New Economics Papers
on Experimental Economics
Issue of 2011‒11‒14
fourteen papers chosen by

  1. Creativity, Analytical Skills, Personality Traits, and Innovation Game Behavior in the Lab: An Experiment By Agnes Bäker; Werner Güth; Kerstin Pull; Manfred Stadler
  2. A Shared Sense of Responsibility: Money Versus Effort Contributions in the Vountary Provision of Public Goods By Robert S. Gazzale; Jared C Carbone
  3. Disadvantageous lies By Urs Fischbacher; Verena Utikal
  4. Maintaining efficiency while integrating entrants from lower-performing environments: an experimental study By Timothy C. Salmon; Roberto A. Weber
  5. Effects of exclusion on social preferences By Sven Fischer; Werner Güth
  6. Would You Mind if I Get More? An Experimental Study of the Envy Game By Sandro Casal; Werner Güth; Mofei Jia; Matteo Ploner
  7. Group Outcomes And Reciprocity By Ioannou, Christos A.; Qi, Shi; ,; Rustichini, Aldo
  8. Power Asymmetry and Escalation in Bargaining By Ulrike Vollstädt
  9. Coordination, efficiency and pre-play communication with forgone costly messages By Peter H. Kriss; Andreas Blume; Roberto A. Weber
  10. How do informal agreements and renegotiation shape contractual reference points? By Ernst Fehr; Oliver Hart; Christian Zehnder
  11. Tradable Set-Aside Requirements (TSARs): Conserving Spatially Dependent Environmental Amenities By Parkhurst, Gregory M; Shogren, Jason F; Crocker, Thomas
  12. How Losses affect Bidding Behavior in Vickrey Auctions By Parkhurst, Gregory M; Shogren, Jason F
  13. Loan Aversion among Canadian High School Students By Cathleen Johnson; Claude Montmarquette
  14. Laws and Norms By Roland Benabou; Jean Tirole

  1. By: Agnes Bäker (University of Tübingen, Department of Business and Economics); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Kerstin Pull (University of Tübingen, Department of Business and Economics); Manfred Stadler (University of Tübingen, Department of Business and Economics)
    Abstract: nnovative behavior is mostly studied theoretically, e.g., in models of patent races, and empirically, e.g., by using R&D or patent data. This research, however, is only poorly informed about the psychological tradition of creativity research. Our study is an attempt to experimentally collect behavioral data revealing in how far creativity, analytical skills, personality traits and innovation game behavior in the lab are interrelated. With the help of a within-subject design we find that participants' performance in the innovation games is in fact related to their creativity, risk tolerance and self-control. Other personality traits such participants' anxiety, independence, tough-mindedness and extraversion, if any, only play a minor role, and the same is true for participants' analytical skills.
    Keywords: Creativity, personality traits, innovation games, experiments
    JEL: C91 L13 O31
    Date: 2011–11–09
  2. By: Robert S. Gazzale (Williams College); Jared C Carbone (University of Calgary)
    Abstract: A frequently cited argument against the use of market-based instruments to provide public goods is that they diminish our sense of responsibility to be good citizens. In this paper, we report on the results of a laboratory experiment designed to explore the idea that this distrust stems from the ability of some members of society to contribute to the public good with money instead of time or effort. We look at how the personal effort exerted by subjects changes when their peers take advantage of an offer to buy out of their obligation to perform lab tasks that contribute toward carbon emission reductions. We find that on average subjects reduce their effort when their peers buy out. However, the aggregate result masks significant heterogeneity across individual responses. Those who choose not to buy out despite its expected profitability have no response to the treatment while those for whom it would simply not be profitable to buy out register large reductions in effort. The magnitude of these responses is increasing in the share of the group that accepts the buyout offer, suggesting that it is the act of peers buying out rather than the simple introduction of monetary incentives that is the source of the effect.
