nep-exp New Economics Papers
on Experimental Economics
Issue of 2011‒07‒02
fifteen papers chosen by
Daniel Houser
George Mason University

  1. Framing in the field. A simple experiment on the reflection effect By Michał Krawczyk
  2. To answer or not to answer? A field test of loss aversion By Michał Krawczyk
  3. The Effects of Penalty Design on Market Performance: Experimental Evidence from an Emissions Trading Scheme with Auctioned Permits By Restiani, Phillia; Betz, Regina
  5. Anticipated regret and self-esteem in the Allais paradox By Emmanuel PETIT (GREThA, CNRS, UMR 5113); Anna TCHERKASSOF (LIP/PC2S); Xavier GASSMANN (INRA)
  6. The effect of providing free autopoweroff plugs to households on electricity consumption - A field experiment By Carsten Lynge Jensen; Lars Gårn Hansen; Troels Fjordbak; Erik Gudbjerg
  7. Damaging the perfect image of athletes: How sport promotes envy By Jérémy CELSE
  8. Social capital dynamics and collective action: the role of subjective satisfaction By Leonardo Becchetti; Stefano Castriota; Pierluigi Conzo
  9. Don’t Be Ashamed to Say You Didn’t Get Much: Redistributive Effects of Information Disclosure in Donations and Inequity-Aversion in Charitable Giving By L. Becchetti; Vittorio Pelligra
  10. Ordering effects and strategic response in discrete choice experiments By Scheufele, Gabriela; Bennett, Jeff
  11. Inequality Aversion and Voting on Redistribution By Wolfgang Höchtl; Rupert Sausgruber; Jean-Robert Tyran
  12. Choice Experiment Framing and Incentive Compatibility: observations from public focus groups By McCartney, Abbie; Cleland, Jonelle
  13. Together we will : experimental evidence on female voting behavior in Pakistan By Gine, Xavier; Mansuri, Ghazala
  14. When is capital enough to get female enterprises growing ? evidence from a randomized experiment in Ghana By Fafchamps, Marcel; McKenzie, David; McKenzie, David; Quinn, Simon; Woodruff, Christopher
  15. A Testable Theory of Imperfect Perception By Andrew Caplin; Daniel Martin

  1. By: Michał Krawczyk (Faculty of Economic Sciences, University of Warsaw)
    Abstract: This study makes use of an unusual opportunity to manipulate framing of a simple decision under uncertainty: whether or not to answer an exam question when unsure which answer is correct and a missing response is scored higher than an incorrect one. Two treatments were compared in a natural field experiment: one in which the decision was framed in terms of losses, and the other – in terms of gains. Some alternative theories of decision making under risk, notably prospect theory, propose that individuals display reflection effect, i.e. tend to be more risk-seeking in losses than gains. No such evidence was found: subjects were generally risk-averse and this disposition was not affected by treatment.
    Keywords: framing, reflection effect, field experiments
    JEL: C93 D81
    Date: 2011
  2. By: Michał Krawczyk (Faculty of Economic Sciences, University of Warsaw)
    Abstract: This study is a field experiment on loss aversion. The framing of scoring rules was differentiated in two exams at the University of Warsaw, with only half the students facing explicit penalty points in the case of giving an incorrect answer. Loss aversion predicts that less risk will be taken (less questions will be answered) when losses are possible but in fact, no treatment effect was observed.
    Keywords: loss aversion, framing, field experiments, gender differences
    JEL: C93 D81
    Date: 2011
  3. By: Restiani, Phillia; Betz, Regina
    Abstract: This paper investigates the behavioural implications of penalty designs on market performance using an experimental method. Three penalty types and two penalty levels are enforced in a laboratory permit market with auctioning, including the Australian Carbon Pollution Reduction Scheme proposed design of tying the penalty rate to the auction price. Compliance strategies are limited to undertaking irreversible abatement investment decisions or buying permits. We aim to assess how penalty design under the presence of subjectsâ risk preferences might affect compliance incentives, permit price discovery, and efficiency. In contrast to theory, we find that penalty levels serve as a focal point that indicates compliance costs and affects compliance strategies. The make-good provision penalty provides stronger compliance incentives than the other penalty types. However, the theory holds with regard to permit price discovery, as we find no evidence of the effect of penalty design on auction price. Interestingly, risk preference does not directly affect compliance decision, but it does influence price discovery, which evidently is a significant factor in compliance decisions as well as efficiency. Most importantly, a trade-off between investment incentives and efficiency is observed.
