New Economics Papers
on Experimental Economics
Issue of 2011‒05‒07
twelve papers chosen by

  1. The Willingness to Pay-Willingness to Accept Gap Revisited: The Role of Emotions and Moral Satisfaction By Biel, Anders; Johansson-Stenman, Olof; Nilsson, Andreas
  2. Smiley or Frowney: The effect of emotions and framing in a downstream water pollution game By Czap, Hans; Czap, Natalia; Khachaturyan, Marianna; Burbach, Mark; Lynne, Gary
  3. Subsidy Incidence in Agricultural Land Markets: An Experimental Investigation By Nagler, Amy M.; Menkhaus, Dale J.; Bastian, Christopher; Ehmke, Mariah D.
  4. Evidence of homo economicus? Findings from experiment on evolutionary prisoners' dilemma game By Pradiptyo, Rimawan; Sasmitasiwi, Banoon; Sahadewo, Gumilang Aryo
  5. Carrots without Bite: On the Ineffectiveness of 'Rewards' in sustaining Cooperation in Social Dilemmas By Stoop, Jan; van Soest, Daan; Vyrastekova, Jana
  6. Are nurses more altruistic than real estate brokers? By Jacobsen, Karin; H. Eika, Kari; Helland, Leif; Thori Lind, Jo; Nyborg, Karine
  7. Negative recency, randomization device choice, and reduction of compound lotteries By Kaivanto, Kim; Kroll, Eike B.
  8. An Iterative Auction for Spatially Contiguous Land Management: An Experimental Analysis By Banerjee, Simanti; Shortle, James S; Kwasnica, Anthony M
  9. Initial Endowment Effects in Multi-Unit Vickrey Auctions By Akaichi, Faical; Nayga, Rodolfo M.; Gil, Jose M.
  10. Decoupled Programs, Payment Incidence, and Factor Markets: Evidence from Market Experiments By Bastian, Christopher; Nagler, Amy M.; Menkhaus, Dale J.; Ehmke, Mariah D.; Whitaker, James B.; Young, C. Edwin
  11. Estimating the Impact of Food and Drug Administration Regulation of Cigarette Package Warning Labels and the Potential Added Impact of Plain Packaging: Evidence From Experimental Auctions Among Adult Smokers By Thrasher, Jim; Rousu, Matthew; Hammond, David; Navarro, Ashley; Corrigan, Jay
  12. Beyond baseline and follow-up : the case for more t in experiments By McKenzie, David

  1. By: Biel, Anders (Department of Psychology); Johansson-Stenman, Olof (Department of Economics, School of Business, Economics and Law, Göteborg University); Nilsson, Andreas (Department of Psychology)
    Abstract: While many earlier studies have found that people’s maximum willingness to pay for having a good is often substantially lower than their minimum willingness to accept not having it, more recent experimental evidence suggests that this discrepancy vanishes for standard consumption goods when an incentive-compatible design without misconceptions is used. This paper hypothesises that there is nevertheless a discrepancy for goods with a perceived moral character, such as contributions to a good cause, and moreover that the reason for this discrepancy can largely be explained by differences in emotions and moral perceptions. The results from a real-money dichotomous-choice experiment, combined with measurements of emotions and morality, are consistent with these hypotheses.<p>
    Keywords: Willingness to pay-Willingness to accept gap; Endowment effect; Emotions; Ethics; Experiments
    JEL: C91 H41
    Date: 2011–04–28
  2. By: Czap, Hans; Czap, Natalia; Khachaturyan, Marianna; Burbach, Mark; Lynne, Gary
    Abstract: Common-pool resources and other shared resources frequently suffer from overextraction/overuse and associated negative externalities. In this paper we design a framed laboratory experiment on downstream water pollution to investigate (a) the importance of framing in determining the behavior of upstreamers regarding the negative externalities, and (b) the potential of downstreamers to influence the choices of upstreamers using non-monetary sanctions and rewards, alleviating the need for intervention by the local governments and regulatory institutions. Our results show that framing has a significant impact on the behavior of subjects. Subjects behaved more profit-oriented in the self-interest framing and more egalitarian in the empathy framing. In addition, we show that nudging subjects to âwalk in the shoes of othersâ significantly increased empathetic behavior. Lastly, negative emotional feedback is a powerful tool for changing behavior of subjects towards more environmentally friendly and empathetic behavior. Interestingly, positive emotional feedback is counterproductive in that it instead decreases environmentally friendly and empathetic behavior. In general our results indicate that explicit emotional feedback, even though not expressed by everyone, works similarly to the implicit appeal to emotions through framing.
