New Economics Papers
on Experimental Economics
Issue of 2012‒02‒27
eighteen papers chosen by

  1. Private and Public Decisions in Social Dilemmas: Evidence from ChildrenÕs Behavior By Daniel Houser; Natalia Montinari; Marco Piovesan
  2. Side-Payments and the Costs of Conflict. By Erik O. Kimbrough; Roman M. Sheremeta
  3. An Experimental Analysis of Contingent Capital Triggering Mechanisms By Douglas D. Davis; Korenok Oleg; Edward S. Prescott
  4. Job Allocation Rules and Sorting Efficiency: Experimental Outcomes in a Peter Principle Environment By David Dickinson; Marie-Claire Villeval
  5. "Do We Follow Others when We Should? A Simple Test of Rational Expectations": Comment By Anthony Ziegelmeyer; Christoph March; Sebastian Krügel
  6. Awe Expands People's Perception of Time, Alters Decision Making, and Enhances Well-Being By Rudd, Melanie; Vohs, Kathleen D.; Aaker, Jennifer
  7. Peer Effects in Pro-Social Behavior: Social Norms or Social Preferences? By Gächter, Simon; Nosenzo, Daniele; Sefton, Martin
  8. Ranking alternatives by a fair bidding rule: a theoretical and experimental analysis By Werner Güth; M. Vittoria Levati; Natalia Montinari
  9. The Labor Market Return to an Attractive Face: Evidence from a Field Experiment By López Bóo, Florencia; Rossi, Martín A.; Urzua, Sergio
  10. Do We Follow Private Information when We Should? Laboratory Evidence on Naive Herding By Christoph March; Sebastian Krügel; Anthony Ziegelmeyer
  11. Broken Punishment Networks in Public Goods Games: Experimental Evidence By Andrweas Leibbrandt; Abhijit Ramalingam; Lauri Sääksvuori; James M. Walker
  12. A Historical Note on the Beauty Contest By Christoph Bühren; Björn Frank; Rosemarie Nagel
  13. Does tax evasion affect firms’ internal control? Some evidence from an experimental approach By Lory Barile
  14. Spectators Versus Stakeholders with/without Information: the Difference it Makes for Justice By Leonardo Becchetti; Giacomo Degli Antoni; Stefania Ottone; nazaria Solferino
  15. Challenges in Banking the Rural Poor: Evidence from Kenya's Western Province By Pascaline Dupas; Sarah Green; Anthony Keats; Jonathan Robinson
  16. Positional Concerns through the Life Cycle: Evidence from Subjective Well-Being Data and Survey Experiments By Akay, Alpaslan; Martinsson, Peter
  17. Small Cues Change Savings Choices By James J. Choi; Emily Haisley; Jennifer Kurkoski; Cade Massey
  18. Emulating interviewers in an online survey: Experimental manipulation of 'do-not-know' over the phone and on the web. By Leeuw, E.D. de; Hox, J.J.C.M.; Scherpenzeel, A.C.

