New Economics Papers
on Experimental Economics
Issue of 2013‒03‒02
twelve papers chosen by

  1. Revealed preferences for climate protection when the purely individual perspective is relaxed: Evidence from a framed field experiment By Löschel, Andreas; Sturm, Bodo; Uehleke, Reinhard
  2. A Theoretical and Experimental Appraisal of Five Risk Elicitation Methods By Paolo Crosetto; Antonio Filippin
  3. REPAYMENT AND EXCLUSION IN A MICROFINANCE EXPERIMENT By Jean-Marie Baland; Lata Gangadharan; Pushkar Maitra; Rohini Somanathan
  4. The Importance of Being Marginal: Gender Differences in Generosity By Stefano DellaVigna; John List; Ulrike Malmendier; Gautam Rao
  5. Time Horizon and Cooperation in Continuous Time By Bigoni, Maria; Casari, Marco; Skrzypacz, Andrzej; Spagnolo, Giancarlo
  6. Impact of Third-Party Enforcement of Contracts in Agricultural Markets - A Field Experiment in Vietnam By Saenger, Christoph; Torero, Maximo; Qaim, Matin
  7. The behavioralist goes to school: Leveraging behavioral economics to improve educational performance By Steven Levitt; John List; Susanne Neckermann; Sally Sadoff
  8. Conditional cooperation among the poor: a new profile? By Jonathan Gheyssens; Isabel Günther
  9. The Non-Equivalence of Labor Market Taxes: A Real-Effort Experiment By Matthias Weber; Arthur Schram
  10. Choice overload, coordination and inequality: three hurdles to the effectiveness of the compensation mechanism? By Estelle Midler; Charles Figuières; Marc Willinger
  11. When is Tit-For-Tat unbeatable? By Peter Duersch; Joerg Oechssler; Burkhard Schipper
  12. Effectiveness and Spillovers of Online Sex Education: Evidence from a Randomized Evaluation in Colombian Public Schools By Alberto Chong; Marco Gonzalez-Navarro; Dean Karlan; Martin Valdivia

  1. By: Löschel, Andreas; Sturm, Bodo; Uehleke, Reinhard
    Abstract: In this paper, we investigate the real demand for climate protection when the purely individual perspective of existing revealed preference studies is relaxed. This is achieved in two treatments; first, we determine the information subjects receive about the demand revealed by other subjects in a similar decision making situation, second, collective action is implemented whereby all subjects are required to purchase the group's median quantity at a given price. Participants in the experiment were offered the opportunity to contribute to climate protection by purchasing European Union Allowances. Allowances purchased were withdrawn from the European Emissions Trading Scheme. In our experiment, information about other subjects' behaviour has no treatment effect on the demand for climate protection. Under collective action however, the probability of purchasing allowances is higher compared to the reference treatment situation, an individual contribution mechanism. Furthermore, we observe a strong correlation between subjects' demand and their expectations about other participants' behaviour. When collective action is not available, subjects' expectations are consistent with free rider behaviour. --
    Keywords: experimental economics,demand for climate protection,climate change,willingness to pay
    JEL: Q51 Q54 C93
    Date: 2013
  2. By: Paolo Crosetto (Max Planck Institute for Economics, Jena); Antonio Filippin (University of Milan, Department of Economics, and Institute for the Study of Labor (IZA))
    Abstract: We perform a comparative analysis of five incentivized tasks used to elicit risk preferences. Theoretically, we compare the elicitation methods in terms of completeness of the range of the estimates as well as their precision, the likelihood of triggering loss aversion, and problems arising when multiple choices are required. Using original data from a homogeneous population, we experimentally investigate the distribution of estimated risk preferences, whether they differ by gender, and the complexity of the tasks. We do so using both non-parametric tests and a structural model estimated with maximum likelihood. We find that the estimated risk aversion parameters vary greatly across tasks and that gender differences appear only when the task is more likely to trigger loss aversion.
