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on Experimental Economics |
| By: | Danilov, Anastasia (University of Cologne); Sliwka, Dirk (University of Cologne) |
| Abstract: | We investigate whether incentive schemes signal social norms and thus affect behavior beyond their direct economic consequences. A principal-agent experiment is studied in which prior to contract choice principals are informed about past actions of other agents and thus have more information about "norms of behavior". Compared to a setting with uninformed principals agents exert nearly 50% higher efforts under a fixed wage contract when an informed principal had chosen this contract. Apparently the informed principal's choice signals a norm not to exploit the trust which leads to more trustworthy behavior. This mechanism's robustness is explored in further experiments. |
| Keywords: | social norms, contracts, incentives, signaling, experiments |
| JEL: | D03 C91 D86 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7477&r=exp |
| By: | Steven Gazzillo (Rutgers University); Barry Sopher (Rutgers University); Athena Aktipis (Arizona State University); Lee Cronk (Rutgers University) |
| Abstract: | Controversy exists about the act of giving as altruistic instead of self-interested behavior. Each side of this argument interprets similar results from similar experiments in different ways. One side argues the results show that the appearance of altruistic behavior can be explained by self-interested motives. The other side argues these results are evidence of group selection,where a group member takes an action that is harmful to itself but benefi cial to the group. We consider this question using a novel approach. We create a rich experimental environment in which subjects have the ability to cooperate to improve the group's outcome by sharing their wealth in non-compulsory, non-enforceable risk-sharing arrangements. We find that average subject behavior appears to be motivated by self-interest more than group survival. |
| Keywords: | risk sharing, experiment, resource management |
| JEL: | C9 D8 |
| Date: | 2013–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:rut:rutres:201302&r=exp |
| By: | Jörg Spiller (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)); Friedel Bolle (Faculty of Business Administration and Economics, European University Viadrina, Frankfurt (Oder)) |
| Abstract: | In a laboratory experiment groups of four played a 15-period Public Good game. Each period a player could either invest in a green sector or in a more profitable but polluting brown sector. The pollutant accumulated and decreased the players’ income in all following periods. We conducted several treatments including the existence of a future generation. In the latter case subjects were told that their final stock would be forwarded to another group in a later session. The framework allowed investigating learning, the effects of communication and the possibly different reactions to self-produced and inherited pollution. The most interesting result is that the existence of heirs restricts pollution. We find that the result may be driven partly by thoughtfulness and partly by the induced motivation for longer-term planning. |
| Keywords: | Experimental Economics, Public Good, Dynamic, Environmental Eco- nomics, Inter Generation |
| JEL: | H41 C91 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:euv:dpaper:008&r=exp |
| By: | Iñigo Iturbe-Ormaetxe Kortajarene (Universidad de Alicante); Giovanni Ponti (Universidad de Alicante); Josefa Tomás (Universidad de Alicante) |
| Abstract: | Experimental evidence suggests that the frequency with which individuals get feedback information on their investments has an effect on risk-taking behavior. In particular, when they are given information sufficiently often, they take fewer risks compared with a situation in which they are informed less frequently. In this paper we find that this result still holds when subjects do not know the probabilities of the lotteries they are betting upon. We also detect significant gender effects, in that the frequency with which information is disclosed mostly affects men’s betting behavior, rather than women’s, and that men are much more risk-seeking after experiencing a loss. |
| Keywords: | Myopic loss aversion, evaluation periods, ambiguity, gender effects |
| JEL: | C91 D81 D14 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:ivi:wpasad:2013-05&r=exp |
| By: | Rosen, Christiane (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)); Madlener, Reinhard (E.ON Energy Research Center, Future Energy Consumer Needs and Behavior (FCN)) |
| Abstract: | In this paper we report on an experiment we conducted that has been inspired by energy trading. Bidders with a portfolio consisting of three cost-quantity pairs bid into a market with a single buyer. Depending on the treatment, they are allowed to submit either one or two bids constructed from their endowments. The novelty of our study is the experimental examination of a procurement auction in the context of divisible goods and the evaluation of the effect of multiple bids in comparison to single bids in such an auction. We created both a low and a high competition scenario to evaluate the effects of competitive forces on each auction format. We find that multiple bids have a calming effect on the market, reducing volatility substantially. However, this comes at the cost of lower profits for bidders, whereas auctioneer’s revenue is maximized. At the same time, supply reduction, which is equivalent to demand reduction in demand auctions, is more pronounced in the multiple-bid setting. A reason for this might be that expensive units are driven out of the market more easily in the multi-bid setting, as they can no longer be offered without causing loss of market efficiency during dispatch. |
