New Economics Papers
on Experimental Economics
Issue of 2013‒05‒22
seventeen papers chosen by

  1. Norms Make Preferences Social By Erik O. Kimbrough; Alexander Vostroknutov
  2. Do Reputation Concerns Make Behavioral Biases Disappear? The Conjunction Fallacy on Facebook and Mechanical Turk By Giovanna Devetag; Francesca Ceccacci; Paola De Salvo
  3. The decentralization of punishments in experiments with public goods By Zuzana Berná; Jiøí Špalek
  4. Sustaining Group Reputation. By Erik O. Kimbrough; Jared Rubin
  5. Worker or Shirker – Who Evades More Taxes? A Real Effort Experiment By Christoph Bühren; Torben C. Kundt
  6. Revisiting the Antisocial Punishment across Societies Experiment By Pablo Lucas; Issam Malki
  7. Turnout, Political Preferences and Information: Experimental Evidence from Peru By Gianmarco León
  8. Two Studies on the Interplay between Social Preferences and Individual Biological Features. By Santiago Sanchez-Pages (University of Barcelona, University of Edinburgh)
  9. Intergenerational Attitudes Towards Strategic Uncertainty and Competition: A Field Experiment in a Swiss Bank By Thierry Madiès; Marie-Claire Villeval; Malgorzata Wasmer
  10. Battle of the (Same) Sexes: How We Take Advantage of Presumed Trust from Same-Gender Others and Rationalize to the Contrary By Van Sant, Alex B.; Kray, Laura J.
  11. Not All Price Endings Are Created Equal: Price Points and Asymmetric Price Rigidity By Avichai Snir; Daniel Levy; Alex Gotler; Haipeng (Allen) Chen
  12. Top Guns May Not Fire: Best-Shot Group Contests with Group-Specific Public Good Prizes By Subhasish M. Chowdhury; Dongryul Lee; Roman M. Sheremeta
  13. Why is voluntary financial education so unpopular ? Experimental evidence from Mexico By Bruhn, Miriam; Ibarra, Gabriel Lara; McKenzie, David
  14. Observable Implications of Nash and Subgame- Perfect Behavior in Extensive Games By Indrajit Ray; Susan Snyder
  15. Performance in Mathematics and Digit Ratio: Evidence from 500 University Students By Ángeles Sánchez-Domínguez; José Sánchez-Campillo; Dolores Moreno-Herrero; Virginia Rosales
  16. Punishment Mechanisms and their Effect on Cooperation - A Simulation Study By M. D. Farjam; M. Faillo; W.F.G. Haselager; I.G. Sprinkhuizen-Kuyper
  17. Dominance Concepts for Fehr-Schmidt Preferences By Sanjit Dhami; Ali al-Nowaihi

  1. By: Erik O. Kimbrough (Simon Fraser Unviersity); Alexander Vostroknutov (SMaastricht University)
    Abstract: We develop a unifying explanation for prosocial behavior. We argue that people care not about others’ payoffs per se, but whether their own behavior accords with social norms. Individuals who are sensitive to norms will adhere to them so long as they observe others doing the same. A model formalizing this generates both prosociality (without relying on explicit distributional preferences) and well-known context effects (for which distributional preferences cannot account). A simple experiment allows us to measure individual-level normsensitivity and to show that norm-sensitivity explains heterogeneity in prosociality in public goods, dictator, ultimatum, and trust games.
    Keywords: experimental economics, norms, social preferences, reciprocity
    JEL: C91 C92 D03
    Date: 2013–05
  2. By: Giovanna Devetag; Francesca Ceccacci; Paola De Salvo
    Abstract: This paper reports the results of experiments designed to test whether individuals interacting on Facebook are more likely to succumb to the conjunction fallacy when they post their answers publicly and are exposed to the answers of others. Using the experimental design in Kahneman and Tversky (1983), we find that the proportion of individuals violating the conjunction rule on Facebook is substantially lower than that reported by previous experiments conducted in the lab, regardless of whether responses are public or private. When responses are posted in a public form, however, the partic- ipation rate is substantially higher. The violation rate on Facebook is also significantly lower than the rate of violation from the same experiment run on Mechanical Turk, a popular online labor market, with monetary incentives. Adding a bonus for the correct answer reduces the violation rate on Mechanical Turk when answers are private, but not when they are public, suggesting that peer effects may indeed counteract the effect of monetary incentives. Our experiment casts doubts about the robustness of behavioral biases for the understanding of real life decisions in environments in which interaction is not anonymous and people are reputation conscious, and suggests the power of social networks to mitigate their effects
    Keywords: Facebook, conjunction fallacy, biases, peer effects, field experiments, incentives, reputation
    JEL: A14 C93 D03 D83
    Date: 2013
  3. By: Zuzana Berná; Jiøí Špalek (Department of Public Economics, Masaryk University)
    Abstract: This paper deals with the effects of introducing adequate punishment opportunities in experiments with public goods. Decentralized punishment means that the contributing subjects have a possibility to sanction free riders without the intervention of an external authority. The very first experiments demonstrated a significantly positive effect of a punishment opportunity on enhancing cooperation in situations of social dilemma. Following studies, however, pointed at limited effectiveness of this mechanism. The first part of the paper summarizes selected literature on the topic and presents its principal findings. The second part is dedicated to the presentation of the results of an experimental series on decentralized punishment realized in the Czech Republic. The last part introduces possible questions and topics which may be subject of future research within this area.
