New Economics Papers
on Experimental Economics
Issue of 2013‒05‒24
twelve papers chosen by

  1. Experimental Evidence on the Effects of Home Computers on Academic Achievement among Schoolchildren By Robert W. Fairlie; Jonathan Robinson
  2. Indiscriminate Discrimination: A Correspondence Test for Ethnic Homophily in the Chicago Labor Market By Nicolas Jacquemet; Constantine Yannelis
  3. Incomplete Information Models of Guilt Aversion in the Trust Game By Giuseppe Attanasi; Pierpaolo Battigalli; Elena Manzoni
  4. Priming the charitable pump: An experimental investigation of two-stage raffles By Sebastian J. Goerg; John Lightle; Dmitry Ryvkin
  5. Using Performance Incentives to Improve Medical Care Productivity and Health Outcomes By Paul Gertler; Christel Vermeersch
  6. The Minimum Approval Mechanism Implements the Efficient Public Good Allocation Theoretically and Experimentally By Takehito Masuda; Yoshitaka Okano; Tatsuyoshi Saijo
  7. Formation and adaptation of reference prices in grain marketing: An experimental study By Mattos, Fabio; Poirier, Jamie
  8. Fetal testosterone (2D:4D) as predictor of cognitive reflection By Antoni Bosch-Domènech; Pablo Brañas-Garza; Antonio M. Espín
  9. Using Preferred Outcome Distributions to Estimate Value and Probability Weighting Functions in Decisions under Risk By Donkers, A.C.D.; Lourenço, C.J.S.; Dellaert, B.G.C.; Goldstein, D.G.
  10. Freezeout, Compensation Rules and Voting Equilibria By Christian At; Sylvain Béal; Pierre-Henri Morand
  11. A Behavioral Local Public Finance Perspective on the Renter’s Illusion Hypothesis By Roberto Dell’Anno; Jorge Martinez-Vazquez
  12. The Condorcet paradox revisited By Herings P.J.J.; Houba H

  1. By: Robert W. Fairlie; Jonathan Robinson
    Abstract: Computers are an important part of modern education, yet many schoolchildren lack access to a computer at home. We test whether this impedes educational achievement by conducting the largest-ever field experiment that randomly provides free home computers to students. Although computer ownership and use increased substantially, we find no effects on any educational outcomes, including grades, test scores, credits earned, attendance and disciplinary actions. Our estimates are precise enough to rule out even modestly-sized positive or negative impacts. The estimated null effect is consistent with survey evidence showing no change in homework time or other "intermediate" inputs in education.
    JEL: I24
    Date: 2013–05
  2. By: Nicolas Jacquemet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne); Constantine Yannelis (Stanford University - Department of Economics - Department of Economics)
    Abstract: Numerous field experiments have demonstrated the existence of discrimination in labor markets against specific minority groups. This paper uses a correspondence test to determine whether this discrimination is due to prejudice against specific groups, or a general preference for the majority group. Three groups of identical fabricated resumes are sent to help-wanted advertisements in Chicago newspapers: one with Anglo-Saxon names, one with African-American names, and one with fictitious foreign names whose ethnic origin is unidentifiable to most Americans. Resumes with Anglo-Saxon names generate nearly one third more call-backs than identical resumes with non Anglo-Saxon ones, either African-American or Foreign. We take this as evidence that discriminatory behavior is part of a larger pattern of unequal treatment of any member of non-majority groups, ethnic homophily.
    Keywords: Correspondence testing; Discrimination; Ethnic homophily
    Date: 2012–12
  3. By: Giuseppe Attanasi; Pierpaolo Battigalli; Elena Manzoni
    Abstract: In the theory of psychological games it is assumed that players' preferences on material consequences depend on endogenous beliefs. Most of the applications of this theoretical framework assume that the psychological utility functions representing such preferences are common knowledge. But this is often unrealistic. In particular, it cannot be true in experimental games where players are subjects drawn at random from a population. Therefore an incomplete-information methodology is called for. We take a first step in this direction, focusing on models of guilt aversion in the Trust Game. We consider two alternative modeling assumptions: (i) guilt aversion depends on the role played in the game, because only the "trustee" can feel guilt for letting the co-player down, (ii) guilt aversion is independent of the role played in the game. We show how the set of Bayesian equilibria changes as the upper bound on guilt sensitivity varies, and we compare this with the complete-information case. Our analysis illustrates the incomplete-information approach to psychological games and can help organize experimental results in the Trust Game. JEL classification: C72, C91, D03. Keywords: Psychological games, Trust Game, guilt, incomplete information.
