New Economics Papers
on Experimental Economics
Issue of 2013‒07‒05
fifteen papers chosen by

  1. Does willful ignorance deflect punishment? – An experimental study By Björn Bartling; Florian Engl; Roberto A. Weber
  2. Premium Auctions and Risk Preferences: An Experimental Study By Brunner, Christoph; Hu, Audrey; Oechssler, Jörg
  3. Purchase Intention Effects in Experimental Auctions and Real Choice Experiments By Xie, Jing; Gao, Zhifeng; House, Lisa
  4. The Puzzle of Valuation Gaps Between Experimental Auction and Real Choice Experiments: Do Purchase Intention and Price Bargaining Preference Matter? By Xie, Jing; Gao, Zhifeng; House, Lisa
  5. When to Pay More: Incentives, Culture and Status in Principal‐ Agent Interactions By Dessi, Roberta; Miquel-Florensa, Pepita
  6. Cooperation makes it happen? Groundwater management in Aguascalientes, Mexico: An experimental approach By Du Bois, Rodrigo Salcedo; Macias, Miguel Angel Gutierrez
  7. Non-Strategic Punishment when Monitoring is Costly: Experimental Evidence on Differences between Second and Third Party Behavior By Goeschl, Timo; Jarke, Johannes
  8. Limelight on dark markets: an experimental study of liquidity and information By Aleksander Berentsen; Michael McBride; Guillaume Rocheteau
  9. Programming for Experimental Economics: Introducing CORAL - a lightweight framework for experimental economic experiments By Markus Schaffner
  10. The Influence of Short-term Financial Incentives (PES) on Social Norms and Behaviors: Laboratory Experimental Evidence By Kerr, John; Lapinski-Lafaive, Marie; Shupp, Robert; Zhao, Jinhua
  11. Justice among strangers. On altruism, inequality aversion and fairness By Luciano Andreozzi; Matteo Ploner; Ivan Soraperra
  12. Oxytocin does not make a face appear more trustworthy but improves the accuracy of trustworthiness judgments By Lambert B.; Declerck C.H.; Boone Ch.
  13. Do elected councils improve governance ? experimental evidence on local institutions in Afghanistan By Beath, Andrew; Christia, Fotini; Enikolopov, Ruben
  14. Risk and Ambiguity Preferences and the Adoption of New Agricultural Technologies: Evidence from Field Experiments in Rural India By Ward, Patrick S.; Singh, Vartika
  15. Ordeal Mechanisms In Targeting: Theory And Evidence From A Field Experiment In Indonesia By Vivi Alatas; Abhijit Banerjee; Rema Hanna; Benjamin A. Olken; Ririn Purnamasari; Matthew Wai-Poi

  1. By: Björn Bartling; Florian Engl; Roberto A. Weber
    Abstract: This paper studies whether people can avoid punishment by remaining willfully ignorant about possible negative consequences of their actions for others. We employ a laboratory experiment, using modified dictator games in which a dictator can remain willfully ignorant about the payoff consequences of his decision for a receiver. A third party can punish the dictator after observing the dictator’s decision and the resulting payoffs. On the one hand, willfully ignorant dictators are punished less if their actions lead to unfair outcomes than dictators who reveal the consequences before implementing the same outcome. On the other hand, willfully ignorant dictators are punished more than revealing dictators if their actions do not lead to unfair outcomes. We conclude that willful ignorance can circumvent blame when unfair outcomes result, but that the act of remaining willfully ignorant is itself punished, regardless of the outcome.
    Keywords: Willful ignorance, third party punishment, dictator game, fairness
    JEL: C91 D63
    Date: 2013–06
  2. By: Brunner, Christoph; Hu, Audrey; Oechssler, Jörg
    Abstract: In premium auctions, the highest losing bidder receives a reward from the seller. This paper studies the private value English premium auction (EPA) for different risk attitudes of bidders. We explicitly derive the symmetric equilibrium for bidders with CARA utilities and conduct an experimental study to test the theoretical predictions. In our experiment, subjects are sorted into risk-averse and risk loving groups. We find that revenues in the EPA are significantly higher when bidders are risk loving rather than risk averse. These results are partly consistent with theory and confirm the general view that bidders’ risk preferences constitute an important factor that affects bidding behavior and consequently also the seller’s expected revenue. However, individual subjects rarely follow the equilibrium strategy and as a result, revenue in our experiment is lower than in the symmetric equilibrium.
    Keywords: premium auction; risk preference; Holt-Laury method; experimental economics.
    Date: 2013–06–03
  3. By: Xie, Jing; Gao, Zhifeng; House, Lisa
    Abstract: This article examines consumers’ preference for three types of orange juice in China. Two non-hypothetical experiments, Real Choice Experiments and Experimental Auctions were used in the study. We found that WTP estimates from real choice experiment are significantly higher than auction bids, which is consistent with what Lusk and Schroeder (2006) and Gracia, Loureiro, and Nayga (2011) found in their paper. In addition, we found that purchase intention only has significantly effects on consumers’ behavior in Experimental Auction, but not in Real Choice Experiments, and this purchase intention only has effects on non-novel food, but not novel food.