    Keywords: emissions trading, penalty design, experiment, auction, irreversible investment, abatement, compliance, Environmental Economics and Policy, Resource /Energy Economics and Policy,
    Date: 2010–12
  4. By: Damien Besancenot (CEPN - Centre d'Economie de l'Université Paris Nord - Université Paris-Nord - Paris XIII - CNRS : UMR7234); Radu Vranceanu (Economics Department - ESSEC Business School)
    Abstract: This paper brings experimental evidence on investors' behavior subject to an "illiquidity" constraint, where the success of a risky project depends on the participation of a minimum number of investors. The experiment is set up as a frameless coordination game that replicates the investment context. Results confirm the insidious nature of the illiquidity risk: as long as a first illiquidity default does not occur, investors do not seem able to fully internalize it. After several defaults, agents manage to coordinate on a default probability above which they refuse to participate to the project. This default probability is lower than the default probability of the first illiquidity default.
    Keywords: Coordination game, Illiquidity risk, Threshold strategy, Experimental economics
    Date: 2011–06–21
  5. By: Emmanuel PETIT (GREThA, CNRS, UMR 5113); Anna TCHERKASSOF (LIP/PC2S); Xavier GASSMANN (INRA)
    Abstract: Our experiment aims at studying the impact of self-esteem on risk-prone choices in an Allais-type decision context using hypothetical money. We use an Internet protocol in order to reach a large heterogeneous student population sample. An anticipated regret explanation for the certainty effect implies that self-esteem is a crucial psychological variable in what concerns risky decision, but only when the choice is between a safe option and a risky option. Thus, in our experiment, we hypothesize that low self-esteem people will choose more frequently the safe option (rather than the risky-prone option) than high self-esteem people, whereas low self-esteem and high self-esteem individuals will show the same pattern of choices between two different risk-based options. Our data confirm our hypothesis. Regarding risky choices preferences, we also observe that females, non economists and older people significantly exhibit safer choice preferences than other participants. We find also that men and students in economics are more likely to conform to expected utility theory than females and other social science students respectively. We then discuss what these findings mean for economic regret theory, and suggest that a complete theory of decision-making under risk should introduce both situational and motivational explanations of individual behaviour.
    Keywords: Allais paradox; Risk; Regret aversion; Self-esteem; Internet experiment; Gender differences
    JEL: C91 D81
    Date: 2011
  6. By: Carsten Lynge Jensen (Institute of Food and Resource Economics, University of Copenhagen); Lars Gårn Hansen (Institute of Food and Resource Economics, University of Copenhagen); Troels Fjordbak (IT-Energy); Erik Gudbjerg (Lokalenergi)
    Abstract: Experimental evidence of the effect of providing cheap energy saving technology to households is sparse. We present results from a field experiment in which autopoweroff plugs are provided free of charge to randomly selected households. We use propensity score matching to find treatment effects on metered electricity consumption for different types of households. We find effects for single men and couples without children, while we find no effect for single women and households with children. We suggest that this could be because of differences in saving potential (e.g. some households do not have appliances where using a plug is relevant), differences in the skills relevant for installing the technology and differences in the willingness to spend time and effort on installation. We conclude that targeting interventions at more responsive households, and tailoring interventions to target groups, can increase efficiency of programmes.