| Keywords: | Divisible good auction; laboratory experiment; discriminatory pricing; multiple bids |
| JEL: | C72 C91 D44 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:ris:fcnwpa:2013_008&r=exp |
| By: | Marco Faravelli; Luca Stanca |
| Abstract: | This paper provides a direct test of the hypothesis that agents' objective functions are non-separable in economic incentives and social preferences. We study experimentally fixed-prize contests using a 2x2 design, varying orthogonally the degree of competition of the incentive mechanism (all-pay auction vs. lottery) and the presence or absence of social returns to bidding (rent seeking vs. public good). The results indicate that either stronger competition or positive social returns have positive main effects on bids. In addition, we find a negative interaction between the all-pay auction mechanism and the public good environment, leading us to reject separability. This finding provides causal evidence that economic incentives may negatively affect pro-social behavior. |
| Keywords: | Contests, Public goods, Rent-seeking, Social preferences, Separability, Laboratory experiments |
| JEL: | C91 D44 H41 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:mib:wpaper:250&r=exp |
| By: | John Bone (University of York); Paolo Crosetto (Max Planck Institute of Economics, Jena); John D. Hey (University of York); Carmen Pasca (University of York) |
| Abstract: | This paper reports an experiment designed to elicit social preferences over income compensation schemes, where income differences between subjects have two independent components: one due to chosen effort and the other due to random chance. These differences can be compensated through social dividends, according to principles chosen beforehand by subjects themselves from behind a stylised Rawlsian veil of ignorance, or outside the society on which the principles will be implemented. We test the attractiveness in particular of Luck Egalitarianism, compensating inequalities due to chance but not those due to choice. We find modest but not overwhelming support for these principles, suggesting that subjects' actual preferences are more complex. |
| Keywords: | chance, choice, envy-freeness, fairness, luck, luck egalitarianism, responsibility |
| JEL: | D31 D63 C91 |
| Date: | 2013–07–12 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2013-029&r=exp |
| By: | Campos-Vazquez, Raymundo M.; Cuilty, Emilio |
| Abstract: | This study measures risk and loss aversion using Prospect Theory and the impact of emotions on those parameters. Our controlled experiment at two universities in Mexico City, using uncompensated students as research subjects, found results similar to those obtained by Tanaka et al. (2010). In order to study the role of emotions, we provided subjects with randomly varied information on rising deaths due to drug violence in Mexico and also on youth unemployment. In agreement with previous studies, we find that risk aversion on the gains domain decreases with age and income. We also find that loss aversion decreases with income and is less for students in public universities. With regard to emotions, risk aversion increases with sadness and loss aversion is negatively influenced by anger. On the loss domain, anger dominates sadness. On average, anger reduces loss aversion by half. |
| Keywords: | Risk Aversion; Emotions; Prospect Theory; Experiment; Mexico |
| JEL: | C93 D03 D12 O12 O54 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48280&r=exp |
| By: | Butler, Jerey V.; Conzo, Pierluigi; Leroch, Martin A. (University of Turin) |
| Abstract: | Third party punishment is crucial for sustaining cooperative behavior. Still, little is known about its determinants. In this paper we use laboratory experiments to investigate a long-conjectured interaction between group identication and bystanders' punishment preferences using a novel measure of these preferences. We induce minimal groups and give a bystander the opportunity to punish the perpetrator of an unfair act against a defenseless victim. We elicit the bystander's valuation for punishment in four cases: when the perpetrator, the victim, both or neither are members of the bystander's group. We generate testable predictions about the rank order of punishment valuations from a simple framework incorporating group-contingent preferences for justice which are largely conrmed. Finally, we conduct control sessions where groups are not induced. Comparing punishment across treatment and control suggests that third-party punishers tend to treat others as in-group members unless otherwise divided. |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:uto:dipeco:201329&r=exp |
| By: | Galasso, Vincenzo (USI Università della Svizzera Italiana); Nannicini, Tommaso (Bocconi University) |