    Keywords: Consumer preferences, choice experiment, experimental auction, purchase intention, Agribusiness, Food Consumption/Nutrition/Food Safety, Marketing,
    Date: 2013
  4. By: Xie, Jing; Gao, Zhifeng; House, Lisa
    Abstract: This article examines the preferences revealed by two non-hypothetical experiments. We found that WTP estimates from real choice experiment are significantly than auction bids. We provide two possible reasons for it: consumers’ purchase intention and aggressiveness in price bargaining. Our results suggest that the discrepancies among experiments can come from the heterogeneity of respondents’ price bargaining aggressiveness, but not from purchase intention differences.
    Keywords: Consumer preferences, choice experiment, auction, purchase intention, price bargaining aggressiveness, Consumer/Household Economics,
    Date: 2013
  5. By: Dessi, Roberta (IDEI, Toulouse School of Economics); Miquel-Florensa, Pepita (Toulouse School of Economics)
    Abstract: We study the role of status in an experimental Principal-Agent game.Status is awarded to subjects based on either talent or luck. In each randomly matched principal-agent pair, the principal chooses the agent's status-contingent piece rate for a task in which talent matters for performance (an IQ test). We perform the experiment in Cambridge (UK) and in HCMV (Vietnam). We find that in Cambridge piece rate others are significantly higher for high-status agents (only) when status signals talent. However, these higher offers are not payoff-maximizing for the principals.In contrast, Vietnam piece rate offers are significantly higher for high-status agents (only) when status is determined by luck. We explore possible explanations, and the implications for status and incentives.
    Keywords: , , incentives, status, identity, piece rate, principal-agent, signaling, culture.
    Date: 2013–05
  6. By: Du Bois, Rodrigo Salcedo; Macias, Miguel Angel Gutierrez
    Abstract: This research develops economic framed field experiments in order to analyze the attitude and behavior of farm groundwater users in several fictional situations, including adoption of efficient irrigation technology and compliance of group arrangements. A groundwater game was played by 256 farmers selected from different regions of the state of Aguascalientes, Mexico.
    Keywords: Common pool resource management, groundwater, efficient irrigation technologies, strategic behavior, behavioral economics, economic framed field experiments, Latin America, Institutional and Behavioral Economics, Resource /Energy Economics and Policy,
    Date: 2013
  7. By: Goeschl, Timo; Jarke, Johannes
    Abstract: This paper studies monitoring and punishment behavior by second and third parties in a cooperation experiment with endogenous information structures: Players are uninformed whether the target player cooperated or defected at the cooperation stage, but can decide to resolve the information imperfection at non-negative cost at the punishment stage. We examine how monitoring and punishment respond to changes in monitoring costs, and exploit the evidence to gain new insights about commonalities and differences between second and third party behavior. We establish three effects of positive monitoring costs relative to the zero-cost baseline and find that each one affects third parties differently than second parties: A «direct punishment cost effect» (the supply of non-strategic punishment decreases), a «blind punishment effect» (players punish without resolving the information imperfection) and a «diffusion effect» (defectors make up a smaller share of the punished and receive weaker punishment). The first effect affects third parties less, the other two more. As a result, third party punishment leads to increasingly weaker incentives for cooperation relative to second party punishment as monitoring costs rise. In addition, the differences between second and third parties suggest the presence of a «pure role effect»: Taking into account elicited beliefs and risk preferences, third parties punish differently from second parties, not just more weakly.
    Keywords: monitoring; punishment; sanctions; information; cooperation
    Date: 2013–06–26
  8. By: Aleksander Berentsen; Michael McBride; Guillaume Rocheteau
    Abstract: The goal of this paper is to study how informational frictions affect asset liquidity in OTC markets in a laboratory setting. The experiments replicate an OTC market similar to the one used in monetary and financial economics (Shi, 1995; Trejos and Wright, 1995; Duffie, Garleanu, and Pedersen, 2005): individuals are matched bilaterally and at random, there are gains from trades due to differences in technologies and endowments, and the terms of trade are determined through a simple bargaining protocol. Subjects buy commodities that have different private values with assets that have common values and can be subject to a private information problem. The asset plays the role of a medium of exchange, but this role can be affected by its lack of "recognizability." We study a benchmark experiment where the OTC bargaining game takes place under complete information, a set of experiments with adverse selection where the terminal value of notes are determined exogenously, and a set of experiments with hidden actions where subjects can produce fraudulent notes at some cost.
    Keywords: Liquidity, money, information, experiments
    JEL: G12 G14 E42 D82 D83
    Date: 2013–06
  9. 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, specifically 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
  10. By: Kerr, John; Lapinski-Lafaive, Marie; Shupp, Robert; Zhao, Jinhua
    Keywords: Agricultural Finance, Institutional and Behavioral Economics,
    Date: 2013
  11. By: Luciano Andreozzi; Matteo Ploner; Ivan Soraperra
    Abstract: We present an axiomatic model of choice involving two agents, motivated by the experimental evidence on non-selfish preferences. We distinguish two classes of social preferences, depending on whether they are or not separable. Altruism and spite (Andreoni & Miller, 2002; Cox et al., 2007) are separable, while the various forms of inequality aversion are not (Fehr & Schmidt, 1999; Bolton & Ockenfels, 2000; Charness & Rabin, 2002). Separable and non-separable preferences give very close predictions when only sure outcomes are involved, but they make opposite predictions in choices involving lotteries. We show this by proposing a generalization of expected utility that accounts for preferences for “fair procedures”, which violate the independence axiom. An experimental test of the model reveals little evidence of ex-post inequality aversion, even when non-expected utility preferences are accounted for.