    Keywords: experimental economics, public goods, effort contribution, environment, climate change
    JEL: C90 C91 H41 Q54
    Date: 2011–09
  3. By: Urs Fischbacher; Verena Utikal
    Abstract: We present experimental evidence on the existence of disadvantageous lies. Literature so far assumes that people do not lie to their monetary disadvantage. However, some people have preferences for appearing honest. If the utility gained from appearing honest outweighs the monetary payoff gained from an advantageous lie or the truth, people will tell a disadvantageous lie.
    Keywords: Lying, experiment
    Date: 2011
  4. By: Timothy C. Salmon; Roberto A. Weber
    Abstract: Efficient growth often requires the integration of individuals from lower-performing groups, firms, or societies into higher-performing ones. Such integration may be difficult without facilitating interventions or restrictions. We explore, using a laboratory experiment, the effectiveness of two regularly-employed entry restrictions: entry quotas and entry exams. We use a coordination game with Pareto-ranked equilibria, in which we allow an efficiently-coordinated group and an inefficiently-coordinated one to arise endogenously. We then allow individuals to move from the low-performing group to the high-performing one. We vary whether such movement is unrestricted, is limited to one entrant per period, or is subject to passing an entry exam. We find both kinds of restrictions improve the efficient integration of entrants, but that there is no additional benefit obtained by their combination. The restrictions lead to improved behavior among entrants, but they have a stronger influence on the maintenance of good behavior among incumbents in the high-performing group.
    Keywords: Growth, entry, coordination, experiments
    JEL: C72 C92 M12
    Date: 2011–10
  5. By: Sven Fischer (Max Planck Institute for Research on Collective Goods, Bonn); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: In three party ultimatum games the proposer can first decide whether to exclude one responder, what increases the available pie. The experiments control for intentionality of exclusion and veto power of the third party. We do not find evidence for indirect reciprocity of the remaining responder after the exclusion of the other. Similarly, not excluding the second responder is only insignificantly reciprocated by it. Overall, we find little evidence that intentional exclusion has substantial effects on behavior.
    Keywords: Exclusion, bargaining, ultimatum game, social preferences, experiment
    JEL: C91 J52
    Date: 2011–11–07
  6. By: Sandro Casal (School of Social Sciences, University of Trento); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Mofei Jia (School of Social Sciences, University of Trento); Matteo Ploner (DECO-CEEL, University of Trento)
    Abstract: Envy is often the cause of mutually harmful outcomes. We experimentally study the impact of envy in a bargaining setting in which there is no conflict in material interests: a proposer, holding the role of residual claimant, chooses the size of the pie to be shared with a responder, whose share is exogenously fixed. Responders can accept or reject the proposal, with game types differing in the consequences of rejection: all four combinations of (not) self-harming and (not) other-harming are considered. We find that envy leads responders to reject high proposer claims, especially when rejection harms the proposer. Notwithstanding, maximal claims by proposers are predominant for all game types. This generates conflict and results in a considerable loss of efficiency.
    Keywords: Social Preferences, Conflict, Experimental Economic,, Bargaining
    JEL: D63 D74 C91 C72
    Date: 2011–11–04
  7. By: Ioannou, Christos A.; Qi, Shi; ,; Rustichini, Aldo
    Abstract: Group membership affects an agent's individual behavior. We determine how, by testing two competing hypotheses. One is that group membership operates through social identity, and the other is that group membership implements a correlation among the actions of in-group members in response to an implicit signal. We introduce two novel features in the experimental design. The first feature is the display of group outcomes. This allows us to assess directly the importance of relative group performance on subjects' decisions. The second is a careful manipulation of the Dictator game and the Trust game. More specifically, we choose parameters strategically so as to ensure no change in the pecuniary incentives across the two games. For a precise quantitative test of the two hypotheses we develop a structural model to describe an agent's behavior across treatments. Our findings suggest that the role of social identity on motivating agents' decisions has been exaggerated. The display of group outcomes induces a group effect, but a careful analysis of this effect reveals that participants use group outcomes as a signal to coordinate in-group members on favorable outcomes. Furthermore, we find evidence in support of recent experimental studies which demonstrate that an agent's allocation choice is sensitive to the behavior of the agent that generated the choice set.
