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on Experimental Economics |
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Issue of 2012‒02‒20
eighteen papers chosen by |
| By: | López-Pérez, Raúl (Departamento de Análisis Económico (Teoría e Historia Económica). Universidad Autónoma de Madrid.); Spiegelman, Eli (Departement des sciences économiques, Université du Québec à Montréal, Montréal, Canada.) |
| Abstract: | Recent experimental evidence suggests that some people dislike telling lies, and tell the truth even at a cost. We use experiments as well to study the socio-demographic covariates of such lie aversion, and find gender and religiosity to be without predictive value. However, subjects’ major is predictive: Business and Economics (B&E) subjects lie significantly more frequently than other majors. This is true even after controlling for subjects’ beliefs about the overall rate of deception, which predict behavior very well: Although B&E subjects expect most others to lie in our decision problem, the effect of major remains. An instrumental variables analysis suggests that the effect is not simply one of selection: It seems that studying B&E has a causal impact on behavior. |
| Keywords: | Communication; honesty; lie aversion; major; norms. |
| JEL: | C70 C91 D03 D64 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:uam:wpaper:201204&r=exp |
| By: | Fei Song (Ted Rogers School of Management, Ryerson University); C. Bram Cadsby (Department of Economics, University of Guelph); Yunyun Bi (Taiping Asset Management, Shanghai, China) |
| Abstract: | We examine the influence of social distance on levels of trust and reciprocity in China. Social distance, reflected in the indigenous concept of guanxi, is of central importance to Chinese culture. In Study 1, some participants participated in two financially salient trust games to measure behavior, one with an anonymous classmate and the other with an anonymous, demographically identical nonclassmate. Other participants, drawn from the same population, completed hypothetical surveys to gauge both hypothetical behavior and expectations of others. Social distance effects on actual and hypothetical behavior were statistically consistent. The results together corroborated the hypothesized negative relationship between trust and social distance. However, reciprocity was not responsive to social distance. Study 2 found that affect-based trust, but not cognition-based trust, played a mediating role in the relationship between social distance and interpersonal trust in a hypothetical scenario. We conclude that close guanxi ties in China engender affect-based trust, which is extended to shouren classmates. This is true despite the fact that no more cognition-based trust is placed nor reciprocity received or expected from classmates compared to demographically identical shengren nonclassmates. |
| Keywords: | Experiment; Affect-based Trust; China; Guano; Reciprocity; Trust; Social Distance |
| JEL: | C91 D03 D69 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:gue:guelph:2012-04.&r=exp |
| By: | Crosetto, Paolo; Gaudeul, Alexia |
| Abstract: | Abstract Consumers make mistakes when facing complex purchasing decision problems but if at least some consumers disregard any offers that is difficult to compare with others then firms will adopt common ways to present their offers and thus make choice easier. We design an original experiment to identify consumers’ choice heuristics in the lab. Subjects are asked to choose from menus of offers and we measure the extent to which they favor those offers that are easy to compare with others in the menu. A sufficient number of subjects do so with sufficient intensity for offers presented in common terms to generate higher revenues than offers that are expressed in an idiosyncratic way. |
| Keywords: | Bounded Rationality; Cognitive Limitations; Standards; Consumer Choice; Experimental Economics; Heuristics; Pricing Formats; Spurious Complexity |
| JEL: | D18 D83 C25 |
| Date: | 2012–03–08 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:36526&r=exp |
| By: | Kocher, Martin G.; Martinsson, Peter; Myrseth, Kristian Ove R.; Wollbrant, Conny |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12706&r=exp |
| By: | Kast, Felipe (Pontificia Universidad Catolica de Chile); Meier, Stephan (Columbia University); Pomeranz, Dina (Harvard Business School) |
| Abstract: | While commitment devices such as defaults and direct deposits from wages have been found to be highly effective to increase savings, they are unavailable to the millions of people worldwide who not have a formal wage bill. Self-help peer groups are an alternative commitment device that is widespread and highly accessible, but there is little empirical evidence evaluating their effectiveness. We conduct two randomized field experiments among low-income micro-entrepreneurs in Chile. The first experiment finds that self-help peer groups are very potent at increasing savings. In contrast, a more classical measure, a substantially increased interest rate, has no effect on the vast majority of participants. A second experiment is designed to unbundle the key elements of peer groups as a commitment device, through the use of regular text messages. It finds that surprisingly, actual meetings and peer pressure do not seem to be crucial in making self-help peer groups an effective tool to encourage savings. |
