nep-exp New Economics Papers
on Experimental Economics
Issue of 2011‒04‒09
seventeen papers chosen by
Daniel Houser
George Mason University

  1. Does Market Experience Eliminate Market Anomalies? The Case of Exogenous Market Experience By John A. List
  2. Rarer Actions: Giving and Taking in Third-Party Punishment Games By Simon Halliday
  3. Paradoxes and Mechanisms for Choice under Risk By James C. Cox; Vjollca Sadiraj; Ulrich Schmidt
  4. Is It How You Look or Speak That Matters? - An Experimental Study Exploring the Mechanisms of Ethnic Discrimination By Rödin, Magnus; Özcan, Gülay
  5. Challenging the Intrapersonal Empathy Gap An Experiment with Self-Commitment Power By Matthias Uhl
  6. Bosses and Kings: Asymmetric Power in Paired Common Pool and Public Good Games By James C. Cox; Elinor Ostrom; James M. Walker
  7. Emotions, Sanctions and Cooperation By Matteus Joffily; David Masclet; Charles Noussair; Marie-Claire Villeval
  8. The Endogenous Formation of Coalitions to Provide Public Goods: Theory and Experimental Evidence By David M. McEvoy; Todd L. Cherry; John K. Stranlund
  9. Determining risk preferences for pain By Eike B. Kroll; Judith N. Trarbach; Bodo Vogt
  10. How Payment Systems Affect Physicians' Provision Behaviour – An Experimental Investigation By Heike Hennig-Schmidt; Reinhard Selten; Daniel Wiesen
  11. Brothers in Arms - An Experiment on the Alliance Puzzle By Changxia Ke; Kai A. Konrad; Florian Morath
  12. Tax Evasion, Welfare Fraud, and ”The Broken Windows” Effect: An Experiment in Belgium, France and the Netherlands By Mathieu Lefebvre; Pierre Pestieau; Arno Riedl; Marie Claire Villeval
  13. The Relative Efficiency of Active Labour Market Policies: Evidence from a Social Experiment and Non-Parametric Methods By Vikström, Johan; Rosholm, Michael; Svarer, Michael
  14. The emergence of norms from conflicts over just distributions By Luis Miller; Heiko Rauhut; Fabian Winter
  15. Gender Bias in Negotiators’ Ethical Decision Making By Kray, Laura
  16. Male Pragmatism in Ethical Decision Making By Kray, Laura J.; Haselhuhn, Michael P.
  17. Anchoring Vignettes and Response Consistency By Arie Kapteyn; James P. Smith; Arthur van Soest

  1. By: John A. List
    Abstract: A vibrant literature has emerged that suggests willingness to pay and willingness to accept measures of value are quite different for inexperienced consumers but that value differences erode with market experience. One potential shortcoming of this literature is that market experience is endogenous. This study presents a framed field experiment that exogenously induces market experience. Empirical findings support the premise that market experience, alone, can eliminate an important market anomaly.
    JEL: C93 D01 Q5
    Date: 2011–03
  2. By: Simon Halliday
    Abstract: In attempting to understand cooperation, economists have used the methods of experimental economics to focus on spheres of human behavior in which humans display altruism, reciprocity, or other social preferences through giving and through punishment. Recent work has begun to examine whether allowing allocations in the negative domain, that is, allowing subjects to take (or steal) other subjects' endowments, might affect participants' behavior. If participants' behavior is affected, then our understanding of experimental results generally, and social preferences speci cally, should be affected too (List 2007, Bardsley 2008). In this paper we propose an experimental variation on the Dictator Game with third-party punishment (Fehr and Fischbacher 2004b). We examine, first, a basic Dictator Game with third-party punishment, after which we introduce a treatment allowing the dictator to take from the receiver, in the knowledge that the third party could punish them. The results conflict. Many dictators choose the most self-interested option, while, when taking is introduced as an option for the dictator, third parties punish the most self-interested option more than in the baseline.