    Date: 2011–05–01
  8. By: Ulrike Vollstädt (International Max Planck Research School on Adapting Behavior in a Fundamentally Uncertain World, University of Jena)
    Abstract: Bargaining is prevalent in economic interactions. Under complete information, game theory predicts efficient bargaining outcomes (immediate acceptance of first offer) (see Rubinstein, 1982). However, continuous rejections of offers leading to inefficient delays (escalation) have regularly been found in previous bargaining experiments even under complete information (see Roth, 1995). I test experimentally (1) whether power asymmetry leads to more escalation in bargaining and (2) whether perspective-taking reduces escalation. I find that power asymmetry increases escalation, but that perspective-taking does not reduce escalation.
    Keywords: two-person bargaining experiment, asymmetric power, escalation, perspective-taking
    JEL: C78 D89
    Date: 2011–11–07
  9. By: Peter H. Kriss; Andreas Blume; Roberto A. Weber
    Abstract: We examine communication in a two-player coordination game with Pareto-ranked equilibria. Prior research demonstrates that efficient coordination is difficult without communication but obtains regularly with (mandatory) costless pre-play messages. In a laboratory experiment, we introduce two realistic features of communication by making the sending of messages optional and costly. Even small costs dramatically reduce message use, but efficient coordination of actions occurs with similar frequency to that observed under costless communication. By varying communication costs we corroborate several predictions from a theoretical analysis based on forward induction. Our results indicate that, for some levels of communication costs, explicit communication may be unnecessary for efficient coordination; instead, players simply need to know that the option to send messages was available. Thus, the relationship between communication and coordination is more complex than suggested by prior research.
    Keywords: Coordination, communication, experiment
    JEL: C72 C92 D83
    Date: 2011–10
  10. By: Ernst Fehr; Oliver Hart; Christian Zehnder
    Abstract: Previous experimental work provides encouraging support for some of the central assumptions underlying Hart and Moore (2008)’s theory of contractual reference points. However, existing studies ignore realistic aspects of trading relationships such as informal agreements and ex post renegotiation. We investigate the relevance of these features experimentally. Our evidence indicates that the central behavioral mechanism underlying the concept of contractual reference points is robust to the presence of informal agreements and ex post renegotiation. However, our data also reveal new behavioral features that suggest refinements of the theory. In particular, we find that the availability of informal agreements and ex post renegotiation changes how trading parties evaluate ex post outcomes. Interestingly, the availability of these additional options affects ex post evaluations even in situations in which the parties do not use them.
    JEL: C91 D86 J41
    Date: 2011–10
  11. By: Parkhurst, Gregory M; Shogren, Jason F; Crocker, Thomas
    Abstract: In the lab, we examine the effectiveness of two land use conservation policies: a tradable set aside requirements (TSARs), and the TSARs combined with an agglomeration bonus. Evaluated by bioeconomic efficiency, our experimental results suggest: 1) TSARs is a cost-effective land conservation tool; and 2) combining TSARS with the agglomeration bonus increases habitat connectivity but at a price—lower economic efficiency.
    Keywords: Conservation; tradable development rights; spatial conservation; market instruments
    JEL: D02 Q27
    Date: 2011
  12. By: Parkhurst, Gregory M; Shogren, Jason F
    Abstract: We use Vickrey uniform auctions to provide an indirect robustness test of the endowment effect. Our panel data promotes two results: (1) evidence of the endowment effect exists in that risk seeking behavior following losses is less severe for 'out of pocket' losses as opposed to foregone gain. We did not find support for the prediction that bidders recoil from future losses following a realized loss (i.e., become more risk averse); and (2) a form of gamblers fallacy termed the escalation of commitment better explains bidding behavior for inexperienced bidders—risk seeking bidding behavior is observed following a loss. But as bidders gain experience the escalation of commitment is attenuated for “out of pocket” losses but not for foregone gains.