    Date: 2013
  4. By: Sebastian J. Goerg (Department of Economics, Florida State University); John Lightle (Department of Economics, Florida State University); Dmitry Ryvkin (Department of Economics, Florida State University)
    Abstract: We study experimentally two-stage self-financing raffles, a novel class of charity fund-raising mechanisms in which participants can buy tickets in two stages. The proceeds of the first stage are used as the seed money for the second stage. The mechanisms differ by what happens to the tickets purchased in the first stage. In the complete draw down two-stage raffle, the first stage tickets are eliminated from the active pool of tickets, while in the no draw down raffle they remain in the active pool. We find that both two-stage raffles initially perform better than the standard one-stage 50-50 raffle. Over time, the aggregate contribution level in the complete draw down raffle declines and approaches that of the one-stage raffle, while in the no draw down raffle contributions are stable and remain higher than in the other two mechanisms. In both two-stage raffles we observe a positive correlation between the proceeds of the first stage and the number of tickets bought in the second stage. Our results show promise for multi-stage self-financing fund-raising mechanisms, although not necessarily driven by equilibrium motives.
    Keywords: two-stage raffle, charity, experiment
    JEL: C72 C92 D64
    Date: 2013–05
  5. By: Paul Gertler; Christel Vermeersch
    Abstract: We nested a large-scale field experiment into the national rollout of the introduction of performance pay for medical care providers in Rwanda to study the effect of incentives for health care providers. In order to identify the effect of incentives separately from higher compensation, we held constant compensation across treatment and comparison groups – a portion of the treatment group’s compensation was based on performance whereas the compensation of the comparison group was fixed. The incentives led to a 20% increase in productivity, and significant improvements in child health. We also find evidence of a strong complementarity between performance incentives and baseline provider skill.
    JEL: I11 J33 O12
    Date: 2013–05
  6. By: Takehito Masuda; Yoshitaka Okano; Tatsuyoshi Saijo
    Abstract: We propose the minimum approval mechanism (MAM) for a standard linear public good environment with two players. Players simultaneously and privately choose their contributions to the public good in the first stage. In the second stage, they simultaneously decide whether to approve the otherfs choice. Both contribute what they choose in the first stage if both players approve; otherwise, both contribute the minimum of the two choices in the first stage. The MAM implements the Pareto-efficient allocation in backward elimination of weakly dominated strategies (BEWDS) and is unique under plausible conditions. Contributions in the MAM experiment overall averaged 94.9%. The data support BEWDS rather than subgame perfect Nash equilibria. Quantifying subjectsf responses to the questionnaire showed that the majority of subjects in the MAM found a heuristic or an algorithm named diagonalization and supported the notions of minimax regret and iterated best response, all of which mimic BEWDS outcomes.
    Date: 2013–05
  7. By: Mattos, Fabio; Poirier, Jamie
    Abstract: This study examines formation and adaptation of reference prices by Manitoban grain producers. Research shows that preferences are reference‐dependent and marketing decisions are affected by reference prices. Results suggest that Manitoban producers’ reference prices are formed primarily by an average of recent prices and the highest price to‐date in the marketing window. Reference prices are found to adapt in the same direction as market prices, with adaptation to increasing prices being larger than adaptation to decreasing prices. When deciding to sell grain, producers are more likely to sell when they expect prices to decrease over the next month and when their reference price adjusts downwards towards the current price.
    Keywords: grain marketing, reference prices, Agribusiness, Crop Production/Industries, Institutional and Behavioral Economics, Risk and Uncertainty, C93, D03, D81, Q13,
    Date: 2013–04
  8. By: Antoni Bosch-Domènech; Pablo Brañas-Garza; Antonio M. Espín
    Abstract: The Cognitive Reflection Test (CRT) is a test introduced by S. Frederick (2005) Cognitive reflection and decision making, J Econ Perspect 19(4): 25-42. The task is designed to measure the tendency to override an intuitive response that is incorrect and to engage in further reflection that leads to the correct response. The consistent sex differences in CRT performance may suggest a role for gonadal hormones, particularly testosterone. A now widely studied putative marker for fetal testosterone is the second-to-fourth digit ratio (2D:4D). This paper tests to what extent 2D:4D, as a proxy for prenatal exposure to testosterone, can predict CRT scores in a sample of 623 students. After controlling for sex, we observe that a lower 2D:4D (reflecting a higher exposure to testosterone) is significantly associated with a higher number of correct answers. The result holds for both hands’ 2D:4Ds. In addition, the effect appears to be sharper for females than for males. We also control for patience and math proficiency, which are significantly related to performance in the CRT. But the effect of 2D:4D on performance in CRT is not reduced with these controls, implying that these variables are not mediating the relationship between digit ratio and CRT.