    Keywords: Risk attitudes, Elicitation methods, Experiment
    JEL: C81 C91 D81
    Date: 2013–02–19
  3. By: Jean-Marie Baland (University of Namur BREAD and CEPR); Lata Gangadharan (Monash University); Pushkar Maitra (Monash University); Rohini Somanathan (Department of Economics, Delhi School of Economics, Delhi, India)
    Abstract: Microfinance groups often engage in a variety of collective activities not directly related to credit. Groups can sanction members who default on their loans by excluding them from these activities. Our experiment is designed to explore the effectiveness of such sanctions in improving repayment incentives. Groups of 10 members are provided with joint-liability loans for a specific investment project. If groups repay their loans, contributing members have the option of excluding other members and those that remain play a public goods game. By varying loan sizes across groups and allowing for heterogeneous gains from the public good within groups, we identify the role of incentives in repayment decisions. In line with theoretical predictions, groups with the largest repayment burdens have the highest default rates and within groups, individual decisions to contribute to loan repayment depend on gains from the public good game.
    Keywords: Microfinance, Joint Liability, Social Exclusion, Public Good, Heterogeneous Pro- ductivity, Laboratory Experiments.
    JEL: C9 G21 O12
    Date: 2013–02
  4. By: Stefano DellaVigna; John List; Ulrike Malmendier; Gautam Rao
    Abstract: Do men and women have different social preferences? Previous findings are contradictory. We provide a potential explanation using evidence from a field experiment. In a door-to-door solicitation, men and women are equally generous, but women become less generous when it becomes easy to avoid the solicitor. Our structural estimates of the social preference parameters suggest an explanation: women are more likely to be on the margin of giving, partly because of a less dispersed distribution of altruism. We find similar results for the willingness to complete an unpaid survey: women are more likely to be on the margin of participation.
    Date: 2013
  5. By: Bigoni, Maria (University of Bologna); Casari, Marco (University of Bologna); Skrzypacz, Andrzej (Stanford University); Spagnolo, Giancarlo (SITE, Stockholm School of Economics and University of Rome "Tor Vergata")
    Abstract: When subjects interact in continuous time, their ability to cooperate may dramatically increase. In an experiment, we study the impact of different time horizons on cooperation in (quasi) continuous time prisoner's dilemmas. We find that cooperation levels are similar or higher when the horizon is deterministic rather than stochastic. Moreover, a deterministic duration generates different aggregate patterns and individual strategies than a stochastic one. For instance, under a deterministic horizon subjects show high initial cooperation and a strong end-of-period reversal to defection. Moreover, they do not learn to apply backward induction but to postpone defection closer to the end.
    JEL: C72 C73 C91 C92 D74
    Date: 2013–02
  6. By: Saenger, Christoph; Torero, Maximo; Qaim, Matin
    Abstract: We study the effect of alleviating information asymmetry regarding product quality that is widespread in developing-country agricultural markets. Opportunistic buyers may underreport quality levels back to farmers to reduce the price they have to pay. In response, farmers may curb investment, negatively affecting farm productivity. In an experiment, we entitle randomly selected smallholder dairy farmers in Vietnam to independently verify milk testing results. Treatment farmers use 13 percent more inputs and also increase their output. We show that the buying company had initially not underreported product quality, which is why third-party monitoring led to a Pareto improvement in the supply chain.
    Keywords: Agribusiness, Industrial Organization, Institutional and Behavioral Economics, International Development, Livestock Production/Industries, C93, D86, L14, O13, Q12, Q13,
    Date: 2013–01
  7. By: Steven Levitt; John List; Susanne Neckermann; Sally Sadoff
    Abstract: Research on behavioral economics has established the importance of factors such as reference dependent preferences, hyperbolic preferences, and the value placed on non-financial rewards. To date, these insights have had little impact on the way the educational system operates. Through a series of field experiments involving thousands of primary and secondary school students, we demonstrate the power of behavioral economics to influence educational performance. Several insights emerge. First, we find that incentives framed as losses have more robust effects than comparable incentives framed as gains. Second, we find that non-financial incentives are considerably more cost-effective than financial incentives for younger students, but were not effective with older students. Finally, and perhaps most importantly, consistent with hyperbolic discounting, all motivating power of the incentives vanishes when rewards are handed out with a delay. Since the rewards to educational investment virtually always come with a delay, our results suggest that the current set of incentives may lead to under-investment. For policymakers, our findings imply that in the absence of immediate incentives, many students put forth low effort on standardized tests, which may create biases in measures of student ability, teacher value added, school quality, and achievement gaps.
