nep-exp New Economics Papers
on Experimental Economics
Issue of 2013‒11‒02
25 papers chosen by
Daniel Houser
George Mason University

  1. Teams punish less By Auerswald, Heike; Schmidt, Carsten; Thum, Marcel; Torsvik, Gaute
  2. Revealed Notions of Distributive Justice II: Experimental Evidence By Nicole Becker; Kirsten Häger; Jan Heufer
  3. Tit for Others' Tat Repeated Prisoner's Dilemma Experiments with Third-Party Monitoring and Indirect Punishment By Lisa Bruttel; Werner Güth
  4. Individuals, Teams and Hometowns in an Experimental Market in China By Xiangdong Qin; Junyi Shen; Ken-Ichi Shimomura; Takehiko Yamato
  5. Norm enforcement in the city: A natural field experiment By Loukas Balafoutas; Nikos Nikiforakis
  6. The Impact of Military Work Experience on Later Hiring Chances in the Civilian Labour Market. Evidence from a Field Experiment. By S. BAERT; P. BALCAEN
  7. Partnership and trust in gift-exchange games. By Benoît Chalvignac
  8. Confucianism and Preferences: Evidence from Lab Experiments in Taiwan and China By Liu, Elaine M.; Meng, Juanjuan; Wang, Joseph Tao-yi
  9. Mortality Salience, Self-esteem and Status Seeking By C. Giannetti; R. Orsini
  10. Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence By Tanja Hörtnagl; Rudolf Kerschbamer; Rudi Stracke; Uwe Sunde
  11. Social Centipedes: the Impact of Group Identity on Preferences and Reasoning By Le Coq, Chloe; Tremewan, James; Wagner, Alexander K.
  12. Career Lesbians. Getting Hired for Not Having Kids? By S. BAERT
  13. You Are Who Your Friends Are: An Experiment on Trust and Homophily in Friendship Networks By Fabian Winter; Mitesh Kataria
  14. Alternating or compensating? An experimentrepeated sequential best shot game By Lisa Bruttel; Werner Güth
  15. The Difficult Case of Persuading Women: Experimental Evidence from Childcare By Galasso, Vincenzo; Profeta, Paola; Pronzato, Chiara D.; Billari, Francesco C.
  16. Incentives and creativity in groups By Ramm, Joachim; Tjøtta, Sigve; Torsvik, Gaute
  17. Revealed Notions of Distributive Justice I: Theory By Nicole Becker; Kirsten Häger; Jan Heufer
  18. Fairness and Efficiency in a Subjective Claims Problem By Anita Gantner; Rudolf Kerschbamer
  19. Effects of Religiosity on Social Behaviour: Experimental Evidence from a Representative Sample of Spaniards By Brañas-Garza, Pablo; Espín, Antonio M.; Neuman, Shoshana
  20. Labour market discrimination against former juvenile delinquents: evidence from a field experiment By S. BAERT; E. VERHOFSTADT
  21. Inflation tax in the lab: a theoretical and experimental study of competitive search equilibrium with inflation By Nejat Anbarci; Richard Dutu; Nick Feltovich
  22. Fair Division in Unanimity Bargaining with Subjective Claims By Anita Gantner; Kristian Horn; Rudolf Kerschbamer
  23. Kantian Optimization: An Approach to Cooperative Behavior By John E. Roemer
  24. Second-Degree Moral Hazard in a Real-World Credence Goods Market By Loukas Balafoutas; Rudolf Kerschbamer; Matthias Sutter
  25. Peer Effects in Disadvantaged Primary Schools: Evidence from a Randomized Experiment By Antecol, Heather; Eren, Ozkan; Ozbeklik, Serkan

  1. By: Auerswald, Heike (Faculty of Business and Economics, Technical University Dresden); Schmidt, Carsten (University of Mannheim); Thum, Marcel (Faculty of Business and Economics, Technical University Dresden,); Torsvik, Gaute (University of Bergen)
    Abstract: Many decisions in politics and business are made by teams rather than by single individuals. In contrast, economic models typically assume an individual rational decision maker. A rapidly growing body of (experimental) literature investigates team decisions in different settings. We study team decisions in a public goods contribution game with a costly punishment option and compare it to the behavior of individuals in a laboratory experiment. We also consider different team decision-making rules (unanimity, majority). We find that teams contribute significantly more and punish less than individuals, regardless of the team decision rule. Overall, teams yield higher payoffs than individuals.
