nep-exp New Economics Papers
on Experimental Economics
Issue of 2011‒09‒22
ten papers chosen by
Daniel Houser
George Mason University

  1. Learning about a Class of Belief-Dependent Preferences without Information on Beliefs By Bellemare, Charles; Sebald, Alexander
  2. Asset Integration and Attitudes to Risk: Theory and Evidence By Steffen Andersen; James C. Cox; Glenn W. Harrison; Morten Lau; Elisabet E. Rutstroem; Vjollca Sadiraj
  3. Intertemporal Utility and Correlation Aversion By Steffen Andersen; Glenn W. Harrison; Morten Lau; Elisabet E. Rutstroem
  4. Two heads are less bubbly than one: Team decision-making in an experimental asset market By Cheung, Stephen L.; Palan, Stefan
  5. Labor market discrimination of minorities? yes, but not in job offers By Bøg, Martin; Kranendonk, Erik
  6. Vote-Buying and Reciprocity By Finan, Frederico S.; Schechter, Laura
  7. The Effect of Hysteresis on Equilibrium Selection in Coordination Games By Julian Romero
  8. Use of data on planned contributions and stated beliefs in the measurement of social preferences By Anna Conte; M. Vittoria Levati
  9. Lying and Team Incentives By Conrads, Julian; Irlenbusch, Bernd; Rilke, Rainer Michael; Walkowitz, Gari
  10. Political Motivations and Electoral Competition: Equilibrium Analysis and Experimental Evidence By Michalis Drouvelis; Alejandro Saporiti; Nicolaas J Vriend

