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on Experimental Economics |
| By: | Nicolas Jacquemet (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); Adam Zylbersztejn (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | In experiments based on the Beard and Beil (1994) game, second movers very often fail to select the decision that maximizes both players payoff. This note reports on a new experimental treatment, in which we neutralize the potential effect of inequality aversion on the likelihood of this behavior. We show this behavior is robust to this change, even after allowing for repetition-based learning. |
| Keywords: | Coordination failure, laboratory experiments, aversion to inequality. |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00611696&r=exp |
| By: | Giovanna Devetag; Francesca Pancotto; Thomas Brenner |
| Abstract: | In minority games, players in a group must decide at each round which of two available options to choose, knowing that only subjects who picked the minority option obtain a positive reward. Previous experiments on the minority and similar congestion games have shown that players interacting repeatedly are remarkably able to coordinate efficiently, despite not conforming to Nash equilibrium behavior. We conduct an experiment on a minority-of-three game in which each player is a team composed by three subjects. Each team can freely discuss its strategies in the game and decisions must be made via a majority rule. Team discussions are recorded and their content analyzed to detect evidence of strategy co-evolution among teams playing together. Our main results of team discussion analysis show no evidence supporting the mixed strategy Nash equilibrium solution, and support a low-rationality, backward-looking approach to model behavior in the game, more consistent with reinforcement learning models than with belief-based models. Showing level-2 rationality (i.e., reasoning about others' beliefs) is positively and significantly correlated with higher than average earnings in the game, showing that a mildly sophisticated approach pays off. In addition, teams that are more successful tend to become more egocentric over time, paying more attention to their own past successes than to the behavior of other teams. Finally, we find evidence of mutual adaptation over time, as teams that are more strategic (i.e., they pay more attention to other teams' moves) induce competing teams to be more egocentric instead. Our results contribute to the understanding of coordination dynamics resting on heterogeneity and co-evolution of decision rules rather than on conformity to equilibrium behavior. In addition, they provide support at the decision process level to the validity of modeling behavior using low-rationality reinforcement learning models. |
| Keywords: | coordination, minority game, market efficiency, information, self-organization, reinforcement learning |
| JEL: | C72 C91 C92 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:trn:utwpce:1102&r=exp |
| By: | Oriana Bandiera; Iwan Baranky; Imran Rasul |
| 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: | C5 M5 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:cep:stieop:028&r=exp |
| By: | Caetano, Gregorio; Patrinos, Harry A.; Palacios, Miguel |
| Abstract: | This paper reports the results of an experiment designed to test for the presence of debt aversion. The population who participated in the experiment were recent financial aid candidates and the experiment focused on student loans. The goal is to shed new light on different aspects of the perceptions with respect to debt. These perceptions can prevent agents from choosing an optimal portfolio or from undertaking attractive investment opportunities, such as in education. The study design disentangles two types of debt aversion: one that is studied in the previous literature, which encompasses both framing and labeling effects, and another that controls for framing effects and identifies only what we denote labeling debt aversion. The results suggest that participants in the experiment exhibit debt aversion, and most of the debt aversion is due to labeling effects. Labeling a contract as a"loan"'decreases its probability of being chosen over a financially equivalent contract by more than 8 percent. The analysis also provides evidence that students are willing to pay a premium of about 4 percent of the financed value to avoid a contract labeled as debt. |
| Keywords: | Access to Finance,Debt Markets,Bankruptcy and Resolution ofFinancial Distress,Economic Theory&Research,Tertiary Education |
| Date: | 2011–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5737&r=exp |
| By: | Christina Fang; Sari Carp; Zur Shapira |
| Abstract: | Do participants bring their own priors to an experiment? If so, do they share the same priors as the researchers who design the experiment? In this article, we examine the extent to which self-generated priors conform to experimenters’ expectations by explicitly asking participants to indicate their own priors in estimating the probability of a variety of events. We find in Study 1 that despite being instructed to follow a uniform distribution, participants appear to have used their own priors, which deviated from the given instructions. Using subjects’ own priors allows us to account better for their responses rather than merely to test the accuracy of their estimates. Implications for the study of judgment and decision making are discussed. |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp587&r=exp |
