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on Experimental Economics |
| By: | Matthew W. McCarter (Argyros School of Business and Economics, Chapman University); Anya C. Samak (School of Human Ecology, University of Wisconsin-Madison); Roman M. Sheremeta (Argyros School of Business and Economics, Chapman University) |
| Abstract: | It is common in organizational life to be simultaneously involved in multiple collective actions. These collective actions may be modeled using public good dilemmas. The developing social dilemma literature has two perspectives – the “divided loyalties” and “conditional cooperation” perspectives – that give opposite predictions about how individuals will behave when they simultaneously play two identical public good games. The current paper creates consensus between these social dilemma perspectives by examining cooperative behavior of participants interacting in two public good games with either different or the same group members. In each round, individuals have a common budget constraint across the two games. In support of the conditional cooperator’s perspective of social dilemmas, we find that playing two games with different, rather than same, group members increases overall contributions. Over the course of the experiment, participants playing two games with different group members shift their contributions significantly more often toward more cooperative public good games than participants playing with the same group members. |
| Keywords: | cooperation, conditional cooperation, public good, experiments, group composition |
| JEL: | C72 C73 C91 D03 H41 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:13-08&r=exp |
| By: | Spiros Bougheas (School of Economics, University of Nottingham); Jeroen Nieboer (School of Economics, University of Nottingham); Martin Sefton (School of Economics, University of Nottingham) |
| Abstract: | We investigate experimentally the effect of consultation (unincentivized advice) on choices under risk in an incentivized investment task. We compare these choices to two benchmark treatments: one with isolated individual choices, and a second with group choice after communication. Our benchmarking treatments replicate earlier findings that groups take more risk than individuals in the investment task . In our consultation treatments we find evidence of peer effects: there is significant correlation of decisions within the peer group. However, average risk taking is not significantly different from the benchmark treatment with isolated individual choices. This latter result underlines the importance of payoff-commonality for bringing about higher risk-taking in groups. |
| Keywords: | experimental economics, choice under risk, advice, social influence, peer effects |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:not:notcdx:2013-01&r=exp |
| By: | Brice Corgnet; Roberto Hernán; Praveen Kujal; David Porter |
| Abstract: | Can “house money” explain asset market bubbles? We test this hypothesis in an asset experiment with a certain dividend cash and shares is given to subjects initial portfolios are constructed using subject that bubbles still occur; however trading volumes are significantly abated and the dispersion of earnings is significantly lower when subjects earn their starting endowments. We investigate the role of cognitive ability in accounting for the differences in earnings distribution across treatments by using the Cognitive Reflection Test (CRT). We find that high CRT subjects earned more money on average than the initial value of their portfolio while low CRT subjects earned less. Subjects with low CRT scores were net purchasers (sellers) of shares when the price was above (below) fundamental value while the opposite was true for subjects with high CRT scores. |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:cte:werepe:we1304&r=exp |
| By: | Maria De Paola; Francesca Gioia; Vincenzo Scoppa (Dipartimento di Scienze Economiche, Statistiche e Finanziarie, Università della Calabria) |
| Abstract: | We analyze how overconfidence is affected by superstitious beliefs and emotions induced by positive and negative stimuli in a field experiment involving about 700 Italian students who were randomly assigned to numbered seats in their written examination sessions. According to widespread superstitions, some numbers are considered lucky, while others are considered unlucky. At the end of the examination, we asked students the grade they expected to get. We find that students tend to be systematically overconfident and that their overconfidence is positively affected by being assigned to a lucky number. Interestingly, males and females react differently: on the one hand, females tend to expect lower grades when assigned to unlucky numbers, while they are not affected by being assigned to lucky numbers. On the other hand, males are not affected by being assigned to unlucky numbers but expect higher grades when assigned to lucky numbers. |
| Keywords: | Expectations, Grade, Overconfidence, Emotions, Superstition |
| JEL: | D01 D83 D03 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:clb:wpaper:201303&r=exp |
| By: | Giovanna Devetag; Sibilla Di Guida; Luca Polonio |