    Date: 2013
  8. By: Jonathan Gheyssens (ETH Zürich); Isabel Günther (ETH Zürich)
    Abstract: On the basis of a conditional contribution experiment conducted in Benin and Uganda, we argue that a conditional u-shaped profile exists, at least in poor communities. Under this profile, individuals invest considerably in public goods when nobody else does, reduce their commitment in reaction to positive group participation and turn into conditional cooperators after a threshold of others’ participation is reached. For the understanding of the dynamics of repeated cooperation the implications of this group of u-shaped cooperators might be important.
    Keywords: Conditional cooperation; Public goods; Experiments; sub-Saharan Africa
    Date: 2013–02–22
  9. By: Matthias Weber (CREED, University of Amsterdam); Arthur Schram (CREED, University of Amsterdam)
    Abstract: In a competitive market with taxed transactions, it does not matter under full rationality which side of the market legally transfers the taxes. In the labor market, a tax levied on employers and a corresponding income tax levied on employees are equivalent. With boundedly rational agents, this equivalence is no longer obvious. If people react differently to the two taxes this has direct impact on policy making, political economics, and optimal taxation theory. This paper examines how people react to these duties in a real effort laboratory experiment. We study the differential effects of the two types of taxes on preferences concerning the size of the public sector, subjective well-being, labor supply, and on-the-job performance. To elicit public-sector-size preferences in the laboratory we introduce a novel, incentive compatible approach. Our findings suggest that employer-side taxes induce preferences for a larger public sector. Our findings also sugges t that subjective well-being is higher while both labor supply and on-the-job performance are lower when the taxes are levied on employers. Furthermore, there are gender effects, e.g., women's subjective well-being appears to be more sensitive to framing than men's, while men's labor supply is more sensitive to framing than women's.
    Keywords: tax perception; liability side equivalence; political economy; labor supply
    JEL: C91 H22 H30
    Date: 2013–02–19
  10. By: Estelle Midler; Charles Figuières; Marc Willinger
    Abstract: In this paper we test the effectiveness of a compensation mechanism when a negative externality is produced. It allows agents suffering from the negative externality to compensate those who reduce its production. Transfers are implemented via a two-stage design which is an adaptation of Varian’s mechanism. It has been previously tested in the lab with different types of games, and its effectiveness turns out to depend on the experiment, for unclear reasons which we try to decipher in this paper. Three possible explanations, choice overload, mere coordination and inequality, are proposed and studied. We show that, other things equal, the larger the size of the strategy space, the lower the mechanism’s efficiency (choice overload effect). Perhaps surprisingly, the data show that the appearance of additional equilibria does not jeopardize effectiveness (no mere coordination effect). Finally, inequality of outcomes plays a key role (fairness effect).
    Date: 2013–02
  11. By: Peter Duersch; Joerg Oechssler; Burkhard Schipper (Department of Economics, University of California Davis)
    Abstract: We characterize the class of symmetric two-player games in which tit-for-tat cannot be beaten even by very sophisticated opponents in a repeated game. It turns out to be the class of exact potential games. More generally, there is a class of simple imitation rules that includes tit-for-tat but also imitate-the-best and imitate-if-better. Every decision rule in this class is essentially unbeatable in exact potential games. Our results apply to many interesting games including all symmetric 2x2 games, and standard examples of Cournot duopoly, price competition, public goods games, common pool resource games, and minimum effort coordination games.
    Keywords: Imitation, tit-for-tat, decision rules, learning, exact potential games, symmetric games, repeated games, relative payoffs, zero-sum games
    JEL: C72 C73 D43
    Date: 2013–01–22
  12. By: Alberto Chong; Marco Gonzalez-Navarro; Dean Karlan; Martin Valdivia
    Abstract: Sexual health problems cause negative externalities from contagious diseases and public expenditure burdens from teenage pregnancies. In a randomized evaluation, we find that an online sexual-health education course in Colombia leads to significant impacts on knowledge and attitudes and, for those already sexually active, fewer STIs. To go beyond self-reported measures, we provide condom vouchers six months after the course, and find a 9 percentage point increase in redemption. We find no evidence of spillovers to untreated classrooms, but we do observe a social reinforcement effect: the impact intensifies when a larger fraction of a student’s friends is also treated.
    JEL: I1 I2 O12
    Date: 2013–02

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