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on Experimental Economics |
| By: | Jason Shachat; J. Todd Swarthout; Lijia Wei |
| Abstract: | We propose a statistical model to assess whether individuals strategically use mixed strategies in repeated games. We formulate a hidden Markov model in which the latent state space contains both pure and mixed strategies, and allows switching between these states. We apply the model to data from an experiment in which human subjects repeatedly play a normal form game against a computer that always follows its part of the unique mixed strategy Nash equilibrium profile. Estimated results show significant mixed strategy play and non-stationary dynamics. We also explore the ability of the model to forecast action choice. |
| Keywords: | Mixed Strategy, Nash Equilibrium, Experiment, Hidden Markov Model |
| JEL: | C92 C72 C10 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:exc:wpaper:2012-11&r=exp |
| By: | Timothy Shields (Argyros School of Business and Economics, Chapman University, USA); Baohua Xin (Rotman School of Management, University of Toronto, Canada) |
| Abstract: | We examine the role of higher order beliefs in asset markets where coordination between a buyer and seller can lead to gains to trade. The scenarios are modeled such that trader’s strategies do not only depend upon their beliefs of underlying economic phenomena, but also upon the others’ beliefs regarding the beliefs of themselves. Under certain parameters the breakdown of coordination is predicted–even when both traders are certain the underlying phenomena dictates trade is advantageous. We demonstrate the equilibrium predictions can be constructed via a small number of iterated thought exercises. The experimental design allows us to control for various behavioral phenomena and examine subjects’ decisions across different accounting regimes as to tease out strategic uncertainty due solely to information asymmetry. In this setting we find evidence supporting higher order beliefs. An implication is that the lack of uniformity leads to lack of common knowledge of the beliefs of others, which in turn leads to the spreading of inefficient outcomes. |
| Keywords: | information asymmetry; experiment; strategic uncertainty; higher-order beliefs; iterative reasoning |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:12-18&r=exp |
| By: | Robert Böhm (Center for Empirical Research in Economics and Behavioral Sciences (CEREB), University of Erfurt, Germany); Tobias Regner (Max Planck Institute of Economics, Jena, Germany) |
| Abstract: | We conduct a real-effort task experiment where subjects' performance translates into a donation to a charity. In a within-subjects design we vary the visibility of the donation (no/private/public feedback). Confirming previous studies, we find that subjects' performance increases, that is, they donate more to charity, when their relative performance is made public. In line with the competitive altruism hypothesis, a biology-based explanation for status-seeking behavior, especially male subjects increase performance in the public setting. |
| Keywords: | social preferences, other-regarding behavior, charitable giving, social-image concerns, competitive altruism, experiments, social status |
| JEL: | C91 D03 J16 |
| Date: | 2012–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2012-038&r=exp |
| By: | Lambarraa, Fatima; Riener, Gerhard |
| Abstract: | Charitable giving is one of the major obligations Islam and a strong Muslim norm endorses giving to the needy, but discourages public displays of giving. This norm is puzzling in light of previous evidence, suggesting that making donations public often increases giving. We report the results two field experiments with 534 and 186 participants at Moroccan educational institutions (among them two religious schools) to assess the effects this moral prescription on actual giving levels in anonymous and public settings. Subjects who participated in a paid study were given the option to donate from their payment to a local orphanage, under treatments that varied the publicity of the donation and the salience of Islamic values. In the salient Islamic treatment, anonymity of donations significantly increased donation incidence from 59% to 77% percent as well as average donations for religious subjects from 8.90 to 13.00 Dh. This findings stand in stark contrast to most previous findings in the charitable giving literature and suggest to rethink fundraising strategies in Muslim populations. -- |
| Keywords: | Charitable giving,Islam,Social pressure,Priming,Religion,Norms,Field experiment |
| JEL: | H40 C93 D01 Z12 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:59&r=exp |
| By: | Robert Dur (Erasmus University Rotterdam, CESifo, and IZA); Ben Vollaard (Tilburg University, CentER, and TILEC) |
| Abstract: | Field-experimental studies have shown that people litter more in more littered environments. Inspired by these findings, many cities around the world have adopted policies to quickly remove litter. While such policies may avoid that people follow the bad example of litterers, they may also invite free-riding on public cleaning services. This paper reports the results of a natural field experiment where, in a randomly assigned part of a residential area, the frequency of cleaning was reduced from daily to twice a week during a three-month period. Using high-frequency data on litter at treated and control locations before, during, and after the experiment, we find strong evidence that litter begets litter. However, we also find evidence that some people start to clean up after themselves when public cleaning services are diminished. |
