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on Experimental Economics |
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Issue of 2012‒02‒01
nineteen papers chosen by |
| By: | Martin G. Kocher (Department of Economics, University of Munich); Peter Martinsson (Department of Economics, University of Gothenburg); Kristian Ove R. Myrseth (ESMT European School of Management and Technology); Conny Wollbrant (Department of Economics, University of Gothenburg) |
| Abstract: | We develop a model relating self-control, risk preferences and conflict identification to cooperation patterns in social dilemmas. We subject our model to data from an experimental public goods game and a risk experiment, and we measure conflict identification and self-control. As predicted, we find a robust association between self-control and higher levels of cooperation, and the association is weaker for more risk-averse individuals. Free riders differ from other contributor types only in their tendency not to have identified a self-control conflict in the first place. Our model accounts for the data at least as well as do other models. |
| Keywords: | self-control, cooperation, public good, risk, experiment |
| JEL: | C91 D03 H40 |
| Date: | 2012–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-12-01&r=exp |
| By: | Charles R. Plott (CALTECH - Division of the Humanities and Social Sciences, California Institute of Technology - California Institute of Technology); Jean-Louis Rullière (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon) |
| Abstract: | The workshop of the Association for Public Economic Theory on behavioral and experimental public economics was held at Ecole Normale Superieure de Lyon, Universite de Lyon, from June 24 to June 26, 2008. Thirty papers were presented in addition to keynotes by Charlie Plott and John List. The focus of the workshop was to test theoretical models using experimental methods to increase our understanding of the efficiency of mechanisms supporting the provision of public goods, social cooperation, and voting systems. This special issue aims at showing how lively and diversified the ongoing experimental research in public economics has come to be. We highlight three topics in particular: the power of voting and legal enforcement systems, the efficiency of various institutions to support cooperation in social dilemma games, and auctions. |
| Keywords: | Behavioral Public Economics |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00661261&r=exp |
| By: | Tor Eriksson (Department of economics - University of Aarhus); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure de Lyon) |
| Abstract: | Assuming that people care not only about what others do but also on what others think, we study respect in a labor market context where the length of the employment relationship is endogenous. In our three-stage gift-exchange experiment, the employer can express respect by giving the employee costly symbolic rewards after observing his level of effort. We study whether symbolic rewards are used by the employers mainly to praise employees or as a coordination device to build relational contracts by manipulating the balance between labor demand and supply in the market. We find that a high proportion of long-term relationships have been initiated by the assignment of symbolic rewards. However, the assignment of symbolic rewards decreases when it becomes clear that the relationship is durable, suggesting that employers mainly use symbolic rewards as a coordination device to initiate relational contracts. Compared to the balanced market condition, assigning symbolic rewards in initial relationships is less likely when there is excess demand in the market and more likely when there is excess supply, i.e. when the relationship is more valuable. Receiving symbolic rewards increases the employees' likelihood of accepting to continue the relationship with the same employer. It also motivates them to increase their effort further but only when the market is balanced. Overall, the ability to assign symbolic rewards does not give rise to higher profits because it is associated with lower rents offered to the employees on average, leading to lower effort levels. |
| Keywords: | Respect; Symbolic rewards; Coordination; Signaling; Labor market; Experiment |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:hal:journl:halshs-00642527&r=exp |
| By: | Pedro Bordalo; Nicola Gennaioli; Andrei Shleifer |
| Abstract: | We provide a novel account of experimental evidence for the endowment effect using the salience mechanism (Bordalo, Gennaioli, and Shleifer, 2011). The two-stage procedure implemented in experiments implies that the endowed good and other goods are evaluated in different contexts. We describe conditions under which the standard effect occurs, but also account for recent evidence such as a reverse endowment effect for bads and a role for reference prices in modulating the WTA-WTP gap. |
| JEL: | D03 D81 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:17761&r=exp |
| By: | Mathias Erlei; Heike Schenk-Mathes (Abteilung für Volkswirtschaftslehre, Technische Universität Clausthal (Department of Economics, Technical University Clausthal)) |
