New Economics Papers
on Experimental Economics
Issue of 2013‒11‒16
23 papers chosen by

  1. A Randomized Controlled Trial of Teaching Methods: Do Classroom Experiments Improve Economic Education in High Schools? By Gerald Eisenkopf; Pascal Sulser
  2. Revealed Notions of Distributive Justice II – Experimental Evidence By Nicole Becker; Kirsten Häger; Jan Heufer
  3. Risk Preferences under Acute Stress By Lubomir Cingl; Jana Cahlikova
  4. Make Humans Randomize By Lisa Bruttel; Tim Friehe
  5. Cooperation Hidden Frontiers: The Behavioral Foundations of the Italian North-South Divide By Maria Bigoni; Stefania Bortolotti; Marco Casari; Diego Gambetta; Francesca Pancotto
  6. Does being Elected Increase Subjective Entitlements? Evidence from the Laboratory By Arne Robert Weiss; Irenaeus Wolff
  7. Buying and Selling Risk - An Experiment Investigating Evaluation Asymmetries By Werner Güth; Matteo Ploner; Ivan Soraperra
  8. I am sorry - Honest and Fake Apologies By Verena Utikal
  9. Confucianism and Preferences: Evidence from Lab Experiments in Taiwan and China By Elaine M. Liu; Juanjuan Meng; Joseph Tao-yi Wang
  10. Risk preferences and development revisited: A field experiment in Vietnam By Vieider, Ferdinand M.; Truong, Nghi; Martinsson, Peter; Pham Khanh Nam; Martinsson, Peter
  11. Strategy choice in the infinitely repeated prisoners' dilemma By Dal Bó, Pedro; Fréchette, Guillaume R.
  12. Sharing or gambling? On risk attitudes in social contexts By Kocher, Martin; Krawczyk, Michal; Le Lec, Fabrice
  13. The influence of wages on public officials' corruptibility: A laboratory investigation By van Veldhuizen, Roel
  14. Fairness through the Lens of Cooperative Game Theory: An Experimental Approach By Geoffroy de Clippel; Kareen Rozen
  15. Labor Market Effects of Adult Education Vouchers: Evidence from a Randomized Field Experiment By Dolores Messer; Guido Schwerdt; Ludger Woessmann; Stefan C. Wolter
  16. The Role of Emotions on Risk Preferences: An Experimental Analysis By Anna Conte; M. Vittoria Levati; Chiara Nardi
  17. Political Motivations and Electoral Competition: Equilibrium Analysis and Experimental Evidence By Michalis Drouvelis; Alejandro Saporiti; Nicolaas J. Vriend
  18. More on the dynamic Vickrey mechanism for multi-unit auctions: an experimental study on the emission permits initial auction By Anabela Botelho; Lígia M.Costa Pinto; Eduarda Fernandes
  19. Gender- and Frame-specific Audience Effects in Dictator Games By Jonathan E. Alevy; Francis L. Jeffries; Yonggang Lu
  20. Revealed Notions of Distributive Justice I – Theory By Nicole Becker; Kirsten Häger; Jan Heufer
  21. Alternating or compensating? An experiment on the repeated sequential best shot game By Lisa Bruttel; Werner GŸth
  22. The dark side of the vote: Biased voters, social information, and information aggregation through majority voting By Morton, Rebecca B.; Piovesan, Marco; Tyran, Jean-Robert
  23. Discretionary enforcement and strategic interactions between firms, regulatory agency and justice department: a theoretical and empirical investigation By Germani, Anna Rita; Morone, Andrea; Morone, Piergiuseppe; Scaramozzino, Pasquale

  1. By: Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany); Pascal Sulser (Department of Economics, University of Konstanz, Germany)
    Abstract: We present results from a field experiments at Swiss high schools in which we compare the effectiveness of teaching methods in economics. We randomly assigned classes into an experimental and a conventional teaching group, or a control group that received no specific instruction. Both of our teaching treatments improve economic understanding considerably while effect sizes are almost identical. However, student ability crucially affects learning outcomes as more able students seem to benefit disproportionately from classroom experiments while weaker students lose out. Supplemental data indicates that our experimental treatment crowded out time for adequately discussing the subject, which may have limited less able students to generate a profound understanding. Furthermore there is no robust impact of economic training on social preferences, measured as both individual behavior in incentivized decisions or political opinions.