| Keywords: | littering; public services; free-riding; field experiment |
| JEL: | C93 H40 K42 |
| Date: | 2012–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:uvatin:20120061&r=exp |
| By: | Paolo Crosetto (Max Planck Institute of Economics, Jena); Antonio Filippin (University of Milan, Department of Economics, and Institute for the Study of Labor (IZA), Bonn) |
| Abstract: | This paper presents the Bomb Risk Elicitation Task (BRET), an intuitive procedure aimed at measuring risk attitudes. Subjects decide how many boxes to collect out of 100, one of which containing a bomb. Earnings increase linearly with the number of boxes accumulated but are zero if the bomb is also collected. The BRET requires minimal numeracy skills, avoids truncation of the data, allows to precisely es- timate both risk aversion and risk seeking, and is not affected by the degree of loss aversion or by violations of the Reduction Axiom. We validate the task and test its robustness in a large-scale experiment. Choices react significantly to the stakes and to the size of the choice set. Our experiment rationalizes the gender gap that often characterizes choices under uncertainty by means of a higher loss rather than risk aversion. |
| Keywords: | Risk Aversion, Loss Aversion, Elicitation method |
| JEL: | C81 C91 D81 |
| Date: | 2012–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2012-035&r=exp |
| By: | Cid, Alejandro; Cabrera, José María |
| Abstract: | We evaluate the impact of joint-liability incentives in the classroom using a randomized field experiment. The instructor design groups of three students in the classroom and provides a premium to their homework's grade only if all three members of the group accomplish some requirements. To isolate the joint liability effect from selfish motivations, we design also an individual incentives treatment. We find that joint-liability incentives impact positively on the grades accomplished in homework and midterm exams both in the experimental courses and in the other courses taken by the students in the semester. Though the positive average effect seems to disappear in the final exams, the overall impact of joint-liability incentives on the academic achievements in the semester is still positive. A drawback of this program is a decrease in the satisfaction with classmates. The significant effectiveness of the peer monitoring developed by the joint liability of group incentives provides novel implications for the design of the grading policies in the classroom and for other social settings where incentives may be based in peer monitoring or joint liability. |
| Keywords: | field experiment; randomization; education; joint liability; student incentives |
| JEL: | I20 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:39907&r=exp |
| By: | Kerri Brick; Martine Visser |
| Abstract: | The lack of cooperation and prevalence of free riding in efforts to reduce emissions reflects the public good dilemma synonymous with climate change: whereby individual incentives lead to sub-optimal outcomes. This study examines how cooperative norms can be fostered through democratic processes. Specifically, we assess whether a given policy affects cooperation more significantly when it is democratically chosen by heterogeneous subjects as opposed to exogenously imposed by the experimenter. Subjects with differing marginal costs of abatement must democratically select an institution to reduce a national greenhouse gas inventory. By majority vote, subjects can choose between communication and two carbon tax variants. The experimental literature from studies with homogenous subjects suggests that cooperation improves when policy is endogenously selected as opposed to exogenously enforced. Overall we find that endogenous choice does not improve cooperation when subjects are heterogeneous. Furthermore, we find that, in the absence of a binding commitment, cooperation declines with endogenous choice as the prevalence of free-riding increases. |
| Keywords: | heterogeneity; voting; communication; public good |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:rza:wpaper:298&r=exp |
| By: | Shawn Cole (Harvard Business School, Finance Unit); Martin Kanz (World Bank); Leora Klapper (World Bank) |
| Abstract: | This paper uses a series of experiments with commercial bank loan officers to test the effect of performance incentives on risk-assessment and lending decisions. We first show that, while high-powered incentives lead to greater screening effort and more profitable lending, their power is muted by both deferred compensation and the limited liability typically enjoyed by credit officers. Second, we present direct evidence that incentive contracts distort judgment and beliefs, even among trained professionals with many years of experience. Loans evaluated under more permissive incentive schemes are rated significantly less risky than the same loans evaluated under pay-for-performance. |
| Keywords: | loan officer incentives, banking, emerging markets |
| JEL: | D03 G21 J22 J33 L2 |
| Date: | 2012–07 |
| URL: | http://d.repec.org/n?u=RePEc:hbs:wpaper:13-002&r=exp |
| By: | Leonardo Becchetti (Faculty of Economics, University of Rome "Tor Vergata"); Stefano Castriota (University of Perugia); Pierluigi Conzo (Faculty of Economics, University of Rome "Tor Vergata" and CSEF) |
