New Economics Papers
on Experimental Economics
Issue of 2013‒06‒24
twenty-one papers chosen by

  1. An experimental study on the incentives of the probabilistic serial mechanism By Hugh-Jones, David; Kurino, Morimitsu; Vanberg, Christoph
  2. Deterrence by Imperfect Sanctions – A Public Good Experiment By Christoph Engel
  3. Custom-made healthcare – An experimental investigation By Claudia Keser; Claude Montmarquette; Martin Schmidt; Cornelius Schnitzler
  4. Understanding the Investment Behavior of Ugandan Smallholder Farmers: An Experimental Analysis By Ihli, Hanna Julia; Musshoff, Oliver
  5. Selfishness As a Potential Cause of Crime. A Prison Experiment By Thorsten Chmura; Christoph Engel; Markus Englerth
  6. Short- and Long-run Goals in Ultimatum Bargaining. By Antonio M. Espín; Filippos Exadaktylos; Benedikt Herrmann; Pablo Brañas-Garza
  7. Programming for Experimental Economics: Introducing CORAL { a lightweight framework for experimental economic experiments By Markus Schaffner
  8. Two Asymmetric and Conflicting Learning Effects of Calorie Posting on Overeating: Laboratory Snack Choice Experiment By Shimokawa, Satoru
  9. Level-k reasoning and time pressure in the 11-20 money request game By Florian Lindner; Matthias Sutter
  10. Basis Risk and Compound-Risk Aversion: Evidence from a WTP Experiment in Mali By Elabed, Ghada; Carter, Michael R.
  11. Self-regulating organizations under the shadow of governmental oversight: An experimental investigation By Silvester Van Koten; Andreas Ortmann
  12. Who is Afraid of Pirates? An Experiment on the Deterrence of Innovation by Imitation By Christoph Engel; Marco Kleine
  13. When the Economics of a Decision Matters More than the Psychology of the Decision: Understanding the Economic Significance of Auction Fever. By Matthew W. McCarter; Abel M. Winn; Adam D. Galinsky
  14. Calorie labeling and fast food choices in surveys and actual markets: some new behavioral results By Loureiro, Maria L.; Rahmani, Djamal
  15. Time Preference and Technology Adoption: A Single-Choice Experiment with U.S. Farmers By Duquette, Eric; Higgins, Nathaniel; Horowitz, John
  16. Who’s Favored by Evaluative Voting ? An Experiment Conducted During the 2012 French Presidential Election. By Antoinette Baujard; Frédéric Gavrel; Herrade Igersheim; Jean-François Laslier; Isabelle Lebon
  17. Cooperation under punishment: Imperfect information destroys it and centralizing punishment does not help By Sven Fischer; Kristoffel Grechenig; Nicolas Meier