    Keywords: Education of Economics, Classroom Experiments, Conventional Teaching
    JEL: A21 C93 I21
    Date: 2013–07–21
  2. By: Nicole Becker; Kirsten Häger; Jan Heufer
    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 nonparametrically.
    Keywords: Altruism; dictator games; distributive justice; experimental economics; nonparametric analysis; preference decomposition; revealed preference; social preferences
    JEL: C14 C91 D11 D12
    Date: 2013–10
  3. By: Lubomir Cingl (Institute of Economic Studies, Faculty of Social Sciences, Charles University, Prague, Czech Republic); Jana Cahlikova (CERGE-EI, a joint workplace of Charles University and the Economics Institute of the Academy of Sciences of the Czech Republic)
    Abstract: Many important decisions are made under stress and they often involve risky alternatives. There has been ample evidence that stress influences decision making in cognitive as well as in affective domains, but still very little is known about whether individual attitudes to risk change with exposure to acute stress. To directly evaluate the causal effect of stress on risk attitudes, we adopt an experimental approach in which we randomly expose participants to a psychosocial stressor in the form of a standard laboratory stress-induction procedure: the Trier Social Stress Test for Groups. Risk preferences are elicited using an incentive compatible task, which has been previously shown to predict risk-oriented behavior out of the laboratory. Using three different measures (salivary cortisol levels, heart rate and multidimensional mood questionnaire scores), we show that stress was successfully induced on the treatment group. Our main result is that acute psychosocial stress significantly increases risk aversion. The effect is mainly driven by males; men in our control group are less risk-averse than women, which is a standard result in the literature, but this difference almost disappears when under psychosocial stress.
    Keywords: risk preferences, stress, Trier Social Stress Test, cortisol
    JEL: C90 C91 D03 D81 D87
    Date: 2013–11
  4. By: Lisa Bruttel (Department of Economics, University of Konstanz, Germany); Tim Friehe (Center for Advanced Studies in Law and Economics, University of Bonn, Germany)
    Abstract: This paper presents results from an experiment studying a two-person 4x4 pure coordination game. We seek to identify a labeling of actions that induces subjects to select all options with the same probability. Such a display of actions must be free from salient properties that might be used by participants to coordinate. Testing 23 different sets of labels, we identify two sets that produce a distribution of subjects’ choices which approximate the uniform distribution quite well. Our design can be used in studies intending to compare the behavior of subjects who play against a random mechanism with that of participants who play against human counterparts.
    Keywords: coordination game, experiment, mixed strategy, level k
    JEL: C71 C92 D83
    Date: 2013–07–19
  5. By: Maria Bigoni; Stefania Bortolotti; Marco Casari; Diego Gambetta; Francesca Pancotto
    Abstract: Socio-economic performance differs not only across countries but within countries too and can persist even after religion, language, and formal institutions are long shared. One interpretation of these disparities is that successful regions are characterized by higher levels of trust, and, more generally, of cooperation. Here we study a classic case of within-country disparities, the Italian North-South divide, to find out whether people exhibit geographically distinct abilities to cooperate independently of many other factors and whence these differences emerge. Through an experiment in four Italian cities, we study the behavior of a sample of the general population toward trust and contributions to the common good. We find that trust and contributions vary in unison, and diminish moving from North to South. This regional gap cannot be attributed to payoffs from cooperation or to institutions, formal or informal, that may vary across Italy, as the experimental methodology silences their impact. The gap is also independent of risk and other-regarding preferences which we measure experimentally, suggesting that the lower ability to cooperate we find in the South is not due to individual "moral" flaws. The gap could originate from emergent collective properties, such as different social norms and the expectations they engender. The absence of convergence in behavior during the last 150 years, since Italy was unified, further suggests that these norms can persist overtime. Using a millenniumlong dataset, we explore whether the quality of past political institutions and the frequency of wars could explain the emergence of these differences in norms.