    Date: 2013
  12. By: Lambert B.; Declerck C.H.; Boone Ch.
    Abstract: Previous research on the relation between oxytocin and trustworthiness evaluations has yielded inconsistent results. The current study reports an experiment using artificial faces which allows manipulating the dimension of trustworthiness without changing factors like emotions or face symmetry. We investigate whether (1) oxytocin increases the average trustworthiness evaluation of faces (level effect), and/or whether (2) oxytocin improves the discriminatory ability of trustworthiness perception so that people become more accurate in distinguishing faces that vary along a gradient of trustworthiness. In a double blind oxytocin/placebo experiment (N = 106) participants conducted two judgment tasks. First they evaluated the trustworthiness of a series of pictures of artificially generated neutral faces. Next they compared neutral faces with artificially generated faces that were manipulated to vary in trustworthiness. The results indicate that oxytocin (relative to a placebo) does not affect the evaluation of trustworthiness in the first task. However, in the second task, misclassification of untrustworthy faces as trustworthy occurred significantly less in the oxytocin group. Furthermore, oxytocin improved the discriminatory ability of untrustworthy, but not trustworthy faces. We conclude that oxytocin does not increase trustworthiness judgments on average, but that it helps people to more accurately recognize an untrustworthy face.
    Date: 2013–06
  13. By: Beath, Andrew; Christia, Fotini; Enikolopov, Ruben
    Abstract: Using data from a field experiment in 500 villages, this paper studies how local institutions affect the quality of governance, as measured by aid distribution outcomes. In villages where elected councils exist and manage distributions, aid targeting improves. However, if the distribution is not clearly assigned to either the council or customary leaders, the creation of elected councils increases embezzlement and makes decision-making less inclusive. Requiring that women manage the distribution jointly with customary leaders also increases embezzlement. Thus, while elected councils can improve governance, overlapping mandates between new and existing institutions may result in increased rent-seeking.
    Keywords: Social Accountability,Governance Indicators,National Governance,Housing&Human Habitats,Peri-Urban Communities
    Date: 2013–06–01
  14. By: Ward, Patrick S.; Singh, Vartika
    Abstract: In this paper we conduct a series of eld experiments in rural India in order to measure preferences related to risk, loss, and ambiguity. Disaggregating by data, we nd that on average women are signicantly more risk averse and loss averse than men, though the higher average risk aversion arises due to a greater share of women who are extremely risk averse. Through a series of two empirical examples, we demonstrate how these parameters aect decisions to adopt new agricultural technologies. By combining these results with a choice experiment over new and familiar rice seeds, we nd that ambiguity averse individuals are far more likely to stick with seeds they are familiar with, while a greater degree of loss aversion generally suggests people are more willing to switch to a new variety.
    Keywords: uncertainty, Prospect Theory, technology adoption, India, Community/Rural/Urban Development, Consumer/Household Economics, International Development, International Relations/Trade, Research Methods/ Statistical Methods, O13, O33, C93,
    Date: 2013–06–03
  15. By: Vivi Alatas; Abhijit Banerjee; Rema Hanna; Benjamin A. Olken; Ririn Purnamasari; Matthew Wai-Poi
    Abstract: Economic theory suggests that, when designing aid programs, ordeal mechanisms that impose differential costs for rich and poor can induce self-selection and hence improve targeting (“self-targeting”). We first re-examine this theory and show that ordeal mechanisms may actually have theoretically ambiguous effects on targeting: for example, time spent applying imposes a higher monetary cost on the rich, but may impose a higher utility cost on the poor. We then examine these issues empirically by conducting a 400-village field experiment within Indonesia's Conditional Cash Transfer program. Targeting in the program is usually conducted by automatically enrolling candidates who pass an asset test. We compare whether instituting an ordeal mechanism, where villagers come to a central application site to apply and take the asset test, improves targeting over the existing automatic enrollment system. Within self-targeting villages, we find that the poor are more likely to apply, even conditional on whether they would pass the asset test. On net, self-targeting villages have a much poorer group of beneficiaries than status quo villages. However, marginally increasing the ordeal does not necessarily improve targeting: while experimentally increasing the distance to the application site reduces the number of applicants, it screens out both rich and poor in roughly equal proportions. Estimating the model structurally, we show that only one would need to increase the ordeal dramatically (e.g. tripling wait times to 9 hours or more) to induce detectable additional selection. In short, ordeal mechanisms can induce self-selection, but marginally increasing the ordeal can impose additional costs on applicants without necessarily improving targeting.
    JEL: I38 O12
    Date: 2013–06

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