| Abstract: | We conducted six treatments of a standard moral hazard experiment with hidden action. All treatments had identical Nash equilibria. However, the behavior in all treatments and periods was inconsistent with established agency theory (Nash equilibrium). In the early periods of the experiment, behavior differed significantly between treatments. This difference largely vanished in the final periods. We used logit equilibrium (LE) as a device to grasp boundedly rational behavior and found the following: (1) LE predictions are much closer to subjects’ behavior in the laboratory; (2) LE probabilities of choosing between strategies and experimental behavior show remarkably similar patterns; and (3) profit‐maximizing contract offers according to the LE are close to those derived from regressions. |
| Keywords: | experiment, logit equilibrium, moral hazard, hidden action |
| JEL: | C72 C92 J31 L14 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:tuc:tucewp:0006&r=exp |
| By: | Mani, Anandi (University of Warwick) |
| Abstract: | We conduct an experiment to measure the relative importance of key factors that influence the efficiency of household investment decisions. We find that, both for men and women, their spouse's access to information does not affect efficiency. However, they are willing to sacrifice much ef¬ficiency for greater personal control over household income. Intriguingly, even when spouses' control over household income is exogenously assigned, inefficiency persists: As a wife's assigned share increases, husbands undercut their own income to reduce hers. This self-destructive and spiteful behavior is best explained by non-economic factors such as identity, seldom emphasized in mainstream household economic models. |
| Keywords: | INTRA-HOUSEHOLD, FAMILY, EFFICIENCY, BARGAINING, FIELD EXPERIMENT, IDENTITY |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:cge:warwcg:63&r=exp |
| By: | B. Arruñada; M. Casari; F. Pancotto |
| Abstract: | Through an experiment, we investigate how the level of rationality relates to concerns for equality and efficiency. Subjects perform dictator games and a guessing game. More rational subjects are not more frequently of the selfregarding type. When performing a comparison within the same degree of rationality, self-regarding subjects show more strategic sophistication than other subjects. |
| JEL: | C91 C92 D63 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:bol:bodewp:wp805&r=exp |
| By: | A. BANERJI (Department of Economics, Delhi School of Economics, Delhi, India); NEHA GUPTA (Department of Economics, Delhi School of Economics, Delhi, India) |
| Abstract: | In this paper, we provide a novel experimental auction design that exploits an exogenous variation in the probability of winning to test for the presence of expectations-based reference dependent preferences. We prove that (i) in this design, (which is a one parameter modification of a Becker-de Groote-Marschak (BDM) auction), a lower probability of winning will cause a loss averse agent to bid lower, for a large range of intrinsic values for the object. Data from an experiment demonstrate the existence of this effect. The effect would be absent if preferences were 'standard', or if the status quo was the reference point. Thus we contribute to the nascent literature that empirically documents the importance of expectations as a source of reference points. (ii) We further prove that the experimental design enables unique identification of participants' value distribution and loss averse than men. Finally, as a contribution to experimental methodology, we prove that the BDM mechanism will underestimate loss averse participants' values, we quantify the underestimation, and we suggest methods to bound this bias. |
| Keywords: | Auctions, Expectations, Loss Aversion, Reference dependence |
| JEL: | C91 D03 D44 |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:cde:cdewps:206&r=exp |
| By: | Yuki Tanaka (National Graduate Institute for Policy Studies); Alistair Munro (National Graduate Institute for Policy Studies) |
| Abstract: | Experiments measuring risk and time preferences in developing countries have tended to have relatively small samples and geographically concentrated sampling. This large-scale field experiment uses a Holt-Laury mechanism to elicit the preferences of 1289 randomly selected subjects from 94 villages covering six out of seven agro-climatic zones across rural Uganda. As in previous studies we find evidence of risk aversion and loss aversion amongst most subjects. In addition we find significant heterogeneity in risk attitudes across agro-climatic zones. Especially, the farmers in the agro-climatically least favourable zone, the uni-modal rainfall zone, are the most risk averse, loss averse and impatient. We also find significant relationships between risk attitudes and village level predictors such as the distance to town and the road conditions. After controlling for the village level factors, we find that the level of schooling still positively correlates with the individual’s level of loss tolerance and patience. The main results are not altered by allowing for probability weighting in subjects’ choices. Overall the results provide clear evidence that within one country there may be significant regional variations in risk and time attitudes. We conjecture that the agro-climatic conditions that affect farmers’ livelihoods may also affect their risk and time preferences and village level development in infrastructure could improve the household perception of investment related policies. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ngi:dpaper:11-19&r=exp |
| By: | Banerjee, Simanti; Kwasnica, Anthony M; Shortle, James S |
