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on Experimental Economics |
| By: | Fehr, Ernst (University of Zurich); Hart, Oliver (Harvard University); Zehnder, Christian (University of Lausanne) |
| 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. |
| Keywords: | contracts, reference points, fairness, renegotiation, informal agreement |
| JEL: | C91 D86 J41 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6095&r=exp |
| By: | Samuel Bowles; Sandra Polania-Reyes |
| Abstract: | Explicit economic incentives designed to increase contributions to public goods and to promote other pro-social behavior sometimes are counterproductive or less effective than would be predicted among entirely self-interested individuals. This may occur when incentives adversely affect individuals’ altruism, ethical norms, intrinsic motives to serve the public, and other social preferences. In the 50 experimental studies that we survey these effects are common, so that incentives and social preferences may be either substitutes (crowding out) or complements. We provide evidence for four mechanisms that may account for these incentive effects on preferences, based on the fact that incentives may (i) provide information about the person who implemented the incentive, (ii) frame the decision situation so as to suggest appropriate behavior, (iii) compromise a control averse individual’s sense of autonomy and (iv) affect the process by which people learn new preferences. An implication of the fact that incentives affect preferences is that the evaluation of public policy must be restricted to allocations that are supportable as Nash equilibria when account is taken of these crowding effects. We show that well designed fines, subsidies and the like minimize crowding out and may even do the opposite, making incentives and social preferences complements rather than substitutes |
| Keywords: | Public goods, behavioral experiments, social preferences, endogenous preferences, motivational crowding, explicit incentive |
| JEL: | A13 C90 D02 D63 D64 H41 D78 E61 Z13 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:usi:wpaper:617&r=exp |
| By: | Pearson, Matthew (University of CA, Davis); Schipper, Burkhard C. (University of CA, Davis) |
| Abstract: | In an experiment using two-bidder first-price sealed bid auctions with symmetric independent private values and 400 subjects, we scan also the right hand of each subject. We study how the ratio of the length of the index and ring fingers (2D:4D) of the right hand, a measure of prenatal hormone exposure, is correlated with bidding behavior and total profits. 2D:4D has been reported to predict competitiveness in sports competition (Manning and Taylor, 2001, and Hoenekopp, Manning, and Mueller, 2006), risk aversion in lottery tasks (Dreber and Hoffman, 2007, Garbarino et al., 2010), and the average profitability of high-frequency traders in financial markets (Coates, Gurnell, and Rustichini, 2009). We do not find any significant correlation between 2D:4D on either bidding or profits. However, there might be racial differences in the correlation between 2D:4D and bidding and profits. |
| JEL: | C72 C91 C92 D44 D81 D87 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-9&r=exp |
| By: | Guy Mayraz |
| Abstract: | An experiment tested whether and in what circumstances people are more likely to believe an event simply because it makes them better off. Subjects observed a financial asset's historical price chart, and received both an accuracy bonus for predicting the price at some future point, and an unconditional award that was either increasing or decreasing in this price. Despite incentives for hedging, subjects gaining from high prices made significantly higher predictions than those gaining from low prices. The magnitude of the bias was smaller in charts with less subjective uncertainty, but was independent of the amount paid for accurate predictions. |
| Keywords: | Wishful-thinking, optimal expectations, priors and desires, payoff-dependent beliefs, asset prices |
| JEL: | D01 D81 D84 G11 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1092&r=exp |
| By: | Conrads, Julian (University of Cologne); Irlenbusch, Bernd (University of Cologne) |
| Abstract: | In his classic article "An Essay on Bargaining" Schelling (1956) argues that ignorance might actually be strength rather than weakness. We test and confirm Schelling's conjecture in a simple take-it-or-leave bargaining experiment where the proposer can choose between two possible offers. Option A always gives the proposer a higher payoff than option B. The payoff of the responder depends on the (randomly determined) state of nature, i.e., in state s2 payoffs of the two players are aligned while they are not in state s1. The responder is always informed about the actual state. The proposer knows the actual state in our first treatment but not in the second. We find that proposers indeed benefit from ignorance because the responders accept almost all offers (even the unfavorable ones) if the payoffs of the responder have not been transparent for the proposer. In additional treatments we investigate situations where the proposer can deliberately remain ignorant. One could assume that remaining ignorant on purpose would be punished by the responder at least if an unfavorable outcome results. Surprisingly, we find that strategically remaining ignorant tends to be beneficial for the proposer particularly if the responder does not know with certainty whether it was the proposer's intention to remain ignorant or whether it was not her intention. |
| Keywords: | strategic ignorance, bargaining, intentions, experiment |
| JEL: | C72 C78 C91 D63 D82 D83 |
| Date: | 2011–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6087&r=exp |
| By: | Pearson, Matthew (University of CA, Davis); Schipper, Burkhard C. (University of CA, Davis) |
