nep-exp New Economics Papers
on Experimental Economics
Issue of 2012‒05‒29
fifteen papers chosen by
Daniel Houser
George Mason University

  1. Gender Differences in Bargaining Outcomes: A Field Experiment on Discrimination By Marco Castillo; Ragan Petrie; Máximo Torero; Lise Vesterlund
  2. Behavioral dynamics of tax compliance under an information services initiative By McKee, Michael; Siladke, Caleb; Vossler, Christian A.
  3. Some effects of tax information services reliability and availability on tax reporting behavior By Vossler, Christian A.; McKee, Michael; Jones, Michael
  4. Public-good experiments with large groups By Joachim Weimann; Jeannette Brosig-Koch; Heike Hennig-Schmidt; Claudia Keser; Christian Stahr
  5. Black Swan Protection: an Experimental Investigation By Ozlem Ozdemir; Andrea Morone
  6. Do We Follow Private Information when We Should? Laboratory Evidence on Naive Herding By Christoph March; Sebastian Krügel; Anthony Ziegelmeyer
  7. Ingratiation and Favoritism: Experimental Evidence By Stéphane Robin; Agnieszka Rusinowska; Marie-Claire Villeval
  8. Relative Performance of Liability Rules: Experimental Evidence By Angelova, Vera; Attanasi, Giuseppe; Hiriart, Yolande
  9. Strategic behavior in Schelling dynamics: A new result and experimental evidence By Juan Miguel Benito; Pablo Brañas-Garza; Penélope Hernández; Juan A. Sanchis
  10. Why Bother Asking? The Limited Value of Self-Reported Vote Intention By Rogers, Todd T
  11. Coordination with Communication under Oath By Nicolas Jacquemet; Stephane Luchini; Jason Shogren; Adam Zylbersztejn
  12. Shunning Uncertainty: The Neglect of Learning Opportunities By Trautmann, Stefan T; Zeckhauser, Richard Jay
  13. Early interventions and disability insurance: Experience from a field experiment By Engström, Per; Hägglund, Pathric; Johansson, Per
  14. The Aging Investor: Insights from Neuroeconomics By Peter N. C. Mohr; Hauke R. Heekeren;
  15. Compliance Framing - Framing Compliance By Lutz-Ulrich Haack; Martin C. Reimann

  1. By: Marco Castillo; Ragan Petrie; Máximo Torero; Lise Vesterlund
    Abstract: We examine gender differences in bargaining outcomes in a highly competitive and commonly used market: the taxi market in Lima, Peru. Examining the entire path of negotiation we find that men face higher initial prices and rejection rates. These differentials are consistent with both statistical and taste-based discrimination. To identify the source of the inferior treatment of men we conduct an experiment where passengers send a signal on valuation before negotiating. The signal eliminates gender differences and the response is shown only to be consistent with statistical discrimination. Our study secures identification within the market of interest and demonstrates that there are environments where sophisticated statistical inference is the sole source of differential gender outcomes.
    JEL: C78 C93 J16
    Date: 2012–05
  2. By: McKee, Michael; Siladke, Caleb; Vossler, Christian A.
    Abstract: Tax authorities utilize the audit process, imposing penalties on tax evaders, as their primary means of enforcement. In recent years, a “service” paradigm, whereby tax authorities provide information about correct tax reporting to taxpayers, has shown the potential to further “encourage” correct tax reporting. This research utilizes laboratory experiments to investigate the behavioral dynamics pertaining to information acquisition and tax evasion. The results show that the overall effect of a helpful information service is to decrease tax evasion. Further, an audit has the behavioral effect of lowering information acquisition rates and increasing evasion immediately after experiencing a penalty. This effect persists (although diminishes) in subsequent tax reporting decisions.
    Keywords: Tax evasion; Tax compliance; Behavioral Dynamics; Behavioral economics; Experimental economics
    JEL: C91 H26
    Date: 2011–12–23
  3. By: Vossler, Christian A.; McKee, Michael; Jones, Michael
    Abstract: As an alternative to analyzing field data, our research utilizes controlled laboratory experiments with human decision makers and salient financial incentives. Within the laboratory, we determine (hence, know) the true tax liability, and then identify the effects of information services by systematically varying the setting across groups of players. In particular, our experimental design varies the degree of accessibility and accuracy of information services. Our design allows us to observe both the tax reporting behavior as well as the propensity of the taxpayer to obtain information by making information acquisition a (sometimes costly) choice.