    Keywords: empathy framing, self-interest framing, emotions, water pollution, environmental experiment, reward and punishment., Environmental Economics and Policy, Institutional and Behavioral Economics, Land Economics/Use, C9, D03, Q25, Q53, Q57,
    Date: 2011
  3. By: Nagler, Amy M.; Menkhaus, Dale J.; Bastian, Christopher; Ehmke, Mariah D.
    Abstract: We use laboratory market experiments to control for market power and social norms in order to evaluate market outcomes associated with subsidy incidence. We estimate the incidence of a stylized agricultural subsidy in laboratory land rental negotiations and compare the market behavior of university students to agricultural professionals. In separate sessions with both subject groups, 21.5 percent of a per-unit subsidy paid to the buyer (tenant) was passed on to sellers (landlords). The consistent treatment effect between students and professionals is encouraging, particularly in the use of experimental laboratory methods for ex ante analyses of agricultural policy impacts.
    Keywords: agricultural subsidies, ex ante policy analysis, laboratory market experiments, land market, professional versus student subject pools, subsidy incidence, Agricultural and Food Policy, Institutional and Behavioral Economics, Q1, Q18, C92,
    Date: 2011
  4. By: Pradiptyo, Rimawan; Sasmitasiwi, Banoon; Sahadewo, Gumilang Aryo
    Abstract: This paper aims to analyze subjects’ behavior in an experiment on evolutionary process of prisoners’ dilemma game. The experiment has been designed by using sixteen one-shot prisoners’ dilemma games with payoffs perturbation and random matching players under perfect information. The subjects of the experiment were students and staff in Universitas Gadjah Mada, Indonesia. In contrast to previous studies, for instance Selten and Stoecker’s (1986) Cooper’s, (1991, 1996), the majority of the subjects in this experiment tend to choose Nash equilibrium strategy consistently from the first game. The result showed that the proportion of the Nash equilibrium outcome was consistently in the range of 85%-88%, whereas the tacit cooperation or Pareto optimum outcome was about 1%-2%. There were evidence that payoffs perturbation influences players’ decision. In contrast to the previous studies above, the results from this study revealed that the vast majority of the subjects tend to choose the dominant strategy as prescribed in Game Theory.
    Keywords: Prisoners' dilemma; experiment; random-matching players; payoffs perturbation; framing effect
    JEL: C92 C73
    Date: 2011–02–09
  5. By: Stoop, Jan; van Soest, Daan; Vyrastekova, Jana
    Abstract: Peer-to-peer sanctions increase cooperation in multi-person social dilemmas (Fehr & Gachter (2000)), but not when subjects have the option to retaliate (Nikiforakis (2008)). One-shot peer-to-peer rewards have been found to enhance efficiency too (Vyrastekova & van Soest (2008), Rand et al. (2009a)), but it is an open question whether the positive impact on cooperation is weakened or strengthened when we allow for counterrewarding. We examine the impact of possible reciprocity in rewarding on cooperation in a non-linear public bad game, and find that efficiency in the social dilemma is equally low as absent any reward options. We hypothesize that subjects are unwilling to sever mutually profitable bilateral exchanges of reward tokens to induce cooperation in the social dilemma, and identify the underlying mechanism by comparing behavior across three matching protocols.
    Keywords: Social dilemmas; economic experiments; rewards.
    JEL: C92 D74 C72
    Date: 2011–03–11
  6. By: Jacobsen, Karin (Dept. of Economics, University of Oslo); H. Eika, Kari (The Royal Ministry of Health and Care Services); Helland, Leif (Department of Economics, BI Norwegian School of Management); Thori Lind, Jo (Dept. of Economics, University of Oslo); Nyborg, Karine (Dept. of Economics, University of Oslo)
    Abstract: We report results from a dictator game experiment with nurse students and real estate broker students as dictators, and Amnesty International as the recipient. Although brokers contributed substantial amounts, nurses contributed significantly more, on average 76 percent of their endowment. In a second part, subjects chose between a certain repetition of the experiment and a 50-50 chance of costly exit. About one third of the brokers and half of the nurses chose the exit option. While generosity was indeed higher among nurses, even when taking exits into account, the difference cannot readily be attributed to different degrees of altruism.
    Keywords: Dictator game; exit option; generosity; occupational differences
    JEL: D10 D64
    Date: 2011–04–28
  7. By: Kaivanto, Kim; Kroll, Eike B.
    Abstract: We report an experiment in which subjects are not indifferent between real-money lotteries implemented with randomization devices that are equivalent under the Reduction Axiom. Instead choice behavior is consistent with subjective distortion of conditional probability, and this persists in treatment conditions that control for (i) computational limitations and (ii) possible confounding by ratio bias. --
    Keywords: reduction of compound lotteries,negative recency effect,gambler's fallacy,law of small numbers,randomization devices,instruments and materials,design of experiments,St. Petersburg paradox
    JEL: D81 C91
    Date: 2011
  8. By: Banerjee, Simanti; Shortle, James S; Kwasnica, Anthony M
    Abstract: Tackling the problem of ecosystem services degradation is an important policy challenge. Different types of economic instruments have been employed by conservation agencies to meet this challenge. Notable among them are Payment for Ecosystem Services (PES) schemes that pay private landowners to change land uses to pro-environmental ones on their properties. This paper focuses on a PES scheme â an auction for the cost-efficient disbursal of government funds for selection of spatially contiguous land management projects. The auction is structured as an iterative descending price auction where every bid is evaluated on the basis of a scoring metric â a benefit cost ratio. The ecological effectiveness and economic efficiency of the auction is tested with data generated from lab experiments. These experiments use the information available to the subjects about the spatial goal as the treatment variable. Analysis indicates that the information reduces the cost-efficiency of the auction. Experience with bidding also has a negative impact on auction efficiency. The study also provides an analysis of the behavior of winners and losers at the final auction outcome. Winners and losers are found to have significantly different behavior with winners bidding much higher than their costs than losers.
