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on Experimental Economics |
| By: | James Andreoni; Charles Sprenger |
| Abstract: | There is convincing experimental evidence that Expected Utility fails, but when does it fail, how severely, and for what fraction of subjects? We explore these questions using a novel measure we call the uncertainty equivalent. We find Expected Utility performs well away from certainty, but fails near certainty for about 40% of subjects. Comparing non-Expected Utility theories, we strongly reject Prospect Theory probability weighting, we support disappointment aversion if amended to allow violations of stochastic dominance, but find the u-v model of a direct preference for certainty the most parsimonious approach. |
| JEL: | D81 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17342&r=exp |
| By: | Judd B. Kessler; Alvin E. Roth |
| Abstract: | Organ donations from deceased donors provide the majority of transplanted organs in the United States, and one deceased donor can save numerous lives by providing multiple organs. Nevertheless, most Americans are not registered organ donors despite the relative ease of becoming one. We study in the laboratory an experimental game modeled on the decision to register as an organ donor, and investigate how changes in the management of organ waiting lists might impact donations. We find that an organ allocation policy giving priority on waiting lists to those who previously registered as donors has a significant positive impact on registration. |
| JEL: | C91 C92 D02 D71 I11 I28 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17324&r=exp |
| By: | David J. Cooper; Matthias Sutter |
| Abstract: | Team success relies on assigning team members to the right tasks. We use controlled experiments to study how roles are assigned within teams and how this affects team performance. Subjects play the takeover game in pairs consisting of a buyer and a seller. Understanding optimal play is very demanding for buyers and trivial for sellers. Teams perform better when roles are assigned endogenously or teammates are allowed to chat about their decisions, but the interaction effect between endogenous role assignment and chat unexpectedly worsens team performance. We argue that ego depletion provides a likely explanation for this surprising result. |
| Keywords: | Role selection in teams, team performance, takeover game, winner’s curse, communication, experiment |
| JEL: | C91 C92 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2011-14&r=exp |
| By: | Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Anastasios Koukoumelis (Max Planck Institute of Economics, Strategic Interaction Group); M. Vittoria Levati (Max Planck Institute of Economics, Strategic Interaction Group) |
| Abstract: | We compare, on the basis of a procedurally fair "provision point" mechanism, bids for a public project from which some gain and some lose with bids for a less efficient public project from which all gain. In the main treatment, participants independently decide which one, if any, of the public projects should be implemented. We also run control treatments where only one of the two projects can be implemented. We find that (a) mixed feelings per se do not affect bidding behavior, and (b) the provision frequency of the project that raises mixed feelings declines significantly when it faces competition from the public good. |
| Keywords: | Public project, Bidding behavior, Procedural fairness |
| JEL: | C72 C92 D63 H44 |
| Date: | 2011–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-034&r=exp |
| By: | Christian Rusche |
| Abstract: | The direct evolutionary approach according to Leininger (2003) states that players in a two player Tullock rent-seeking contest within a fi nite population behave „as if“ they were relative payoff maximizers. Accordingly contest expenditures are higher than in Nash equilibrium. The indirect evolutionary approach also predicts more aggressive behavior by the players since negatively interdependent preferences are evolutionary stable. Both players are willing to harm themselves in material terms just to harm their opponent even more. I consider that every player in the contest has to contract a delegate either using a relative contract or a no-win-nopay contract. I show that delegation once introduced is able to overcompensate all negative eff ects of negatively interdependent objective functions. But as in the case without delegation a commitment on more aggressive behavior is a dominant strategy. Nevertheless delegation endows principals with a material payoff that is equal to the payoff an individualistic player facing another individualistic player would get. |
| Keywords: | Contest; strategic delegation; spite; agency theory |
| JEL: | C72 D72 M52 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:rwi:repape:0270&r=exp |
| By: | C. Bram Cadsby (Department of Economics and Finance, University of Guelph); Maros Servatka (Department of Economics and Finance, University of Canterbury); Fei Song (Ted Rogers School of Business Management, Ryerson University) |
