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on Experimental Economics |
| By: | Petrie, Ragan (Interdisciplinary Center for Economic Science (ICES), George Mason University, 4400 University Drive, MSN 1B2); Jacobson, Sarah (Department of Economics, Williams College, 24 Hopkins Hall Dr., Williamstown, MA 01267, USA) |
| Abstract: | Favor trading is common. We do something nice for someone and they do something nice in return. Several motives might underlie such behavior, including altruism, strategic motives, and direct or indirect positive reciprocity. It is not yet well-understood how these fit together to affect behavior, how they interact in various institutional structures, and how they play out over time. We use a laboratory experiment to study the elements and dynamics of favor trading in a particular setting: the private provision of a public good. In our experiment, giving subjects the ability to practice targeted reciprocity by making a simple, low-cost change in information provision increases contributions to the public good by 14%. Subjects reward group members who have previously been generous to them and withhold rewards from ungenerous group members. Strategic concerns cannot explain all of this behavior, and it must be at least partly due to direct reciprocity. When someone cannot directly benefit from favor trading, he gives much less to the public good. People thus excluded from the “circle of reciprocity” provide a clean and strict test of indirect reciprocity. Contrary to previous studies in the literature, we do not observe indirect reciprocity. |
| Keywords: | public goods, direct and indirect reciprocity, experiment, peer-to-peer fundraising |
| JEL: | C92 H41 D01 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:wil:wileco:2013-03&r=exp |
| By: | John A. List; Michael K. Price |
| Abstract: | This study showcases the usefulness of field experiments to the study of environmental and resource economics. Our focus pertains to work related to field experiments in the area of ‘behavioral’ environmental and resource economics. Within this rubric, we discuss research in two areas: those that inform i) benefit cost analysis and ii) conservation of resources. Within each realm, we show how field experiments have been able to test the relevant theories, provide important parameters to construct new theories, and guide policymakers. We conclude with thoughts on how field experiments can be used to deepen our understanding of important areas within environmental and resource economics. |
| JEL: | C9 C93 Q5 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19289&r=exp |
| By: | Karlan, Dean S.; Zinman, Jonathan |
| Abstract: | The long-run price elasticity of demand for credit is a key parameter for intertemporal modeling, policy levers, and lending practice. We use randomized interest rates, offered across 80 regions by Mexico’s largest microlender, to identify a 29-month dollars-borrowed elasticity of -1.9. This elasticity increases from -1.1 in year one to -2.9 in year three. The number of borrowers is also elastic. Credit bureau data does not show evidence of crowd-out. Competitors do not respond by reducing rates, perhaps because Compartamos’ profits are unchanged. The results are consistent with multiple equilibria in loan pricing. |
| Keywords: | interest rate elasticities; interest rate policy; interest rates; microcredit |
| JEL: | E43 G21 O11 O12 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9503&r=exp |
| By: | Carpenter, Jeffrey P. (Middlebury College); Gong, Erick (Middlebury College) |
| Abstract: | Economic theory predicts that agents will work harder if they believe in the "mission" of the organization. Well-identified estimates of exactly how much harder they will work have been elusive, however, because agents select into jobs. We conduct a real effort experiment with participants who work directly for organizations with clear missions. Weeks before the experiment, we survey potential participants for their organizational preferences. At the experiment, we randomly assign workers to organizations, creating either mission matches or mismatches. We overlay performance incentives to test whether they can make up for the motivational deficit caused by a mismatch. Our estimates suggest that matched workers produce 72% more than mismatched workers and that performance pay can increase output by 35% compared to workers who only receive a base wage. Considering matches and mismatches separately, we find that performance pay has only a modest effect on matched workers (a 13% increase) while it has a large effect (a 86% increase) on mismatches, an effect that erodes much of the performance gap caused by the poor match. Our results have broad implications both for those organizations already with well-defined missions (i.e., compensation and screening policies) as well as for those organizations strategizing about strengthening or clarifying their missions. |