  1. By: Daniel Houser (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Natalia Montinari (Max Planck Institute for Economics); Marco Piovesan (Harvard Business School)
    Abstract: Substantial research with adult populations has found that selfish impulses are less likely to be pursued when decisions are publicly observable. To the best of our knowledge, however, this behavioral regularity has not been systematically explored as potential solution to social dilemmas. This paper takes a step in that direction. We report data on the self-control decisions of children aged 6 to 11 who participated in games that require one to resist a selfish impulse for several minutes in order to benefit others. In one condition children make decisions in public view of the group of other participants, while in another they can make decisions either publicly or privately. In both conditions, we allow the group size to vary. We find that children aged 9 and higher are better able to resist selfish impulses in public environments. Younger children, however, display no such effect. Further, we find self-control substantially impacted by group size. When decisions are public, larger groups lead to better self-control, while in the private condition the opposite holds. Our findings suggest that announcing decisions publicly and to large groups may be part of a solution to some social dilemmas. In addition, the fact that public decision-making promotes pro-social behavior only in older children suggests this positive effect may stem from a desire to avoid shame. Length: 28
    Keywords: Experimental Economics
    Date: 2012–02
  2. By: Erik O. Kimbrough (Department of Economics (AE1), School of Business and Economics, Maastricht University); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University)
    Abstract: Conflict and competition often impose costs on both winners and losers, and conflicting parties may prefer to resolve the dispute before it occurs. The equilibrium of a conflict game with side-payments predicts that with binding offers, proposers make and responders accept side-payments, generating settlements that strongly favor proposers. When side-payments are non-binding, proposers offer nothing and conflicts always arise. Laboratory experiments confirm that binding side-payments reduce conflicts. However, 30% of responders reject binding offers, and offers are more egalitarian than predicted. Surprisingly, non-binding side-payments also improve efficiency, although less than binding. With binding side-payments, 87% of efficiency gains come from avoided conflicts. However, with non-binding side-payments, only 39% of gains come from avoided conflicts and 61% from reduced conflict expenditures.
    Keywords: contests, conflict resolution, side-payments, experiments
    JEL: C72 C91 D72
    Date: 2012
  3. By: Douglas D. Davis (Department of Economics, VCU School of Business); Korenok Oleg (Department of Economics, VCU School of Business); Edward S. Prescott (Federal Reserve Bank of Richmond)
    Abstract: Experiments are run that evaluate three regimes for triggering conversion of contingent capital bonds into equity: A ÒregulatorÓ regime, where regulators make conversion decisions based on prices; A Òfixed-triggerÓ regime, where a price threshold triggers mandatory conversion; And, a Òprediction-marketÓ regime, where regulators also observe a market that predicts conversion. Consistent with theory, we observe inefficiencies and conversion errors in the regulator and fixed-trigger regimes. Contrary to theory, we observe inefficiencies and conversion errors in the prediction-market regime. The regulator regime is the most informationally inefficient. Allocative efficiencies are low and conversion errors high in all regimes.
    Keywords: bank regulation; experiments; contingent capital
    JEL: C92 G14 G28
    Date: 2011–10
  4. By: David Dickinson (Department of Economics - Appalachian State University); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon)
    Abstract: An important issue in personnel economics is the design of efficient job allocation rules. Firms often use promotions both to sort workers across jobs and to provide them with incentives. However, the Peter Principle states that employees' output tends to fall after a promotion. Lazear (2004) suggests that self-selection may improve job allocation efficiency while preserving incentive effects. We reproduce this Peter Principle in the laboratory and compare the efficiency of a promotion standard with subjects self-selecting their task. We find no evidence of effort distortion, as predicted by theory. Furthermore, we find that when the Peter Principle is not severe, promotion rules often dominate self-selection efficiency of task assignment. Results are consistent with imperfect appraisal of transitory ability and a lack of strategic behavior.
    Keywords: Promotion, Peter Principle, Sorting, Experiment
    Date: 2012
  5. By: Anthony Ziegelmeyer (Max Planck Institute of Economics, Jena); Christoph March (Paris School of Economics); Sebastian Krügel (Max Planck Institute of Economics, Jena, IMPRS "Uncertainty")
    Abstract: Weizsäcker (2010) estimates the payoff of actions to test rational expectations and to measure the success of social learning in information cascade experiments. He concludes that participants perform poorly when learning from others and that rational expectations are violated. We show that his estimated payoffs rely on estimates of the publicly known prior and signal qualities which may lead the formulated test of rational expectations to generate false positives. We rely on the true values of the prior and signal qualities to estimate the payoff of actions. We confirm that the rational expectations hypothesis is rejected, but we measure a much larger success of social learning.