    Keywords: Ecosystem Services, economic experiments, auctions, spatial contiguity, Environmental Economics and Policy, Institutional and Behavioral Economics, Land Economics/Use, Resource /Energy Economics and Policy, Q,
    Date: 2011
  9. By: Akaichi, Faical; Nayga, Rodolfo M.; Gil, Jose M.
    Abstract: We report the result of experiments designed to assess the effect of initial endowments on willingness to pay values elicited from multi-unit Vickrey auctions. Comparing bids from an âendow and upgradeâ approach with the âfull biddingâ approach, we find that the direction of the endowment effect generally depends on the number of endowed units of the conventional product that subjects are willing to give up in exchange for units of the upgraded product. The endowment effect is âreverseâ when the number of units that participants are willing to give up is lower or equal to the number of remaining endowed units. However, we generally find an endowment effect when the number of units a participant is willing to give up is higher than the number of remaining endowed units.
    Keywords: Endowment effect, Number of units of the endowed product, Multi-unit Vickrey auctions., Agribusiness, Research Methods/ Statistical Methods, Teaching/Communication/Extension/Profession, C91, D12, D44,
    Date: 2011
  10. By: Bastian, Christopher; Nagler, Amy M.; Menkhaus, Dale J.; Ehmke, Mariah D.; Whitaker, James B.; Young, C. Edwin
    Abstract: We use laboratory market experiments to assess the impact of asymmetric knowledge of a per-unit subsidy and the effect of a decoupled annual income subsidy on factor market outcomes. Results indicate that when the subsidy is tied to the factor as a per-unit subsidy, regardless of full or asymmetric knowledge for market participants, subsidized factor buyers distribute nearly 22 percent of the subsidy to factor sellers. When the subsidy is fully decoupled from the factor, as is the case with the annual payment, payment incidence is mitigated and prices are not statistically different from the no-policy treatment.
    Keywords: laboratory market experiments, agricultural subsidies, subsidy incidence, land market, ex ante policy analysis, Agricultural and Food Policy, Institutional and Behavioral Economics, Q18, D03, C92,
    Date: 2011
  11. By: Thrasher, Jim; Rousu, Matthew; Hammond, David; Navarro, Ashley; Corrigan, Jay
    Abstract: Objective: To estimate differences in demand for cigarette packages with different packaging and health warning label formats. Methods: Adult smokers (n=404) in four states participated in experimental auctions. Participants bid on two of four experimental conditions, each involving a different health warning label format but with the same warning message: 1. text on 50% of pack side; 2. text on 50% of the pack front and back; 3. text with a graphic picture on 50% of the pack front and back; and 4. same as previous format, but without brand imagery. Results: Mean bids decreased across conditions (1. $3.52; 2. $3.43; 3. $3.11; 4. $2.93). Bivariate and multivariate random effects models indicated that there was no statistically significant difference in demand for packs with either of the two text only warnings; however, demand was significantly lower for both packs with prominent pictorial warnings, with the lowest demand associated with the plain, unbranded pack. Conclusions: Results suggest that prominent health warnings with graphic pictures will reduce demand for cigarettes. Regulators should not only consider this type of warning label, but also plain packaging policies for tobacco products.
    Keywords: experimental auctions, cigarette labels, grotesque images, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, C93,
    Date: 2011
  12. By: McKenzie, David
    Abstract: The vast majority of randomized experiments in economics rely on a single baseline and single follow-up survey. If multiple follow-ups are conducted, the reason is typically to examine the trajectory of impact effects, so that in effect only one follow-up round is being used to estimate each treatment effect of interest. While such a design is suitable for study of highly autocorrelated and relatively precisely measured outcomes in the health and education domains, this paper makes the case that it is unlikely to be optimal for measuring noisy and relatively less autocorrelated outcomes such as business profits, household incomes and expenditures, and episodic health outcomes. Taking multiple measurements of such outcomes at relatively short intervals allows the researcher to average out noise, increasing power. When the outcomes have low autocorrelation, it can make sense to do no baseline at all. Moreover, the author shows how for such outcomes, more power can be achieved with multiple follow-ups than allocating the same total sample size over a single follow-up and baseline. The analysis highlights the large gains in power from ANCOVA rather than difference-in-differences when autocorrelations are low and a baseline is taken. The paper discusses the issues involved in multiple measurements, and makes recommendations for the design of experiments and related non-experimental impact evaluations.
    Keywords: Scientific Research&Science Parks,Science Education,Statistical&Mathematical Sciences,Disease Control&Prevention,Economic Theory&Research
    Date: 2011–04–01

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