New Economics Papers
on Experimental Economics
Issue of 2012‒11‒03
eleven papers chosen by

  1. Ethnic discrimination and signals of trustworthiness in an online market: Evidence from two field experiments By Wojtek Przepiorka
  2. Naive Responses to Kind Delegation By Gerald Eisenkopf; Urs Fischbacher
  3. Strategic commitment and cooperation in experimental games of strategic complements and substitutes By Embrey Matthew; Mengel Friederike; Peeters Ronald
  4. The Effect of Social Fragmentation on Public Good Provision: an Experimental Study By Surajeet Chakravarty; Miguel A. Fonseca
  5. An Experiment on the Causes of Bank Run Contagions By Surajeet Chakravarty; Miguel A. Fonseca; Todd Kaplan
  6. Loss Aversion and Consumption Choice: Theory and Experimental Evidence By Karle, Heiko; Kirchsteiger, Georg; Peitz, Martin
  7. The Role of Seed Money and Threshold Size in Optimizing Fundraising Campaigns: Past Behavior Matters! By G. A. VERHAERT; D. VAN DEN POEL
  8. The Short-Run and Long-Run Effects of Behavioral Interventions: Experimental Evidence from Energy Conservation By Hunt Allcott; Todd Rogers
  9. Probably Not the Best Lager in the World: Effect of Brands on Consumers’ Preferences in a Beer Tasting Experiment By Matteo Maria Galizzi; Christian Garavaglia
  10. Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity By Snir, Avichai; Levy, Daniel; Gotler, Alex; Chen, Haipeng (Allan)
  11. The lowest-bid all-pay-auction as a fund-raising mechanism: Theoretically optimal but behaviorally fragile By Damianov Damian S.; Peeters Ronald