  18. A Field Experiment on Consumer Willingness to Accept Milk From Cloned Cows By Britwum, Kofi; Bernard, John C.
  19. Testing for Discrimination against Lesbians of Different Marital Status: A Field Experiment By Weichselbaumer, Doris
  20. Experimental Spousal Financial Decisions in Rural Tanzania By Seitz McCarthy, Aine
  21. Repairing the Damage: The Effect of Price Expectations on Auto-Repair Price Quotes By Meghan R. Busse; Ayelet Israeli; Florian Zettelmeyer

  1. By: Hugh-Jones, David; Kurino, Morimitsu; Vanberg, Christoph
    Abstract: We report an experiment on the Probabilistic Serial (PS) mechanism for allocating indivisible goods. The PS mechanism, a recently discovered alternative to the widely used Random Serial Dictatorship mechanism, has attractive fairness and efficiency properties if people report their preferences truthfully. However, the mechanism is not strategy-proof, so participants may not truthfully report their preferences. We investigate misreporting in a set of simple applications of the PS mechanism. We confront subjects with situations in which theory suggests that there is an incentive or no incentive to misreport. We find little misreporting in situations where misreporting is a Nash equilibrium. However, we also find a significant degree of misreporting in situations where there is actually no benefit in doing so. These findings suggest that the PS mechanism may have problems in terms of truthful elicitation. --
    Keywords: probabilistic serial mechanism,incentives
    JEL: C78 C91 C92
    Date: 2013
  2. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: Sanctions are often so weak that a money maximizing individual would not be deterred. In this paper I show that they may nonetheless serve a forward looking purpose if sufficiently many individuals are averse against advantageous inequity. Using the Fehr/Schmidt model (QJE 1999) I define three alternative channels: (a) identical preferences are common knowledge, but inequity is not pronounced enough to sustain cooperation; (b) heterogeneous preferences are common knowledge; (c) there is preference uncertainty. In a linear public good with punishment meted out by a disinterested participant, I test two implications of the model: (a) participants increase contributions in reaction to imperfect punishment; (b) imperfect punishment helps sustain cooperation if participants experience free-riding
    Keywords: Deterrence, Public Good Experiment, Inequity Aversion, imperfect sanction, Fehr/Schmidt preferences, centralized punishement
    JEL: H41 D63 K42 C91 D03 K14 K13
    Date: 2013–05
  3. By: Claudia Keser; Claude Montmarquette; Martin Schmidt; Cornelius Schnitzler
    Abstract: In this paper, we investigate in a controlled laboratory experiment physician behavior in the case of payment heterogeneity. In the experiment, each physician provides medical care to patients whose treatments are paid for either under fee-for-service (FFS) or capitation (CAP). We observe that physicians customize care in response to the payment system. A FFS patient receives considerably more medical care than the corresponding CAP patient with the same illness and treatment preference. Physicians over-serve FFS patients and under-serve CAP patients. After a CAP payment reduction in the experiment we observe neither a quantity reduction under CAP nor a spillover into the treatment of FFS patients. <P>
    Keywords: Experimental Economics, Physician Reimbursement, Capitation, FFS, Customization, Fee Regulation,
    JEL: I12 I18
    Date: 2013–06–01
  4. By: Ihli, Hanna Julia; Musshoff, Oliver
    Abstract: In this study, we experimentally analyze the investment behavior of smallholder farmers in Uganda. We ascertain whether, and to what extent, the real options approach and the classical investment theory can predict farmers’ investment behaviors. We also examine differences in the investment behavior with respect to the presence of a price floor, which is often used to stimulate investments. Furthermore, we look at learning effects. We consider a problem of optimal stopping, stylizing an option to invest in a project. Our results show that both theories do not explain the observed investment behavior exactly. However, our results suggest that the real options models better predict the decision behavior of farmers than classical investment theory. The presence of a price floor has a significant impact on the investment behavior of Ugandan smallholder farmers. Learning from personal experience during the experiment does not have an effect on the investment behavior. However, we find that specific socio-demographic and socio-economic characteristics affect the investment behavior of farmers.
    Keywords: experimental economics, investment, price floors, real options, Uganda, Agricultural Finance, Institutional and Behavioral Economics,
    Date: 2013
  5. By: Thorsten Chmura (Centre for Decision Research and Experimental Economics, University of Nottigham); Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Markus Englerth
    Abstract: For a rational choice theorist, the absence of crime is more difficult to explain than its presence. Arguably, the expected value of criminal sanctions, i.e. the product of severity times certainty, is often below the expected benefit. We rely on a standard theory from behavioral economics, inequity aversion, to offer an explanation. This theory could also explain how imperfect criminal sanctions deter crime. The critical component of the theory is aversion against outperforming others. To test this theory, we exploit that it posits inequity aversion to be a personality trait. We can therefore test it in a very simple standard game. Inequity averse individuals give a fraction of their endowment to another anonymous, unendowed participant. We have prisoners play this game, and compare results to findings from a meta-study of more than 100 dictator games with non-prisoners. Surprisingly, results do not differ, not even if we only compare with other dictator games among close-knit groups. To exclude social proximity as an explanation, we retest prisoners on a second dictator game where the recipient is a charity. Prisoners give more, not less.