    Keywords: Uniform Auction; Vickrey; Losses; opportunity cost; endowment effect; escalation of commitment
    JEL: D44
    Date: 2011
  13. By: Cathleen Johnson; Claude Montmarquette
    Abstract: Evidence is presented on whether the willingness to borrow for education varies significantly among some at-risk students: low SES levels, First Nations, and first generation students. 1248 students participated in a survey, a numeracy assessment and took part in experimental decisions. During these sessions, students were presented with a series of paid binary decisions: bursaries vs. cash, loans for postsecondary education studies vs. cash, intertemporal decisions and risky decisions. The paid binary decisions involved trade-offs between cash and various types of student financial aid, allowing us to generate a cost per dollar of educational financing (grants, loans, mixtures of loans and grants). Prices for the various types of educational financing overlapped substantially in order to more clearly distinguish the impact of loan aversion on the decision to take up financial assistance to pursue PSE. Results show that several factors influence the subjects’ decisions about education financing but the most prominent influence was the price of educational subsidies. Participants were marginally sensitive to the form of financing (grant or loan), with no evidence of systematic loan aversion being detected. <P>Cette étude montre que la volonté d'emprunter pour s’instruire varie considérablement chez certains étudiants issus de milieu socio-économique faible, des Premières nations, et les étudiants de première génération. 1248 étudiants ont participé à une enquête, une évaluation de leur niveau de connaissances numériques et ont pris part à des décisions expérimentales. Pendant ces séances, les étudiants ont été confrontés à une série de décisions binaires rémunérées : bourses vs dollars, prêts d’études pour le postsecondaire vs dollars, des décisions intertemporelles et des décisions risquées. Les décisions binaires rémunérées impliquant un arbitrage entre des dollars et divers types d'aide financière, nous ont permis de générer un coût par dollar du financement de l'éducation (bourses, prêts, mélanges de prêts et de bourses). Les prix pour les différents types de financement de l'éducation se chevauchent de manière substantielle pour permettre de distinguer clairement l'impact de l'aversion pour les prêts sur la décision de prendre ou non l’option d’une aide financière pour poursuivre des études postsecondaires. Les résultats montrent que plusieurs facteurs influencent les décisions des sujets sur le financement de leur éducation, mais l'influence la plus importante est le prix en dollars des subventions à l'éducation. Les participants ont été légèrement influencés par la forme de financement (subvention ou prêt), mais aucune preuve d'aversion pour les prêts n’a été décelée.
    Keywords: Intertemporal choice, field experiments, risk attitudes, loans aversion, choix intertemporels, expériences sur le terrain, attitudes vis-à-vis des risques, l'aversion aux prêts d’études.
    Date: 2011–11–01
  14. By: Roland Benabou; Jean Tirole
    Abstract: This paper analyzes how private decisions and public policies are shaped by personal and societal preferences ("values"), material or other explicit incentives ("laws") and social sanctions or rewards ("norms"). It first examines how honor, stigma and social norms arise from individuals' behaviors and inferences, and how they interact with material incentives. It then characterizes optimal incentive-setting in the presence of norms, deriving in particular appropriately modified versions of Pigou and Ramsey taxation. Incorporating agents' imperfect knowledge of the distribution of preferences opens up to analysis several new questions. The first is social psychologists' practice of "norms-based interventions", namely campaigns and messages that seek to alter people’s perceptions of what constitutes "normal" behavior or values among their peers. The model makes clear how such interventions operate but also how their effectiveness is limited by a credibility problem, particularly when the descriptive and prescriptive norms conflict. The next main question is the expressive role of law. The choices of legislators and other principals naturally reflect their knowledge of societal preferences, and these same "community standards" are also what shapes social judgments and moral sentiments. Setting law thus means both imposing material incentives and sending a message about society's values, and hence about the norms that different behaviors are likely to encounter. The analysis, combining an informed principal with individually signaling agents, makes precise the notion of expressive law, determining in particular when a weakening or a strengthening of incentives is called for. Pushing further this logic, the paper also sheds light on why societies are often resistant to the message of economists, as well as on why they renounce certain policies, such as "cruel and unusual" punishments, irrespective of effectiveness considerations, in order to express their being "civilized".
    JEL: D64 D82 H41 K1 K42 Z13
    Date: 2011–11

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