  1. By: Wojtek Przepiorka (University of Oxford)
    Abstract: Results from two field experiments which were designed to identify possible ethnic discrimination on a German internet auction platform are discussed. A first set of results is produced by a secondary analysis of an earlier experiment. The second experiment additionally tests whether costly signals can help to overcome trust problems between buyers and sellers in online markets. The evidence is rather mixed with respect to ethnic discrimination, and it does not support the signaling hypothesis.
    Keywords: Discrimination, Costly signaling, Trust, Online market, Field experiment
    JEL: C93 D82 J15 L81
    Date: 2012–10
  2. By: Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany); Urs Fischbacher (Department of Economics, University of Konstanz, Germany)
    Abstract: People do not like to delegate the distribution of favors. To explain this reluctance we disentangle reward motives in an experiment, in which an investor can directly transfer money to a trustee or delegate this decision to another investor. Varying the transfer values of investor and delegate, we find that the trustee’s rewards follow a rather simple pattern. In all situations, both investors are rewarded, but the person who ultimately decides gets a higher reward. Unlike studies on the punishment of delegated unkind decisions our results do not reveal sophisticated reward behavior that takes the responsibility of people into account.
    Keywords: Delegation, trust, reciprocity, intentions, experiment
    JEL: C91 D63
    Date: 2012–08–02
  3. By: Embrey Matthew; Mengel Friederike; Peeters Ronald (METEOR)
    Abstract: We study the impact of strategic commitment on cooperation in indefinitely repeated games ofstrategic substitutes (Cournot) and complements (Bertrand) using laboratory experiments. Overall,strategic commitment has no effect on cooperation with strategic substitutes and a negative onewith strategic complements. In the absence of strong strategic commitment, we find morecooperation in the complements game than in the substitutes game. However, when subjects are morecommitted to initial plans, a higher level of cooperation is achieved with strategic substitutes.These results cannot be explained by standard risk-dominance or renegotiation considerations, butare consistent with a notion of fear of miscoordination based on minmax regret.
    Keywords: microeconomics ;
    Date: 2012
  4. By: Surajeet Chakravarty (Department of Economics, University of Exeter); Miguel A. Fonseca (Department of Economics, University of Exeter)
    Abstract: We study the role of social identity in determining the impact of social frag- mentation on public good provision using laboratory experiments. We nd that as long as there is some degree of social fragmentation, increasing it leads to lower public good provision. This is mainly because the share of those who contribute fully to the public good diminishes with social fragmentation, while the share of free-riders is unchanged, which suggests social identity preferences drive our result, as opposed to self-interest. Importantly, socially homogeneous groups do not generate the highest contributions: some social diversity is actually welfare-improving. Finally, social fragmentation is felt differently for visible minorities, whose contributions are higher than minority groups whose actions are not identiable.
    Keywords: Social Identity, Public Goods, Social Fragmentation, Experiments.
    JEL: C92 D02 D03 H41
    Date: 2012
  5. By: Surajeet Chakravarty (Department of Economics, University of Exeter); Miguel A. Fonseca (Department of Economics, University of Exeter); Todd Kaplan (Department of Economics, University of Exeter)
    Abstract: To understand the mechanisms behind bank run contagions, we conduct bank run experiments in a modified Diamond-Dybvig setup with two banks (Left and Right). The banks' liquidity levels are either linked or independent. Left Bank depositors see their bank's liquidity level before deciding. Right Bank depositors only see Left Bank withdrawals before deciding. We find that Left Bank depositors' actions signicantly affect Right Bank depositors' behavior, even when liquidities are independent. Furthermore, a panic may be a one-way street: an increase in Left Bank withdrawals can cause a panic run on the Right Bank, but a decrease cannot calm markets.
    Keywords: bank runs, contagion, experiment, multiple equilibria.
    JEL: C72 C92 D43
    Date: 2012
  6. By: Karle, Heiko; Kirchsteiger, Georg; Peitz, Martin
    Abstract: In this paper we analyze a consumer choice model with price uncertainty, loss aversion, and expectation-based reference points. The implications of this model are tested in an experiment in which participants have to make a consumption choice between two sandwiches. We make use of the fact that participants differ in their reported taste difference between the two sandwiches and the degree of loss aversion which we measure separately. We find that more loss-averse participants are more likely to opt for the cheaper sandwich provided that their reported taste difference is below some threshold, confirming the model’s predictions.
    Keywords: Contextual Reference Points; Loss Aversion; Reference-Dependent Utility
    JEL: C91 D01 D11 D83
    Date: 2012–10
    Abstract: Fundraising appeals often announce that some funds have already been raised in order to reach a certain threshold. This article reports results from a field experiment examining the role of seed money (i.e., no, 50%, and 67%) in combination with threshold size (i.e., low versus high) in fundraising appeals across different targets (i.e., prospects, low fidelity donors, and high fidelity donors). Based on a 2x3x3 between-subjects design we investigate charitable behavior of 25,617 households. Findings reveal a novel qualification of using seed contributions as well as the necessity of a communication differentiation by considering past behavior. We show that seed money works well if the threshold is high but with a low threshold it could have a baleful influence. More specifically, in campaigns targeted at prospects and low fidelity donors, the announcement of seed money increases donations regardless of the threshold level. However, in campaigns targeted at high fidelity donors, seed money is an effective strategy only when the threshold is rather high.
    Keywords: Charitable giving, Differentiated communication, Field experiments, Fundraising, Seed money, Threshold size
    Date: 2012–09
  8. By: Hunt Allcott; Todd Rogers
    Abstract: Interventions to affect repeated behaviors, such as smoking, exercise, or workplace effort, can often have large short-run impacts but uncertain or disappointing long-run effects. We study one part of a large program designed to induce energy conservation, in which home energy reports containing personalized feedback, social comparisons, and energy conservation information are being repeatedly mailed to more than five million households across the United States. We show that treatment group households reduce electricity use within days of receiving each of their initial few reports, but these immediate responses decay rapidly in the months between reports. As more reports are delivered, the average treatment effect grows but the high-frequency pattern of action and backsliding attenuates. When a randomly-selected group of households has reports discontinued after two years, the effects are much more persistent than they had been between the initial reports, implying that households have formed a new "capital stock" of physical capital or consumption habits. We show how assumptions about long-run persistence can be important enough to change program adoption decisions, and we illustrate how program design that accounts for the capital stock formation process can significantly improve cost effectiveness.
    JEL: D03 D11 L97 Q41
    Date: 2012–10
  9. By: Matteo Maria Galizzi; Christian Garavaglia
    Abstract: We investigate the role and impact of exposure to brands in consumers’ evaluations of lager beers, and explore its relation with exposure to intrinsic information. The first objective is to study the ability of young consumers to identify their preferred beer. The second is to explore the role played by brands, under two distinct perspectives: i) whether the effect of exposure to brands is either generalized or specific to preferred beers; ii) the ability of brands to induce perception of sensory characteristics. We propose a two-stage beer tasting experiment, exploiting information both on within-subject differences across different stages, and between-subjects differences across treatments. In each stage, participants’ evaluations for three beers was elicited using an incentive-compatible mechanism. The first stage was a blind tasting, while in the second stage beers were presented together with the bottles. Our main results are the following. Consumers seem unable to identify their preferred lager beer in a blind taste. Brands affect consumers’ evaluations: after brands are revealed, average evaluations change. Although they are stronger on most preferred brands, brand effects are generalized. Finally, extrinsic information on brands also affects and induces the description of sensorial perceptions of intrinsic characteristics of beers.
    Date: 2012–10
  10. By: Snir, Avichai; Levy, Daniel; Gotler, Alex; Chen, Haipeng (Allan)
    Abstract: There is evidence that 9-ending prices are more common and more rigid than other prices. We use data from three sources: a laboratory experiment, a field study, and a large US supermarket chain, to study the cognitive underpinning and the ensuing asymmetry in rigidity associated with 9-ending prices. We find that consumers use 9-endings as a signal for low prices, and that this signal interferes with price information processing. Consequently, consumers are less likely to notice a bigger price when it ends with 9, or a price increase when the new price ends with 9, in comparison to a situation where the prices end with some other digit. We also find that retailers respond strategically to this consumer bias by setting 9-ending prices more often after price increases than after price decreases. 9-ending prices, therefore, usually increase only if the new prices are also 9-ending. Consequently, there is an asymmetry in the rigidity of 9-ending prices: they are more rigid than non 9-ending prices upward but not downward.
    Keywords: Price Points; Price Recall; Sticky Prices; Rigid Prices; Price Adjustment; 9-Ending Prices; Psychological Prices
    JEL: L16 D03 M31 E31 D80 C93 C91
    Date: 2012–10–26
  11. By: Damianov Damian S.; Peeters Ronald (METEOR)
    Abstract: We study the optimal design of mechanisms for the private provision of public goods in a simplesetting in which donors compete for a prize of commonly known value. The optimal mechanism in thismodel is the lowest-price all-pay auction – a mechanism in which the highest bidder wins but allbidders pay the lowest bid. The highest amount for the public good is generated in the unique,symmetric, mixed-strategy equilibrium of this mechanism. We derive the equilibrium distributionfunction in a closed form for any number of bidders. We then compare various all-pay auctions andlotteries in lieu of voluntary contributions with a battery of laboratory experiments. Theperformance of the optimal mechanism depends on the level of competition. The lowest-price all-payauction dominates the remaining auction formats with three competing bidders, but is inferior tothe own-pay auction and the lottery with only two bidders.
    Keywords: public economics ;
    Date: 2012

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