    Keywords: crime, imperfect sanctions, selfishness, inequity aversion, dictator game, social proximity, charity
    JEL: A12 C91 C93 D03 D63 K14
    Date: 2013–03
  6. By: Antonio M. Espín (GLOBE, Departamento de Teoría e Historia Económica, Universidad de Granada); Filippos Exadaktylos (BELIS, Murat Sertel Center for Advanced Economic Studies, Istanbul Bilgi University); Benedikt Herrmann (Institute for Health and Consumer Protection, Joint Research Centre, European Commission); Pablo Brañas-Garza (Economic Science Institute, and Department of Economics and International Development, Middlesex University Business School)
    Abstract: The ultimatum game (UG) is widely used to study human bargaining behavior and fairness norms. In this game, two players have to agree on how to split a sum of money. The proposer makes an offer, which the responder can accept or reject. If the responder rejects, neither player gets anything. The prevailing view is that, beyond self-interest, the desire to equalize both players’ payoffs (i.e., fairness) is the crucial motivation in the UG. Based on this view, previous research suggests that responders follow short-run psychological incentives when imposing fairness through the rejection of low offers. However, competitive spite, which reflects the desire to reduce others’ payoffs, can also account for the behavior observed in the UG, and has been linked to short-run, present-oriented aspirations as well. In this paper, we explore the relationship between individuals’ inter-temporal preferences and their behavior in a large-scale dual-role UG experiment. We find that impatience (present orientation) predicts the rejection of low, “unfair” offers as responders and the proposal of low, “unfair” offers as proposers, which is consistent with spite but inconsistent with fairness motivations. This behavior systematically reduces the payoffs of those who interact with impatient individuals. Thus, impatient individuals appear to be keen on reducing their partners’ share of the pie, even at the risk of destroying it. These findings indicate that competitive spite, rather than fairness, is the short-run motivation in ultimatum bargaining.
    Keywords: ultimatum game, costly punishment, delay discounting, impatience, fairness, spite, cooperation, competition
    Date: 2013
  7. By: Markus Schaffner
    Abstract: The field of experimental economics is past its 50th anniversary and is celebrating its 2nd Nobel prize winner. By far the largest number of economic experiments are now conducted in computer labs, although there is a wide array of settings, ranging from pen-and-paper to elaborate field settings. The controlled environment of the computer lab remains a strong foothold for experimental research. On top of the high level of control, including the standardisation of recruitment protocol and software used, the ease of data collection singles out the lab environment as a key instrument for the testing of economic theory and market mechanics. A number of tools and procedures have developed over the recent decades shaping how experiments are conducted. Z-tree (Fischbacher, 2007) has been established as the quasi-standard tool to conduct experiments. This paper introduces a novel view on how to approach programming for experiments, specically it introduces a number of innovations from professional software development into the programming of economic experiments. Finally the lightweight experimental software framework CORAL will be introduced.
    Keywords: Experimental Economics, Programming, CORAL
    Date: 2013–06–12
  8. By: Shimokawa, Satoru
    Abstract: We develop a new framework to analyze the effect of calorie posting on overconsumption of calories in a fixed-price context (e.g., fixed-price buffets). The framework demonstrates that a desire to get `a good deal’ (transaction utility) and loss aversion can induce asymmetry between two conflicting learning effects of calorie posing: a calorie-decreasing effect of learning that one was underestimating calorie contents (LUE effect) and a calorie-increasing effect of learning that one was overestimating calorie contents (LOE effect). Our laboratory snack choice experiments confirm that the LUE effect dominates the LOE effect under the context of overconsumption, which is consistent with transaction utility theory rather than loss aversion. The findings demonstrate the potential of calorie posting to mitigate overeating.