    Keywords: autopoweroff plugs, treatment effect, energy consumption, types of households
    JEL: C21 D12 Q41
    Date: 2011–06
  7. By: Jérémy CELSE
    Abstract: We explore the behavioural and affective differences between subjects practicing sport activities and subjects not practicing sport. Are athletes more distressed by unfavourable social comparisons and more prone to engage in hostile behaviour than non-athletes? Using experimental methods, we investigate the connection between sport practice and antisocial behaviour. In our experiment we capture the satisfaction subjects derive from unflattering social comparisons by asking them to evaluate their satisfaction after being informed of their own endowment and after being informed of their opponent’s endowment. Then subjects can decide to reduce their opponent’s endowment by incurring a cost. We observe that sport plays a key role on both individual well-being and behaviour: 1) sport practice amplifies the negative impact of unfavourable social comparisons on individual well-being and 2) sport practice exerts subjects to reduce others’ income. Besides the satisfaction sporty subjects report from social comparisons predicts their decisions to reduce others’ income. Finally we provide empirical evidences suggesting that envy affects significantly athletes’ satisfaction and behaviour.
    Date: 2011–06
  8. By: Leonardo Becchetti (Department of Economics, Universitˆ Tor Vergata); Stefano Castriota (Department of Economics, Universitˆ di Perugia); Pierluigi Conzo (Università di Roma Tor Vergata & EIEF)
    Abstract: In low income countries grass-root collective action is a well known substitute for government provision of public goods. In our research we wonder what is its effect on the law of motion of social capital, a crucial microeconomic determinant of economic development. To this purpose we structure a ?sandwich? experiment in which participants play a public good game (PGG) between two trust games (TG1 and TG2). Our findings show that the change in trustworthiness between the two trust game rounds generated by the PGG treatment is crucially affected by the subjective satisfaction about the PGG rather than by standard objective measures related to PGG players? behavior. These results highlight that subjective satisfaction after collective action has relevant predictive power on social capital creation providing information which can be crucial to design successful self-organized resource regimes.
    Keywords: trust games, public good games, randomized experiment, social capital, subjective wellbeing
    JEL: O12 C93 Z13
    Date: 2011–06
  9. By: L. Becchetti; Vittorio Pelligra
    Abstract: We run a modified dictator game experiment to investigate the determinants of donation choices to philanthropic organizations. We find experimentally that the adoption of a simple form of accountability such as the disclosure of information on the ranking of aggregate contributions received bythe organizations has important redistributive effects on donations, leading donors to reallocate significantly their giving from top to bottom performers. Our findings support the hypothesis that individuals have preferences on total donations and their “ideal” distribution and not just on their own giving. Policy consequences of our findings in terms of public and private contribution disclosure rules arediscussed.
    JEL: D64 H00 C91
    Date: 2011
  10. By: Scheufele, Gabriela; Bennett, Jeff
    Abstract: This study explores ordering effects and response strategies in repeated binary discrete choice experiments (DCE). Mechanism design theory and empirical evidence suggest that repeated choice tasks per respondent introduce strategic behavior. We find evidence that the order in which choice sets are presented to respondents may provide strategic opportunities that affect choice decisions (âstrategic responseâ). The findings propose that the âstrategic responseâ does not follow strong cost-minimization but other strategies such as weak cost-minimization or good deal/ bad deal heuristics. Evidence further suggests that participants, as they answer more choice questions, not only make more accurate choices (âinstitutional learningâ) but may also become increasingly aware of and learn to take advantage of the order in which choice sets are presented to them (âstrategic learningâ).
    Keywords: discrete choice experiments, incentive compatibility, mixed logit models, ordering effects, repeated binary choice task, response strategies, Environmental Economics and Policy,
    Date: 2010–03
  11. By: Wolfgang Höchtl (University of Innsbruck); Rupert Sausgruber (University of Innsbruck); Jean-Robert Tyran (University of Vienna)
    Abstract: Some people have a concern for a fair distribution of incomes while others do not. Does such a concern matter for majority voting on redistribution? Fairness preferences are relevant for redistribution outcomes only if fair-minded voters are pivotal. Pivotality, in turn, depends on the structure of income classes. We experimentally study voting on redistribution between two income classes and show that the effect of inequality aversion is asymmetric. Inequality aversion is more likely to matter if the “rich” are in majority. With a “poor” majority, we find that redistribution outcomes look as if all voters were exclusively motivated by self-interest.