    Keywords: Cognitive Refection Test, 2D:4D, fetal testosterone, patience, sex.
    Date: 2013–05
  9. By: Donkers, A.C.D.; Lourenço, C.J.S.; Dellaert, B.G.C.; Goldstein, D.G.
    Abstract: In this paper we propose the use of preferred outcome distributions as a new method to elicit individuals’ value and probability weighting functions in decisions under risk. Extant approaches for the elicitation of these two key ingredients of individuals’ risk attitude typically rely on a long, chained sequence of lottery choices. In contrast, preferred outcome distributions can be elicited through an intuitive graphical interface, and, as we show, the information contained in two preferred outcome distributions is sufficient to identify non-parametrically both the value function and the probability weighting function in rank-dependent utility models. To illustrate our method and its advantages, we run an incentive-compatible lab study in which participants use a simple graphical interface – the Distribution Builder (Goldstein et al. 2008) – to construct their preferred outcome distributions, subject to a budget constraint. Results show that estimates of the value function are in line with previous research but that probability weighting biases are diminished, thus favoring our proposed approach based on preferred outcome distributions.
    Keywords: decision making;rank dependent utility;risk preference;distribution builder;micro economics;preference elicitation
    Date: 2013–05–08
  10. By: Christian At (CRESE, Université de Franche-comté); Sylvain Béal (CRESE, Université de Franche-Comté); Pierre-Henri Morand (Université d'Avignon et des pays de Vaucluse)
    Abstract: A single proposer has the opportunity to generate a surplus by taking the assets of a group of individuals. These individuals are called upon to vote for accepting or rejecting the monetary offer made to them by the proposer, who needs the agreement of a qualified majority. The voters who rejected the offer while the qualified majority is met are frozen out but they can claim a compensation in exchange for their asset. This article analyses how compensation rules influence both the votes and the offer made by the proposer. We find that unanimity rule or compensation equals to the proposal or voters' initial wealth maximize the expected social surplus that entirely accrues to the proposer. We show that increasing the offer does not always increase the probability of acceptance, in sharp contrast to many close models. We identify the optimal offer when the compensation does not depend on the proposal. Increasing the compensation always reduces the expected social surplus and the expected profit of the proposer, but does not always benefit to the voters. Reinforcing the qualified majority always increases the expected profit of the proposer, and can decrease both the expected social surplus and the expected utility of the voters. When the compensation is based on the proposal we find that the success or the failure of the proposition depends crucially of the compensation's shape.
    Keywords: Voting games, Compensations, Fairness, Freezeout, Regulatory takings, Debt restructuring
    JEL: D72 K2
    Date: 2013–05
  11. By: Roberto Dell’Anno (University of Salerno); Jorge Martinez-Vazquez (International Center for Public Policy. Andrew Young School of Policy Studies, Georgia State University)
    Abstract: In this paper we argue that renter’s illusion may not be a form of asymmetric information neither irrationality but rather a way to include in our economic analysis evidence that while homo oeconomicus aims to do a good job of making choices, he frequently is not able to do that. Taxpayers do not know the “objective” world but take decisions according to mental and often biased representations of “their” world. We develop a simple model where misperception plays a fundamental role in the behavior of renters and allows overcoming the dichotomy between rational and irrational renter's behavior. In the paper we also pursue the two complementary aims of introducing “cognitive limitation” into the theory of local public finance and of filling a gap in this literature regarding the lack of micro-foundations for the renter’s illusion hypothesis.
    Keywords: Renter effect; Renter’s illusion; Fiscal illusion; Behavioral local public finance.
    Date: 2013–02–18
  12. By: Herings P.J.J.; Houba H (GSBE)
    Abstract: We analyze the Condorcet paradox within a strategic bargaining model with majority voting, exogenous recognition probabilities, and no discounting. Stationary subgame perfect equilibria (SSPE) exist whenever the geometric mean of the players' risk coefficients, ratios of utility differences between alternatives, is at most one. SSPEs ensure agreement within finite expected time. For generic parameter values, SSPEs are unique and exclude Condorcet cycles. In an SSPE, at least two players propose their best alternative and at most one player proposes his middle alternative with positive probability. Players never reject best alternatives, may reject middle alternatives with positive probability, and reject worst alternatives. Recognition probabilities represent bargaining power and drive expected delay. Irrespective of utilities, no delay occurs for suitable distributions of bargaining power, whereas expected delay goes to infinity in the limit where one player holds all bargaining power. Contrary to the case with unanimous approval, a player benefits from an increase in his risk aversion.
    Keywords: Stochastic and Dynamic Games; Evolutionary Games; Repeated Games;
    Date: 2013

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