| Keywords: | principal-agent, mission, incentive, labor supply, experiment |
| JEL: | C91 J22 J33 M52 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp7602&r=exp |
| By: | David L. Dickinson; E. Glenn Dutcher; Cortney S. Rodet |
| Abstract: | Punishment has been shown to be an effective reinforcement mechanism. Intentional or not, punishment will likely generate spillover effects that extend beyond one’s immediate decision environment, and these spillovers are not as well understood. We seek to understand these secondary spillover effects in a controlled lab setting using a standard social dilemma: the voluntary contributions mechanism. We find that spillovers occur when others observe punishment outside their own social dilemma. However, the direction of the spillover effect depends crucially on personal punishment history and whether one is personally exempt from punishment or not. Key Words: Punishment, Punishment Spillovers, Vicarious Punishment, VCM, Social Dilemma, Experiment |
| JEL: | C91 C92 D03 H40 J24 K42 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:apl:wpaper:13-20&r=exp |
| By: | Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Martin G. Kocher (University of Munich, University of Gothenburg and CESifo Munich) |
| Abstract: | Take-it or leave-it offers are probably as old as mankind. Our objective here is, first, to provide a, probably subjectively-colored, recollection of the initial ultimatum game experiment, its motivation and the immediate responses. Second, we discuss important extensions of the standard ultimatum bargaining game in a unified framework, and, third, we offer a survey of the experimental ultimatum bargaining literature containing papers published since the turn of the century. The paper argues that the ultimatum game is an extremely versatile tool for research in bargaining and on social preferences. Finally, we provide examples for open research questions and directions for future studies. |
| Keywords: | ultimatum bargaining, experiment, social preferences |
| JEL: | C91 |
| Date: | 2013–09–16 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2013-035&r=exp |
| By: | Berg, Erlend; Ghatak, Maitreesh; Manjula, R; Rajasekhar, D; Roy, Sanchari |
| Abstract: | This paper studies the interaction of incentive pay and social distance in the dissemination of information. We analyse theoretically as well as empirically the effect of incentive pay when agents have pro-social objectives, but also preferences over dealing with one social group relative to another. In a randomised field experiment undertaken across 151 villages in South India, local agents were hired to spread information about a public health insurance programme. Relative to flat pay, incentive pay improves knowledge transmission to households that are socially distant from the agent, but not to households similar to the agent. |
| Keywords: | incentive pay; information constraints; knowledge transmission; public services; social proximity |
| JEL: | C93 D83 I38 M52 O15 Z13 |
| Date: | 2013–05 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9477&r=exp |
| By: | Guillermo Baquero (ESMT European School of Management and Technology); Willem Smit (SMU, IMD); Luc Wathieu (Georgetown University, McDonough School of Business) |
| Abstract: | We explore the interaction between fairness attitudes and reference dependence both theoretically and experimentally. Our theory of fairness behavior under reference-dependent preferences in the context of ultimatum games, defines fairness in the utility domain and not in the domain of dollar payments. We test our model predictions using a within-subject design with ultimatum and dictator games involving gains and losses of varying amounts. Proposers indicated their offer in gain- and (neatly comparable) loss- games; responders indicated minimum acceptable gain and maximum acceptable loss. We find a significant “generosity effect” in the loss domain: on average, proposers bear the largest share of losses as if anticipating responders’ call for a smaller share. In contrast, reference dependence hardly affects the outcome of dictator games -where responders have no veto right- though we detect a small but significant “compassion effect”, whereby dictators are on average somewhat more generous sharing losses than sharing gains. |
| Keywords: | Fairness, loss domain, ultimatum game, dictator game, referencedependent preferences, social preferences |
| JEL: | D03 D81 |
| Date: | 2013–08–29 |
| URL: | http://d.repec.org/n?u=RePEc:esm:wpaper:esmt-13-08&r=exp |
| By: | Müller, Malte; Rommel, Jens |
| Abstract: | Farmers’ technology adoption in electric irrigation has recently been analyzed as a coordination problem. To study how the Pareto-inferior equilibrium, farmers are trapped in, can be overcome we have developed a framed field experiment. Leadership and group size are varied in a full factorial experimental design. Initial results show only minor treatment effects. Further analysis is necessary to account for socio-demographic heterogeneity. |