    Keywords: redistribution; self interest; inequality aversion; median voter; experiment
    JEL: A13 C9 D72
    Date: 2011–06
  12. By: McCartney, Abbie; Cleland, Jonelle
    Abstract: The hypothetical nature of choice modelling surveys makes it difficult to enforce incentive compatible properties. It is thought that bias may result through strategic behaviour and untruthful responses, given that the hypothetical choice scenarios and payment structure are not binding. This study examines three methods of addressing incentive compatibility through survey framing: (1) a statement of consequence; (2) use of an âhonestyâ script that openly explains how the data are to be analysed and used; and (3) use of a provision rule that defines how survey outcomes relate to actual implementation. Focus groups, involving members of the public, were held to investigate participantsâ reactions to the three framing treatments. The provision rule emerged as the preferred treatment in terms of being more realistic than the alternatives. The rule did not need to be 100% binding to have the desired effect of inducing realism. However, the participants did not believe that their responses to the choice scenarios would have changed between framing treatments. Empirical testing is required to determine if this is actually the case. Other reassuring results were found in relation to how participants interpreted the general choice scenario instructions, particularly in terms of answering questions independently and as an individual consumer. This provides evidence that respondents make choices in response to the questions as they are intended by the researcher.
    Keywords: Environmental Economics and Policy,
    Date: 2010–11
  13. By: Gine, Xavier; Mansuri, Ghazala
    Abstract: In many emerging democracies women are less likely to vote than men and, when they do vote, are more likely to follow the wishes of household males. The authors assess the impact of a voter awareness campaign on female turnout and candidate choice. Geographic clusters within villages were randomly assigned to treatment or control, and within treated clusters, some households were left untreated. Compared with women in control clusters, both treated and untreated women in treated clusters are 12 percentage points more likely to vote, and are also more likely to exercise independence in candidate choice, indicating large spillovers. Data from polling stations suggest that treating 10 women increased turnout by about 9 votes, resulting in a cost per vote of US$ 2.3. Finally, a 10 percent increase in the share of treated women at the polling station led to a 6 percent decrease in the share of votes of the winning party.
    Keywords: Population Policies,Parliamentary Government,Gender and Health,Gender and Law,Agricultural Knowledge&Information Systems
    Date: 2011–06–01
  14. By: Fafchamps, Marcel; McKenzie, David; McKenzie, David; Quinn, Simon; Woodruff, Christopher
    Abstract: Standard models of investment predict that credit-constrained firms should grow rapidly when given additional capital, and that how this capital is provided should not affect decisions to invest in the business or consume the capital. The authors randomly gave cash and in-kind grants to male- and female-owned microenterprises in urban Ghana. Their findings cast doubt on the ability of capital alone to stimulate the growth of female microenterprises. First, while the average treatment effects of the in-kind grants are large and positive for both males and females, the gain in profits is almost zero for women with initial profits below the median, suggesting that capital alone is not enough to grow subsistence enterprises owned by women. Second, for women they strongly reject equality of the cash and in-kind grants; only in-kind grants lead to growth in business profits. The results for men also suggest a lower impact of cash, but differences between cash and in-kind grants are less robust. The difference in the effects of cash and in-kind grants is associated more with a lack of self-control than with external pressure. As a result, the manner in which funding is provided affects microenterprise growth.
    Keywords: Debt Markets,Economic Theory&Research,Investment and Investment Climate,Science Education,Scientific Research&Science Parks
    Date: 2011–06–01
  15. By: Andrew Caplin; Daniel Martin
    Abstract: We introduce a rational choice theory that allows for many forms of imperfect perception, including failures of memory, selective attention, and adherence to simplifying rules of thumb. Despite its generality, the theory has strong, simple, and intuitive implications for standard choice data and for more enriched choice data. The central assumption is rational expectations: decision makers understand the relationship between their perceptions, however limited they may be, and the (stochastic) consequences of their available choices. Our theory separately identifies two distinct "framing" effects: standard effects involving the layout of the prizes (e.g. order in a list) and novel effects relating to the information content of the environment (e.g. how likely is the first in the list to be the best). Simple experimental tests both affirm the basic model and confirm the existence of information-based framing effects.
    JEL: D01
    Date: 2011–06

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