| By: | Brune, Lasse; Gine, Xavier; Goldberg, Jessica; Yang, Dean |
| Abstract: | This paper reports the results of a field experiment that randomly assigned smallholder cash crop farmers formal savings accounts. In collaboration with a microfinance institution in Malawi, the authors tested two primary treatments, offering either: 1)"ordinary"accounts, or 2) both ordinary and"commitment"accounts. Commitment accounts allowed customers to restrict access to their own funds until a future date of their choosing. A control group was not offered any account but was tracked alongside the treatment groups. Only the commitment treatment had statistically significant effects on subsequent outcomes. The effects were positive and large on deposits and withdrawals immediately prior to the next planting season, agricultural input use in that planting, crop sales from the subsequent harvest, and household expenditures in the period after harvest. Across the set of key outcomes, the commitment savings treatment had larger effects than the ordinary savings treatment. Additional evidence suggests that the positive impacts of commitment derive from keeping funds from being shared with one's social network. |
| Keywords: | Economic Theory&Research,Emerging Markets,Banks&Banking Reform,Debt Markets,Rural Poverty Reduction |
| Date: | 2011–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:5748&r=exp |
| By: | Pascaline Dupas; Jonathan Robinson |
| Abstract: | Using data from a field experiment in Kenya, we document that providing individuals with simple informal savings technologies can substantially increase investment in preventative health, reduce vulnerability to health shocks, and help people meet their savings goals. The two main barriers that keep people from saving on their own appear to be transfers to others and “unplanned expenditures” on luxury items. Providing people with a designated safe place to keep money was sufficient to overcome these barriers for the majority of individuals, through a mental accounting effect. Adding an earmarking feature reduced savings for the average individual due to the associated liquidity cost and did not help present-biased people save more. For such individuals, stronger incentives to start and continue making deposits are necessary to overcome self-control problems. |
| JEL: | D14 D91 O16 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17255&r=exp |
| By: | Yusuke Kinari; Noriko Mizutani; Fumio Ohtake; Hiroko Okudaira |
| Abstract: | Recent studies report that productivity increases under tournament reward structures than under piece rate reward structures. We conduct maze-solving experiments under both reward structures and reveal that overconfidence is a significant factor in increasing productivity. Specifically, subjects exhibiting progressively higher degrees of overconfidence solve more mazes. This result shows a positive aspect of overconfidence, which usually has been examined in its negative aspect as an expectation bias. |
| Date: | 2011–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0814&r=exp |
| By: | Leonardo Becchetti (Department of Economics, Universitˆ Tor Vergata); Giacomo Degli Antoni (University of Milano-Bicocca); Stefania Ottone (University of Milano-Bicocca); Nazaria Solferino (University of Calabria-Unical) |
| Abstract: | We document with a randomized experiment that being spectators and, to a lesser extent, stakeholders with veil of ignorance on relative payoffs, induces subjects who can choose distribution criteria to prefer rewarding talent (vis à vis effort, chance or strict egalitarianism) after guaranteeing a minimal egalitarian base. The removal of the veil of ignorance reduces dramatically such choice since most players opt or revise their decision in favour of the criterion which maximizes their own payoff (and, by doing so, end up being farther from the maximin choice). Large part (but not all) of the stakeholders? choices before the removal of the veil of ignorance are driven by their performance beliefs since two thirds of them choose under the veil the criterion in which they assume to perform relatively better. |
| Keywords: | Distributive Justice; Perceived Fairness; Talent, Chance and Effort; Veil of Ignorance |
| JEL: | C91 D63 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:ent:wpaper:wp31&r=exp |
| By: | Ulrich Schmidt; Alexander Zimper |
| Abstract: | According to the harmonic sequence paradox (Blavatskyy 2006), an expected utility decision maker's willingness-to-pay for a gamble whose expected payoffs evolve according to the harmonic series is finite if and only if his marginal utility of additional income becomes zero for rather low payoff levels. Since the assumption of zero marginal utility is implausible for finite payoffs levels, expected utility theory—as well as its standard generalizations such as cumulative prospect theory—are apparently unable to explain a finite willingness-to-pay. The present paper presents first an experimental study of the harmonic sequence paradox. Additionally, it demonstrates that the theoretical argument of the harmonic sequence paradox only applies to time-patient decision makers whereas the paradox is easily avoided if time-impatience is introduced |
| Keywords: | St. Petersburg Paradox, Expected Utility, Time-Preferences |
| JEL: | C91 D81 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1724&r=exp |