punishments will be misapplied, but also should have no efficiency benefit under standard assumptions of self-interested agents. We experimentally investigate the relative effectiveness of formal vs. informal sanctions in the voluntary provision of public goods. Unsurprisingly, we find that effective formal sanctions are popular and efficient when they are free to impose. Surprisingly, we find that informal sanctions are often more popular and more efficient when effective formal sanctions entail a modest cost. The reason is that informal sanctions achieve more efficient outcomes than theory predicts, especially when the mechanism is chosen by voting.
    Keywords: sanction; social dilemma; public goods; voluntary contribution mechanism; punishment; experiment
    JEL: C92 C91 D71 H41
    Date: 2011–02
  8. By: Thomas Markussen; Louis Putterman; Jean-Robert Tyran
    Abstract: Entrusting the power to punish to a central authority is a hallmark of civilization. We study a collective action dilemma in which self-interest should produce a sub-optimal outcome absent sanctions for non-cooperation. We then test experimentally whether subjects make the theoretically optimal choice of a formal sanction scheme that costs less than the surplus it makes possible, or instead opt for the use of informal sanctions or no sanctions. Most groups adopt formal sanctions when they are of deterrent magnitude and cost a small fraction (10%) of the potential surplus. Contrary to the standard theoretical prediction, however, most groups choose informal sanctions when formal sanctions are more costly (40% of the surplus). Being adopted by voting appears to enhance the efficiency of both informal sanctions and non-deterrent formal sanctions.
    Keywords: formal sanctions, informal sanctions, experiment, voting, cooperation, punishment.
    Date: 2011
  9. By: Yang, Chun-Lei; Yao, Lan
    Abstract: We study the two-color problem by Ellsberg (1961) with the modification that the decision maker draws twice with replacement and a different color wins in each draw. The 50-50 risky urn turns out to have the highest risk conceivable among all prospects including the ambiguous one, while all feasible color distributions are mean-preserving spreads to one another. We show that the well-known second-order sophisticated theories like MEU, CEU, and REU as well as Savage’s first-order theory of SEU share the same predictions in our design, for any first-order risk attitude. Yet, we observe that substantial numbers of subjects violate the theory predictions even in this simple design.
    Keywords: Ellsberg paradox; Ambiguity; Second-order risk; Second-order preference theory; Experiment
    JEL: D81 C91
    Date: 2011–01–22
  10. By: Corrigan, Jay; Drichoutis, Andreas; Lusk, Jayson; Nayga, Rodolfo; Rousu, Matt
    Abstract: It is generally thought that market outcomes are improved with the provision of market information. As a result, the use of repeated rounds with price feedback has become standard practice in the applied experimental auction valuation literature. We conducted two experiments to determine how rationally subjects behave with and without price feedback in a second price auction. Results from an auction for lotteries show that subjects exposed to price feedback are significantly more likely to commit preference reversals. However, this irrationality diminishes in later rounds. Results from an induced value auction indicate that price feedback caused greater deviations from the Nash equilibrium bidding strategy. Our results suggest that while bidding on the same item repeatedly improves auction outcomes, this improvement is not the result of price feedback.
    Keywords: bid affiliation; posted prices; induced value experiment; preference reversals; lotteries
    JEL: D44
    Date: 2011–01
  11. By: Hardeweg, Bernd; Menkhoff, Lukas; Waibel, Hermann
    Abstract: This study validates a survey-based measure of general risk attitude by an incentive compatible experiment among more than 900 participants in rural Thailand. The survey measure of self-assessed risk attitude provides a useful approximation of the experimentally derived risk attitude. This holds when we add various socio-demographic control variables to the survey-experiment-relation which are available from the representative household survey and which are related to risk attitude in plausible ways. The survey measure also predicts individual behavior towards risk in other cases; the survey measure even outperforms the experimental measure in this respect.
    Keywords: field experiment, socio-economic survey, risk attitude
    JEL: C93 D81 O1
    Date: 2011–01
  12. By: Lucy F. Ackert; Ann B. Gillette; Mark Rider
    Abstract: This study sheds light on the difficulties people face in cooperating to resist coercion. We adapt a threshold public goods game to investigate whether people are able to cooperate to resist coercion despite individual incentives to free-ride. Behavior in this resistance game is similar to that observed in multi-period public goods games. Specifically, we observe "out-of-equilibrium" outcomes and a decrease in successful resistance in later periods of a session compared to earlier ones. Nevertheless, cooperation remains relatively high even in the later periods. Finally, we find that increasing the resistance threshold has a substantial negative effect on the probability of successful resistance.
    JEL: C91 C92 D63 H21
    Date: 2011–02
  13. By: Friederike Mengel (Maastricht University); Emanuela Sciubba (Birkbeck College London)
    Abstract: We study extrapolation between games in a laboratory experiment. Participants in our experiment first play either the dominance solvable guessing game or a Coordination version of the guessing game for five rounds. Afterwards they play a 3x3 normal form game for ten rounds with random matching which is either a game solvable through iterated elimination of dominated strategies (IEDS), a pure Coordination game or a Coordination game with pareto ranked equilibria. We find strong evidence that participants do extrapolate between games. Playing a strategically different game hurts compared to the control treatment where no guessing game is played before and in fact impedes convergence to Nash equilibrium in both the 3x3 IEDS and the Coordination games. Playing a strategically similar game before leads to faster convergence to Nash equilibrium in the second game. In the Coordination games some participants try to use the first game as a Coordination device. Our design and results allow us to conclude that participants do not only learn about the population and/or successful actions, but that they are also able to learn structural properties of the games.