    Keywords: Calorie posting, Calorie consumption, Learning, Transaction utility, Loss aversion, Laboratory Experiment, Agricultural and Food Policy, Consumer/Household Economics, Food Consumption/Nutrition/Food Safety, Health Economics and Policy, D81, D91, I12,
    Date: 2013
  9. By: Florian Lindner; Matthias Sutter
    Abstract: Arad and Rubinstein (2012a) have designed a novel game to study level-k reasoning experimentally. Just like them, we find that the depth of reasoning is very limited and clearly different from equilibrium play. We show that such behavior is even robust to repetitions, hence there is, at best, little learning. However, under time pressure, behavior is, perhaps coincidentally, closer to equilibrium play. We argue that time pressure evokes intuitive reasoning and reduces the focal attraction of choosing higher (and per se more profitable) numbers in the game.
    Keywords: Level-k reasoning, Time pressure, Repetition, Experiment
    JEL: C91 C72
    Date: 2013–06
  10. By: Elabed, Ghada; Carter, Michael R.
    Abstract: We present a novel way to understand the low uptake of index insurance using the interlinked concepts of ambiguity and compound-lottery aversion. Noting that the presence of basis risk makes index insurance a compound lottery, we derive an expression of the willingness to pay (WTP) to eliminate basis risk. Empirically, we implement this WTP measure using framed eld experiments with cotton farmers in Southern Mali. In this sample, 57% of the surveyed farmers reveal themselves to be compound-risk averse to varying degrees. Using the distributions of compound-risk aversion and risk aversion in this population, we simulate the impact of basis risk on the demand for an index insurance contract. Compound-risk aversion decreases the demand for index insurance relative to what it would be if individuals had the same degree of risk aversion but were compound-risk neutral. In addition, demand declines more steeply as basis risk increases under compound-risk aversion than it does under risk neutrality. Our results highlight the importance of designing contracts with minimal basis risk if potential buyers are compound-risk averse.
    Keywords: Index Insurance, Risk and Uncertainty, Compound Risk, Ambiguity, Field Experiments, International Relations/Trade, Research Methods/ Statistical Methods, Risk and Uncertainty,
    Date: 2013
  11. By: Silvester Van Koten (CERGE-EI and Department of Institutional Economics, University of Economics, Prague); Andreas Ortmann (School of Economics, the University of New South Wales)
    Abstract: Self-regulatory organizations (SROs) can be found in education, healthcare, and other not-for-profit sectors as well as the accounting, financial, and legal professions. DeMarzo et al. (2005) show theoretically that SROs can create monopoly market power for their affiliated agents, but that governmental oversight, even if less efficient than oversight by the SRO, can largely offset the market power. We provide an experimental test of this conjecture. For carefully rationalized parameterizations and implementation details, we find that the predictions of DeMarzo et al. (2005) are borne out.
    Keywords: Experimental Economics, Self-regulating organizations, Governmental oversight
    JEL: C90 L44 G18 G28
    Date: 2013–05
  12. By: Christoph Engel (Max Planck Institute for Research on Collective Goods, Bonn); Marco Kleine (Max Planck Institute for Research on Collective Goods, Bonn)
    Abstract: In the policy debate, intellectual property is often justified by what seems to be a straightforward argument: if innovators are not protected against others appropriating their ideas, incentives for innovation are suboptimally low. Now in most industries for most potential users, appropriating a foreign innovation is itself an investment decision fraught with cost and risk. Nonetheless standard theory predicts too little innovation. Arguably the problem is exacerbated by innovators’ risk aversion as well as their aversion against others benefitting from their efforts without contributing to the cost, and without bearing innovation risk. We model the situation as a game and test it in the lab. We find even more appropriation than predicted by standard theory. But the risk and the experience of appropriation does not deter innovation. We find even more innovation than predicted by theory, and actually more than would be efficient. In the lab, the prospect of givingimitators a free lunch does not have a chilling effect on innovation.