    JEL: C91 D63
    Date: 2011
  3. By: James C. Cox; Vjollca Sadiraj; Ulrich Schmidt
    Abstract: Experiments on choice under risk typically involve multiple decisions by individual subjects. The choice of mechanism for selecting decision(s) for payoff is an essential design feature that is often driven by appeal to the isolation hypothesis or the independence axiom. We report two experiments with 710 subjects. Experiment 1 provides the first simple test of the isolation hypothesis. Experiment 2 is a crossed design with six payoff mechanisms and five lottery pairs that can elicit four paradoxes for the independence axiom and dual independence axiom. The crossed design discriminates between: (a) behavioral deviations from postulated properties of payoff mechanisms; and (b) behavioral deviations from theoretical implications of alternative decision theories. Experiment 2 provides tests of the isolation hypothesis and four paradoxes. It also provides data for tests for portfolio effect, wealth effect, reduction, adding up, and cross-task contamination. Data from Experiment 2 suggest that a new mechanism introduced herein may be less biased than random selection of one decision for payoff.
    JEL: C91 D81
    Date: 2011–04
  4. By: Rödin, Magnus (Dept. of Economics, Stockholm University); Özcan, Gülay (Dept. of Economics, Stockholm University)
    Abstract: Using a unique laboratory experiment where subjects are asked to guess the test performance of candidates presented by facial portraits and voice messages, this paper explores the following questions: Are beliefs about performance affected by if a candidate is perceived to have looks that are non-stereotypical for the dominant population and do these beliefs change if the candidate has native-like versus accented speech? The experiment is conducted in Sweden and the results show that candidates not perceived as stereotypically Swedish are considered to be worse performers. These beliefs are found in within-gender but not in cross-gender evaluations and are not eliminated when additional performance-related information about the candidates is provided. When candidates are presented by both looks and speech, differential evaluations based on looks disappear. Instead, we find strong negative beliefs about performance for candidates that speak Swedish with a foreign accent implying that ethnic stereotypes associated with speech override stereotypes associated with appearance. The negative beliefs associated with foreign-accented speech are not supported by corresponding mean differences in the candidates’ actual test performance.
    Keywords: Experiment; Appearance; Speech; Beliefs; Performance; Stereotypes
    JEL: J15 J71
    Date: 2011–04–01
  5. By: Matthias Uhl (Max Planck Institute of Economics, IMPRS "Uncertainty", Jena, Germany)
    Abstract: Loewenstein (1996, 2005) identifies an intrapersonal empathy gap. In the respective experiments, subjects make choices with delayed consequences. When entering the state where these consequences would unfold, they get the possibility to revise their initial choice. Revisions are more substantial when these two choices are made in different emotional states. The concept of the empathy gap suggests that the initial choice represents a misprediction of future preferences. However, it might alternatively be based on a well understood disagreement with future preferences. In this sense, people would like to add: "But don't ask me again!" To disentangle both explanations, we induce two different emotional states in each subject and offer a self-commitment device in the first state. In one condition, subjects move from a "cold" state of reflection to a "hot" state of impulsiveness. In the other condition, this order is reversed. We find evidence for the hot-to-cold empathy gap, but not for the cold-to-hot empathy gap when subjects can self-commit to their initial choice.