    Keywords: Game Theory, Learning, Extrapolation
    JEL: C72 C91
    Date: 2010–11
  14. By: Tonin, Mirco (University of Southampton); Vlassopoulos, Michael (University of Southampton)
    Abstract: This paper presents results from a modified dictator experiment aimed at distinguishing and quantifying the two intrinsic motivations for giving: warm glow and pure altruism. In particular, we implemented a within-subject experimental design with three treatments: (i) one, T1, where the recipient is the experimenters, which measures altruistic feelings towards the experimenters, (ii) the Crumpler and Grossman (2008) design, T2, in which the recipient is a charity, and the dictator’s donation crowds out one-for-one a donation by the experimenters, which aims at measuring warm glow giving, (iii) a third one, T3, with a charity recipient and no crowding out, which elicits both types of altruism. We use T1 to assess to what extent altruistic feelings towards the experimenters are a potential confound for measuring warm glow in T2. We find giving in T1 not to be significantly different from T2, suggesting that the Crumpler and Grossman design provides an upper bound estimate of warm glow giving. We provide a lower bound estimate based on the behavior of subjects whose warm glow giving in T2 is not confounded, that is, those who do not display altruistic feelings towards the experimenters in T1. We use these two estimates to quantify the portion of giving in T3 due to pure altruism and find it to be between 20% and 26% of endowment. We also propose a new method of detecting warm glow motivation based on the idea that in a random-lottery incentive (RLI) scheme, such as the one we employ, warm glow accumulates and this may lead to satiation, whereas purely altruistic motivation does not.
    Keywords: dictator game, warm glow, pure altruism, charitable giving, random lottery, incentive scheme
    JEL: C91 D64
    Date: 2011–01
  15. By: Holger Müller (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Numerous researchers have investigated the compromise effect, according to which a middle option of a consideration set is assumed to be perceived more attractive by consumers, thus becoming more likely to be chosen than the extreme options. However, a closer examination of the experimental designs that were used in previous studies on compromise effects clearly reveals a lack of realism in terms of forced choices between fictitious options in hypothetical choice settings of student samples. In two consecutive studies, this article demonstrates that the compromise effect is robust even in an enhanced design that incorporates basic conditions of real purchase decisions in lab-based experiments. Specifically, the relative share of the middle option increases significantly in an overall analysis when experienced consumers make unforced decisions between real brands in a binding choice context. However, segmented analysis indicates substantial differences, meaning that (1) the compromise effect is strong and significant among quality-seeking consumers; whereas (2) the compromise effect is weak and insignificant among price-conscious subjects.
    Keywords: Compromise Effect, Experimental Designs, Price Consciousness, Purchase Decisions
    Date: 2011–02
  16. By: Eva I. Hoppe (Department of Economics, University of Cologne); David J. Kusterer (Department of Economics, University of Cologne); Patrick W. Schmitz (Department of Economics, University of Cologne)
    Abstract: A government agency wants an infrastructure-based public service to be provided. Our experimental study compares two different modes of provision. In a public-private partnership, the two tasks of building the infrastructure and operating it are delegated to one private contractor (a consortium), while under traditional procurement, these tasks are delegated to separate contractors. We find support for the theoretical prediction that, compared to traditional procurement, a public-private partnership provides stronger incentives to make cost-reducing investments (which may increase or decrease service quality). In two additional treatments, we study governance structures which explicitly take subcontracting within private consortia into account.
    Keywords: experiment, incomplete contracts, procurement, public-private partnerships
    JEL: D86 H11 L33
    Date: 2011–01
  17. By: Mellizo, Philip (College of Wooster); Carpenter, Jeffrey P. (Middlebury College); Matthews, Peter Hans (Middlebury College)
    Abstract: While intuition suggests that empowering workers to have some say in the control of the firm is likely to have beneficial incentive effects, empirical evidence of such an effect is hard to come by because of numerous confounding factors in the naturally occurring data. We report evidence from a real-effort experiment confirming that worker performance is sensitive to the process used to select the compensation contract. Groups of workers that voted to determine their compensation scheme provided significantly more effort than groups that had no say in how they would be compensated. This effect is robust to controls for the compensation scheme implemented and worker characteristics (i.e., ability and gender).
    Keywords: real-effort experiment, workplace democracy, decision control rights
    JEL: C92 J33 J54
    Date: 2011–01
  18. By: Emmanuel Flachaire (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); 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); Jason Shogren (Departement Economy and Finance, University of Wyoming - University of Wyoming)
    Abstract: This paper tests whether individual perceptions of markets as good or bad for a public good is correlated with the propensity to report gaps in willingness to pay (WTP) and willingness to accept (WTA) revealed within an incentive compatible mechanism. Identifying people based on a notion of market affinity, we find a substantial part of the gap can be explained by controlling for some variables that were not controlled for before. This result suggests the valuation gap for public goods can be reduced through well-defined variables.
    Keywords: behavioral economics; contingent valuation; WTA-WTP gap
    Date: 2011–02–01

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