  1. By: Bellemare, Charles (Université Laval); Sebald, Alexander (University of Copenhagen)
    Abstract: We show how to bound the effect of belief-dependent preferences on choices in sequential two-player games without information about the (higher-order) beliefs of players. The approach can be applied to a class of belief-dependent preferences which includes reciprocity (Dufwenberg and Kirchsteiger, 2004) and guilt aversion (Battigalli and Dufwenberg, 2007) as special cases. We show how the size of the bounds can be substantially reduced by exploiting a specific invariance property common to preferences in this class. We illustrate our approach by analyzing data from a large scale experiment conducted with a sample of participants randomly drawn from the Dutch population. We find that behavior of players in the experiment is consistent with significant guilt aversion: some groups of the population are willing to pay at least 0.16e to avoid 'letting down' another player by 1e. We also find that our approach produces narrow and thus very informative bounds on the effect of reciprocity in the games we consider. Our bounds suggest the model of reciprocity we consider is not a significant determinant of decisions in our experiment.
    Keywords: belief-dependent preferences, guilt aversion, reciprocity, partial identification
    JEL: C93 D63 D84
    Date: 2011–09
  2. By: Steffen Andersen (Copenhagen Business School); James C. Cox (Robinson College of Business, Georgia State University); Glenn W. Harrison (Robinson College of Business, Georgia State University); Morten Lau (Durham Business School); Elisabet E. Rutstroem (Robinson College of Business, Georgia State University); Vjollca Sadiraj (Robinson College of Business, Georgia State University)
    Abstract: Measures of risk attitudes derived from experiments are often questioned because they are based on small stakes bets and do not account for the extent to which the decision-maker integrates the prizes of the experimental tasks with personal wealth. We exploit the existence of detailed information on individual wealth of experimental subjects in Denmark, and directly estimate risk attitudes and the degree of asset integration consistent with observed behavior. The behavior of the adult Danes in our experiments is consistent with partial asset integration: they behave as if some small fraction of personal wealth is combined with experimental prizes in a utility function, and that this combination entails less than perfect substitution. Our subjects do not perfectly asset integrate. The implied risk attitudes from estimating these specifications imply risk premia and certainty equivalents that are a priori plausible under expected utility theory or rank dependent utility models. These are reassuring and constructive solutions to payoff calibration paradoxes. In addition, the rigorous, structural modeling of partial asset integration points to a rich array of neglected questions in risk management and policy evaluation in important field settings.
    Date: 2011–09–14
  3. By: Steffen Andersen (Copenhagen Business School); Glenn W. Harrison (Robinson College of Business, Georgia State University); Morten Lau (Durham Business School); Elisabet E. Rutstroem (Robinson College of Business, Georgia State University)
    Abstract: Convenient assumptions about qualitative properties of the intertemporal utility function have generated counter-intuitive implications for the relationship between atemporal risk aversion and the intertemporal elasticity of substitution. If the intertemporal utility function is additively separable then the latter two concepts are the inverse of each other. We review a simple theoretical specification with a long lineage in the literature on multi-attribute utility, and demonstrate the critical role of a concept known as intertemporal risk aversion or intertemporal correlation aversion. This concept is the intertemporal analogue of a more general concept applied to two attributes of utility, but where the attributes just happen to be the time-dating of the good. In the context of intertemporal utility functions, the concept provides an intuitive explanation of possible differences between (the inverse of) atemporal risk aversion and the intertemporal elasticity of substitution. We use this theoretical structure to guide the design of a series of experiments that allow us to identify and estimate intertemporal correlation aversion. Our results show that subjects are correlation averse over lotteries with intertemporal income profiles, and that the convenient additive specification of the intertemporal utility function is not an appropriate representation of preferences over time.
    Date: 2011–03–01
  4. By: Cheung, Stephen L.; Palan, Stefan
    Abstract: In the world of mutual funds management, responsibility for investment decisions is increasingly entrusted to small teams instead of individuals. Yet the effect of team decision-making in a market environment has never been studied in a controlled experiment. In this paper, we investigate the effect of team decision-making in an asset market experiment that has long been known to reliably generate price bubbles and crashes in markets populated by individuals. We find that this tendency is substantially reduced when each decision-making unit is instead a team of two. This holds across a broad spectrum of measures of the severity of mispricing, both under a continuous double-auction institution and in a call market. The result is not driven by reduced turnover due to time required for deliberation by teams, and continues to hold even when subjects are experienced. Our result also holds not only when our teams treatments are compared to the ‘narrow' baseline provided by the corresponding individuals treatments, but also when compared more broadly to the results of the large body of previous research on markets of this kind.
    Keywords: asset market experiments; price bubbles; group decision-making
    Date: 2011–09
  5. By: Bøg, Martin; Kranendonk, Erik
    Abstract: This paper presents evidence from a field experiment designed to evaluate the efficacy of anonymous application procedures. While the policy evaluation itself is of interest, more importantly the experiment provides a unique opportunity to detect race based differential treatment in a controlled market environment. Over a 6 month period we observe all applications sent in response to local public sector vacancies. We observe both the callback and the job oer decision. We compare decisions of recruiters when they can observe ethnic markers (control) with a treatment condition where ethnic markers are absent. We find a substantial differential in the callback decision. Interestingly, we do not find evidence for differential treatment in the job offer decision. A follow up experiment provides indications that recruiters respond strategically to the announcement of the results of the first experiment.
    Keywords: Field Experiment; Discrimination; Public Sector; Anonymous Application Procedures
    JEL: J45 J71 J78 C93
    Date: 2011–04–15
  6. By: Finan, Frederico S. (University of California, Berkeley); Schechter, Laura (University of Wisconsin-Madison)
    Abstract: While vote-buying is common, little is known about how politicians determine who to target. We argue that vote-buying can be sustained by an internalized norm of reciprocity. Receiving money engenders feelings of obligation. Combining survey data on vote-buying with an experiment-based measure of reciprocity, we show that politicians target reciprocal individuals. Overall, our findings highlight the importance of social preferences in determining political behavior.
    Keywords: vote-buying, reciprocity, redistributive politics, voting, social preferences
    JEL: H0
    Date: 2011–09
  7. By: Julian Romero
    Abstract: One of the fundamental problems in both economics and organization is to understand how individuals coordinate. The widely used minimum-effort coordination game has been used as a simplied model to better understand this problem. This paper rst presents some theoretical results that give conditions under which the minimum-effort coordination game exhibits hysteresis. Using these theoretical results, some experimental hypotheses are developed and then conrmed using human subjects in the laboratory. The main insight is that play in a given game is heavily dependent on the history of parameters leading up to that game. For example, the experiments show when cost c = 0:5 in the minimum-effort coordination game, there is signicantly more high effort if the cost has increased to c = 0:5 compared to when the cost has decreased to c = 0:5. One implication of this is that a temporary change in parameters may be able move the economic system from a bad equilibrium to a good equilibrium.
    Keywords: Hysteresis, Minimum-effort Coordination Game, Logit Equilibrium, Experimental Economics, Equilibrium Selection
    JEL: C72 C92 M53
    Date: 2011–09
  8. By: Anna Conte (Max Planck Institute of Economics, Jena, and University of Westminster, EQM Department, London); M. Vittoria Levati (Max Planck Institute of Economics, Jena, and University of Verona, Department of Economics)
    Abstract: In a series of one-shot linear public goods game, we ask subjects to report their contributions, their contribution plans for the next period, and their first-order beliefs about their present and future partner. We estimate subjects' preferences from plans data by a finite mixture approach and compare the results with those obtained from contribution data. Our results indicate that preferences are heterogeneous, and that most subjects exhibit conditionally cooperative inclinations. Controlling for beliefs, which incorporate the information about the other's decisions, we are able to show that plans convey accurate information about subjects' preferences and, consequently, are good predictors of their future behavior.
    Keywords: Public goods games, Experiments, Social preferences, Mixture models
    JEL: C35 C51 C72 H41
    Date: 2011–09–13
  9. By: Conrads, Julian (University of Cologne); Irlenbusch, Bernd (University of Cologne); Rilke, Rainer Michael (University of Cologne); Walkowitz, Gari (University of Cologne)
    Abstract: We investigate the influence of two widespread compensation schemes, individual piece-rates and team incentives, on participants' inclination to lie, by adapting the experimental setup of Fischbacher and Heusi (2008). Lying turns out to be more pronounced under team incentives than under individual piece-rates, which highlights a so far fairly neglected feature of these compensation schemes.
    Keywords: compensation schemes, lying, team, experiment
    JEL: C91 C92 M52
    Date: 2011–09
  10. By: Michalis Drouvelis; Alejandro Saporiti; Nicolaas J Vriend
    Abstract: We study both theoretically and experimentally the complete set of Nash equilibria of a classical one-dimensional, majority rule election game with two candidates, who might be interested in power as well as in ideology, but not necessarily in the same way. Apart from obtaining the well known median voter result and the two-sided policy differentiation outcome, the paper uncovers the existence of two new equilibrium configurations, called 'one-sided' and probabilistic' policy differentiation, respectively. Our analysis shows how these equilibrium configurations depend on the relative interests in power (resp., ideology) and the uncertainty about voters' preferences. The theoretical predictions are supported by the data collected from a series of laboratory experiments, as we observe convergence to the Nash equilibrium values at the aggregate as well as the individual levels in all treatments, and the comparative statics effects across treatments are as prediced by the theory.
    Keywords: Electoral competition, Power, Ideology, Uncertainty, Nash equilibrium
    JEL: C72 C90 D7
    Date: 2011–08

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