    Keywords: economic experiment, cooperation, public goods, decentralized punishment, partner and stranger matching
    JEL: C92 D70 H41
    Date: 2012–12
  4. By: Erik O. Kimbrough (Simon Fraser University); Jared Rubin (Chapman University)
    Abstract: When individuals trade with strangers, there is a temptation to renege on contracts. In the absence of repeated interaction or exogenous enforcement mechanisms, this problem can impede valuable exchange. Historically, individuals have solved this problem by forming institutions that sustain trade using group, rather than individual, reputation. Groups can employ two mechanisms to uphold reputation that are generally unavailable to isolated individuals: information sharing and in-group punishment. In this paper, we design a laboratory experiment to distinguish the roles of these two mechanisms in sustaining group reputation and increasing gains from trade. We find that information sharing encourages path dependence via group reputation; good (bad) behavior by individuals results in greater (fewer) gains from exchange for the group in the future. However, the mere threat of in-group punishment is enough to discourage bad behavior, even if punishment is rarely employed. When combined, information sharing and in-group punishment work as complements; the presence of in-group punishment encourages cooperation early on, and information sharing reinforces this behavior over time.
    Keywords: Experimental Economics, Group Reputation, Information, Group Punishment, Gains from Trade, Trust Game, Juries
    JEL: C9 D02 D7 Q2
    Date: 2013
  5. By: Christoph Bühren (University of Kassel); Torben C. Kundt (University of the Federal Armed Forces)
    Abstract: WWith the help of a real effort experiment, we analyze if tax evasion depends on the amount of effort invested to generate income. In three treatments, subjects were either endowed with income or had to work moderately or hard to earn it. In line with prospect theory, subjects evaded more taxes when they worked hard for their income. We find little evidence for the prediction that tax evasion in the endowed treatment is higher than in the moderate work treatment.
    Date: 2013
  6. By: Pablo Lucas (Geary Institute, University College Dublin, Ireland and Maastricht School of Management, The Netherlands); Issam Malki (Sheffield Hallam University, Department of Economics, England)
    Abstract: This paper presents an alternative interpretation of an experimental public goods game dataset, particularly on the understanding of the observed antisocial behaviour phenomenon between subjects around the world. The anonymous nature of contributions and punishments are taken into account to reinterpret the experimental results by analysing dynamic behaviour in terms of mean contributions across societies and their association with antisocial punishment. Thus, by also taking into account the heterogeneity between the experimented cities, the analysis contrasts with the interpretation of one trend across cities, as the findings indicate two opposite trends in differentgroups of cities.
    Keywords: Behavioural economics, experimental public goods, game dataset
    JEL: D03
    Date: 2013–05–15
  7. By: Gianmarco León
    Abstract: I combine a field experiment with a change in voting laws reducing the fine for abstention to assess the effect of monetary incentives to encourage voter participation. I estimate that the elasticity of voting with respect to the cost is -0.21. As predicted by the model, the reduction in turnout is driven by centrist voters, those who hold less political information, and are less interested in politics. The increase in abstention does not change preferences for specific policies, on average, or lower information acquisition. Finally, the incidence of vote buying is unaffected, but the price of a vote increases.