| Keywords: | Coordination Game, Energy Efficiency, India, Irrigation, Technology Adoption, Community/Rural/Urban Development, Institutional and Behavioral Economics, Research Methods/ Statistical Methods, |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:ags:gewi13:156244&r=exp |
| By: | Guiso, Luigi; Sapienza, Paola; Zingales, Luigi |
| Abstract: | We use a repeated survey of an Italian bank’s clients to test whether investors’ risk aversion increases following the 2008 financial crisis. We find that both a qualitative and a quantitative measure of risk aversion increases substantially after the crisis. After considering standard explanations, we investigate whether this increase might be an emotional response (fear) triggered by a scary experience. To show the plausibility of this conjecture, we conduct a lab experiment. We find that subjects who watched a horror movie have a certainty equivalent that is 27% lower than the ones who did not, supporting the fear-based explanation. Finally, we test the fear-based model with actual trading behavior and find consistent evidence. |
| Keywords: | Fear; Financial Crisis; Risk Aversion |
| JEL: | D1 D8 G11 G12 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9589&r=exp |
| By: | Jade Wong (Centre for Social Impact, Australian School of Business, the University of New South Wales); Andreas Ortman (School of Economics, Australian School of Business, the University of New South Wales); Alberto Motta (School of Economics, Australian School of Business, the University of New South Wales); Le Zhang (School of Banking and Finance, Australian School of Business, the University of New South Wales) |
| Abstract: | Policy-makers world-wide have proposed a new contract – the “social impact bond” (SIB) – which they claim can allay the underperformance and underfunding afflicting not-for-profit sectors, by tying the private returns of (social) investors to the success of social programs (Bolton 2010; Bolton & Savell 2010; Mulgan et al. 2010a,b; Liebman 2011; Tierney & Fleishman 2011; Von Glahn & Whistler 2011). Given the high hopes governments on various levels in England, Australia, and New York have pinned on this contract format, the considerable amount of money that has recently been poured into this emerging market (e.g., http://www.bigsocietycapital.com/), and the fact that serious are program evaluations cannot be expected any time soon (Disley et al. 2011; see also McKay 2013 and Pratt 2013), we test this new contract by way of experimental methods. We report an investigation of how SIBs perform in a first-best world, where investors are rational and able to obtain hard information about not-for-profits’ performance. To this end, we use a principal-agent multi-tasking framework to compare SIBs to inputs-based (IBs) and performance-based (PBs) contracts, which represent the most commonly used contracts governments and not-for-profits write. IBs contain a piece-rate mechanism, PBs contain a non-binding bonus mechanism, and SIBs contain a mechanism that, due to the presence of an investor, offers full enforceability. Although SIBs can perfectly enforce good behavior, they also require the principal (i.e. government) to relinquish control over the agent’s (i.e. not-for-profit’s) payoff to a self-regarding investor, which prevents the principal and agent from being reciprocal. In spite of these drawbacks, in our experiment SIBs outperformed IBs and PBs. We therefore conclude that, at least in our laboratory test-bed, SIBs can indeed allay underperformance and therefore possibly underfunding of not-for-profits. |
| Keywords: | social impact bonds, principal-agent multi-tasking framework, performance-based contracts,inputs-based contracts, social finance |
| JEL: | C92 D03 L14 L15 L31 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:swe:wpaper:2013-21&r=exp |
| By: | KIRCHSTEIGER, Georg (Université Libre de Bruxelles, ECARES, B-1050 Brussels, Belgium); MANTOVANI, Marco (Università degli studi di Milano, I-20122 Milano, Italy); MAULEON, Ana (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium); VANNETELBOSCH, Vincent (CEREC, Saint-Louis University, Brussels, Belgium; Université catholique de Louvain, CORE, Belgium) |
| Abstract: | Pairwise stability Jackson and Wolinsky [1996] is the standard stability concept in network formation. It assumes myopic behavior of the agents in the sense that they do not forecast how others might react to their actions. Assuming that agents are perfectly farsighted, related stability concepts have been proposed. We design a simple network formation experiment to test these extreme theories, but find evidence against both of them: the subjects are consistent with an intermediate rule of behavior, which we interpret as a form of limited farsightedness. On aggregate, the selection among multiple pairwise stable networks (and the performance of farsighted stability) crucially depends on the level of farsightedness needed to sustain them, and not on efficiency or cooperative considerations. Individual behavior analysis corroborates this interpretation, and suggests, in general, a low level of farsightedness (around two steps) on the part of the agents. |