    Keywords: Trust, social norms, experiments, long-term persistence, conflicts, institutions.
    JEL: C90 D03
    Date: 2013
  6. By: Arne Robert Weiss (Department of Economics, University of Köln, Germany); Irenaeus Wolff (Department of Economics, University of Konstanz, Germany and TWI Kreuzlingen, Switzerland)
    Abstract: In Geng, Weiss, and Woff (2011), we pointed to the possibility that a voting mechanism may create or strengthen an entitlement effect in political-power holders relative to a random-appointment mechanism. This comment documents that such an effect, if it exists, is not robust.
    Keywords: Elections, Electoral Campaigns, Dictator Game, Social Distance, Entitlement, Experiment
    JEL: D72 D03 C91
    Date: 2013–10–31
  7. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Matteo Ploner (DEM-University of Trento); Ivan Soraperra (Max Planck Institute of Economics, Strategic Interaction Group)
    Abstract: Experimental studies of the WTP-WTA gap avoid social trading by implementing an incentive compatible mechanism for each individual trader. We compare a traditional random price mechanism and a novel elicitation mechanism preserving social trading, without sacrificing mutual incentive compatibility. Furthermore, we focus on risky goods - binary monetary lotteries - for which asymmetries in evaluations are more robust with respect to experimental procedures. For both elicitation mechanisms, the usual asymmetry in evaluation by sellers and buyers is observed. An econometric estimation sheds new light on its causes: potential buyers are over-pessimistic and systematically underweight the probability of a good outcome.
    Keywords: WTP-WTA gap, Risk, Elicitation Mechanisms, Probability Weighting
    JEL: D81 D03 C91
    Date: 2013–11–05
  8. By: Verena Utikal (Department of Economics, University of Erlangen-Nürnberg, Germany)
    Abstract: Apologies have a positive effect on forgiveness. Nevertheless not all people apologize after an offense. In a laboratory experiment we test whether lying aversion can explain this behavior by comparing honest and fake apologies. First, we show that even an honest apology comes along with a cost for some people. Second, costs for fake apologies are even higher. Fake apologies are less likely than honest apologies and consist of different wording and content. Receivers understand apologies as a signal for honesty. Following, forgiveness after an honest apology is more likely than after a fake apology.
    Keywords: Apology, Lying, Intentions, Experiment
    JEL: C91 D82 D83
    Date: 2013–04–30
  9. By: Elaine M. Liu; Juanjuan Meng; Joseph Tao-yi Wang
    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.
    JEL: C91 Z10
    Date: 2013–11
  10. By: Vieider, Ferdinand M.; Truong, Nghi; Martinsson, Peter; Pham Khanh Nam; Martinsson, Peter
    Abstract: We obtain rich measures of risk preferences of poor farmers in Vietnam, and estimate structural models that capture risk preferences over different probability levels and across different domains (gains and losses). The results break radically with the previous literature on risk preferences, in developed and developing countries alike. Far from being particularly risk averse, our Vietnamese farmers are on average risk neutral. At the same time, we find our preference measures to perform well at predicting behavior, from the purchase of lottery tickets to risk management on the farm. We also find strong direct evidence of a risk-income paradox. While risk aversion is strongly decreasing in income within our farmer subject population, our Vietnamese farmers are significantly less risk averse than subjects in Western countries according to measurements obtained using the same decision tasks and procedures. --