    Keywords: voting behavior, incentives to vote, public choice, Peru
    JEL: D71 D72 O53
    Date: 2013–04
  8. By: Santiago Sanchez-Pages (University of Barcelona, University of Edinburgh)
    Abstract: Biological features and social preferences have been studied separately as factors influencing human strategic behaviour. We run two studies in order to explore the interplay between these two sets of factors. In the first study, we investigate to what extent social preferences may have some biological underpinnings. We use simple one-shot distribution experiments to attribute subjects one out of four types of social preferences: Self-interested (SI), Competitive (C), Inequality averse (IA) and Efficiency-seeking (ES). We then investigate whether these four groups display differences in their levels of facial Fluctuating Asymmetry (FA) and in proxies for exposure to testosterone during phoetal development and puberty. We observe that development-related biological features and social preferences are relatively independent. In the second study, we compare the relative weight of these two set of factors by studying how they affect subjects’ behaviour in the Ultimatum Game (UG). We find differences in offers made and rejection rates across the four social preference groups. The effect of social preferences is stronger than the effect of biological features even though the latter is significant. We also report a novel link between facial masculinity (a proxy for exposure to testosterone during puberty) and rejection rates in the UG. Our results suggest that biological features influence behaviour both directly and through their relation with the type of social preferences that individuals hold.
    Keywords: Testosterone; Ultimatum Game; Fluctuating Asymmetry; Facial masculinity;2D:4D; Social preferences.
    Date: 2013–03–29
  9. By: Thierry Madiès (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie); Marie-Claire Villeval (GATE Lyon Saint-Etienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure - Lyon); Malgorzata Wasmer (Department of Economics - University of Fribourg - University of Fribourg)
    Abstract: With a market entry game inspired by Camerer and Lovallo (1999), we study the attitudes of junior and senior employees towards strategic uncertainty and competition. Seniors exhibit higher entry rates compared to juniors, especially when the market capacity is not too low or when earnings from entry depend on relative performance. This difference persists after controlling for attitudes towards non-strategic uncertainty and for beliefs on others' competitiveness and on relative ability. Seniors are more willing to compete when they predict a higher number of competitors. This contradicts the stereotype of less competitive older employees.
    Keywords: Aging; risk; ambiguity; competitiveness; confidence; experiment
    Date: 2013
  10. By: Van Sant, Alex B.; Kray, Laura J.
    Abstract: In the current research, we consider how gender composition may impact the likelihood of deception in contexts with asymmetric information where one party has the opportunity to strategically deceive another party for the opportunity to gain economically. We predict that the combined processes of social categorization and social projection should make people more likely to presume trust from same-gender others than different-gender others. Because anonymous interactions promote the tendency to construe situations instrumentally, we hypothesize that people will take advantage of presumed trust from same-gender others by being more likely to deceive them than different-gender others under conditions of anonymity. Finally,we argue that when rationalizing their deceptive behavior, liars should be more likely to attribute mistrust to same-gender others than different-gender others. We turn to the Cheap Talk Game paradigm (Gneezy, 2005) for our research setting and find support for our hypotheses across three different vignettes and a laboratory study using a behavioral measure of deception.
    Keywords: Human Resources Management and Services, Business Administration, Management and Operations, trust, gender, social projection, deception, ethical decision making
    Date: 2013–05–13
  11. By: Avichai Snir; Daniel Levy; Alex Gotler; Haipeng (Allen) Chen
    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.
    Date: 2012–10
  12. By: Subhasish M. Chowdhury (University of East Anglia, Norwich); Dongryul Lee (Department of Economics, Sungshin University, Seoul); Roman M. Sheremeta (Chapman University)
    Abstract: We analyze a group contest in which n groups compete to win a group-specific public good prize. Group sizes can be different and any player may value the prize differently within and across groups. Players exert costly efforts simultaneously and independently. Only the highest effort (the best-shot) within each group represents the group effort that determines the winning group. We fully characterize the set of equilibria and show that in any equilibrium at most one player in each group exerts strictly positive effort. There always exists an equilibrium in which only the highest value player in each active group exerts strictly positive effort. However, perverse equilibria may exist in which the highest value players completely free-ride on others by exerting no effort. We provide conditions under which the set of equilibria can be restricted and discuss contest design implications.
    Keywords: best-shot technology; group contest; group-specific public goods; free-riding
    JEL: C72 D70 D72 H41
    Date: 2013
  13. By: Bruhn, Miriam; Ibarra, Gabriel Lara; McKenzie, David
    Abstract: Take-up of voluntary financial education programs is typically extremely low. This paper reports on randomized experiments around a large financial literacy course offered in Mexico City to understand the reasons for low take-up, and to measure the impact of financial education. It documents that the general public displays little interest in such courses and that participation is low even among individuals who express interest in financial education. The paper experimentally investigates barriers to take-up, and finds no impact of relaxing reputational or logistical constraints and no evidence that time inconsistency is the reason for limited participation. Even relatively sizeable monetary incentives get less than 40 percent of interested individuals invited to training to attend. Using a randomized encouragement design, the authors measure the impact of the course on financial knowledge and behavior. Attending training results in a 9 percentage point increase in financial knowledge and a 9 percentage point increase in saving outcomes, but no impact on borrowing behavior. Administrative data indicate that the savings impact is relatively short-lived. The results suggest people are making optimal choices not to attend financial education courses, and point to the limits of using general purpose courses to improve financial behavior for the general population.