| Abstract: | We analyze subjects' eye movements while they make decisions in a series of one-shot games. The majority of them perform a partial and selective analysis of the payoff matrix, often ignoring the payoffs of the opponent and/or paying attention only to specific cells. Our results suggest that subjects apply boundedly rational decision heuristics that involve best responding to a simplification of the decision problem, obtained either by ignoring the other players' motivations or by considering them only for a subset of outcomes. Finally, we find a correlation between types of eye movements observed and choices in the games. |
| Keywords: | one-shot games, eye-tracking, similarity, categorization, focal points, individual behavior, experimental economics, behavioral economics |
| Date: | 2013–02–13 |
| URL: | http://d.repec.org/n?u=RePEc:ssa:lemwps:2013/05&r=exp |
| By: | Nicholas Bloom; James Liang; John Roberts; Zhichun Jenny Ying |
| Abstract: | About 10% of US employees now regularly work from home (WFH), but there are concerns this can lead to "shirking from home." We report the results of a WFH experiment at CTrip, a 16,000-employee, NASDAQ-listed Chinese travel agency. Call center employees who volunteered to WFH were randomly assigned to work from home or in the office for 9 months. Home working led to a 13% performance increase, of which about 9% was from working more minutes per shift (fewer breaks and sick-days) and 4% from more calls per minute (attributed to a quieter working environment). Home workers also reported improved work satisfaction and experienced less turnover, but their promotion rate conditional on performance fell. Due to the success of the experiment, CTrip rolled-out the option to WFH to the whole firm and allowed the experimental employees to re-select between the home or office. Interestingly, over half of them switched, which led to the gains from WFH almost doubling to 22%. This highlights the benefits of learning and selection effects when adopting modern management practices like WFH. |
| Keywords: | working from home, organization, productivity, field experiment, and China |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:cep:cepdps:dp1194&r=exp |
| By: | Kohsaka Youki (Center for Finance Research, Waseda University); Grzegorz Mardyla (Faculty of Economics, Kinki University); Shinji Takenaka (Japan Center for Economic Research); Yoshiro Tsutsui (Graduate School of Economics, Osaka University) |
| Abstract: | We experimentally investigate the existence of and possible origin of the disposition effect. Our approach has three distinct characteristics: Firstly, we created an experimental environment that closely mimics a real stock market and were thus able to obtain and analyze trading behavior data that accurately depicts actual individual investor trading behavior. Secondly, based on a questionnaire survey we conducted during the experiment, we were able to pinpoint each individual participantfs reference point. This, in effect, allowed us to verify an independent hypothesis of the existence of the disposition effect. such an approach differs from the extant literature, where only a joint hypothesis has been examined so far. Thirdly, we measured individual loss aversion coefficients and directly tested whether loss aversion is a cause of the disposition effect. Our results indicate both the existence of the disposition effect as well as prospect theoryfs loss aversion being one of its sources. |
| Keywords: | disposition effect, loss aversion, investor behavior, experimental economics |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:osk:wpaper:1302&r=exp |
| By: | Bezu, Sosina (School of Economics and Business Norwegian University of Life Sciences); Holden, Stein T. (School of Economics and Business Norwegian University of Life Sciences) |
| Abstract: | Field experiments combining dictator games with stated preference questions are used to elicit within subject and between subject sharing behavior with known family members and anonymous villager. A simple theoretical model incorporating social preferences, social distance and inter-dependent preferences is developed. The results show that generosity in form of probability of giving and amounts given are much lower towards anonymous villagers than to known family members. The probability of giving to the spouse is positively correlated with probability of giving to anonymous villager. Husbands and wives receiving positive amounts from their spouses (without knowing), were also more likely to give positive amounts to their spouses than those that received nothing from their spouses. Receiving positive amounts from spouse was uncorrelated with giving behavior towards anonymous villager. How sharing behavior is correlated with marriage type (parental arrangement, parental and bride agreement, love marriage, and kidnapping marriage), and other socioeconomic characteristics was assessed separately for husbands and wives to explore the sensitivity of responses to such socio-economic characteristics. |
| Keywords: | Generosity; social distance; within-family generosity |
| JEL: | C93 D03 O12 |
| Date: | 2013–01–15 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:nlsclt:2013_001&r=exp |
| By: | Charness, Gary; Masclet, David; Villeval, Marie Claire |