| Abstract: | Tackling the problem of ecosystem services degradation is an important policy challenge. Different types of economic instruments have been employed by conservation agencies to meet this challenge. Notable among them are Payment for Ecosystem Services (PES) schemes that pay private landowners to change land uses to pro-environmental ones on their properties. This paper focuses on a PES scheme - an auction for the cost-efficient disbursal of government funds for selection of spatially contiguous land management projects. The auction is structured as an iterative descending price auction where every bid is evaluated on the basis of a scoring metric - a benefit cost ratio. The ecological effectiveness and economic efficiency of the auction is tested with data generated from lab experiments. These experiments use the information available to the subjects about the spatial goal as the treatment variable. Analysis indicates that the information reduces the cost-efficiency of the auction. Experience with bidding also has a negative impact on auction efficiency. The study also provides an analysis of the behavior of winners and losers at the final auction outcome as well as during the entire lifetime of the auction. Winners and losers are found to have significantly different behavior in this analysis. Behavior is also found to be significantly affected by the treatments as well. |
| Keywords: | Spatial Contiguity; experiments Ecosystem Services; Conservation Aucti ons |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2011-19&r=exp |
| By: | Costard, Jano; Bolle, Friedel |
| Abstract: | In the Solidarity Game (Selten and Ockenfels, 1998) lucky winners of a lottery can transfer part of their income to unlucky losers. Will losers get smaller transfers if they can be assumed to be (partly) responsible for their zero income because they have chosen riskier lotteries (Trhal and Radermacher, 2009)? Or will risk-lovers and risk-averters develop group identity feelings, leading to larger transfers within, rather than between, the groups (Chen and Li, 2009, for charitable transfers between and within otherwise defined groups)? In an experiment we find behavior to be guided by in-group favoritism. Responsibility for self-inflicted neediness does not seem to play an important role. In-group/out-group behavior is successfully described by a variant of a social utility function suggested by Cappelen et al. (2010). -- |
| Keywords: | risky behavior,group identity,solidarity |
| JEL: | D3 D8 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:euvwdp:309&r=exp |
| By: | Banerjee, Simanti; Kwasnica, Anthony M.; Shortle, James S. |
| Abstract: | The Agglomeration Bonus (AB) - a subsidy mechanism can incentivize neighboring landowners to spatially coordinate their land use decisions for effective provision of ecosystem services such as biodiversity protection. In this paper we explore individual AB performance on a local network in a laboratory setting. In our experiments, we vary the local network size while keeping the number of neighbors for each player same. Results suggest better AB performance and greater spatial coordination in smaller groups relative to bigger ones. In bigger groups however we observe localized areas of coordinated land use choices which indicate partial AB effectiveness. |
| Keywords: | experiments; local networks; coordination failure; Agglomeration Bonus |
| Date: | 2011–11 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2011-18&r=exp |
| By: | Proost, Karin (Hogeschool-Universiteit Brussel (HUB), Belgium); Germeys, Filip (Hogeschool-Universiteit Brussel (HUB), Belgium); Schreurs, Bert (Maastricht University School of Business and Economics Department of Organization and Strategy, Maastricht, The Netherlands) |
| Abstract: | In two experiments, it was shown that the effectiveness of different tactics of self-promotion in personnel selection is affected by temporal distance. In Experiment 1, the use of a direct form of self-promotion was more successful when applying for immediate entry whereas an indirect form of self-promotion was more successful when applying for a job in the long term. In Experiment 2, promoting oneself in concrete terms (situation-specific behaviors) was more successful when applying for immediate entry while promoting oneself in abstract terms (traits) was more successful when applying for a job in the distant future. |
| Date: | 2011–09 |
| URL: | http://d.repec.org/n?u=RePEc:hub:wpecon:201130&r=exp |
| By: | Rogers, Todd (Harvard University and Analyst Institute, Washington, DC); Aida, Masa (Greenberg Quinlan Rosner Research, Washington, DC) |
| Abstract: | How accurate are people when predicting whether they will vote? These self-predictions are used by political scientists to proxy for political motivation, and by public opinion researcher to predict election outcomes. Phone surveys from three elections, including one survey experiment, are analyzed to compare respondents' pre-election vote intention with their actual voting behavior using administrative records (N=29,403). Unsurprisingly, many who predict that they will vote actually do not vote. More surprisingly, many who predict that they will not vote actually do vote (29% to 56%). Records of past voting behavior predicts turnout substantially better than self-prediction. Self-prediction inaccuracy is not caused by lack of cognitive salience of past voting, or by inability to recall past voting. Moreover, self-reported recall of turnout in one past election predicts future turnout just as well as self-prediction. We discuss implications for political science research, behavioral prediction, election administration policy, and public opinion. |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:harjfk:rwp12-001&r=exp |