| Keywords: | savings, commitment device, peer pressure, field experiment |
| JEL: | O16 D03 D14 D91 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6311&r=exp |
| By: | Ligon, Ethan (University of California, Berkeley. Dept of agricultural and resource economics); Schechter, Laura (University of Wisconsin, Madison) |
| Abstract: | What motivates people in rural villages to share? We first elicit a baseline level of sharing using a standard, anonymous dictator game. Then using variants of the dictator game that allow for either revealing the dictator's identity or allowing the dictator to choose the recipient, we attribute variationin sharing to three different motives. The first of these, directed altruism, is related to preferences, while the remaining two are incentive-related(sanctions and reciprocity). We observe high average levels of sharing in ourbaseline treatment, while variation across individuals depends importantlyon the incentive-related motives. Finally, variation in measured reciprocity within the experiment predicts observed 'real-world' gift-giving, while other motives measured in the experiment do not predict behavior outside the experiment. |
| Date: | 2011–12 |
| URL: | http://d.repec.org/n?u=RePEc:are:cudare:1120&r=exp |
| By: | Hammermann, Andrea (RWTH Aachen University); Mohnen, Alwine (Munich University of Technology); Nieken, Petra (University of Bonn) |
| Abstract: | The practical relevance of favouritism among students of the same study path is evident in lifelong memberships in fraternities or sororities or in high donations to faculties. In our study, we focus on the in-group favouritism of students by examining the trade-off of acting based on in-group favouritism or a performance signal when decisions are made about whom to choose as a team mate. The novel feature of your study is that the choice of a team mate is either benevolence or relevant to the own output. In the first scenario, only the payoff of the chosen subject changed, whereas in the second scenario, the decision affected the decider's own payoff as well as that of the chosen subject. The subjects ex ante knew the group type (path of study) of the pool of possible team mates and received a signal giving weak information about their ability regarding the task. Intuitively, one would expect more favouritism if the own payoff was not affected by the performance of the chosen team mate. However, we found the opposite. The subjects exerted more favouritism in the revenue sharing scenario. Possibly they expected reciprocal behaviour and less free riding if they selected a team mate belonging to their own group. Interestingly, groups formed based on favouritism did not perform significantly different from groups formed based on the performance signal. |
| Keywords: | lab experiment, favouritism, teams |
| JEL: | C92 D03 J71 M51 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6286&r=exp |
| By: | Sheremeta, Roman M. (Chapman University); Wu, Steven Y. (Purdue University) |
| Abstract: | We use experiments to test comparative statics predictions of canonical tournament theory. Both the roles of principal and agent are populated by human subjects, allowing us to test predictions for both incentive responses and optimal tournament design. Consistent with theory, we observed an incentive effect from raising the winner's prize. However, we also observed several empirical puzzles that appeared to contradict theory. Controlling for social preferences did not resolve the puzzles, although social preferences do influence behavior. It turns out that the puzzles can be explained by the canonical model once the textbook assumption of separable agent utility is relaxed. |
| Keywords: | tournaments, experiment, social preferences, contract theory |
| JEL: | D03 D82 D86 M52 M55 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6304&r=exp |
| By: | Ligon, Ethan A. (University of California, Berkeley. Dept of agricultural and resource economics); Schechter, Laura (University of Wisconsin, Madison) |
| Abstract: | We conduct field experiments in rural Paraguay to measure the value of reciprocity within social networks in a set of fifteen villages. These experiments involve conducting dictator- type games; different treatments involve manipulating the information and choice that individuals have in the game. These different treatments allow us to measure and distinguish between different motives for giving in these games. The different motives we're able to measure include a general benevolence, directed altruism, fear of sanctions, and reciprocity within the social network. We're further able to draw inferences from play in the games regarding the sorts of impediments to trade which must restrict villagers' ability to share in states of the world when no researchers are present running experiments and measuring outcomes. |
| Date: | 2011–02 |
| URL: | http://d.repec.org/n?u=RePEc:are:cudare:1116&r=exp |
| By: | Graf Lambsdorff, Johann; Schubert, Manuel; Giamattei, Marcus |
