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on Experimental Economics |
| By: | James Andreoni; Michael A. Kuhn; Charles Sprenger |
| Abstract: | Eliciting time preferences has become an important component of both laboratory and field experiments, yet there is no consensus as how to best measure discounting. We examine the predictive validity of two recent, simple, easily administered, and individually successful elicitation tools: Convex Time Budgets (CTB) and Double Multiple Price Lists (DMPL). Using similar methods, the CTB and DMPL are compared using within- and out-of-sample predictions. While each perform equally well within sample, the CTB significantly outperforms the DMPL on out-of-sample measures. |
| JEL: | D03 D14 G02 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19392&r=exp |
| By: | Falk, Armin; Szech, Nora |
| Abstract: | This paper studies how organizational design affects moral outcomes. Subjects face the decision to either kill mice for money or to save mice. We compare a Baseline treatment where subjects are fully pivotal to a Diffused-Pivotality treatment where subjects simultaneously choose in groups of eight. In the latter condition eight mice are killed if at least one subject opts for killing. The fraction of subjects deciding to kill is higher when pivotality is diffused. The likelihood of killing is monotone in subjective perceptions of pivotality. On an aggregate level many more mice are killed in Diffused-Pivotality than Baseline. |
| Keywords: | experiment; morality; organization; pivotality |
| JEL: | C91 D01 D03 D23 D63 |
| Date: | 2013–06 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:9522&r=exp |
| By: | Giovanni Giusti; Charles Noussair; Hans-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:bge:wpaper:710&r=exp |
| By: | Peter J. Kuhn; Marie-Claire Villeval |
| Abstract: | We conduct a real-effort experiment where participants choose between individual compensation and team-based pay. In contrast to tournaments, which are often avoided by women, we find that women choose team-based pay at least as frequently as men in all our treatments and conditions, and significantly more often than men in a well-defined subset of those cases. Key factors explaining gender patterns in attraction to co-operative incentives across experimental conditions include women’s more optimistic assessments of their prospective teammate’s ability and men’s greater responsiveness to efficiency gains associated with team production. Women also respond differently to alternative rules for team formation in a manner that is consistent with stronger inequity aversion |
| JEL: | C91 J16 J24 J31 M5 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19277&r=exp |
| By: | David Dickinson (Appalachian State University); E. Glenn Dutcher (The University of Central Missouri); Cortney Rodet (Chapman University) |
| 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. |
| Keywords: | Punishment, Punishment Spillovers, Vicarious Punishment, VCM, Social Dilemma, Experiment |
| JEL: | C91 C92 D03 H40 J24 K42 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:umn:wpaper:1301&r=exp |
| By: | Erik O. Kimbrough; Nikolaus Robalino; Arthur J. Robson |
| Date: | 2013–09–19 |
| URL: | http://d.repec.org/n?u=RePEc:cla:levarc:786969000000000735&r=exp |
| By: | Johannes Diederich; Timo Goeschl |
| Abstract: | We examine the relationship between the price of giving and the decision to contribute in a framed field experiment (n = 2,440). In a departure from previous research using match rates and rebates, we vary the price of contributing to the public good directly. Treatment groups differ between subjects by the amount of money subjects have to give up in order to provide one unit of the public good. In contrast to earlier results, the theoretical prediction of a clear negative relationship between price and the decision whether to contribute is borne out by the experimental evidence. We estimate the mean elasticity of the probability to contribute as -0.31. The direct price effect is robust across specifications including sociodemographic controls for the highly heterogenous, Internet-representative non-student sample of subjects. |
| JEL: | C93 D12 H41 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19332&r=exp |
| By: | Egebark, Johan (Dept. of Economics, Stockholm University); Ekström, Mathias (Dept. of Economics, Stockholm University) |
| Abstract: | We test whether people's tendency to stick with the default option can help save resources. In a natural field experiment we switch printers' default settings, from simplex to duplex printing, at a large Swedish university. The results confirm that roughly one third of all printing is determined by the default alternative, and hence daily paper consumption drops by 15 percent due to the change. The effect is immediate, lasts throughout the experimental period, and remains intact after six months. We also investigate how the more conventional method of encouraging people to save resources performs, and find it has no impact. Recent theoretical and empirical contributions indicate that the default effect works through recommendation, depends positively on the number of alternatives in the choice set, and is reinforced for difficult decisions. We demonstrate that the default option matter in a simple, non-dynamic, decision task with only two alternatives, and where people have been explicitly informed about the recommended course of action. |
| Keywords: | Default option; Resource Conservation; Natural Field Experiment |
| JEL: | C93 D03 Q50 |
| Date: | 2013–09–09 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:sunrpe:2013_0012&r=exp |