| Abstract: | Natural disasters have been shown to produce effects on social capital, risk and time preferences of victims. We run experiments on altruistic, time and risk preferences on a sample of Sri Lankan microfinance borrowers affected/unaffected by the tsunami shock in 2004 at a 7-year distance from the event (a distance longer than in most empirical studies). We find that people who suffered at least a damage from the event behave in dictator games less altruistically as senders (and expect less as receivers) than those who do not report any damage. Interestingly, among damaged, those who suffered also house damages or injuries send (expect) more than those reporting only losses to the economic activity. Since the former are shown to receive significantly more help than the latter we interpret this last finding as a form of indirect reciprocity. |
| Keywords: | tsunami, disaster recovery, social preferences, altruism, development aid |
| JEL: | C90 D03 O12 |
| Date: | 2012–07–06 |
| URL: | http://d.repec.org/n?u=RePEc:rtv:ceisrp:239&r=exp |
| By: | Drydakis, Nick (University of Patras) |
| Abstract: | Sexual orientation and employment bias is examined in Cyprus (Republic of Cyprus: Nicosia, Limassol, Larnaca, Paphos) by implementing an experiment for the period 2010-2011. The design is aimed at answering three main questions: Do gay and lesbian people face occupational access constraints and entry wage bias than comparable heterosexuals? Do gay and lesbian people benefit from providing more job-related information? Does the differential treatment between gay/lesbian and heterosexual applicants disappear as the information of the applicants increases? Methodologically, we sent applications to advertised vacancies and we experimented with two information sets the 'sexual orientation' and 'information' of the potential applicants. The estimations suggest that gay and lesbian applicants face significant bias than heterosexual applicants. Moreover, both heterosexual and gay/lesbian applicants gain by providing more job-related information. However, the estimations suggest that the informational premium for sexual orientation minorities could not reduce the discriminatory patterns. The current results indicate that discrimination against sexual orientation minorities in the Cypriot labour market is a matter of preference, not the result of limited information. One strategy the Cypriot government may employ is to try to affect public opinion and people's attitudes towards sexual orientation minorities. This is the first nationwide field experiment in the Cypriot labour market and contributes to the literature as it is the first field study on sexual orientation which tries to disentangle statistical from taste-based discrimination in the labour market. |
| Keywords: | sexual orientation, hiring discrimination, entry wage offers, taste theory of discrimination, statistical theory of discrimination |
| JEL: | C93 J7 J82 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp6684&r=exp |
| By: | Cid, Alejandro; Balsa, Ana |
| Abstract: | Using a randomized trial, we evaluate the impact of a free privately-managed middle school in a poor neighborhood. The research compares over time adolescents randomly selected to enter Liceo-Jubilar and those that were not drawn in the lottery. Besides positive impacts on expectations, we find better educational outcomes in the treatment group relative to control subjects. The features of Liceo-Jubilar -autonomy of management, capacity for innovation, and adaptation to the context- contrast with the Uruguayan highly centralized and inflexible public education system. Our results shed light on new approaches to education that may contribute to improve opportunities for disadvantaged adolescents in developing countries. Unlike the experiences of charter schools in developed countries, Liceo-Jubilar does not have autonomy regarding the formal school curricula nor depends on public funding by any means. |
| Keywords: | Education; Field Experiment; Poverty; Impact Evaluation |
| JEL: | I21 |
| Date: | 2012 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:39913&r=exp |
| By: | Omar Sene (Centre d'Economie de la Sorbonne) |
| Abstract: | The ability to produce local public goods and services such as sharing savings, risk, insurance, sanitation and educational services, is a key fator for development. This ability, however, varies greatly across communities (Ostrom 1990 ; Khwaja 2009). Considering that this ability depends critically on members' willingness to act collectively, this paper investigate whether the level of trust among people measured in different ways can predict the amount of public good produced. I find that (i) trust, as measured by survey questions, has poor predictive power, while (ii) the results from our version of Trust Game are much better predictors of local public-good production. |
| Keywords: | Trust, collective action, provision of local public goods, trust game. |
| JEL: | C93 H41 D71 |
| Date: | 2012–06 |
| URL: | http://d.repec.org/n?u=RePEc:mse:cesdoc:12041&r=exp |
| By: | Alexander K. Koch, (Department of Economics and Business, Aarhus University, Denmark); Julia Nafziger (Department of Economics and Business, Aarhus University, Denmark); Anton Suvorov (CEFIR and New Economic School); Jeroen van de Ven (University of Amsterdam and Tinbergen Institute) |
| Abstract: | Self-administered rewards are ubiquitous. They serve as incentives for personal accomplishments and are widely recommended to increase personal motivation. We show that in a model with time-inconsistent and reference-dependent preferences, self-rewards can be a credible and effective tool to overcome self-control problems. We also characterize the type of self-rewards that can be used, such as vice goods and virtue goods, and analyze which types of goods will be preferred by the individual. |
| Keywords: | Quasi-hyperbolic discounting, reference-dependent preferences, loss aversion, self-control, self-rewards, goals |
| JEL: | D03 D81 D91 |
| Date: | 2012–07–04 |
| URL: | http://d.repec.org/n?u=RePEc:aah:aarhec:2012-14&r=exp |