    Keywords: Intrapersonal empathy gap, self-commitment, intrapersonal conflict, naiveté, sophistication
    JEL: C90
    Date: 2011–04–04
  6. By: James C. Cox; Elinor Ostrom; James M. Walker
    Abstract: Social dilemmas characterize decision environments in which individuals' exclusive pursuit of their own material self-interest can produce inefficient allocations. Two such environments are those characterized by public goods and common-pool resources in which the social dilemmas can be manifested in free riding and tragedy of the commons outcomes. Much field and laboratory research has focused on the effectiveness of alternative political-economic institutions in counteracting individuals' tendencies to underprovide public goods and over-extract commonpool resources. Previous laboratory research has not focused on the implications of power asymmetries in paired public good and common pool game settings. In our baseline treatments, we experiment with simultaneous move one-period games in which paired comparisons can be made across settings with public good and common pool games. In our central treatments, we experiment with pairs of sequential move one-period games in which second movers with asymmetric power -- "bosses and kings" -- can have large effects on efficiency and equity. The central questions are whether the bosses and kings do have significant effects on outcomes and whether those effects differ across the paired public good and common pool games in ways that can be rationalized by some theories but not others.
    Date: 2011–03
  7. By: Matteus Joffily (ISC - Institut des Sciences Cognitives - CNRS : UMR5015 - Université Claude Bernard - Lyon I); David Masclet (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes I - Université de Caen); Charles Noussair (Department of economics, Tilburg University - Tilburg University); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon)
    Abstract: We use skin conductance responses and self-reports of hedonic valence to study the emotional basis of cooperation and punishment in a social dilemma. Emotional reaction to free-riding incites individuals to apply sanctions when they are available. The application of sanctions activates a "virtuous emotional circle" that accompanies cooperation. Emotionally aroused cooperators relieve negative emotions when they punish free riders. In response, the free-riders experience negative emotions when punished, and increase their subsequent level of cooperation. The outcome is an increased level of contribution that becomes the new standard or norm. For a given contribution level, individuals attain higher levels of satisfaction when sanctioning institutions are in place.
    Keywords: Emotions; Sanctions; Cooperation; Experiment; Skin Conductance Responses
    Date: 2011
  8. By: David M. McEvoy (Department of Economics, Appalachian State University); Todd L. Cherry (Department of Economics, Appalachian State University); John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst)
    Abstract: This paper examines the endogenous formation of coalitions that provide public goods in which players implement a minimum participation requirement before deciding whether to join. We demonstrate theoretically that payoff-maximizing players will vote to implement efficient participation requirements and these coalitions will form. However, we also demonstrate that if some players are averse to inequality they can cause inefficient outcomes. Inequality-averse players can limit free riding by implementing larger than efficient coalitions or by blocking efficient coalitions from forming. We test the theory with experimental methods and observe individual behavior and coalition formation consistent with a model of inequality-averse players.
    Keywords: public goods, coalition formation, inequality aversion, participation requirement, experiments
    JEL: C92 H41
    Date: 2011–04
  9. By: Eike B. Kroll (Institute of Economic Theory and Statistics (ETS), Karlsruhe Institute of Technology); Judith N. Trarbach (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Bodo Vogt (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: The QALY concept is the commonly used approach in research to evaluate the efficiency of therapies in cost utility analysis. We investigate the risk neutrality assumption for time of the QALY concept: can time be included as a linear factor? Various studies show that this assumption does not hold empirically. However, the results are based on hypothetical questionnaires rather than decisions with real consequences. Experimental economists argue that experiments are necessary to avoid hypothetical bias. Our study provides the first experimental analysis of health related decision making. Using the cold pressor test we can analyze decisions when subjects face real consequences. Analog to the hypothetical studies, our experimental results of real decisions provide no linear time preferences. In conclusion, the QALY concept needs to be modified by a weighting factor for time.
    Date: 2011–03
  10. By: Heike Hennig-Schmidt; Reinhard Selten; Daniel Wiesen
    Abstract: Understanding how physicians respond to incentives from payment schemes is a central concern in health economics research. We introduce a controlled laboratory experiment to analyse the influence of incentives from fee-for-service and capitation payments on physicians’ supply of medical services. In our experiment, physicians choose quantities of medical services for patients with different states of health. We find that physicians provide significantly more services under fee-for-service than under capitation. Patients are overserved under fee-forservice and underserved under capitation. However, payment incentives are not the only motivation for physicians’ quantity choices, as patients’ health benefits are of considerable importance as well. We find that patients in need of a high (low) level of medical services receive a larger health benefit under fee-for-service (capitation).