| By: | Lisa Barrow; Cecilia E. Rouse |
| Abstract: | Using survey data from a field experiment in the U.S., we test whether and how financial incentives change student behavior. We find that providing post-secondary scholarships with incentives to meet performance, enrollment, and/or attendance benchmarks induced students to devote more time to educational activities and to increase the quality of effort toward, and engagement with, their studies; students also allocated less time to other activities such as work and leisure. While the incentives did not generate impacts after eligibility had ended, they also did not decrease students’ inherent interest or enjoyment in learning. Finally, we present evidence suggesting that students were motivated more by the incentives provided than simply the effect of giving additional money, and that students who were arguably less time-constrained were more responsive to the incentives as were those who were plausibly more myopic. Overall these results indicate that well-designed incentives can induce post-secondary students to increase investments in educational attainment. |
| JEL: | D03 I2 J24 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19351&r=exp |
| By: | Navon, David; Kaplan, Todd; Kasten, Ronen |
| Abstract: | To study switching behavior, an experiment mimicking the state of a driver on the road was conducted. In each trial participants were given a chance to switch lanes. Despite the fact that lane switching had no sound rational basis, participants often switched lanes when the speed of driving in their lane on the previous trial was relatively slow. That tendency was discerned even when switching behavior had been sparsely reinforced, and was especially marked in almost a third of the participants, who manifested it consistently. The findings illustrate a type of behavior occuring in various contexts (e.g., stocks held in a portfolio, conduct pertinent for residual life expectancy, supermarket queues). We argue that this behavior may be due to a fallacy reminiscent of that arising in the well-known “envelopes problem”, in which each of two players holds a sum of money of which she knows nothing about except that it is either half or twice the amount held by the other player. Players may be paradoxically tempted to exchange assets, since an exchange fallaciously appears to always yield an expected value greater than whatever is regarded as the player’s present assets. We argue that the fallacy is due to egocentrically framing the problem as if the “amount I have” is definite, albeit unspecified, and show that framing the paradox acentrically instead eliminates the incentive to exchange assets. A possible psychological source for the human disposition to frame problems in a way that inflates expected gain is discussed. Finally, a heuristic meant to avert the source of the fallacy is proposed. |
| Keywords: | Decision making; Reasoning; Cognitive fallacies and biases; Switching behavior |
| JEL: | C9 C91 D03 |
| Date: | 2013–09–18 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:50032&r=exp |
| By: | Ori Weisel (Max Planck Institute of Economics); Ro'i Zultan (Ben-Gurion University of the Negev) |
| Abstract: | We experimentally test the social motives behind individual participation in intergroup conflict by manipulating the framing and symmetry of conflict. We find that behavior in conflict depends on whether one is harmed by actions perpetrated by the out-group, but not on one's own influ- ence on the outcome of the out-group. The way in which this harm is presented and perceived dramatically alters participation decisions. When people perceive their group to be under threat, they are mobilized to do what is good for the group and contribute to the conflict. On the other hand, if people perceive to be personally under threat, they are driven to do what is good for themselves and withhold their contribution. The first phenomenon is attributed to group identity, possibly combined with a concern for social welfare. The second phenomenon is attributed to a novel victim effect. Another social motive-reciprocity-is ruled out by the data. |
| Keywords: | intergroup conflict, intergroup prisoner's dilemma, asymmetric conflict, framing |
| JEL: | C72 C92 D03 D62 D74 H41 |
| Date: | 2013–09–10 |
| URL: | http://d.repec.org/n?u=RePEc:jrp:jrpwrp:2013-033&r=exp |
| By: | Sandner, Malte |
| Abstract: | This paper presents results from a randomized evaluation of a home visiting program for disadvantaged first-time mothers and their families implemented in Germany. 12 months after birth, the intervention increases infants' cognitive development by 0.18 SD. However, the effect fades out after 24 months. Gender analyses reveal that the intervention was more beneficial for girls. Furthermore, sensitivity analyses show that the estimated effects seem downward biased by additional treatment for the control families. Analyzing the infant skill formation process reveals self-productivity of skills but in different magnitude for boys and girls. |
| Keywords: | Early Childhood Intervention, Randomized Experiment |
| JEL: | J13 J12 I21 H52 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:han:dpaper:dp-518&r=exp |
| By: | Cheung, Stephen L. |
| Abstract: | Andreoni and Sprenger (2012) report evidence that distinct utility functions govern choices under certainty and risk. I investigate the robustness of this result to the experimental design. I find that the effect disappears completely when a multiple price list instrument is used instead of a convex time budget design. Alternatively, the effect is reduced by half when sooner and later payment risks are realized using a single lottery instead of two independent lotteries. The result is thus at least partially driven by intertemporal diversification, supporting an explanation in terms of concavity of the intertemporal, and not only atemporal, utility function. |