| Abstract: | This paper investigates the differential response of male and female voters to competitive persuasion in political campaigns. During the 2011 municipal elections in Milan, a sample of eligible voters was randomly divided into three groups. Two were exposed to the same incumbent's campaign but to different opponent's campaigns, with either a positive or a negative tone. The third – control – group received no electoral information. The campaigns were administered online and consisted of a bundle of advertising tools (videos, texts, slogans). Stark gender differences emerge. Negative advertising increases men's turnout, but has no effect on women. Females, however, vote more for the opponent and less for the incumbent when they are exposed to the opponent's positive campaign. Exactly the opposite occurs for males. Additional tests show that our results are not driven by gender identification with the candidate, ideology, or other voter's observable attributes. Effective strategies of persuasive communication should thus take gender into account. Our results may also help to reconcile the conflicting evidence on the effect of negative vs. positive advertising, as the average impact may wash out when aggregated across gender. |
| Keywords: | gender differences, political campaigns, competitive persuasion |
| JEL: | D72 J16 M37 |
| Date: | 2013–07 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7483&r=exp |
| By: | Goulart, Marco; Da Costa Jr, Newton; Santos, Andre; Takase, Emilio; Da Silva, Sergio |
| Abstract: | We assess the psychophysiological characteristics underlying the disposition effect and find that subjects showing greater disposition effect are those who sweat more and present lower body temperature and heart rate. |
| Keywords: | disposition effect, psychophysiology of decision making |
| JEL: | C91 C92 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:48227&r=exp |
| By: | Newell, Richard G.; Siikamäki, Juha (Resources for the Future) |
| Abstract: | We evaluate the effectiveness of energy efficiency labeling in guiding household appliance choice decisions. Using a carefully designed choice experiment with several alternative labeling treatments, we disentangle the relative importance of different types of information and intertemporal behavior (i.e., discounting) in guiding energy efficiency behavior. We find that simple information on the economic value of saving energy was the most important element guiding more cost-efficient investments in appliance energy efficiency, with information on physical energy use and carbon dioxide emissions having additional but lesser importance. The degree to which the current EnergyGuide label guided cost-efficient decisions depends importantly on the discount rate assumed appropriate for the analysis. Using individual discount rates separately elicited in our study, we find that the current EnergyGuide label came very close to guiding cost-efficient decisions, on average. However, using a uniform five percent rate for discounting—which was much lower than the average individual elicited rate—the EnergyGuide label led to choices that result in a one-third undervaluation of energy efficiency. We find that labels that not only nudged people with dispassionate monetary or physical information, but also endorsed a model (with Energy Star) or gave a suggestive grade to a model (as with the EU-style label), had a substantial impact in encouraging the choice of appliances with higher energy efficiency. Our results reinforce the centrality of views on intertemporal choice and discounting, both in terms of understanding individual behavior and in guiding public policy decisions. |
| Keywords: | energy efficiency behavior, gap, information label, discounting, time preference gap, choice experiment, mixed logit |
| JEL: | C91 D12 D91 D83 H43 Q41 Q48 |
| Date: | 2013–07–03 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-13-17&r=exp |
| By: | Luís Francisco Aguiar-Conraria (Universidade do Minho - NIPE); Pedro C. Magalhães (University of Lisbon, Social Sciences Institute); Christoph A. Vanberg (Alfred-Weber-Institut, University of Heidelberg) |
| Abstract: | In most instances of collective decision-making, it cannot be expected that all persons who are entitled to vote will end up doing so. This has led institutional designers, out of concerns with the “legitimacy” of decisions, to introduce quorum requirements. A prominent example of this can be found in the context of direct democracy mechanisms, such as referenda and initiatives. We discuss the results of an experiment about the consequences of such quora. We show that quora lead to overall decreases in participation rates, dramatically increasing the likelihood of full-fledged electoral boycotts on the part of status quo supporters. |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:nip:nipewp:14/2013&r=exp |
| By: | Barry Sopher (Rutgers University); Revan Sopher (Rutgers University) |
| Abstract: | We study experimentally “partnership protocols” of the sort proposed by Kalai and Kalai (2010), for bilateral trade games with incomplete information. We utilize the familiar game analyzed by Chatterjee and Samuelson (1983) and Myerson and Sattherwaite (1983), with a buyer and seller with value and cost independently distributed uniformly on (0,100). The usual rules of the game are for the buyer and seller to submit price bids and asks, and for trade to occur if and only if the buyer’s bid price exceeds the seller’s ask price, in which case trade occurs at the average of the bid and the ask price. We compare the efficiency of trade and the nature of bid functions in this standard game to those in other versions of the game, including games in which cheap talk is allowed prior to trade (either before or after the traders know their own information, but without knowing each others’ information), games with the formal mechanisms proposed by Kalai and Kalai available as an option for the traders to