    Keywords: Group Decision Making; Public Good; Experiment; Punishment
    JEL: H54 Q54 Q58
    Date: 2013–10–18
  2. By: Nicole Becker (TU Dortmund University and Ruhr Graduate School in Economics); Kirsten Häger (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Jan Heufer (TU Dortmund University)
    Abstract: We report the results of a combination of a dictator experiment with either a "social planner" or a "veil of ignorance" experiment. The experimental design and the analysis of the data are based on the theoretical framework proposed in the companion paper by Becker, Häger, and Heufer (BHH, 2013), in which we introduce a "notion of distributive justice" by which individuals trade off equality and efficiency. The purpose of the theoretical framework is to explain preferences in dictator experiments by a combination of selfishness and concerns for distributive justice. Most participants conform very well with the Agreement and Symmetry axioms proposed in BHH; we find that for 80% of participants the evidence is very strong. The experiment therefore demonstrates that most participants' behaviour in dictator experiments can be explained by a combination of selfishness and concerns for distributive justice. We also provide a rough classification of preferences and notions of distributive justice and show that participants' strength of the sense for justice (Karni and Safra 2002b) can be compared non- parametrically.
    Keywords: Altruism, Dictator Games, Distributive Justice, Experimental Economics, Non- parametric Analysis, Preference Decom- position, Revealed Preference, Social Preferences
    JEL: C14 C91 D11 D12 D63 D64
    Date: 2013–10–18
  3. By: Lisa Bruttel (University of Konstanz, Department of Economics); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: Two pairs of two participants each interact repeatedly in two structurally independent but informationally linked Prisoner's Dilemma games. Neither pair receives feedback about past choices by their own partner but is fully informed about the choices by the other pair. Considering this as a four-person infinite horizon game allows for Folk-Theorem-like voluntary cooperation. We ask whether monitoring and indirect punishment with the help of others are comparable to direct monitoring and punishment in establishing and maintaining voluntary cooperation. The treatment effects we find are rather weak. Others' monitoring of own activities is only an insufficient substitute for direct observability.
    Keywords: prisoner's dilemma, monitoring, experiment
    JEL: C73 C91 D82 D84
    Date: 2013–10–18
  4. By: Xiangdong Qin (School of Economics, Shanghai Jiao Tong University, China); Junyi Shen (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Ken-Ichi Shimomura (Research Institute for Economics & Business Administration (RIEB), Kobe University, Japan); Takehiko Yamato (Department of Social Engineering, Graduate School of Decision Science and Technology, Tokyo Institute of Technology, Japan)
    Abstract: Several papers have documented that individual decision-making and team or group decision-making differ in a broad range of economic situations. We conducted a market experiment in China to examine potential differences between team and individual trades, and potential effects of subjects’ hometowns on their behaviors. Our results revealed that increasing group size from one-person to two-person strengthened the bargaining power of subjects from coastal areas but weakened that of subjects from inland areas when commodity exchanges were conducted between subjects from different areas.
    Keywords: Market experiment, Team trade, Individual trade, Hometown, China
    JEL: C91 C92 D51
    Date: 2013–10
  5. By: Loukas Balafoutas; Nikos Nikiforakis
    Abstract: Extensive evidence from laboratory experiments indicates that many individuals are willing to use costly punishment to enforce social norms, even in one-shot interactions. However, there appears to be little evidence in the literature of such behavior in the field. We study the propensity to punish norm violators in a natural field experiment conducted in the main subway station in Athens, Greece. The large number of passengers ensures that strategic motives for punishing are minimized. We study violations of two distinct efficiency enhancing social norms. In line with laboratory evidence, we find that individuals punish norm violators. However, these individuals are a minority. Men are more likely than women to punish violators, while the decision to punish is unaffected by the violator’s height and gender. Interestingly, we find that violations of the better known of the two norms are substantially less likely to trigger punishment. We present additional evidence from two surveys providing insights into the determinants of norm enforcement.
    Date: 2013
    Abstract: This study directly assesses the impact of military work experience compared with civilian work experience in similar jobs on the subsequent chances of being hired in the civilian labour market. It does so through a field experiment in the Belgian labour market. A statistical examination of our experimental dataset shows that in general we cannot reject that employers are indifferent to whether job candidates gained their experience in a civilian or a military environment.
    Keywords: field experiments; hiring discrimination; economics of defence.