    Keywords: Financial Literacy,Access to Finance,Education For All,Access&Equity in Basic Education,Primary Education
    Date: 2013–05–01
  14. By: Indrajit Ray; Susan Snyder
    Abstract: We provide necessary and sufficient conditions for observed outcomes in extensive game forms, in which preferences are unobserved, to be rationalized first, weakly, as a Nash equilibrium and then, fully, as the unique subgame-perfect equilibrium. Thus, one could use these conditions to find that play is (a) consistent with subgame-perfect equilibrium, or (b) not consistent with subgame-perfect behavior but is consistent with Nash equilibrium, or (c) consistent with neither.
    Keywords: Revealed Preference, Consistency, Subgame- Perfect Equilibrium
    JEL: C72 C92
    Date: 2013–04
  15. By: Ángeles Sánchez-Domínguez (Departament of Applied Economics, University of Granada, Spain.); José Sánchez-Campillo (Departament of Applied Economics, University of Granada, Spain.); Dolores Moreno-Herrero (Departament of Applied Economics, University of Granada, Spain.); Virginia Rosales (Departament of Applied Economics, University of Granada, Spain.)
    Abstract: We analyze the association between performance in a mathematics course among university students at the Faculty of Business and Economics and exposure to prenatal sex hormones using the second-to-fourth digit ratio. In a sample of 516 freshmen (304 women), we find an inverted U-shaped relationship between digit ratio and mathematics grades. Males and females show the same pattern in that subjects with both high and low digit ratios earn lower grades in mathematics, while subjects with the highest grades in mathematics have intermediate digit ratios. We also find that there is no statistically significant relationship between the digit ratio and the average grades earned by students in other courses except mathematics taken in the first semester at the Faculty of Business and Economics.
    Keywords: Prenatal Sex Hormones, 2D:4D Digit Ratios, Performance
    Date: 2013–04–27
  16. By: M. D. Farjam; M. Faillo; W.F.G. Haselager; I.G. Sprinkhuizen-Kuyper
    Abstract: In social dilemmas punishment costs resources, not just from the one who is punished but often also from the punisher and society. Reciprocity on the other side is known to lead to cooperation without the costs of punishment. The question at hand is whether punishment besides its costs brings advantages and how its negative side-effects can be reduced to a minimum in an environment populated by reciprocal agents. Various punishment mechanisms have been studied in the economic literature such as unrestricted punishment, legitimate punishment, cooperative punishment, and the hired gun mechanism. All these mechanisms are implemented in a simulation where agents can share resources and may decide to punish other agents when they do not share. Through evolutionary learning agents adapt their sharing/punishing policy. Despite the costs of punishment, legitimate punishment compared to no-punishment increased performance when the availability of resources was low. When the availability was high, performance was better in no-punishment conditions with indirect reciprocity. Furthermore the hired gun mechanism worked only as good as other punishment mechanisms when the availability of resources was high. Legitimate punishment leads to a higher performance than unrestricted punishment. Summarized, this paper shows that a well-chosen punishment mechanism can play a facilitating role for cooperation even if the cooperating system already adopted reciprocity.
    Keywords: Public Goods Games, Punishment, Cooperation, Reciprocity, Evolution of Cooperation
    Date: 2013
  17. By: Sanjit Dhami; Ali al-Nowaihi
    Abstract: Many diverse problems in economics can only be reasonably explained by assuming that people have social preferences, i.e., in addition to their own payoffs they are altruistic towards those who are poorer and envious towards those who are richer. How do people with social preferences choose among alternative income distributions? The aim of our paper is to answer this question in the context of the Fehr-Schmidt (1999) preferences. The classical notions of first and second order stochastic dominance are not useful in this case. However, a fairly natural set of conditions that are a modification of the concepts of first and second order stochastic dominance and generalized Lorenz dominance turn out to successfully answer the question posed. We also introduce weak FS dominance, which is particularly suited to the linear form of Fehr-Schmidt preferences.
    Keywords: Fehr-Schmidt Preferences; ?First Order Fehr-Schmidt Dominance; Second Order Fehr-Schmidt Dominance; Weak Fehr-Schmidt Dominance; Strong Fehr-Schmidt Dominance; Fehr-Schmidt-Lorenz Dominance.
    JEL: D03 D63 D64
    Date: 2013–05

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