| Abstract: | In an experiment using two-bidder first-price sealed bid auctions with symmetric independent private values and 400 participants, we collected information on the female participants' menstrual cycles and the use of hormonal contraceptives. We find that naturally cycling women bid significantly higher than men and earn significantly lower profits than men except during the midcycle when fecundity is highest. We suggest an evolutionary hypothesis according to which women are predisposed by hormones to generally behave more riskily during their fecund phase of their menstrual cycle in order to increase the probability of conception, quality of offspring, and genetic variety. We also find that women on hormonal contraceptives bid significantly higher and earn substantially lower profits than men. This may be due to progestins contained in hormonal contraceptives or a selection effect. We discuss how our study differs from Chen, Katuscak, and Ozdenoren (2009). |
| JEL: | C72 C91 C92 D44 D81 D87 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-10&r=exp |
| By: | Declerck C.H.; Boone Ch.; Kiyonari T. |
| Abstract: | Shame is often considered a moral emotion with action tendencies shaped by natural selection to elicit socially beneficial behavior. Yet, unlike guilt or other social emotions, prior experimental studies do not indicate that incidental shame boosts prosocial behavior. Based on the affect as information theory, we hypothesize that incidental feelings of shame increase cooperative behavior, but only for self-interested individuals, and only in situations where shame is relevant with regards to its action tendency of avoiding reputation losses. To test this hypothesis, cooperation levels are compared between a classic prisoner’s dilemma (where “defect” may result from multiple motives) and a sequential prisoner’s dilemma (where “defect” is the result of intentional greediness). The results indicate that, as hypothesized, proself individuals cooperate more following incidental shame, but only in a sequential prisoner’s dilemma. Hence ashamed proselfs become inclined to cooperate when they believe they have no way to hide their greediness, and not necessarily because they want to make up for earlier wrong-doing. |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:ant:wpaper:2011018&r=exp |
| By: | Shoko Yamane; Hiroyasu Yoneda; Taiki Takahashi; Yoshio Kamijo; Yasuhiro Komori; Fumihiko Hiruma; Yoshiro Tsutsui |
| Abstract: | This paper investigates whether smokers exhibit greater time discounting than non-smokers, and how short-term nicotine deprivation affects time discounting. A unique feature of our experiment is that our subjects receive rewards not only of money, but also of actual tobacco. This is done in order to elicit smokersf true preferences. Smokers are more impatient than non-smokers, consistent with previous studies. Additionally, nicotine deprivation makes smokers even more impatient. These results suggest that nicotine concentration has different effects on time preferences in the short and long runs. |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:dpr:wpaper:0822&r=exp |
| By: | Trautmann, S.T.; Kuilen, G. van de (Tilburg University, Center for Economic Research) |
| Abstract: | In survey studies, probabilistic expectations about uncertain events are typically elicited by asking respondents for their introspective beliefs. If more complex procedures are feasible, beliefs can be elicited by incentive compatible revealed preference mechanisms (“truth serumsâ€). Various mechanisms have been proposed in the literature, which differ in the degree to which they account for respondents’ deviations from expected value maximization. In this paper, we pit non-incentivized introspection against five truth serums, to elicit beliefs in a simple two-player game. We test the internal validity (additivity and predictive power for own behavior), and the external validity (predictive power for other players’ behavior, or accuracy) of each method. We find no differences among the truth serums. Beliefs from incentivized methods are better predictors of subjects’ own behavior compared to introspection. However, introspection performs equally well as the truth serums in terms of accuracy and additivity. |
| Keywords: | belief measurement;subjective probability;scoring rules;outcome matching;probability matching;internal validity;external validity. |
| JEL: | D81 C91 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2011117&r=exp |
| By: | Trautmann, Stefan T. (Tilburg University); Zeckhauser, Richard J. (Harvard University) |
| Abstract: | Financial, managerial, and medical decisions often involve alternatives whose possible outcomes have uncertain probabilities. In contrast to alternatives whose probabilities are known, these uncertain alternatives offer the benefits of learning. In repeat-choice situations, such learning brings value. If probabilities appear favorable (unfavorable), a choice can be repeated (avoided). In a series of experiments involving bets on the colors of poker chips drawn from bags, decision makers often prove to be blind to the learning opportunities offered by uncertain probabilities. Such decision makers violate rational decision making and forgo significant expected payoffs when they shun uncertain alternatives in favor of risky ones. Worse, when information is revealed, many make choices contrary to learning. A range of factors explain these violations. The results indicate that priming with optimal strategies offers little improvement. |
| JEL: | C91 D81 D83 G11 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp11-044&r=exp |
| By: | Sébastien Massoni (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I); Jean-Christophe Vergnaud (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Panthéon-Sorbonne - Paris I) |
| Abstract: | The Action Lecture program is an innovative teaching method run in some nursery and primary schools in Paris and designed to improve pupils' literacy. We report the results of an evaluation of this program. We describe the experimental protocol that was built to estimate the program's impact on several types of indicators. Data were processed following a Differences-in-Differences (DID) method. Then we use the estimation of the impact on academic achievement to conduct a cost-effectiveness analysis and take a reduction of the class size program as a benchmark. The results are positive for the Action Lecture program. |
| Keywords: | Economics of education, evaluation, cost-effectiveness analysis, field experiment. |
| Date: | 2011–06 |
| URL: | http://d.repec.org/n?u=RePEc:hal:cesptp:halshs-00639571&r=exp |