    Keywords: Physician payment system; laboratory experiment; incentives; fee-for-service; capitation
    JEL: C91 I11
    Date: 2011–03
  11. By: Changxia Ke; Kai A. Konrad; Florian Morath
    Abstract: Our experimental analysis of alliances in conflicts leads to three main findings. First, even in the absence of repeated interaction, direct contact or communication, free-riding among alliance members is far less pronounced than what would be expected from non-cooperative theory. Second, this possible solidarity among 'brothers in arms' when fighting against an outside enemy may rapidly deteriorate or disappear as soon as the outside enemy disappears. Third, when fighting an outside enemy, 'brothers in arms' may already anticipate future internal conflict about dividing the spoils of winning; however, this subsequent internal conflict does not discourage alliance members from expending much effort in the contest against the external enemy.
    Keywords: Alliance, conflict, contest, free-riding, hold-up problem, solidarity
    JEL: D72 D74
    Date: 2011–01
  12. By: Mathieu Lefebvre; Pierre Pestieau; Arno Riedl; Marie Claire Villeval
    Abstract: In a series of experiments conducted in Belgium (Wallonia and Flanders), France and the Netherlands, we compare behavior regarding tax evasion and welfare dodging, with and without information about others’ behavior. Subjects have to decide between a ‘registered’ income, the realization of which will be known to the tax authority for sure, and an ‘unregistered’ income that will only be known with some probability. This unregistered income comes from self-employment in the Tax treatment and from black labor supplementing some unemployment compensation in the Welfare treatment. Subjects have then to decide on whether reporting their income or not, knowing the risk of detection. The results show that (i) individuals evade more in the Welfare treatment than in the Tax treatment; (ii) many subjects choose an option that allows for tax evasion or welfare fraud but report their income honestly anyway; (iii) examples of low compliance tend to increase tax evasion while examples of high compliance exert no influence; (iv) tax evasion is more frequent in France and the Netherlands; Walloons evade taxes less than the Flemish. There is no cross-country difference in welfare dodging.
    Date: 2011
  13. By: Vikström, Johan (Uppsala University); Rosholm, Michael (Aarhus School of Business); Svarer, Michael (University of Aarhus)
    Abstract: We re-analyze the effects of a Danish active labour market program social experiment that included a range of sub-treatments, including monitoring, job search assistance and training. Previous studies have shown that the overall effect of the experiment is positive. We apply newly developed non-parametric methods to determine which of the individual policies that explains the positive effect. The use of non-parametric methods to separate sub-treatment effects is important from a methodological point of view, since the alternative, namely parametric/distributional assumptions, is in conflict with the concept of experimental evidence. Our results are highly relevant in a policy perspective, as optimal labour market policy design requires knowledge on the effectiveness of specific policy measures.
    Keywords: active labour market policy, treatment effect, non-parametric bounds
    JEL: C14 C41 C93
    Date: 2011–03
  14. By: Luis Miller (CESS, Nuffield College, Oxford, Great Britain); Heiko Rauhut (ETH Zurich, Swiss Federal Institute of Technology); Fabian Winter (Max Planck Institute of Economics, Jena, Germany)
    Abstract: Why is it that well-intentioned actions can create persistent conflicts? While norms are widely regarded as a source for cooperation, this article proposes a novel theory in which the emergence of norms can be understood as a bargaining process in which normative conflicts explain the finally emerging norm. The theory is tested with a dynamical experiment on conflicts over the consideration of equality, effort or efficiency for the distribution of joint earnings. Normative conflict is measured by the number of rejected offers in a recursive bargaining game. The emerging normative system is analyzed by feedback cycles between micro- and macro-level. It is demonstrated that more normative cues cause more normative conflict. Further, under the structural conditions of either simple or complex situations, the convergence towards a simple and widely shared norm is likely. In contrast, in moderately complex situations, convergence is unlikely and several equally reasonable norms co-exist. The findings are discussed with respect to the integration of sociological conflict theory with the bargaining concept in economic theory.