    Keywords: Information Cascades, Laboratory Experiments, Quantal Response Equilibrium
    JEL: C92 D82
    Date: 2012–02–20
  6. By: Rudd, Melanie (Stanford University); Vohs, Kathleen D. (University of MN); Aaker, Jennifer (Stanford University)
    Abstract: When do people feel as if they are rich in time? Not often, research and daily experience suggest. However, three experiments showed that participants who felt awe, relative to other emotions, felt they had more time available (Experiments 1, 3) and were less impatient (Experiment 2). Participants who experienced awe were also more willing to volunteer their time to help others (Experiment 2), more strongly preferred experiences over material products (Experiment 3), and experienced a greater boost in life satisfaction (Experiment 3). Mediation analyses revealed that these changes in decision making and well-being were due to awe's ability to alter the subjective experience of time. Experiences of awe bring people into the present moment, which underlies awe's capacity to adjust time perception, influence decisions, and make life feel more satisfying than it would otherwise.
    Date: 2012–01
  7. By: Gächter, Simon (University of Nottingham); Nosenzo, Daniele (University of Nottingham); Sefton, Martin (University of Nottingham)
    Abstract: We compare social preference and social norm based explanations for peer effects in a three-person gift-exchange game experiment. In the experiment a principal pays a wage to each of two agents, who then make effort choices sequentially. In our baseline treatment we observe that the second agent's effort is influenced by the effort choice of the first agent, even though there are no material spillovers between agents. This peer effect is predicted by a model of distributional social preferences (Fehr-Schmidt, 1999). As we show from a norms-elicitation experiment, it is also consistent with social norms compliance. A conditional logit investigation of the explanatory power of payoff inequality and elicited norms finds that the second agent's effort can be best explained by the social preferences model. In further treatments with modified games we find that the presence/strength of peer effects changes as predicted by the social preferences model. As with the baseline treatment, a conditional logit analysis favors an explanation based on social preferences, rather than social norms following for these treatments. Our results suggest that, in our context, the social preferences model provides a parsimonious explanation for the observed peer effect.
    Keywords: peer effects, social influence, gift-exchange, experiment, social preferences, inequity aversion, measuring social norms
    JEL: A13 C92 D03
    Date: 2012–02
  8. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); M. Vittoria Levati (Max Planck Institute of Economics, Jena, Germany, and Department of Economics, University of Verona, Verona, Italy); Natalia Montinari (Max Planck Institute of Economics, Jena, Germany)
    Abstract: We introduce a procedurally fair rule to study a situation where people disagree about the value of three alternatives in the way captured by the voting paradox. The rule allows people to select a final collective ranking by submitting a bid vector with six components (the six possible rankings of the three alternatives). In a laboratory experiment we test the robustness of the rule to the introduction of subsidies and taxes. We have two main results. First, in all treatments, the most frequently chosen ranking is the socially efficient one. Second, subsidies slightly enhance overbidding. Furthermore, an analysis of individual bid vectors reveals interesting behavioral regularities.
    Keywords: Bidding behavior, Procedural fairness, Voting paradox
    JEL: C92 D02 D71
    Date: 2012–02–20
  9. By: López Bóo, Florencia (Inter-American Development Bank); Rossi, Martín A. (Universidad de San Andrés); Urzua, Sergio (University of Maryland)
    Abstract: We provide new evidence on the link between beauty and hiring practices in the labor market. Specifically, we study if people with less attractive faces are less likely to be contacted after submitting a resume. Our empirical strategy is based on an experimental approach. We sent fictitious resumes with pictures of attractive and unattractive faces to real job openings in Buenos Aires, Argentina. We find that attractive people receive 36 percent more responses (callbacks) than unattractive people. Given the experimental design, this difference can be attributed to the exogenous manipulation of facial attractiveness of our fake job applicants.