| Abstract: | We develop and test experimentally the argument that gender/family and/or professional identities, activated through psychological priming, may influence preference for competition. We focus on female professionals for whom these identities may conflict and male professionals for whom they may be reinforcing. We primed MBA-student participants by administering questionnaires that concerned either gender/family or professional issues. Subsequently, participants undertook a real-effort task and chose between piece-rate and competitive-tournament compensation. Identity priming, moderated by gender, significantly affected preference for competitive pay. This relationship was partially mediated by beliefs about oneÕs performance ranking. The implications of our results are profound. The decision to avoid competition made by many female professionals may be driven not by lack of ability, but rather by the increased salience of gender/family identity, influenced by marriage and motherhood over time. Indeed, activation of internalized identities might not only drive the experimental results, but also have strong implications for career choices and job performance of women, thus contributing to the observed gender and motherhood wage gaps. |
| Keywords: | Experiment; Gender; Competitiveness; Identity; Priming; Family; Tournament |
| JEL: | C91 J16 J33 M52 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2011-08.&r=exp |
| By: | Keisaku Higashida (School of Economics, Kwansei Gakuin University); Kenta Tanaka (Graduate School of Environmental Studies, Tohoku University); Shunsuke Managi (Graduate School of Environmental Studies, Tohoku University) |
| Abstract: | Marine resource depletion is a critical concern for humankind. Individual Transferable Quota (ITQ) regimes are among the most effective measures to tackle this problem. Employing an experimental approach, this study examines the rationality of fishers under an ITQ regime. In particular, this study focuses on the case where fishers can change their own vessel scales in the beginning of each period in each experiment. We find that the higher the quota price is, the more irrationally fishers behave. Moreover, vessel scales and initial allocations can influence the rationality of fishers. |
| Keywords: | Individual Transferable Quotas (ITQs), experiment, rational behavior |
| JEL: | C91 Q22 Q28 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:kgu:wpaper:73&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 op- tion obtain a positive reward. Previous experiments on the minority and similar congestion games have shown that players interacting repeatedly are remarkably able to coordinate eciently, 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 sup- porting 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 ratio- nality (i.e., reasoning about others' beliefs) is positively and signicantly 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 nd 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 eciency, information, self-organization, reinforcement learning s |
| JEL: | C72 C91 C92 |
| Date: | 2011–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2011/18&r=exp |
| By: | Soohyung Lee; Muriel Niederle; Hye-Rim Kim; Woo-Keum Kim |
| Abstract: | The large literature on costly signaling and the somewhat scant literature on preference signaling had varying success in showing the effectiveness of signals. We use a field experiment to show that even when everyone can send a signal, signals are free and the only costs are opportunity costs, sending a signal increases the chances of success. In an online dating experiment, participants can attach “virtual roses” to a proposal to signal special interest in another participant. We find that attaching a rose to an offer substantially increases the chance of acceptance. This effect is driven by an increase in the acceptance rate when the offer is made to a participant who is less desirable than the proposer. Furthermore, participants endowed with more roses have more of their offers accepted than their counterparts. |
| JEL: | C78 C93 J0 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17340&r=exp |
| By: | Gerhard Riener (GSBC-EIC - The Economics of Innovative Change, University of Jena); Simon Wiederhold (GSBC-EIC - The Economics of Innovative Change, University of Jena) |