    Keywords: Innovation, imitation, appropriation, patent, fairness of desert
    JEL: H41 O31 D63 K11 C91 D62 H23 L17 D22
    Date: 2013–05
  13. By: Matthew W. McCarter (College of Business, University of Texas at San Antonio and Economic Science Institute, Chapman University); Abel M. Winn (Argyros School of Business & Economics, Chapman University); Adam D. Galinsky (Columbia Business School, Colombia University)
    Abstract: This article uses archival data from English auctions of animal art and eBay gift cards coupled with two laboratory experiments to study the effect of financial stakes on an interdependent decision-making phenomenon critical to organizational success: auction fever. Congruent with rational irrationality theory, we find evidence that the frequency and severity of auction fever decreases as the stakes increase, calling into question the economic significance of the phenomenon. In Study 1, we used two archival field datasets to show that the frequency and magnitude of overbidding decrease as the bidder’s willingness to pay increases. In Study 2 a laboratory experiment replicated this finding as winners make up a minority (only 15.2%) of overbidders, making losers (who incur no cost for overbidding) four-and-half times more likely to experience “auction fever”. In Study 3, we compare the frequency of auction fever between an English auction institution (where only the winner pays) and penny auction institution (where every bidder pays) – and find that the frequency of auction fever declines from 33% in English auctions to 12.7% in penny auctions. In contrast to the English auctions, bidders in the penny auction were more likely to spend beyond their initial limits when their (perceived) item values were higher; this occurs because the cost of each additional bid is smaller relative to the perceived value of the item. These results demonstrate that financial stakes of a decision may override seemingly robust psychological processes and they encourage researchers to test their ideas in contexts where the economic significance of a decision is considerable.
    Keywords: Auction Fever, Bidder’s Curse, Economic Significance, English Auction, Overbidding, Penny Auction, Statistical Significance
    Date: 2013
  14. By: Loureiro, Maria L.; Rahmani, Djamal
    Abstract: We conducted a survey and a randomized natural experiment with the same subjects to investigate the effect of information about calorie intake on fast food choices. This combined approach allows us to maximize both internal and external research validity and test consistency of findings. We find that providing information about calories in a survey context for fast food menus has a moderate effect on calorie consumption, decreasing on average by 2.96 percent the amount of calories of the selected food choices. However, the same nutritional information had no significant impact on actual purchases in the restaurant context. Among the possible menus, the salad menu (the healthiest menu) was the most preferred option by those respondents who received nutritional information in the survey context; whereas in the restaurant, the most popular choice for the same group of people was the “Double bacon burger option” (the least healthy option). Finally, we find that the average calorie content of participants’ actual purchases increases significantly (0.17%) with the number of days elapsed between the day when the survey took place (and information was provided) and the actual purchase day at the restaurant. These results show large discrepancies between stated preferences and actual market behavior. These findings may be justified by the existence of projection bias and subjects acting under rational ignorance.
    Keywords: actual market behavior, labeling, stated preferences, self-control, projection bias, rational ignorance, Consumer/Household Economics, Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Marketing, 3C, 9I,
    Date: 2013
  15. By: Duquette, Eric; Higgins, Nathaniel; Horowitz, John
    Abstract: We elicit time-discounting behavior from U.S. farmers that are broadly known to be either late or early adopters of farming best management practices. Using a single-choice experiment, we estimate the mean discount rate for each farmer group and find that late adopters have a mean discount rate that is thirteen percentage points higher than the mean rate of early adopters. We argue through simulations that this difference is likely due to differences in time preference rather than risk aversion.