| Keywords: | multiple price list; convex time budget; risk and certainty; intertemporal choice |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2123/9362&r=exp |
| By: | Paul Hansen (Department of Economics, University of Otago, New Zealand); Nicole Kergozou (Reserve Bank of New Zealand); Stephen Knowles (Department of Economics, University of Otago, New Zealand); Paul Thorsnes (Department of Economics, University of Otago, New Zealand) |
| Abstract: | A discrete choice experiment was conducted to discover the relative importance of five characteristics of developing countries, as suggested by the literature, considered by people when choosing countries to donate money to. The experiment was administered via an online survey involving almost 700 student participants (potential donors) from a New Zealand university. The most important recipient-country characteristic for participants on average is hunger and malnutrition (a weight of 0.29), followed by child mortality (0.24), quality of infrastructure (0.21), income per capita (0.18), and, least importantly, ties to New Zealand (0.09). A cluster analysis of participants' individual `part-worth utilities' representing the relative importance of the country characteristics reveals they are not strongly correlated with participants' demographic characteristics. Our findings overall indicate that to maximise the donations they receive, non-governmental aid organisations are better to focus their marketing efforts on emphasising country characteristics associated with hunger, malnutrition and child mortality than other things. |
| Keywords: | foreign aid, charitable giving, discrete choice experiment, conjoint analysis, PAPRIKA method |
| JEL: | A13 C91 D64 O1 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:otg:wpaper:1312&r=exp |
| By: | Ghoshal, Sayantan (Glasgow University); Jana, Smarajit (Durbar University); Mani, Anandi (University of Warwick); Mitra, Sandip (ISI Kolkata); Roy, Sanchari (University of Warwick) |
| Abstract: | This paper examines whether psychological empowerment can mitigate mental constraints that impede efforts to overcome the effects of social exclusion. Using a randomized control trial, we study a training program specifically designed to reduce stigma and build self-efficacy among poor and marginalized sex workers in Kolkata, India. We find positive and significant impacts of the training on self-reported measures of efficacy, happiness and self-esteem in the treatment group, both relative to the control group as well as baseline measures. We also find higher effort towards improving future outcomes as measured by the participants’ savings choices and health-seeking behaviour, relative to the control group. These findings highlight the need to account for psychological factors in the design of antipoverty programmes. |
| Keywords: | social exclusion, self-efficacy, self-esteem, future-orientation, sex workers |
| Date: | 2013 |
| URL: | http://d.repec.org/n?u=RePEc:cge:warwcg:151&r=exp |
| By: | Dean Corbae; Erwan Quintin |
| Abstract: | How much of the recent rise in foreclosures can be explained by the large number of high-leverage mortgage contracts originated during the housing boom? We present a model where heterogeneous households select from a set of mortgage contracts and choose whether to default on their payments given realizations of income and housing price shocks. The set of mortgage contracts consists of loans with high downpayments and loans with low downpayments. We run an experiment where the use of low downpayment loans is initially limited by payment-to-income requirements but then becomes unrestricted for 8 years. The relaxation of approval standards causes homeownership rates, high-leverage originations and the frequency of high interest rate loans to rise much like they did in the US between 1998-2006. When home values fall by the magnitude observed in the US from 2007-08, default rates increase by over 180% as they do in the data. Two distinct counterfactual experiments where approval standards remain the same throughout suggest that the increased availability of high-leverage loans prior to the crisis can explain between 40% to 65% of the initial rise in foreclosure rates. Furthermore, we run policy experiments which suggest that recourse could have had significant dampening effects during the crisis. |
| JEL: | E44 G21 R3 |
| Date: | 2013–08 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:19323&r=exp |
| By: | Sebastian Galiani (University of Maryland); Patrick J. McEwan (Wellesley College) |
| Abstract: | The Honduran PRAF experiment randomly assigned conditional cash transfers to 40 of 70 poor municipalities, within five strata defined by a poverty proxy. Using census data, we show that eligible children were 8 percentage points more likely to enroll in school and 3 percentage points less likely to work. The effects were much larger in the two poorest strata, and statistically insignificant in the other three (the latter finding is robust to the use of a separate regression-discontinuity design). Heterogeneity confirms the importance of judicious targeting to maximize the impact and cost-effectiveness of CCTs. There is no consistent evidence of effects on ineligible children or on adult labor supply. |
| JEL: | H00 |
| Date: | 2013–09 |
| URL: | http://d.repec.org/n?u=RePEc:dls:wpaper:0149&r=exp |