    Keywords: tax evasion; laboratory experiments
    JEL: D8 C91 H26
    Date: 2011–06
  4. By: Joachim Weimann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg); Jeannette Brosig-Koch; Heike Hennig-Schmidt; Claudia Keser; Christian Stahr (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Many of real-world public-goods are characterized by a marginal per capita return (MPCR) close to zero and have to be provided by large groups. Up until now, there is almost no evidence on how large groups facing a low MPCR behave in controlled public-good laboratory experiments involving financial incentives. Connecting four experimental laboratories located in four di¤erent German universities via Internet, we are able to run such experiments. In ad-dition to the group size (60 and 100 subjects), we vary the MPCR which is as small as 0:02 or 0:04. Our data reveal a strong MPCR effect, but almost no group-size e¤ect. Our data demonstrates that, even in large groups and for low MPCRs, considerable contributions to public goods can be expected. Interestingly, the contribution patterns observed in large and very small groups are very similar. To the best of our knowledge, this study is the first one that includes large-group laboratory experiments with a small MPCR under conditions comparable to previous small-group standard public-good experiments.
    JEL: C91 C72 H42
    Date: 2012–03
  5. By: Ozlem Ozdemir (Middle East Technical University, Department of Business Administration, Ankara, Turkey); Andrea Morone (Università degli Studi di Bari, Aldo Moro Dipartimento di Studi Aziendali e Giusprivatistici, Bari, Italy And Universitat Jaune I Departament d'Economia, Castellon, SpainAuthor-Name: David Skuse)
    Abstract: This experimental study investigates insurance decisions in low-probability, high-loss risk situations. Results indicate that subjects consider the probability of loss (loss size) when they make buying decisions (paying decisions). Most individuals are risk averse with no specific threshold probability.
    Keywords: Black swan, Risk, Insurance, Low probability, High loss, Experiment
    JEL: C91 D81
    Date: 2012
  6. 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
  7. By: Stéphane Robin (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Agnieszka Rusinowska (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne); 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: We provide experimental evidence of workers' ingratiation by opinion conformity and of managers' discrimination in favor of workers with whom they share similar opinions. In our Baseline, managers can observe both workers' performance at a task and opinions before assigning unequal payoffs. In the Ingratiation treatment, workers can change their opinion after learning that held by the manager. In the Random treatment, workers can also change opinion but payoffs are assigned randomly, which gives a measure of non-strategic opinion conformism. We find evidence of high ingratiation indices, as overall, ingratiation is effective. Indeed, managers reward opinion conformity, and even more so when opinions cannot be manipulated. Additional treatments reveal that ingratiation is cost sensitive and that the introduction of performance pay for managers as well as a less noisy measure of performance increase the role of relative performance in the assignment of payoffs, without eliminating the reward of opinion conformity.
    Keywords: Ingratiation; opinion conformity; favoritism; discrimination; social distance; experiment
    Date: 2012–05–03
  8. By: Angelova, Vera; Attanasi, Giuseppe; Hiriart, Yolande
    Abstract: We compare the performance of liability rules for managing environmental disasters when third parties are harmed and cannot always be compensated. A firm can invest in safety to reduce the likelihood of accidents. The firm’s investment is unobservable to authorities. Externality and asymmetric information call for public intervention to define rules aimed at increasing prevention. We determine the investment in safety under No Liability, Strict Liability and Negligence, and compare it to the first best. Additionally, we investigate how the (dis)ability of the firm to fully cover potential damages affects the firm’s behavior. An experiment tests the theoretical predictions. In line with theory, Strict Liability and Negligence are equally effective; both perform better than No Liability; investment in safety is not sensitive to the ability of the firm to compensate potential victims. In contrast with theory, prevention rates absent liability are much higher and liability is much less effective than predicted.
    Keywords: Risk Regulation, Liability Rules, Incentives, Insolvency, Experiment.
    JEL: D82 K13 K32 Q58
    Date: 2012–04
  9. By: Juan Miguel Benito (Universidad Pública de Navarra); Pablo Brañas-Garza (Universidad de Granada); Penélope Hernández (ERI-CES); Juan A. Sanchis (ERI-CES)
    Abstract: In this paper we experimentally test Schelling's (1971) segregation model and confirm the striking result of segregation. In addition, we extend Schelling's model theo- retically by adding strategic behavior and moving costs. We obtain a unique subgame perfect equilibrium in which rational agents facing moving costs may find it optimal not to move (anticipating other participants' movements). This equilibrium is far for full segregation. We run experiments for this extended Schelling model. We find that the percentage of strategic players dramatically increases with the cost of moving and that the degree of segregation depends on the distribution of rational subjects.