    JEL: C93 J24 J45 J71
    Date: 2013–06
  7. By: Benoît Chalvignac
    Abstract: In this paper we extend the gift-exchange game setting to include a new experimental treatment where subjects are paired with the same partner for the whole game. We observe that the matching mode is more critical to cooperation levels than the contractual arrangement, and that trust-based contracts outperform incentive-based contracts when interaction is repeated within the same pair. In the partner setting, individual preferences seem only to be second-order determinants of cooperation levels and most subjects are highly responsive to others' cooperative choices. Our findings help explain the cooperation dynamics required for organizations to leverage their incentive structure and to endure.
    Keywords: Gift-exchange game; Trust; Cooperation; Informal organization.
    JEL: D2 D7 M2
    Date: 2013
  8. By: Liu, Elaine M. (University of Houston); Meng, Juanjuan (Peking University); Wang, Joseph Tao-yi (National Taiwan University)
    Abstract: This paper investigates how Confucianism affects individual decision making in Taiwan and in China. We found that Chinese subjects in our experiments became less accepting of Confucian values, such that they became significantly more risk loving, less loss averse, and more impatient after being primed with Confucianism, whereas Taiwanese subjects became significantly less present-based and were inclined to be more trustworthy after being primed by Confucianism. Combining the evidence from the incentivized laboratory experiments and subjective survey measures, we found evidence that Chinese subjects and Taiwanese subjects reacted differently to Confucianism.
    Keywords: social norm, Confucianism, time preferences, risk aversion, trust
    JEL: C91 Z10
    Date: 2013–10
  9. By: C. Giannetti; R. Orsini
    Abstract: According to the Terror Management Theory, the fear of death may induce anxiety and threaten individual self-esteem. To remove this fear, individuals need to obtain and sustain self-esteem, for example by competing in rank order tournaments, or by focusing on status seeking. Within an experimental setting, this paper investigates the effect of Mortality Salience on individual productivity, manipulating the information on subjects’ relative performance in a real-effort task where the economic incentive is to not perform: in a first treatment subjects receive only private feedback, which may have effects on productivity via individual self-esteem, while in a second treatment subjects receive public feedback, which may have effects on productivity via status seeking. Our results suggest that the majority of subjects exposed to death-related thoughts tend to be more sensitive to in-group conformity when both types of feedback are provided.
    JEL: C91 C92 D12
    Date: 2013–10
  10. By: Tanja Hörtnagl; Rudolf Kerschbamer; Rudi Stracke; Uwe Sunde
    Abstract: This paper investigates how heterogeneity in contestants' investment costs affects the competition intensity in a dynamic elimination contest. Theory predicts that the absolute level of investment costs has no effect on the competition intensity in homogeneous interactions. Relative cost differences in heterogeneous interactions, however, reduce equilibrium expenditures. Evidence from lab experiments for treatments with homogeneous participants is qualitatively in line with the theoretical prediction. The effect of cost differences on expenditures is positive rather than negative, however, in all heterogeneous treatments.
    Keywords: Multi-Stage Contest, Heterogeneity, Experiment, Joy of Winning
    JEL: C72 D72
    Date: 2013–10
  11. By: Le Coq, Chloe (Stockholm Institute of Transition Economics); Tremewan, James (Department of Economics, University of Vienna (Austria)); Wagner, Alexander K. (Department of Economics, University of Cologne (Germany))
    Abstract: Using a group identity manipulation we examine the role of social preferences in an experimental one-shot centipede game. Contrary to what social preference theory would predict, we find that players continue longer when playing with outgroup members. Our explanation rests on two observations: (i) players should only stop if they are sufficiently confident that their partner will stop at the next node, given the exponentially-increasing payoffs in the game, and (ii) players are more likely to have this degree of certainty if they are matched with someone from the same group, whom they view as similar to themselves and thus predictable. We find strong statistical support for this argument. We conclude that group identity not only impacts a player’s utility function, as identified in earlier research, but also affects her reasoning about the partner’s behavior.
    Keywords: Group identity; centipede game; prospective reference theory
    JEL: C72 C91 C92 D83
    Date: 2013–09–30
  12. By: S. BAERT
    Abstract: Using a field experiment, we investigate whether discrimination based on women's sexual orientation differs by age and family constraints. We find weakly significant evidence of discrimination against young heterosexual women because of their potential to have children. This effect is driven by age rather than by motherhood. We do not find any unequal treatment at older ages. This age effect is consistent with our theoretical expectation that, relative to lesbian women, young heterosexual women are penalised for having children more frequently and taking on, on average, more at-home-caring tasks.
    Keywords: experiments, labour market discrimination, motherhood, sexual orientation.