    Keywords: Time preference, discount rates, experimental economics, technology adoption, risk preference, Demand and Price Analysis, Farm Management, Research and Development/Tech Change/Emerging Technologies, Risk and Uncertainty, C93, D01, D03, D81, Q18, Q52,
    Date: 2013
  16. By: Antoinette Baujard; Frédéric Gavrel; Herrade Igersheim; Jean-François Laslier; Isabelle Lebon
    Abstract: Under evaluative voting, the voter freely grades each candidate on a numerical scale, with the winning candidate being determined by the sum of the grades they receive. This paper compares evaluative voting with the two-round system, reporting on an experiment which used various evaluation scales, conducted during the first round of the 2012 French presidential election. Invitations to participate in the study were extended to around 5,000 voters in three cities, and the experiment attracted 2,340 participants. Basing our argument on the ranks, relative scores, and grade profiles of candidates, we show that the two-round system favors “exclusive” candidates, that is candidates who elicit strong feelings, while evaluative rules favor “inclusive” candidates, that is candidates who attract the support of a large span of the electorate. These differences are explained by two complementary reasons: the opportunity for the voter to support several candidates under evaluative voting rules, and the specific pattern of strategic voting under the official, two-round voting rule.
    Keywords: Voting, In Situ Experiment, Evaluative Voting, Approval Voting, Two-round system.
    JEL: D72 C93
    Date: 2013
  17. By: Sven Fischer (Max Planck Institute for Research on Collective Goods, Bonn); Kristoffel Grechenig (Max Planck Institute for Research on Collective Goods, Bonn); Nicolas Meier
    Abstract: We run several experiments which allow us to compare cooperation under perfect and imperfect information and under a centralized and decentralized punishment regime. We nd that (1) centralization by itself does not improve cooperation and welfare compared to an informal, peer-to-peer punishment regime and (2) centralized punishment is equally sensitive to noise as decentralized punishment, that is, it leads to signicantly lower cooperation and welfare (total prots). Our results shed critical light on the widespread conjecture that the centralization of punishment institutions is welfare increasing in itself.
    Keywords: Public Goods, cooperation, centralized punishment, imperfect information, decentralized punishment, peer to peer punishment
    JEL: C92 K42 H42 D03
    Date: 2013–04
  18. By: Britwum, Kofi; Bernard, John C.
    Keywords: Demand and Price Analysis, Food Consumption/Nutrition/Food Safety, Livestock Production/Industries,
    Date: 2013
  19. By: Weichselbaumer, Doris (University of Linz)
    Abstract: In this paper, a correspondence testing experiment is conducted to examine sexual orientation discrimination against lesbians in Germany. Applications for four fictional female characters are sent out in response to job advertisements: a heterosexual single, a married heterosexual, a single lesbian and a lesbian who is in a 'same-sex registered partnership'. Different results are obtained for the two cities investigated, Munich and Berlin. While single lesbians and lesbians in a registered partnership are equally discriminated in comparison to the heterosexual women in the city of Munich, no discrimination based on sexual orientation has been found in Berlin. Furthermore, for a subset of our data we can compare the effects of a randomized versus a paired testing approach, which suggests that under certain conditions, due to increased conspicuity, the paired testing approach may lead to biased results.
    Keywords: discrimination, sexual orientation, Germany
    JEL: C93 J15 J71
    Date: 2013–05
  20. By: Seitz McCarthy, Aine
    Keywords: Consumer/Household Economics, Financial Economics,
    Date: 2013
  21. By: Meghan R. Busse; Ayelet Israeli; Florian Zettelmeyer
    Abstract: In this paper we investigate whether sellers treat consumers differently on the basis of how well-informed consumers appear to be. We implement a large-scale field experiment in which callers request price quotes from automotive repair shops. We show that sellers alter their initial price quotes depending on whether consumers appear to be well-informed, uninformed, or poorly informed about market prices. We find that repair shops quote higher prices to callers who cite a higher expected price. We find that women are quoted higher prices than men when callers signal that they are uninformed about market prices. However, gender differences disappear when callers mention an expected price for the repair. Finally, we find that repair shops are more likely to offer a price concession if asked to do so by a woman than a man.
    JEL: D12 D83
    Date: 2013–06

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