    Keywords: Subgame perfect equilibrium, segregation, experimental games
    Date: 2012–03
  10. By: Rogers, Todd T
    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
  11. By: Nicolas Jacquemet (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne, EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris); Stephane Luchini (GREQAM - Groupement de Recherche en Économie Quantitative d'Aix-Marseille - Université de la Méditerranée - Aix-Marseille II - Université Paul Cézanne - Aix-Marseille III - Ecole des Hautes Etudes en Sciences Sociales (EHESS) - CNRS : UMR6579); Jason Shogren (Departement of Economics and Finance, University of Wyoming - University of Wyoming); Adam Zylbersztejn (CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon Sorbonne)
    Abstract: Herein we explore whether the social psychology theory of commitment via a truth-telling oath can reduce coordination failure. Using a classic sequential coordination game, we ask all players to sign voluntarily a truth-telling oath before playing the game with cheap-talk communication. Three results emerge with commitment-via-the-oath: (1) coordination increased by nearly 50 percent; (2) senders' messages were significantly more truthful and actions more efficient, and (3) receivers' trust of messages increased.
    Keywords: Coordination game; Cheap talk communication; Oath
    Date: 2011–10–26
  12. By: Trautmann, Stefan T; Zeckhauser, Richard Jay
    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.
    Date: 2011
  13. By: Engström, Per (Uppsala Center for Labor Studies); Hägglund, Pathric (The Swedish Social Insurance Inspectorate); Johansson, Per (Uppsala Center for Labor Studies)
    Abstract: This paper estimates the effects of early interventions in the Swedish sickness insurance system. The aim of the interventions is to screen and, further to, rehabilitate sick listed individuals. We find that the early interventions – in contrast to what is expected – increase the inflow into disability benefits by around 20 percent. In order to explain the results, we develop a simple theoretical model based on asymmetric information of the health status. The model predicts that the treatment effect is larger for individuals with low incentives to return to work. In order to test this prediction we estimate effects for sick listed employed and unemployed separately. Consistent with the model’s prediction, we find that the effect is larger for the unemployed than for the employed.
    Keywords: monitoring; screening; vocation rehabilitation; disability insurance; sickness insurances; unemployemnt insurance; randomized experiment
    JEL: C93 H51 H55 I18 J22
    Date: 2012–04–18
  14. By: Peter N. C. Mohr; Hauke R. Heekeren;
    Abstract: Individuals in most industrialized countries have to make investment decisions throughout their adult life span to save for their retirement. These decisions substantially affect their living standards in old age. Research on cognitive aging has already demonstrated several changes in cognitive functions (e.g., processing speed) that likely influence investment decisions. This review brings together research on behavioral and neural aspects of financial decision making and aging to advance knowledge on age-related changes in financial decision making. The dopaminergic system plays a key role in financial decision making, both in financial decisions from description and financial decisions from experience. Importantly, both dopaminergic neuromodulation and financial decision making change during healthy aging. Especially when the parameters of the return distribution have to be learned from experience, older adults show a different and suboptimal choice behavior compared to younger adults. Based on these observations we suggest ways to circumvent the age-related bias in financial decision making to improve older adults’ wealth.
    Keywords: neuroeconomics, neurofinance, aging, neuromodulation, risk-return models, risk, fMRI, decision making under risk
    JEL: D03 D87 G11
    Date: 2012–05
  15. By: Lutz-Ulrich Haack; Martin C. Reimann (Faculty of Economics and Management, Otto-von-Guericke University Magdeburg)
    Abstract: Corporations have to install various organizational measures to comply with legal as well as internal guidelines systematically. Compliance management systems have the challenging task to make use of an internal compliance-marketing approach in order to ensure not only an adequate but also effective compliance-culture. Compliance-literature and findings of persuasive goal-framing-theory give opposite implications for establishing a rather values- versus rule-based compliance-culture respectively.
    Keywords: Compliance, Compliance-Kultur, regelbasierte Compliance- Kultur, vertrauensbasierte Compliance-Kultur, Compliance- Marketing, Compliance-Grundtonalität, Compliance Management System, Compliance-Framing, Compliance-Goal-Framing
    Date: 2012–03

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