    Keywords: risk preferences,development,external validity
    JEL: C93 D03 D80 O12
    Date: 2013
  11. By: Dal Bó, Pedro; Fréchette, Guillaume R.
    Abstract: We use a novel experimental design to identify the subjects' strategies in an infinitely repeated prisoners' dilemma experiment. We ask subjects to design strategies that will play in their place. We find that eliciting strategies has negligible effects on their behavior, supporting the validity of this method. We find the chosen strategies include some common ones such as Tit-For-Tat and Grim trigger. However, other strategies that are considered to have desirable properties, such as Win-Stay-Lose-Shift, are not prevalent. We also find that the strategies used to support cooperation change with the parameters of the game. Finally, our results confirm that long-run miscoordination can arise. -- In einem neuen experimentellen Design versuchen wir die Strategien von Teilnehmern an einem unendlich wiederholten 'Gefangenendilemma' zu identifizieren. Die Teilnehmer werden gebeten, Strategien zu entwerfen, die an ihrer Stelle spielen sollen. Dabei stellt sich heraus, dass die Erhebung von Strategien nur marginale Auswirkungen auf das Verhalten der Teilnehmer hat, was für die Validität dieser Methode spricht. Unter den gewählten Strategien sind allgemein verbreitete, wie Tit-for-Tat und Grim-Trigger. Andere Strategien dagegen mit erwünschten Eigenschaften wie das 'Win-Stay, Lose-Shift' sind hingegen nicht so gebräuchlich. Zudem stellt sich heraus, dass die Strategien, die Kooperation unterstützen sollen, sich mit den Parametern des Spiels verändern. Schließlich belegen unsere Resultate, dass es zu einer langfristigen Fehlkoordination kommen kann.
    Keywords: infinitely repeated games,prisoner's dilemma,cooperation,strategies,experimental economics
    Date: 2013
  12. By: Kocher, Martin; Krawczyk, Michal; Le Lec, Fabrice
    Abstract: This paper investigates experimentally whether risk attitudes are stable across social contexts. In particular, it focuses on situations where some resource (for instance, a position, decision power, a bonus) has to be allocated between two parties: the decision maker can either opt for sharing the resource or for using a random device that allocates the entire prize to one of the two parties. By varying the relative situation of the decision maker with respect to the other party, we show that risk attitude is strongly affected by social contexts: participants in the experiment seem to be relatively risk seeking when they possess a relatively weaker position than the other party and risk averse when the opposite is true. Our main average results seem to be driven by the behavior of around a quarter of subjects whose choices appear to be fully determined by social comparisons. Various interpretations of the behavior are provided linking our results to preferences under risk with a social reference point and on status-seeking preferences.
    Keywords: risk attitudes; risk preferences in social context; social reference point; status-seeking preferences; social preferences under risk
    JEL: A13 C65 C72 D63 D03
    Date: 2013–10–24
  13. By: van Veldhuizen, Roel
    Abstract: Previous studies have proposed a link between corruption and wages in the public sector. The present paper investigates this link using a laboratory experiment. In the experiment, public officials have the opportunity to accept a bribe and can then decide between a neutral and a corrupt action. The corrupt action benefits the briber but poses a large negative externality on a charity. The results show that increasing public officials' wages greatly reduces their corruptibility. In particular, low-wage public officials accept 91% of bribes on average, whereas high-wage public officials accept 38%. Moreover, high-wage public officials are less likely to choose the corrupt option. Additionally, the results suggest that a positive monitoring rate may be necessary for these effects to arise. --
    Keywords: Bribery,corruption,experimental economics,laboratory experiment
    JEL: D73 C91 K42
    Date: 2013
  14. By: Geoffroy de Clippel (Dept. of Economics, Brown University); Kareen Rozen (Cowles Foundation, Yale University)
    Abstract: This paper experimentally investigates cooperative game theory from a normative perspective. Subjects designated as Decision Makers express their view on what is fair for others, by recommending a payoff allocation for three subjects (Recipients) whose substitutabilities and complementarities are captured by a characteristic function. We show that axioms and solution concepts from cooperative game theory provide valuable insights into the data. Axiomatic and regression analysis suggest that Decision Makers' choices can be (noisily) described as a convex combination of the Shapley value and equal split solution. A mixture model analysis, examining the distribution of Just Deserts indices describing how far one goes in the direction of the Shapley value, reveals heterogeneity across characteristic functions. Aggregating opinions by averaging, however, shows that the societal view of what is fair remains remarkably consistent across problems.