| Keywords: | network formation, experiment, myopic and farsighted stability |
| JEL: | D85 C91 C92 |
| Date: | 2013–07–09 |
| URL: | http://d.repec.org/n?u=RePEc:cor:louvco:2013033&r=exp |
| By: | Kuziemko, Ilyana; Norton, Michael I; Saez, Emmanuel; Stantcheva, Stefanie |
| Abstract: | This paper analyzes the effects of information about inequality and taxes on preferences for redistribution using randomized online surveys on Amazon Mechanical Turk (mTurk). About 5,000 respondents were randomized into treatments providing interactive information on U.S. income inequality, the link between top income tax rates and economic growth, and the estate tax. We find that the informational treatment has very large effects on whether respondents view inequality as an important problem. By contrast, we find quantitatively small effects of the treatment on views about policy and redistribution: support for taxing the rich increases slightly, support for transfers to the poor does not, especially among those with lower incomes and education. An exception is the estate tax---we find that informing respondents that it affects only the very richest families has an extremely large positive effect on estate tax support, even increasing respondents' willingness to write to their U.S. senator about the issue. We also find that the treatment substantially decreases trust in government, potentially mitigating respondents' willingness to translate concerns about inequality into government action. Methodologically, we explore different strategies to lower attrition in online survey platforms and show our main results are robust across methods. A small follow-up survey one month later reveals that our results persist over time. Finally, we compare mTurk with other survey vendors and provide suggestions to future researchers considering this platform. |
| Keywords: | Inequality; Online survey; Randomized experiment; Taxation |
| JEL: | D63 H2 I3 |
| Date: | 2013–04 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9438&r=exp |
| By: | Giovanni Giusti; Charles Noussair; Joachim Voth |
| Abstract: | Major bubble episodes are rare events. In this paper, we examine what factors might cause some asset price bubbles to become very large. We recreate, in a laboratory setting, some of the specific institutional features investors in the South Sea Company faced in 1720. Several factors have been proposed as potentially contributing to one of the greatest periods of asset overvaluation in history: an intricate debt-for-equity swap, deferred payment for these shares, and the possibility of default on the deferred payments. We consider which aspect might have had the most impact in creating the South Sea bubble. The results of the experiment suggest that the company’s attempt to exchange its shares for government debt was the single biggest contributor to the stock price explosion, because of the manner in which the swap affected fundamental value. Issuing new shares with only partial payments required, in conjunction with the debt-equity swap, also had a significant effect on the size of the bubble. Limited contract enforcement, on the other hand, does not appear to have contributed significantly. |
| Keywords: | Financial bubbles, experiments, South Sea bubble, risk-shifting, government debt, equity issuance |
| JEL: | G01 G12 G14 N23 C92 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1381&r=exp |
| By: | Geller, Chris R.; Mustard, Jamie; Shahwan, Ranya |
| Abstract: | Experiments evaluate the fit of human behaviour to the Shapley-Shubik power index (SSPI), a formula of voter power. Groups of six subjects with differing votes divide a fixed purse by majority rule in online chat rooms. Earnings proxy for measured power. Chat rooms and processes for selecting subjects reduce or eliminate extraneous forces. Logrolling remains as the primary political force. Subjects' initial proposals for division of the purse allow measurement of effects from focal points and transaction costs. Divisions of purses, net of those effects, closely fit the SSPI, averaging 1.033 of their SSPI values. The SSPI can serve as a control for power imbedded in voting blocs, permitting fuller analysis of other factors that affect political outcomes. -- |
| Keywords: | social choice,public choice,elections,bargaining,coalitions,politico economic,voting power,conflict,election,collective action,majority rule |
| JEL: | D71 D72 D74 |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:ifwedp:201342&r=exp |