| Abstract: | Unethical behavior within organizations is not rare. We investigate experimentallythe role of status-seeking behavior in sabotage and cheating activities aiming at improving one’sperformance ranking in a flat-wage environment. We find that average effort is higher whenindividuals are informed about their relative performance. However, ranking feedback alsofavors disreputable behavior. Some individuals do not hesitate to incur a cost to improve theirrank by sabotaging others’ work or by increasing artificially their own performance. Introducingsabotage opportunities has a strong detrimental effect on performance. Therefore, rankingincentives should be used with care. Inducing group identity discourages sabotage among peersbut increases in-group rivalry. |
| Keywords: | Economics, Status, ranking, feedback, sabotage, doping, competitive preferences, experiment |
| Date: | 2013–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:qt3858888w&r=exp |
| By: | Weng, Qian (Department of Economics, School of Business, Economics and Law, Göteborg University); Carlsson, Fredrik (Department of Economics, School of Business, Economics and Law, Göteborg University) |
| Abstract: | Common identity and peer punishment have been identified as important means to reduce free riding and to promote cooperation in teamwork settings. This paper examines the relative importance of these two mechanisms, as well as the importance of income distribution in team cooperation. In a repeated public good experiment, conditions vary among different combinations of homogenous or heterogeneous endowment, strong or weak identity, and absence or presence of peer punishment. We find that without punishment, strong identity can counteract the negative impact of endowment heterogeneity on cooperation. Moreover, punishment increases cooperation irrespective of income distribution and identity strength, and cooperation is similar across all treatments with punishment. These findings provide important implications for management policy makers in organizations: implementing ex ante income heterogeneity within teams should be done with caution, and a very strong peer punishment mechanism is more effective in enhancing cooperation over common identity when both are viable.<p> |
| Keywords: | Endowment distribution; identity; punishment; cooperation; public goods experiment |
| JEL: | C91 D63 H41 M54 |
| Date: | 2013–01–23 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:gunwpe:0551&r=exp |
| By: | Catherine Roux; Christian Thöni |
| Abstract: | We explore targeted punishment as an explanation for collusion among many firms. In a series of Cournot oligopoly experiments with various numbers of firms, we compare production decisions with and without the possibility to target punishment at specific market participants. We find strong evidence that targeted punishment enables firms to establish and maintain collusion. More so, we find that the collusive effect of targeted punishment is even stronger in markets with more competitors, suggesting a reversal of the conventional wisdom that collusion is easier the fewer the firms. |
| Keywords: | Cournot oligopoly; Experiments; Collusion; Targeted punishment |
| JEL: | L13 K21 C91 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:lau:crdeep:13.02&r=exp |
| By: | Charness, Gary; Grieco, Daniela |
| Abstract: | Creativity is a complex and multi-dimensional phenomenon that has hardly been considered byeconomists, despite a great deal of economic importance. This paper presents a series ofexperiments where subjects face creativity tasks where, in one case, ex-ante goals and constraintsare imposed on their answers, and in the other case no restrictions apply. The effects of financialincentives in stimulating creativity in both types of tasks is then tested, together with the impactof personal features like risk and ambiguity aversion. Our findings show that, in general,financial incentives affect “in-box†(constrained) creativity, but do not facilitate “blue skyâ€(unconstrained) creativity. However, in the latter case incentives do play a role for ambiguityaverseagents, who tend to be significantly less creative and seem to need extrinsic motivation toexert effort in a task whose odds of success they don’t know. We do find that measures ofcreative style, sensation-seeking preferences, and past involvement in artistic endeavors arerelated to our creativity score, but do not find any difference across gender for either form ofcreativity. |
| Keywords: | Economics, creativity, incentives, ambiguity, constraints, ex-ante goals |
| Date: | 2013–02–14 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucsbec:qt4mr6p1d5&r=exp |
| By: | Pablo Branas-Garza (Business School, Middlesex University London, London, UK and Economic Science Institute, Chapman University); Jaromir Kovarik (Dpto. Fundamentos Analisis Economico I & BRiDGE, University of the Basque Country, Bilbao, Spain); Levent Neyse (GLOBE: Department of Economics, Universidad de Granada, Granada, Spain) |