    Keywords: Cooperative game theory, Fairness, Experiment
    JEL: D63 D03 C71 C91
    Date: 2013–11
  15. By: Dolores Messer (University of Bern, Switzerland); Guido Schwerdt (Ifo Institute for Economic Research and CESifo, Munich, Germany); Ludger Woessmann (University of Munich, Ifo Institute for Economic Research, CESifo); Stefan C. Wolter (Swiss Coordination Centre for Research in Education, University of Bern, CESifo, IZA; University of Bern, Centre for Research in Economics of Education,)
    Abstract: Lifelong learning is often promoted in ageing societies, but little is known about its returns or governmentsÕ ability to advance it. This paper evaluates the effects of a large-scale randomized field experiment issuing vouchers for adult education in Switzerland. We find no significant average effects of voucher-induced adult education on earnings, employment, and subsequent education one year after treatment. But effects are heterogeneous: Low-education individuals are most likely to profit from adult education, but least likely to use the voucher. The findings cast doubt on the effectiveness of existing unrestricted voucher programs in promoting labor market outcomes through adult education.
    Keywords: Field experiment, voucher, adult education, LATE, Switzerland
    JEL: I22 J24 H43 C93 M53
    Date: 2013–11
  16. By: Anna Conte (Westminster Business School, University of Westminster, London, and Strategic Interaction Group, Max Planck Institute of Economics, Jena); M. Vittoria Levati (Strategic Interaction Group, Max Planck Institute of Economics, Jena, and Department of Economics, University of Verona); Chiara Nardi (Department of Economics, University of Verona)
    Abstract: In the last decades, there has been a large volume of research showing that emotions do have relevant effects on decision-making. We contribute to this literature by experimentally investigating the impact of four specific emotional states - joviality, sadness, fear, and anger - on risk attitudes. In order to do so, we fit two models of behaviour under risk: the Expected Utility model (EU) and the Rank Dependent Expected Utility model (RDEU), assuming several functional forms of the weighting function. Our results indicate that all emotional states instigate risk-seeking behaviour. Furthermore, we show that there are some differences across gender and across participants' experience in lab experiments.
    Keywords: Risk aversion, Emotions, Structural models
    JEL: D81 C91 D00
    Date: 2013–10–29
  17. By: Michalis Drouvelis (University of Birmingham); Alejandro Saporiti (University of Manchester); Nicolaas J. Vriend (Queen Mary, University of London)
    Abstract: classical one-dimensional election game with two candidates. These candidates are interested in power and ideology, but their weights on these two motives are not necessarily identical. Apart from obtaining the well known median voter result and the two-sided policy differentiation outcome, the paper uncovers the existence of two new equilibrium configurations, called 'one-sided' and 'probabilistic' policy differentiation, respectively. Our analysis shows how these equilibrium configurations depend on the relative interests in power (resp., ideology) and the uncertainty about voters' preferences. The theoretical predictions are supported by the data collected from a laboratory experiment, as we observe convergence to the Nash equilibrium values at the aggregate as well as at the individual levels in all treatments, and the comparative statics effects across treatments are as predicted by the theory.
    Keywords: Electoral competition, Power, Ideology, Uncertainty, Nash equilibrium, Experimental evidence.