use, and games with both the mechanisms and cheap talk available. We consider both ex ante and interim mechanisms. That is, traders simultaneously choose whether to opt in to the mechanism either prior to knowing their own information, or after knowing their own information. In the last two versions of the game, cheap talk takes place prior to the opt-in decision. We find that the formal mechanisms significantly increase the efficiency of trade in both the ex ante and interim cases. Specifically, in the baseline game, traders captured 73% of the available surplus (compared to a theoretical maximum of 84% possible with optimal strategies). Efficiency rises to 87% and 82% for the ex ante and interim mechanisms, respectively, and further rises to 90% and 84% when cheap talk is also allowed with the mechanisms. When only cheap talk is allowed, traders capture 81% (for ex ante talk), but only 70% (for interim talk). On average, 55% of trading pairs opt in to mechanisms when they are available. |
| Keywords: | Experiments, Bilateral Trade, Protocols |
| JEL: | C9 C7 |
| Date: | 2013–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:rut:rutres:201304&r=exp |
| By: | Wang, Zhongmin (Resources for the Future); Xu, Minbo |
| Abstract: | Online penny auctions, emerged recently, are seen as an adaptation of the famous dollar auction and as ?the evil stepchild of game theory and behavioral economics.?We use the complete bid and bidder history at a website to study if penny auctions can sustain excessive pro?fits over time. The overwhelming majority of new bidders lose money, but they quit quickly. A very small percentage of bidders are experienced and strategically sophisticated, but they earn substantial profi?ts. Our evidence thus suggests that penny auctions cannot sustain excessive pro?fits without attracting a revolving door of new customers who will lose money. |
| Keywords: | behavioral game theory, behavioral industrial organization, auction, learning, strategic sophistication |
| JEL: | D03 D44 L81 |
| Date: | 2013–05–30 |
| URL: | http://d.repec.org/n?u=RePEc:rff:dpaper:dp-13-15&r=exp |
| By: | Gertler, Paul; Heckman, James; Pinto, Rodrigo; Zanolini, Arianna; Vermeerch, Christel; Walker, Susan; Chang-Lopez, Susan; Grantham-McGregor, Sally |
| Abstract: | This paper finds large effects on the earnings of participants from a randomized intervention that gave psychosocial stimulation to stunted Jamaican toddlers living in poverty. The intervention consisted of one-hour weekly visits from community Jamaican health workers over a 2-year period that taught parenting skills and encouraged mothers to interact and play with their children in ways that would develop their children's cognitive and personality skills. The authors re-interviewed the study participants 20 years after the intervention. Stimulation increased the average earnings of participants by 42 percent. Treatment group earnings caught up to the earnings of a matched non-stunted comparison group. These findings show that psychosocial stimulation early in childhood in disadvantaged settings can have substantial effects on labor market outcomes and reduce later life inequality. |
| Keywords: | Educational Sciences,Disease Control&Prevention,Health Monitoring&Evaluation,Primary Education,Labor Policies |
| Date: | 2013–07–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:6529&r=exp |
| By: | Ebru Isgin (West Chester University); Barry Sopher (Rutgers University) |
| Abstract: | The paper studies the role of information transparency on fairness concerns,welfare and efficiency. When the firm's productivity and ultimately profits are revealed, wage offers induce relatively fair divisions of potential gains and workers respond with higher performance. Workers respond not only to wages but also to firms' intentions concerning fairness. Information transparency serves as a mechanism that promotes fairness and performance while the lack of transparency results in reduced earnings for workers and market inefficiency. |
| Keywords: | Experiments, Incomplete Contracts, Fairness, Information Transparency |
| JEL: | C9 D8 J |
| Date: | 2013–01–18 |
| URL: | http://d.repec.org/n?u=RePEc:rut:rutres:201303&r=exp |
| By: | Pablo Brañas-Garza (GLOBE and Middlesex University London); Ramón Cobo-Reyes (GLOBE and Department of Economic Theory and Economic History, University of Granada.); Natalia Jiménez (GLOBE and Department of Economic Theory and Economic History, University of Granada.); Giovanni Ponti (Universidad de Alicante and Università di Ferrara) |
| Abstract: | Limited attention has been devoted on how (real-life) social networks are elicited and mapped, even less from the viewpoint of mechanism design. This paper surveys the few mechanisms that have been proposed by the experimental literature to this purpose. These mechanisms differ in their incentive structure, as well as in the means of reward they employ. We compare these elicitation devices on the basis of the estimated dierences in the characteristics of the induced networks, such as the number of (mutual) links, correspondence and accuracy. Our main conclusion is that the elicited network architecture is itself dependent on the nature (and the structure) of the incentives. This, in turn, should provide the social scientist with guidelines on the most appropriate device to use, depending on the research objectives. |
| Keywords: | Social Networks, Experimental Economics |
| JEL: | C93 D85 |
| Date: | 2013–07–10 |
| URL: | http://d.repec.org/n?u=RePEc:gra:wpaper:13/07&r=exp |