    Keywords: social norms, normative conflict, bargaining, cooperation, experiment
    JEL: C91 D63
    Date: 2011–04–04
  15. By: Kray, Laura
    Abstract: What is the relationship between gender and the likelihood of being deceived in negotiations? In strategic interactions, the decision to deceive is based in part on the expected consequences (Gneezy, 2005). Because gender stereotypes suggest that women are more easily misled than men, the expected consequences of deception were predicted to be more positive with negotiators described in stereotypically feminine as opposed to masculine terms. Studies 1A and 1B confirmed that gender stereotypes affect the expected consequences of deception. An archival analysis of MBA classroom data (N = 298) was then conducted to explore the implications of this relationship in a naturalistic setting. Consistent with gender stereotypes, female negotiators were deceived more frequently than male negotiators, though female negotiators perceived no less honesty in their counterparts than did male negotiators. Economic and psychological consequences of deception were also examined, including agreement rates, sale price, and negotiator subjective experience. When believed by their target, lies facilitated deal making. However, psychologically, lying impaired both negotiators’ subjective experience by reducing perceptions of negotiator honesty. By linking gender stereotypes to the expected and actual consequences of deception, the current research extends our understanding of the role of gender in strategic interactions. Finally, how gender shapes experiences in the MBA classroom is discussed.
    Keywords: Gender, bias, stereotypes, discrimination, negotiation, ethical decision making, deception, person perception, strategic interaction, Organizational Behavior and Theory
    Date: 2011–03–30
  16. By: Kray, Laura J.; Haselhuhn, Michael P.
    Abstract: Why do men have more lenient ethical standards than women? To address this question, we test the male pragmatism hypothesis, which posits that men rely on their social and achievement motivations to set ethical standards more so than women. Across two studies, motivation was both manipulated and measured before examining ethicality judgments. Study 1 manipulated identification with two parties in an ethical dilemma and found that men were more egocentric than women. Whereas men’s ethicality judgments were affected by the identification manipulation, women’s judgments were not. Study 2 examined whether implicit negotiation beliefs, which predict achievement motivations to either demonstrate or develop negotiating skill, predicted ethicality judgments and, if so, whether this relationship was moderated by gender. As hypothesized, fixed beliefs predicted lower ethical standards, particularly for men. In combination, these findings suggest men are more pragmatic in setting ethical standards than women.
    Keywords: Gender, ethical judgment, egocentrism, self-interest, negotiation, motivated reasoning, Organizational Behavior and Theory
    Date: 2011–03–30
  17. By: Arie Kapteyn; James P. Smith; Arthur van Soest
    Abstract: The use of anchoring vignettes to correct for differential item functioning rests upon two identifying assumptions: vignette equivalence and response consistency. To test the second assumption the authors conduct an experiment in which respondents in an Internet panel are asked to both describe their health in a number of domains and rate their health in these domains. In a subsequent interview respondents are shown vignettes that are in fact descriptions of their own health. Under response consistency and some auxiliary assumptions with regard to the validity of the experiment, there should be no systematic differences between the evaluation of these vignettes in the second interview and the self-evaluations in the first interview. They analyze data for five health domains: sleep, mobility, concentration, breathing and affect. Although descriptively the vignettes and the self-evaluations are similar for a number of domains, their nonparametric analysis suggests that response consistency is satisfied for the domain of sleep, while it indicates rejection of either the auxiliary assumptions or response consistency for the other domains of health. Parametric analysis suggests that the auxiliary assumptions may be most problematic. The analysis points at the need for a systematic experimental approach to the design of anchoring vignettes before using them in practice.
    Date: 2011–02

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