New Economics Papers
on Experimental Economics
Issue of 2011‒06‒11
seven papers chosen by

  1. Social Exchange and Risk and Ambiguity Preferences By John Engle; Jim Engle-Warnick; Sonia Laszlo
  2. Cooperative Attitudes in Nonprofit Firms. Evidence from An Artefactual Field Experiment with Workers of Social Cooperatives By Luigi Mittone; Matteo Ploner
  3. An experimental study on multi-dimensional spatial product differentiation By Przemysław Kusztelak
  4. Field Experiments with Firms By Bandiera, Oriana; Barankay, Iwan; Rasul, Imran
  5. Violence, social capital and economic development: Evidence of a microeconomic vicious circle By Leonardo Becchetti; Pierluigi Conzo; Alessandro Romeo
  6. Loss aversion, social comparison and physical abilities at younge age By Nakamoto, Yasuhiro; Sato, Masayuki
  7. Painful Regret and Elation at the Track By Adi Schnytzer; Barbara Luppi

  1. By: John Engle; Jim Engle-Warnick; Sonia Laszlo
    Abstract: We present an experiment in which we test for the effect of participating in a social exchange exercise on revealed risk and ambiguity preferences. In our experiments, subjects make choices over lotteries that reveal their risk and ambiguity preferences. They then participate with a small group in an unstructured on-line chat. After the chat, they reconsider their choices in the risk and ambiguity instruments. In a control session, different subjects view, but do not participate in, past chats. Through a content analysis we investigate the role of chat content and chat participation on changes in revealed preferences. We compare our results to the “Discovered Preferences Hypothesis” (Plott, 1996) and “Fact-Free Learning” (Aragones, Gilboa, Postlewaite, and Schmeidler, 2005). <P>Nous présentons une expérience en laboratoire dans laquelle nous testons l'effet de participer à un exercice d'échange social sur l'aversion au risque et à l'ambiguïté. Dans notre expérience, les participants jouent à une loterie où ils révèlent leurs préférences face au risque et à l'ambiguïté. Ils participent ensuite à une discussion de groupe déstructurée dans une salle de causette. Après la discussion, les participants peuvent reconsidérer leurs choix dans les instruments de risque et d'ambiguïté. Cependant, dans une session contrôle, d'autres participants observent, sans y participer, une discussion d'une session antérieure. Une analyse de contenu nous informe sur le rôle du contenu de la discussion et de la participation elle-même sur le changement des préférences révélées. Nous comparons nos résultats aux hypothèses de « Discovered Preferences » (Plott, 1996) et de « Fact-Free Learning » (Aragones, Gilboa, Postlewaite, and Schmeidler, 2005).
    Keywords: Risk and ambiguity preference measurement instruments, experimental economics, development economics, participatory development; social learning., Instruments de mesure de la préférence vis-à-vis le risque et l'ambiguïté, économie expérimentale, développement économique, développement participatif, apprentissage social
    Date: 2011–05–01
  2. By: Luigi Mittone; Matteo Ploner
    Abstract: We investigate strategic choices of individuals working for social cooperatives in Italy. Specifically, a 2-players Prisoner’s Dilemma is administered as an attachment to a nationwide survey of nonprofit organizations. We experimentally manipulate social proximity of the participants and efficiency of cooperation. We show that higher efficiency of cooperation has a significant positive impact on the cooperation rate in the game, while closer social proximity does not significantly affect choices. In addition, a positive correlation between perceived organizational fairness and self–reported intrinsic motivation is identified in the sample under investigation. This finding provides stimulating insights on the interplay between organizational features and workers’ motivational factors.
    Keywords: Cooperation, Field Experiments, Social Dilemmas, Nonprofit Organizations
    Date: 2011
  3. By: Przemysław Kusztelak (Faculty of Economic Sciences, University of Warsaw)
    Abstract: This study presents the results of an experiment on spatial differentiation of products in Hotelling-type models with different grades of complexity for companies’ choices of space. Three models were compared, including models with a single decision variable (single-dimensional space with automatically calculated prices), two decision variables (single-dimensional space with prices assigned by the participants) and three decision variables (bi-dimensional space with prices assigned by the participants). The research revealed that in more complex conditions, the product differentiation was smaller and that the prices were lower than in a simple environment when the Nash equilibrium was confirmed. Companies that function in complex conditions do not take advantage of the opportunity to make high profits based on product differentiation. This has a greater impact on price rigidity with respect to product variety than could be theoretically predicted. Strategies based on product differentiation are, therefore, less profitable than expected based on theoretical predictions.
    Keywords: spatial competition; product differentiation; laboratory experiments
    JEL: C72 C92 D43
    Date: 2011