    JEL: C93 J13 J16 J71
    Date: 2013–07
  13. By: Fabian Winter (Max-Planck Institute of Economics, Jena); Mitesh Kataria (Max-Planck Institute of Economics, Jena)
    Abstract: We study the existence of homophily (i.e. the tendency for people to make friends with people who are similar to themselves) with respect to trustworthiness. We ask whether two friends show similarly trustworthy behavior towards strangers, and whether this is anticipated by outsiders. We develop a simple model of bayesian learning in trust games and test the derived hypotheses in a controlled laboratory environment. In the experiment, two trustees sequentially play a trust game with the same trustor, where the trustees depending on treatmen are either friends or strangers to each other. We affirm the existence of homophily with re- spect to trustworthiness. Trustors' beliefs about the trustees' trustfulness are not affected by the knowledge about the (non-)existent friendship between the trustees. Behaviorally, however, they indirectly reciprocate the (un-)trustworthy behavior of one trustee towards his/her friends in later interactions.
    Keywords: social networks, homophily, trust, friendship, indirect tit-for-tat
    JEL: C92 D83 J24 J40
    Date: 2013–10–23
  14. By: Lisa Bruttel (University of Konstanz, Department of Economics); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: In the two-person sequential best shot game, first player 1 contributes to a public good and then player 2 is informed about this choice before contributing. The payoff from the public good is the same for both players and depends only on the maximal contribution. Efficient voluntary cooperation in the repeated best shot game therefore requires that only one player should contribute in a given round. To provide better chances for such cooperation, we enrich the sequential best shot base game by a third stage allowing the party with the lower contribution to transfer some of its periodic gain to the other party. Participants easily establish cooperation in the finitely repeated game. When cooperation evolves, it mostly takes the form of "labor division," with one participant constantly contributing and the other constantly compensating. However, in a treatment in which compensation is not possible, (more or less symmetric) alternating occurs frequently and turns out to be almost as efficient as labor division.
    Keywords: best shot game, coordination, transfer, experiment
    JEL: C71 C73 C91
    Date: 2013–10–25
  15. By: Galasso, Vincenzo (Bocconi University); Profeta, Paola (Bocconi University); Pronzato, Chiara D. (University of Turin); Billari, Francesco C. (University of Oxford)
    Abstract: Gender stereotypes are well established also among women. Yet, a recent literature suggests that learning from other women experience about the effects of maternal employment on children outcomes may increase female labor force participation. To further explore this channel, we design a randomized survey experiment, in which 1500 Italian women aged 20 to 40 are exposed to two informational treatments on the positive consequences of formal childcare on children future educational attainments. Surprisingly, we find that women reduce their intended labor supply. However, this result hides strong heterogenous effects: high educated non-mothers are persuaded by the informational treatments to increase their intended use of formal child care (and to pay more); whereas low educated non-mothers to reduce their intended labor supply. These findings are consistent with women responding to monetary incentive and/or having different preferences for maternal care. These heterogenous responses across women send a warning signal about the true effectiveness – in terms of take up rates – of often advocated public policies regarding formal child care.
    Keywords: gender culture, female labour supply, education
    JEL: J2 J16 J13 J18 Z1 C99
    Date: 2013–10
  16. By: Ramm, Joachim (Minestry of Local Governmenet and Regional Development); Tjøtta, Sigve (University of Bergen); Torsvik, Gaute (University of Bergen)
    Abstract: It has been argued that monetary incentives restrain individual creativity and hamper performance in jobs requiring out of the box thinking. This paper reports from an experiment designed to test if the negative incentive effect is present also when individuals work together to solve such problems. We do not find a negative impact of incentives on group performance. As a comparison we ran the same experiment (the Candle Problem) with and without incentives for individuals as well. Incentives did not reduce performance there either. Comparing individuals with groups we find that team-work facilitates creative problems solving. Individuals appear to be more creative when working together than when working alone.