    JEL: C72 C90 D72
    Date: 2013–10
  18. By: Anabela Botelho (NIMA, Universidade do Minho); Lígia M.Costa Pinto (NIMA, Universidade do Minho); Eduarda Fernandes (Instituto Politécnico de Leiria)
    Abstract: The purpose of this paper is to contribute to the multiple-units auction literature, by testing the performance of the dynamic Vickrey auction (the Ausubel model), in an experimental setting, representing the functioning of an emission permits market with an Ausubel auction for the initial allocation of permits. Other features of the experiment include the possibility of banking and the inclusion of uncertainty, and the parameters were set so as to replicate an environment similar to the EU-ETS market.Our results reveal that emission permits are not exactly allocated as theoretically predicted in the Ausubel auction although the differences are not statistically significant.Comparison of our results with previous experimental studies on the same auction mechanism, although under very different conditions, indicate no relevant differences exist on the Ausubel auction performance, which is an important policy indication when decisions are being taken on the implementation of several auctions for multiple units, namely in the context of the EU-ETS.
    Keywords: Multi-unit auctions; dynamic Vickrey (Ausubel) auction; emission permits; experiments
    Date: 2013–11
  19. By: Jonathan E. Alevy (Department of Economics, College of Business and Public Policy, University of Alaska Anchorage); Francis L. Jeffries (College of Business and Public Policy, University of Alaska Anchorage); Yonggang Lu (College of Business and Public Policy, University of Alaska Anchorage)
    Abstract: We study dictator allocations using a 2x2 experimental design that varies the level of anonymity and the choice set, allowing observation of audience effects in both give and take frames. Changes in the distribution of responses across treatment cells allow us to distinguish among alternative motives as elaborated in recent theory. We observe significant audience effects that vary by both frame and gender. The pattern of responses suggests that heterogeneous concerns for reputation and self-signaling across gender give rise to the contextual effects associated with the give and take frames that have previously been observed in the literature .
    Keywords: Dictator game; anonymity; gender; framing.
    JEL: C91 C92 D01 D03
    Date: 2013–10
  20. By: Nicole Becker; Kirsten Häger; Jan Heufer
    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 incentivecompatible, 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; nonparametric analysis; preference decomposition; revealed preference; social preferences
    JEL: C14 C91 D11 D12
    Date: 2013–10
  21. By: Lisa Bruttel; Werner GŸth
    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
    Date: 2013
  22. By: Morton, Rebecca B.; Piovesan, Marco; Tyran, Jean-Robert
    Abstract: We experimentally investigate information aggregation through majority voting when some voters are biased. In such situations, majority voting can have a dark side, that is, result in groups making choices inferior to those made by individuals acting alone. In line with theoretical predictions, information on the popularity of policy choices is beneficial when a minority of voters are biased, but harmful when a majority is biased. In theory, information on the success of policy choices elsewhere de-biases voters and alleviates the inefficiency. However, in the experiment, providing social information on success is ineffective and does not de-bias voters. --
    Keywords: Condorcet Jury Theorem,information aggregation,majority voting,social information
    JEL: C92 D7 D02 D03
    Date: 2013
  23. By: Germani, Anna Rita; Morone, Andrea; Morone, Piergiuseppe; Scaramozzino, Pasquale
    Abstract: This paper presents a game theoretic morphological analysis of the U.S. environmental authorities’ (i.e., EPA and DOJ) behavioural mechanisms, based on strategic interactions among the players. The models explore the role of discretion that such authorities enjoy, either in deciding how to pursue environmental violations (investigative and prosecutorial discretion) or in judging them (judicial discretion). The purpose is to identify both the optimal firms’ behaviour in terms of compliance, and the DOJ’s and EPA’s optimal strategies in terms of enforcement actions to undertake. Consistent with the setting of the game theory models, the role of EPA and DOJ in deterring firms from polluting is, then, empirically tested, by means of a laboratory experiment. Laboratory evidence on compliance behaviour of firms when faced with enforcement conditions predicted by the theoretical models set up is discussed for the different experimental treatments performed.
    Keywords: environmental enforcement, discretion, game theory, experimental economics.
    JEL: D8 D80 D81 K0 K32 K42 Q5 Q50 Q52
    Date: 2013–09

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