    Keywords: facial attractiveness, callback rates, labor market discrimination
    JEL: J71 J78
    Date: 2012–02
  10. By: Christoph March (PSE - Paris-Jourdan Sciences Economiques - CNRS : UMR8545 - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - Ecole des Ponts ParisTech - Ecole Normale Supérieure de Paris - ENS Paris - INRA, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Sebastian Krügel (Max Planck Institute of Economics - Max Planck Institute of Economics); Anthony Ziegelmeyer (Max Planck Institute of Economics - Max Planck Institute of Economics)
    Abstract: We investigate whether experimental participants follow their private information and contradict herds in situations where it is empirically optimal to do so. We consider two sequences of players, an observed and an unobserved sequence. Observed players sequentially predict which of two options has been randomly chosen with the help of a medium quality private signal. Unobserved players predict which of the two options has been randomly chosen knowing previous choices of observed and with the help of a low, medium or high quality signal. We use preprogrammed computers as observed players in half the experimental sessions. Our new evidence suggests that participants are prone to a 'social-confirmation' bias and it gives support to the argument that they naively believe that each observable choice reveals a substantial amount of that person's private information. Though both the 'overweighting-of-private-information' and the 'social-con firmation' bias coexist in our data, participants forgo much larger parts of earnings when herding naively than when relying too much on their private information. Unobserved participants make the empirically optimal choice in 77 and 84 percent of the cases in the human-human and computer-human treatment which suggests that social learning improves in the presence of lower behavioral uncertainty.
    Keywords: Information cascades ; Laboratory Experiments ; Naive herding
    Date: 2012–02
  11. By: Andrweas Leibbrandt (Department of Economics, Monash University, Australia); Abhijit Ramalingam (School of Economics and Centre for Behavioural and Experimental Social Science, and University of East Anglia, Norwich, United Kingdom); Lauri Sääksvuori (Strategic Interaction Group, Max Planck Institute of Economics, Jena, Germany); James M. Walker (Department of Economics and Workshop in Political Theory and Policy Analysis, Indiana University, United States)
    Abstract: Abundant evidence suggests that high levels of contributions to public goods can be sustained through self-governed monitoring and sanctions. This experimental study investigates the effectiveness of decentralized sanctioning institutions where punishment opportunities are restricted to agents who are linked through alternative punishment networks. We find that the structure of the punishment network significantly impacts contributions to the public good, but not overall efficiencies. Contributions collapse over decision rounds in groups with limited punishment opportunities, even if the absolute punishment capacity corresponds to the complete punishment network where all agents are allowed to punish each other. However, after allowing for the costs of sanctions, efficiencies are similar across the different networks that allow for punishment and the no-punishment network.
    Keywords: public goods experiment, punishment, cooperation, networks
    JEL: C92 D01 D03 H41
    Date: 2012–02–02
  12. By: Christoph Bühren (University of Kassel); Björn Frank (University of Kassel); Rosemarie Nagel (University Pompeu Fabra)
    Abstract: Alain Ledoux, who was one of over 6,000 chess players taking part in Bühren and Frank´s (2012) online Beauty Contest experiment, turned out to be the forgotten inventor of that game. We reconstruct the birth of the Beauty Contest. In section 1 of our note, its first two authors outline the history of the game that metamorphosed into the famous guessing game experiment which was first run in the lab by Rosemarie Nagel. In section 2, Rosemarie Nagel adds further remarks and thoughts about the development of the experimental Beauty Contest.
    Date: 2012
  13. By: Lory Barile
    Abstract: The aim of this work is to analyze tax evasion as a factor that potentially affects internal control of firms as an application of the Chen and Chu’s model (2005). For this purpose an experimental approach was employed. Treatments varied depending on whether agents were assumed to be risk-neutral or risk-averse. According to the gift-exchange game (Fehr et al., 1993), results show a positive relationship between wages offered by principal and efforts provided by agents. In general, higher wages lead to more costly effort provision. However, when evasion and risk aversion are introduced in the analysis individuals show opportunistic behaviors and they seem to be less willing to cooperate for the wealth of the firm.
    Keywords: tax evasion, firms, reciprocity, labor market.