    Keywords: Incentives; innovation; creativity
    JEL: J24 J31 M11 O31
    Date: 2013–06–01
  17. By: Nicole Becker (TU Dortmund University and Ruhr Graduate School in Economics); Kirsten Häger (School of Economics and Business Administration, Friedrich-Schiller-University Jena); Jan Heufer (TU Dortmund University)
    Abstract: We provide a framework to decompose preferences into a notion of distributive justice and a selfishness part and to recover individual notions of distributive justice from data collected in appropriately designed experiments. "Dictator games" with varying transfer rates used in Andreoni and Miller (2002) and Fisman et al. (2007) can be used to assess individuals' preferences, but - with the help of simple new axioms - also to recover some part of individuals' notion of justice. "Social planner" experiments or experiments under a "veil of ignorance" (Rawls 1971) can be used to recover larger parts of the notion of justice. The axioms also allow a simple test for the validity of such an experimental approach, which is not necessarily incentive-compatible, and to recover a greater part of an individual's preference relation in dictator experiments than before. Interpersonal comparison of the individual intensity of justice (or fairness) similar to the suggestions in Karni and Safra (2002b) are possible, and we can evaluate the intensity based on an individual's own notion of justice. The approach is kept completely non-parametric. As such, this article is in the spirit of Varian (1982) and Karni and Safra (2002a).
    Keywords: Altruism, Distributive Justice, Non- parametric Analysis, Preference De- composition, Revealed Preference, So- cial Preferences
    JEL: C14 C91 D11 D12 D63 D64
    Date: 2013–10–18
  18. By: Anita Gantner; Rudolf Kerschbamer
    Abstract: In a subjective claims problem several agents have contributed to the production of a cake which is to be divided among them. Since contributions are difficult to compare and the production function is nonlinear, agents'subjective evaluations of claims are likely to be conflicting. In a large-scale experimental study we compare the performance of three mechanisms which use agents' reports to resolve the subjective claims problem. The mechanisms differ with respect to the information they process, and they are compared in terms of efficiency and perceived allocative and procedural fairness.
    Keywords: Fair Division, Subjective Claims, Experiment, Mechanisms
    JEL: D63 C91 D61
    Date: 2013–10
  19. By: Brañas-Garza, Pablo (Middlesex University Business School, London); Espín, Antonio M. (Universidad de Granada); Neuman, Shoshana (Bar-Ilan University)
    Abstract: This study explores the effect of several personal religion-related variables on social behaviour, using three paradigmatic economic games: the dictator (DG), ultimatum (UG), and trust (TG) games. A large carefully designed sample of a Spanish urban adult population (N=766) is employed. From participants' decisions in these games we obtain measures of altruism, bargaining behaviour and sense of fairness/equality, trust, and positive reciprocity. Three dimensions of religiosity are examined: (i) religious denomination; (ii) the intensity of religiosity, measured by active participation at church services; and (iii) converting out into a different denomination than the one raised in. The major results are: (i) individuals with "no religion" made decisions closer to rational selfish behaviour in the DG and the UG compared to those who affiliate with a "standard" religious denomination; (ii) among Catholics, intensity of religiosity is the key variable that affects social behaviour insofar as religiously-active individuals are generally more pro-social than non-active ones; and (iii) the religion raised in seems to have no effect on pro-sociality, beyond the effect of the current measures of religiosity. Importantly, behaviour in the TG is not predicted by any of the religion-related variables we analyse. Given the accelerating share of "no religion" individuals (in Europe and elsewhere) and the large influx of immigrants – who tend to be more religiously active compared to the native populations – our findings have significant implications for the future pro-sociality patterns in Europe.
    Keywords: church attendance, religion, economic experiments, pro-social behaviour, Spain
    JEL: C7 C9 Z12 Z13
    Date: 2013–10
    Abstract: In view of policy action to integrate ex-offenders into society, it is important to identify the underlying mechanisms of the negative relationship between criminal record on the one hand and later employment and earnings on the other hand. Therefore we identify hiring discrimination against former juvenile delinquents in a direct way. To this end we conduct a field experiment in the Belgian labour market. We find that labour market discrimination is indeed a major barrier in the transition to work for former juvenile delinquents. Labour market entrants disclosing a history of juvenile delinquency get about 22 percent less callback compared to their counterparts without a criminal record. This discrimination is more outspoken among the low-educated.
    Keywords: juvenile delinquency, hiring discrimination, field experiments
    JEL: C93 J2 J71
    Date: 2013–10
  21. By: Nejat Anbarci; Richard Dutu; Nick Feltovich
    Abstract: How does the inflation tax impact on buyers’ and sellers’ behaviour? How strong is its effect on aggregate economic activity? To answer, we develop a model of directed search and monetary exchange with inflation. In the model, sellers post prices, which buyers observe before deciding on cash holdings that are costly due to inflation. We derive simple theoretical propositions regarding the effects of inflation in this environment. We then test the model’s predictions with a laboratory experiment that closely implements the theoretical framework. Our main finding confirms that not only is the inflation tax harmful to the economy – with cash holdings, GDP and welfare all falling as inflation rises – but also that its effect is relatively larger at low rates of inflation than at higher rates. For instance, when inflation rises from 0% to 5%, GDP falls by 2.8 percent, an effect 5 to 7 times stronger than when inflation rises from 5% to 30%. Our findings lead us to conclude that the inflation tax is a monetary policy channel of primary importance, even at low inflation rates.