| By: | Lübbe, Ingmar; Bolle, Friedel |
| Abstract: | Most incomes underlie some risk, i.e. ex ante they can be regarded as a lottery ticket. In every society, the lucky winners of this lottery compensate unlucky losers (unemployed workers or bankrupt entrepreneurs) privately and/or by public insurances. Do voluntary solidarity payments depend on the amount and origin of risk of winners and losers? We differentiate between people with riskless incomes (civil servants), with low risk incomes (workers), and with high risk incomes (entrepreneurs). Some of our subjects had no choice of their risk class (civil servants and some workers), some of them had the choice to be a worker or an entrepreneur. The main stylized results are: (i) Civil servants and lucky workers with and without a choice transfer similar shares of their income to unlucky workers, but (ii) discriminate against unlucky entrepreneurs. (iii) Lucky entrepreneurs give about the same share of their income to unlucky workers as lucky workers do and (iv) do not significantly discriminate. (v) The potential solidarity payments are not an incentive for taking higher risks. -- |
| Keywords: | solidarity,responsibility,risk taking |
| JEL: | D63 D64 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:euvwdp:310&r=exp |
| By: | Christie, Mike; Colombo, Sergio; Hanley, Nick |
| Abstract: | This paper investigates the sensitivity of choice experiment values for ecosystem services to "attribute non-attendance". We consider three cases of attendance, namely that people may always, sometimes or never pay attention to a given attribute in making their choices. This allows a series of models to be estimated which address the following questions: To what extent do respondents attend to attributes in choice experiments? What is the impact of alternative strategies for dealing with attribute non-attendance? Can respondents self-report non-attendance? Do respondents partially attend to attributes, and what are the implications of this for willingness to pay estimates? Our results show that allowing for the instance of "sometimes attending" to attributes in making choices offers advantages over methods employed thus far in the literature. |
| Keywords: | stated preference; ecosystem services; Biodiversity; attribute non-attendance; Choice experiments |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:stl:stledp:2011-20&r=exp |
| By: | Talbot Page; Louis Putterman |
| Abstract: | In this working paper we report on two trust games: a BDM-like game which is interpreted through its use of the possibly suggestive words “show up fee,” “sends,” “tripled,” “send back”; and an uninterpreted spatial game that does not use these words suggestive or not. In the spatial game we found a considerable amount of reciprocity, which implies the words are not necessary for reciprocity. For further comparison we designed the two games to have a correspondence relation (the relation extends to the original BDM trust game). We focused on two “variables” – interpreted or uninterpreted and spatial or word-based. We also designed “constants” which were identical or near identical in the two games. We did this to reduce confounding in statistical comparisons. We found the frequency of reciprocity in the spatial game, without the suggestive words, was about the same as the frequency of reciprocity in the BDM-like game, with the suggestive words. We found iterated dominance in the spatial game was 5.5 times higher than in the BDM-like game. And we found sending the full endowment was significantly more frequent in the BDM-like game than in the spatial game. |
| Keywords: | # |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2012-1&r=exp |
| By: | Duersch, Peter (University of Heidelberg); Oechssler, Jorg (University of Heidelberg); Schipper, Burkhard C. (University of CA, Davis) |
| Abstract: | We show that in symmetric two-player exact potential games, the simple decision rule "imitate-if-better" cannot be beaten by any strategy in a repeated game by more than the maximal payoff difference of the one-period game. Our results apply to many interesting games including examples like 2x2 games, Cournot duopoly, price competition, public goods games, common pool resource games, and minimum effort coordination games. |
| JEL: | C72 C73 D43 |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:ecl:ucdeco:11-12&r=exp |
| By: | Attema, Arthur; Brouwer, Werner |
| Abstract: | The numerous reports on preference reversals in preference elicitations pose a great challenge to empirical economics. Many studies have found that different procedures may generate substantially different preferences. However, little is known about whether one procedure is more susceptible to preference reversals than another. Therefore, taking the preference reversals as a robust behavioral pattern, guidelines are called for to provide directions regarding a preferred preference elicitation task. This paper puts forward a new test of the internal consistency of choice and matching tasks, based on “internal preference reversals”. We replicate the preference reversal phenomenon and find a significant higher consistency within choice tasks than within matching tasks. |
| Keywords: | preference reversal; internal consistency; scale compatibility; loss aversion; choice; matching |
| JEL: | C91 B41 I10 |
| Date: | 2012–01–20 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36100&r=exp |