| Abstract: | We carry out an experiment on a macroeconomic price setting game where prices are complements. Despite relevant information being common knowledge and price flexibility we observe significant deviation from equilibrium prices and history dependence. In a first treatment we observe that equilibrium values were obtained in the long run but at the cost of a very slow adjustment and thus history dependence. By reporting a business indicator in a simpler form, subjects were given the chance to coordinate their prices by help of a heuristic in a second treatment. This option was widely taken, bringing about excess volatility and a deviation from equilibrium even in the long run. In a third treatment with staggered pricing we observe, contrary to theoretical predictions, the one-round ahead (publicly known) shock is significant, but future inflation is not. Our findings cast light on price dynamics when subjects have limited computational capacities. -- |
| Keywords: | Inflation Persistence,Staggered Prices,Sticky Reasoning,New Keynesian Phillips Curve |
| JEL: | E31 C92 |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:upadvr:v6311&r=exp |
| By: | Kosse, Fabian; Pfeiffer, Friedhelm |
| Abstract: | Using experimental data of children and their mothers, this paper explores the intergenerational relationship of impatience. The child's impatience stems from a delay of gratification experiment. Mother's impatience has been assessed by a choice task where the mothers faced trade-offs between a smaller-sooner and a larger-later monetary reward with a delay of six or twelve months. The findings demonstrate an intergenerational relationship in short-run decision making. Controlling for mother's and child's characteristics the child's impatience at preschool age is significantly correlated with the six month maternal reservation interest rate. -- |
| Keywords: | time preferences,impatience : intergenerational transmission,field experiments |
| JEL: | C93 D03 D90 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:12001&r=exp |
| By: | Englmaier, Florian; Gratz, Linda; Reisinger, Markus |
| Abstract: | We analyze the profitability of third degree price discrimination under consideration of consumers' fairness concerns within an experiment and explain the results within a theoretical framework. We find that with an increase in the price differential negative reciprocal reactions by disadvantaged consumers become stronger compared to positive reciprocal reactions by advantaged consumers. Consequently, the profit maximizing price differential lies below the one predicted to be optimal by standard theory. Further, profitability increases when consumers who are regarded as poorer are charged lower prices compared to when the wealth of the different consumer groups is unknown. |
| Keywords: | price discrimination; reciprocal fairness; inequity aversion; experimental economics |
| JEL: | D11 D12 E3 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:lmu:muenec:12735&r=exp |
| By: | Kjetil Telle (Statistics Norway) |
| Abstract: | Relying on a small natural field experiment with random assignment of treatments, I estimate effects of three core elements of most monitoring and enforcement practices: self-reporting, audit frequency and specific deterrence. I find evidence of evasive reporting of violations in self-audits, as more violations are detected in on-site audits than in self-audits. Announcing the increased audit frequency has no effect on compliance, but an audit raises the firm’s subsequent compliance substantially. |
| Keywords: | environmental regulation; enforcement; EPA; natural field experiment; random assignment |
| JEL: | K42 C93 Q58 D21 H41 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:ssb:dispap:680&r=exp |
| By: | Landmann, Andreas (University of Mannheim); Vollan, Björn (University of Mannheim); Frölich, Markus (University of Mannheim) |
| Abstract: | This paper analyzes data from a novel field experiment designed to test the impact of two different insurance products and a secret saving device on solidarity in risk-sharing groups among rural villagers in the Philippines. Risk is simulated by a lottery. Risk-sharing is possible in solidarity groups of three and insurance is introduced via less risky lotteries. Our main hypothesis is that formal market-based products lead to lower voluntary transfers among network members. We also test for the persistence of this crowding-out of solidarity. We find evidence for a reduction of solidarity by insurance if shocks are observable. Depending on insurance design, there is also evidence for persistence of this effect even if insurance is removed. Simulations using our regression results show that the benefits of insurance are completely offset by the reduction in transfers. However, if secret saving is possible solidarity is very low in general and there is no crowding out effect of insurance. This suggests that introducing formal insurance is not as effective as it is hoped for when the monetary situation can be closely monitored, but that it might be a very important complement when savings inhibit observing financial resources. The implication for policy is that microsavings should be offered simultaneously with microinsurance. |
| Keywords: | insurance, savings, informal risk sharing, crowding out, field lab experiment, Philippines |
| JEL: | C93 O12 Z13 |