    Keywords: money, inflation tax, directed search, posted prices, cash balances, welfare loss, frictions, experiment
    JEL: E31 E40 C90
    Date: 2013–10–18
  22. By: Anita Gantner; Kristian Horn; Rudolf Kerschbamer
    Abstract: In an experiment on a subjective claims problem we compare three unanimity bargaining procedures - the Demand, the Offer and the Exit variant - in terms of fairness and efficiency. To assess the fairness of the allocations obtained by these procedures, we evaluate them from a partial point of view using stakeholders' subjective evaluations of claims as elicited in a hypothetical fairness question, and we evaluate them from an impartial point of view using spectators' responses in a vignette. We find that after correcting for the self-serving bias in the partial view, both views point towards the same allocation. The Offer variant, which requires stakeholders to supply complete division proposals, yields outcomes that come closest to this fair allocation.
    Keywords: Fair Division, Subjective Claims, Bargaining, Experiment
    JEL: D63 C91 D61
    Date: 2013–10
  23. By: John E. Roemer (Dept. of Political Science, Yale University)
    Abstract: Although evidence accrues in biology, anthropology and experimental economics that homo sapiens is a cooperative species, the reigning assumption in economic theory is that individuals optimize in an autarkic manner (as in Nash and Walrasian equilibrium). I here postulate a cooperative kind of optimizing behavior, called Kantian. It is shown that in simple economic models, when there are negative externalities (such as congestion effects from use of a commonly owned resource) or positive externalities (such as a social ethos reflected in individuals’ preferences), Kantian equilibria dominate Nash-Walras equilibria in terms of efficiency. While economists schooled in Nash equilibrium may view the Kantian behavior as utopian, there is some -- perhaps much -- evidence that it exists. If cultures evolve through group selection, the hypothesis that Kantian behavior is more prevalent than we may think is supported by the efficiency results here demonstrated.
    Keywords: Kantian equilibrium, Social ethos, Implementation
    JEL: D60 D62 D64 C70 H30
    Date: 2012–03
  24. By: Loukas Balafoutas; Rudolf Kerschbamer; Matthias Sutter
    Abstract: Empirical literature on moral hazard focuses exclusively on the direct impact of asymmetric information on market outcomes, thus ignoring possible repercussions. We present a field experiment in which we consider a phenomenon that we call second-degree moral hazard - the tendency of the supply side in a market to react to anticipated moral hazard on the demand side by increasing the extent or the price of the service. In the market for taxi rides, our moral hazard manipulation consists of some passengers explicitly stating that their expenses will be reimbursed by their employer. This has an economically important and statistically significant positive effect on the likelihood of overcharging, with passengers in that treatment being about 13% more likely to pay higher-than-justified prices for a given ride. This indicates that second-degree moral hazard may have a substantial impact on service provision in a credence goods market.
    Keywords: Natural field experiment, credence goods, asymmetric information, moral hazard, overcharging, overtreatment, taxi
    JEL: C93 D82
    Date: 2013–10
  25. By: Antecol, Heather (Claremont McKenna College); Eren, Ozkan (Louisiana State University); Ozbeklik, Serkan (Claremont McKenna College)
    Abstract: We examine the effect of peer achievement on students' own achievement and teacher performance in primary schools in disadvantaged neighborhoods using data from a well-executed randomized experiment in seven states. Contrary to the existing literature, we find that the average classroom peer achievement adversely influences own student achievement in math and reading in linear-in-means models. Extending our analysis to take into account the potential non-linearity in the peer effects leads to non-negligible differences along the achievement distribution. We test several models of peer effects to further understand their underlying mechanisms. While we find no evidence to support the monotonicity model and little evidence in favor of the ability grouping model, we find stronger evidence to support the frame of reference and the invidious comparison models. Moreover, we also find that higher achieving classes improve teaching performance in math. Finally, using a simple policy experiment we find suggestive evidence that tracking students by ability potentially benefits students who end up in a low achievement class while hurting students in a high achievement class.
    Keywords: peer effects, student achievement, random assignment
    JEL: I21 J24
    Date: 2013–10

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