  4. By: Bandiera, Oriana; Barankay, Iwan; Rasul, Imran
    Abstract: We discuss how the use of field experiments sheds light on long standing research questions relating to firm behavior. We present insights from two classes of experiments: within and across firms, and draw common lessons from both sets. Field experiments within firms generally aim to shed light on the nature of agency problems. Along these lines, we discuss how field experiments have provided new insights on shirking behavior, and the provision of monetary and non-monetary incentives. Field experiments across firms generally aim to uncover firms' binding constraints by exogenously varying the availability of key inputs such as labor, physical capital, and managerial capital. We conclude by discussing some of the practical issues researchers face when designing experiments and by highlighting areas for further research.
    Keywords: field experiments; firms; organizations
    JEL: C9 M5
    Date: 2011–06
  5. By: Leonardo Becchetti (University of Rome Tor Vergata); Pierluigi Conzo (University of Rome Tor Vergata & EIEF); Alessandro Romeo (University of Rome Tor Vergata & World Bank)
    Abstract: We test with a randomized experiment in the slums of Nairobi whether violence suffered during the 2007 political outbreaks affects trustworthiness learning when participants live group experiences and face opportunism and free riding in public good games (PGGs) between two subsequent trust games (TGs). Our findings document that participants move toward balanced reciprocity after the PGG with the exception of those who have experienced directly or indirectly physical violence and/or forced relocation who exhibit significantly less trustworthiness in the second TG round. Results are robust to several robustness checks controlling for selection into victimization. Since in a framework of asymmetric information and incomplete contracts, trust games mimic sequential economic exchanges whose functioning is crucial to economic growth, we argue that our results identify a microeconomic nexus among socio-political instability, violence and growth helping to solve identification problems of the cross-country literature on the subject.
    Keywords: trust games, public good games, randomized experiment, social capital, socioeconomic instability and development.
    JEL: O12 C93 Z13
    Date: 2011
  6. By: Nakamoto, Yasuhiro; Sato, Masayuki
    Abstract: We examine how physical abilities affect individuals' preferences. In particular, by incorporating social comparison into prospect theory, we directly estimate the degree of loss aversion from social comparison, a concept we term `ALJ' (\textit{Avoiding Loss relative to the Joneses}). Our main findings are as follows: (i) the participants who choose the physical education as the best subject exhibit a greater degree of ALJ than others; (ii) physical fitness influences the degree of ALJ; (iii) gender influences social comparison preferences; (iv) participants with a greater degree of ALJ do not respond to voluntary questionnaire; (v) the form of participants' ALJ is affected by the voluntary behavior of their parents. A comparison of ALJ with loss aversion in the original prospect theory reveals that they have different characteristics.
    Keywords: Loss aversion; Risk aversion; Social Comparison; Physical fitness; Voluntary participation
    JEL: D12 C90 C93
    Date: 2011–06–01
  7. By: Adi Schnytzer (Bar-Ilan University); Barbara Luppi (University of Modena and Reggio Emilia)
    Abstract: We present an empirical study of loss aversion in the Hong Kong horse betting market. We provide evidence of the presence of loss aversion in a context of complete absence of the favourite-longshot bias. This would suggest that, since loss aversion is a psychological bias, the favourite-longshot bias may not necessarily be caused by psychological issues and may be due, for instance, to informational asymmetry. We investigate different types of bettors and their attitude towards loss aversion. Our data set enables us to distinguish approximately among insiders, unsophisticated outsiders and sophisticated outsiders. The results show clearly that even sophisticated bettors are beset by loss aversion, while even unsophisticated outsiders display no favourite-longshot bias. Thus, our paper provides evidence that loss aversion may be an attitude innate rather than learned, regardless of the level of sophistication in designing economic behaviour or the extent of information asymmetry. Chen et al (2006) show that capuchin monkeys display biases when faced with gambles, including loss aversion, and provide evidence that loss aversion extends beyond humans. The present work supports the idea that loss aversion may be a more universal bias, arising regardless of experience and culture and demonstrates that loss aversion is displayed even by those bettors regarded in the market as “smart money”. Further, we find that more sophisticated and experienced bettors display a higher level of loss aversion. This result is consistent with the findings of Haigh and List (2005), who show that professional traders in financial markets exhibit more loss aversion than do students.
    Date: 2011–03

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