    JEL: C90 C91 H26
    Date: 2012–02
  14. By: Leonardo Becchetti (Faculty of Economics, University of Rome "Tor Vergata"); Giacomo Degli Antoni (University of Milano - Bicocca); Stefania Ottone (University of Milano - Bicocca); nazaria Solferino (University of Calabria)
    Abstract: We document that being spectators (no effect on personal payoffs) and, to a lesser extent, stakeholders without information on relative payoffs, induces subjects who can choose distribution criteria after task performance to prefer rewarding talent (vis à vis effort, chance or strict egalitarianism) after guaranteeing a minimal egalitarian base. Information about distribution of payoffs under different criteria reduces dramatically such choice since most players opt or revise their decision in favor of the criterion which maximizes their own payoff (and, by doing so, end up being farther from the maximin choice). Large part (but not all) of the stakeholders’ choices before knowing the payoff distribution are driven by their performance beliefs since two thirds of them choose the criterion in which they assume to perform and earn relatively better.
    Keywords: Distributive Justice; Perceived Fairness; Meritocracy; Talent; Chance; Effort
    JEL: C91 D63
    Date: 2012–02–20
  15. By: Pascaline Dupas; Sarah Green; Anthony Keats; Jonathan Robinson
    Abstract: Most people in rural Africa do not have bank accounts. In this paper, we combine experimental and survey evidence from Western Kenya to document some of the supply and demand factors behind such low levels of financial inclusion. Our experiment had two parts. In the first part, we waived the fixed cost of opening a basic savings account at a local bank for a random subset of individuals who were initially unbanked. While 63% of people opened an account, only 18% actively used it. Survey evidence suggests that the main reasons people did not begin saving in their bank accounts are that: (1) they do not trust the bank, (2) service is unreliable, and (3) withdrawal fees are prohibitively expensive. In the second part of the experiment, we provided information on local credit options and lowered the eligibility requirements for an initial small loan. Within the following 6 months, only 3% of people initiated the loan application process. Survey evidence suggests that people do not borrow because they do not want to risk losing their collateral. These results suggest that, while simply expanding access to banking services (for instance by lowering account opening fees) will benefit a minority, broader success may be unobtainable unless the quality of services is simultaneously improved. There are also challenges on the demand side, however. More work needs to be done to understand what savings and credit products are best suited for the majority of rural households.
    JEL: D14 G21 O16
    Date: 2012–02
  16. By: Akay, Alpaslan (IZA); Martinsson, Peter (University of Gothenburg)
    Abstract: This paper uses both subjective well-being and survey experimental data to analyze how people's positional concerns regarding income and goods vary with age. The subjective well-being approach is mainly based on German panel data for the period 1984-2009 (German Socio-Economic Panel), while the survey experimental approach is based on a tailor-made experimental design conducted among Swedish adults. Our analysis suggests that the degree of positional concerns is not homogenous across the life cycle. Our different analytical approaches show a robust life cycle pattern of positional concerns: young people experience no or a low degree of positional concerns, yet the level of concerns for income increases gradually and significantly with age. The results also differ across goods: while car consumption is similar to income, the positional concern for leisure time decreases through the life cycle.
    Keywords: positional concerns, life cycle, subjective well-being, survey experiment
    JEL: C90 D63
    Date: 2012–02
  17. By: James J. Choi; Emily Haisley; Jennifer Kurkoski; Cade Massey
    Abstract: In randomized field experiments, we embedded one- to two-sentence anchoring, goal-setting, or savings threshold cues in emails to employees about their 401(k) savings plan. We find that anchors increase or decrease 401(k) contribution rates by up to 1.4% of income. A high savings goal example raises contribution rates by up to 2.2% of income. Highlighting a higher savings threshold in the match incentive structure raises contributions by up to 1.5% of income relative to highlighting the lower threshold. Highlighting the maximum possible contribution rate raises contribution rates by up to 2.9% of income among low savers.
    JEL: D03 D14 D91
    Date: 2012–02
  18. By: Leeuw, E.D. de; Hox, J.J.C.M.; Scherpenzeel, A.C. (Tilburg University)
    Date: 2011

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