| Date: | 2012–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6298&r=exp |
| By: | Alison Booth; Patrick Nolen |
| Abstract: | Risk theories typically assume individuals make risky choices using probability weights that differ from objective probabilities. Recent theories suggest that probability weights vary depending on which portion of a risky environment is made salient. Using experimental data we show that salience affects young men and women differently, even after controlling for cognitive and non-cognitive skills. Men are significantly more likely than women to switch from a certain to a risky choice once the upside of winning is made salient, even though the expected value of the choice remains the same. |
| Keywords: | gender, salience, risk-aversion, probability weights, cognitive ability |
| JEL: | D8 D81 J16 |
| Date: | 2012–02 |
| URL: | http://d.repec.org/n?u=RePEc:auu:dpaper:659&r=exp |
| By: | Etile, Fabrice; Teyssier, Sabrina |
| Abstract: | Although consumer attitudes toward corporate social responsibility are positive, socially responsible (SR) products are far from gaining significant market shares. Information asymmetries have been identified as one of the factor contributing to this attitude-behaviour gap, because social responsibility is a credence attribute. Signalling may remedy this market failure. We use an experimental posted offer market to investigate the impact of various regulatory requirements for labels on sellersâ choice to supply SR products and to signal it, and on buyersâ choice of ethical quality. Three treatments are tested: label certification by a third-party, âcheap-talk signallingâ with random monitoring and with or without reputations. Individual social preferences are elicited prior to the game, and their distribution generates a positive supply of and demand for social responsibility. When there is third-party certification or cheap-talk signalling with random monitoring and reputations, a separating equilibrium emerges, whereby labelled and non-labelled goods are exchanged at different prices. However, efficiency gains are significant only for third-party certification. Cheap-talk signalling with random monitoring but without reputations does not yield efficiency gains. Moreover, it generates a âhaloâ effect, whereby buyers are misguided by sellersâ claims about product quality. Finally, individual social preferences have a significant effect on playersâ decisions. Only third-party certification can increase companiesâ social responsibility and can allow consumers to express their social preferences through consumption. |
| Keywords: | labels, social responsibility, social preferences, separating equilibrium, market game, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Marketing, C92, D82, L15, M14, |
| Date: | 2011 |
| URL: | http://d.repec.org/n?u=RePEc:ags:eaae11:120399&r=exp |
| By: | Braun, Sebastian; Dwenger, Nadja; Kübler, Dorothea; Westkamp, Alexander |
| Abstract: | Quotas for special groups of students often apply in school or university admission procedures. This paper studies the performance of two mechanisms to implement such quotas in a lab experiment. The first mechanism is a simplified version of the mechanism currently employed by the German central clearinghouse for university admissions, which first allocates seats in the quota for top-grade students before allocating all other seats among remaining applicants. The second is a modified version of the student-proposing deferred acceptance (SDA) algorithm, which simultaneously allocates seats in all quotas. Our main result is that the current procedure, designed to give top-grade students an advantage, actually harms them, as students often fail to grasp the strategic issues involved. The modified SDA algorithm significantly improves the matching for top-grade students and could thus be a valuable tool for redesigning university admissions in Germany. -- |
| Keywords: | college admissions,experiment,quotas,matching,Gale-Shapley mechanism,Boston mechanism |
| JEL: | C78 C92 D78 I20 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbmbh:spii2012201&r=exp |
| By: | Becchetti, Leonardo (Associazione Italiana per la Cultura della Cooperazione e del Non Profit); Pisani, Fabio (Associazione Italiana per la Cultura della Cooperazione e del Non Profit) |
| Abstract: | We analyze the effects of financial education on a large sample of secondary school students with a randomized experiment performed in the Center (Rome) and North (Milan and Genova) of Italy. Our main findings document that the course increases significantly financial literacy at both student and class level but the effect is different in different urban environments. More specifically, we document that the overall (questionnaire plus course) learning effect is significantly higher in the North than in Rome. We finally observe that high grades at final middle school exams, willingness to attend Economics at University and household borrowing status are three factors which significantly and positively affect financial education. |
| Keywords: | financial education; financial literacy; demand for money balances; randomized experiment |
| Date: | 2012–01–11 |
| URL: | http://d.repec.org/n?u=RePEc:ris:aiccon:2012_098&r=exp |