| Abstract: | Controlling employees can have severe consequences in situations that are not fully contractible. However, the perception of control may be contingent on the nature of the relationship between principal and agent. We, therefore, propose a principal-agent model of control that takes into account social identity (in the sense of Akerlof and Kranton, 2000, 2005). From the model and previous literature, we conclude that a shared social identity between the principal and agent has both a cognitive, that is, belief-related, and a behavioral, that is, performance-related, dimension. We test these theoretical conjectures in a labor market experiment with perfect monitoring. Our ndings confirm that social identity has important implications for the agent's decision-making. First, agents who are socially close to the principal (in-group) perform, on average, more on behalf of the principal than socially distant (no-group) agents. Second, social identity shapes the agent's subjective expectations of the acceptable level of control. In-group agents expect to experience less control than no-group agents. Third, an agent's reaction to the monitoring level she eventually faces also depends on social identity. If the experienced level of control is lower than the expected control level, that is, the agent faces a positive sensation, the increase in performance is less pronounced for in-group agents than for no-group agents. In the case of a negative sensation, however, in-group agents react stronger than no-group agents. Put differently, being socially distant from the principal amplies the performance-enhancing effect of a positive control surprise and mitigates the detrimental performance effect of a negative surprise. |
| Keywords: | Control, Identity, Employee motivation, Principal-agent theory, Lab experiment |
| JEL: | C92 M54 |
| Date: | 2011–08–22 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2011-035&r=exp |
| By: | Jonathan E. Alevy (Department of Economics, University of Alaska Anchorage) |
| Abstract: | After Ellsberg’s thought experiments brought focus to the relevance of missing information for choice, extensive efforts have been made to understand ambiguity theoretically and empirically (Ellsberg 1961). Fox and Tversky (1995) make an important contribution to understanding behavioral responses to ambiguity. In an individual choice setting they demonstrate that an aversion to ambiguous lotteries arises only when a comparison to unambiguous lotteries is available. The current study advances this literature by exploring the importance of Fox and Tversky’s finding for market outcomes and finds support for their Comparative Ignorance Hypothesis in the market setting. |
| Keywords: | ambiguity, asset market experiment, comparitive ignorance |
| JEL: | C91 C92 D81 G12 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ala:wpaper:2011-04&r=exp |
| By: | Anita Gantner; Wolfgang Höchtl; Rupert Sausgruber |
| Abstract: | This paper studies the vulnerability of the pivotal mechanism with respect to manipulation by groups. In a lab experiment, groups decide on the implementation of various alternatives, some of which imply opposite interests for the two subgroups. We investigate the occurrence of tacit and explicit collusion by allowing for communication within subgroups in one treatment and prohibiting it in another. Even though all agents' preferences are common knowledge and there exists a simple symmetric collusive strategy for one subgroup, we find little evidence for tacit collusion, not even with increasing experience. Only when explicit communication is allowed, collusion is established, and it becomes even more pronounced over time. |
| Keywords: | Collective Decision Making, Pivotal Mechanism, Collusion |
| JEL: | D71 D61 C92 |
| Date: | 2011–07 |
| URL: | http://d.repec.org/n?u=RePEc:inn:wpaper:2011-15&r=exp |
| By: | Bolle, Friedel; Breitmoser, Yves; Otto, Philipp E. |
| Abstract: | This paper proposes two generalization of the core and evaluates them on experimental data of assignment games (workers and firms negotiate wages and matching). The generalizations proposed allow for social utility components (e.g. altruism) and random utility components (e.g. logistic perturbations). These generalizations are well-established in analyses of non-cooperative games, and they prove to be both descriptive and predictive in the assignment games analyzed here. The "logit core" allows us to define a "stochastically more stable" relation on the outcome set, which has intuitive implications, and it fits better than alternative approaches such as random behavior cores and regression modeling. |
| Keywords: | cooperative games; core; random utility; social preferences; laboratory experiment |
| JEL: | C71 C90 D64 |
| Date: | 2011–08–19 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:32918&r=exp |
| By: | Stefan T. Trautmann; Ulrich Schmidt |
| Abstract: | There is a large literature showing that willingness-to-accept (WTA) is usually much higher than willingness-to-pay (WTP) in empirical studies although they should be roughly equal according to traditional economic theory. A second stream of literature shows that people are typically ambiguity averse, i.e. they prefer lotteries with known probabilities over lotteries with unknown ones. Our study combines both streams of literature and analyzes whether there is an interaction between the WTP-WTA disparity and ambiguity aversion |
| Keywords: | WTP-WTA disparity, ambiguity aversion, comparative ignorance |
| JEL: | C91 D81 |
| Date: | 2011–08 |
| URL: | http://d.repec.org/n?u=RePEc:kie:kieliw:1727&r=exp |