| Abstract: | Gene-culture co-evolution emphasizes the joint role of culture and genes for the emergence of altruistic and cooperative behaviors and behavioral genetics provides estimates of their relative importance. However, these approaches cannot assess which biological traits determine altruism or how. We analyze the association between altruism in adults and the exposure to prenatal sex hormones, using the second-to-fourth digit ratio. We find an inverted U-shaped relation for left and right hands, which is very consistent for men and less systematic for women. Subjects with both high and low digit ratios give less than individuals with intermediate digit ratios. We repeat the exercise with the same subjects seven months later and find a similar association, even though subjects' behavior differs the second time they play the game. We then construct proxies of the median digit ratio in the population (using more than 1000 different subjects), show that subjects' altruism decreases with the distance of their ratio to these proxies. These results provide direct evidence that prenatal events contribute to the variation of altruistic behavior and that the exposure to fetal hormones is one of the relevant biological factors. In addition, the findings suggest that there might be an optimal level of exposure to these hormones from social perspective. |
| Keywords: | Altruism, Prosociality, Prenatal Sex Hormones, Digit Ratio, Genoeconomics |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:13-09&r=exp |
| By: | Nekby, Lena (Department of Economics, Stockholm University); Skogman Thoursie, Peter (IFAU - Institute for Evaluation of Labour Market and Education Policy); Vahtrik, Lars (Department of Economics, Stockholm University) |
| Abstract: | A unique examination strategy in first year microeconomics courses is used to test for gender differences in preferences in examination behavior. Students have the possibility of attaining a seminar bonus on the final exam for near-perfect seminar attendance and are given two voluntary initial quizzes during the semester. At the final exam, the scores received on initial quizzes can either be accepted as is, or students can attempt to improve their marks by answering similar quiz questions on the exam. Results suggest that female students are more likely to take initial quizzes and receive a seminar bonus but are less likely to re-take quiz-questions on the final exam. These results suggest higher risk aversion among female students relative to male students, behavioral differences with tangible implications in terms of final grades on the course. |
| Keywords: | Gender; preferences; risk aversion; overconfidence |
| JEL: | A12 A14 J16 |
| Date: | 2013–01–10 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:ifauwp:2013_001&r=exp |
| By: | Fungácová, Zuzana (BOFIT); Turk Ariss, Rima (BOFIT); Weill, Laurent (BOFIT) |
| Abstract: | This paper introduces the “Excessive Liquidity Creation Hypothesis,” whereby a rise in a bank’s core liquidity creation activity increases its probability of failure. Russia experienced many bank failures over the past decade, making it an ideal natural field experiment for testing this hypothesis. Using Berger and Bouwman’s (2009) liquidity creation measures, we find that excessive liquidity creation significantly increased the probability of bank failure during our observation period (2000-2007). This finding survives multiple robustness checks. Our results further suggest that regulatory authorities can mitigate systemic distress and reduce the costs to society from bank failures through early identification and enhanced monitoring of excessive liquidity creators. |
| Keywords: | liquidity creation; bank failures; |
| JEL: | G21 G28 |
| Date: | 2013–01–21 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:bofitp:2013_002&r=exp |
| By: | Hsiu-Hsin Ko (National University of Kaohsiung); Masao Ogaki |
| Abstract: | We use a residual-based bootstrap method to re-examine the finding of the Granger causality relationship from exchange rates to fundamentals in Engel and West (Exchange rate and fundamentals, Journal of Political Economy 2005, 113 (3), 485–517), in which the evidence for the relation is taken as evidence for the present-value model for exchange rates. The test results are against the previous findings. The Monte Carlo experiment results suggest that the causality test implemented in the previous study tends to spuriously reject null hypotheses. Thus, the existing evidence for the present value model for exchange rates is not robust. |
| Keywords: | Bootstrap, Granger causality, exchange rates, fundamentals |
| JEL: | F30 F31 C32 |
| Date: | 2013–02 |
| URL: | http://d.repec.org/n?u=RePEc:roc:rocher:577&r=exp |
| By: | Ignacio Abásolo (Departamento de Economía de las Instituciones, Estadística Económica y Econometría, Facultad de Ciencias Económicas y Empresariales. Universidad de La Laguna, Spain); Aki Tsuchiya (Department of Economics, The University of Sheffield) |
| Abstract: | Four kinds of distributional preferences are explored: inequality aversion in health, inequality aversion in income, risk aversion in health, and risk aversion in income. Face to face interviews of a representative sample of the general public are undertaken using hypothetical scenarios involving losses in either health or income. Whilst in health risk aversion is stronger than inequality aversion, in the income context we cannot reject that attitudes to inequality aversion and risk aversion are the same. When we compare across contexts we find that inequality aversion and risk aversion are both stronger in income than they each are in health. |
| Keywords: | inequality; risk aversion; health; income |
| JEL: | I14 D63 D71 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:shf:wpaper:2013005&r=exp |