New Economics Papers
on Experimental Economics
Issue of 2014‒01‒10
seven papers chosen by

  1. Reference Dependent Altruism By Breitmoser, Yves; Tan, Jonathan H.W.
  2. Explaining Behavior in the "11-20” Game By Lawrence C.Y Choo; Todd R. Kaplan
  3. Sabotage vs Discouragement: Which Dominates Post Promotion Tournament Behavior? By David Johnson; Timothy Salmon
  4. Digit Ratios and Social Preferences: A Comment on Buser (2012) By Pablo Brañas-Garza; Jaromír Kovárík
  5. In sickness but not in wealth: Field evidence on patients? risk preferences in the financial and health domain By Miraldo, M; Galizzi, M; Stavropoulou, C
  6. All-Units Discounts: Experimental Evidence from the Vending Industry By Christopher T. Conlon; Julie Holland Mortimer
  7. Pay What You Want – But Pay Enough! Information Asymmetries and PWYW Pricing By Greiff, Matthias; Egbert, Henrik; Xhangolli, Kreshnik

  1. By: Breitmoser, Yves; Tan, Jonathan H.W.
    Abstract: In view of behavioral patterns left unorganized by current social preference theories, we propose a theory of reference dependent altruism (RDA). With RDA, one's degree of altruism increases at reference points. It induces equity and efficiency effects that are conditional on whether or not payoffs meet reference points. We verify the theory first by experimentally analyzing majority bargaining, where observed behavior contradicts existing theories but confirms RDA. Using parameter estimates from majority bargaining, we then make out-of-sample predictions for Charness-Rabin, Engelmann-Strobel, and Bolton-Ockenfels games. RDA organizes these seemingly disparate games out-of-sample, which validates our hypothesis that pro-social behavior primarily relates to reference points.
    Keywords: bargaining, non-cooperative game, laboratory experiment, social preferences, quantal response equilibrium
    JEL: C72 C78 D72
    Date: 2014–01–07
  2. By: Lawrence C.Y Choo (Department of Economics, University of Exeter); Todd R. Kaplan (Department of Economics, University of Exeter and University of Haifa)
    Abstract: We investigate whether subjects’ behavior in the Arad and Rubinstein (2012) "11-20" game could be well explained by the k-level process described by the authors. We replicated their game in our baseline experiment and provided two other variations that retained the same mixed-strategy equilibrium but resulted in different predicted behavior by the k-level process. Our experiments results suggest that k-level process leads to inconsistent predictions. In contrast to the standard k-level process as in Arad and Rubinstein, we allow players to best respond stochastically in our "SK" model and compared the model’s statistical fit against the Quantal Response Equilibrium and Cognitive Hierarchy Model. The SK model and Cognitive Model were able to outperform the QRE in a statistical sense and performed as well as each other. In addition, theCognitiveHierarchy and to lesser extend the SK model, demonstrate consistent estimates. Our findings suggest that the behavioral assumptions of Arad and Rubinstein k-level process does not fully explain behavior in the "11-20" and better explanations could be obtained when one allows for stochastic best responds as in the SK and Cognitive Hierarchy Models.
    Keywords: k-level, Cognitive Hierarchy, Quantal Response Equilibrium, "11-20" money request game.
    JEL: C73 C91
    Date: 2014
  3. By: David Johnson (University of Calgary); Timothy Salmon
    Abstract: We explore the behavior of losers of promotional tournaments after the tournament is concluded. We do so through the use of an experiment in which we vary the design of the promotion tournament to determine how tournament design affects effort. We provide a theoretical model demonstrating two possible effects from the tournaments which are strategic sabotage and the possibility that a worker becomes discouraged by the tournament outcome. We examine behavior after the tournament and Â…find evidence suggesting that bad tournament design can lead to workers being discouraged. This discouragement expect is strong for low ability workers but not for high ability workers. On the other hand we do Â…find evidence that some high ability workers engage in strategic sabotage but the incidence does not vary with the design of the promotion tournament.
    Keywords: Sabotage, Experiment, Tournament Design
    JEL: C90 C91 D03 J32 J33
    Date: 2013–12–05
  4. By: Pablo Brañas-Garza (Middlesex University London, Business School); Jaromír Kovárík (Dpto. Fundamentos Analisis Economico I & BRiDGE, University of the Basque Country)
    Abstract: Buser (2012) reports an association between the second-to-fourth digit ratio, a biomarker of the exposure to prenatal sex hormones, and behavior in several classic experimental games designed to elicit prosocial attitudes. His subjects self-report whether they have shorter, equal, or larger ring than index nger. We argue that this elicitation method is inappropriate. It generates a poor proxy for the digit ratio as it suers from measurement errors. As a result, using this variable in the regression analysis may lead to inconsistent estimates.
    Keywords: Digit ratio, measurement errors, endogeneity, social preferences, non-monotonicity, altruism
    Date: 2013
  5. By: Miraldo, M; Galizzi, M; Stavropoulou, C
    Date: 2013–12–17
  6. By: Christopher T. Conlon; Julie Holland Mortimer
    Abstract: We study an All-Units Discount, in which a downstream firm pays a linear wholesale price up to a quantity threshold, beyond which a discount applies to all future and previous units. The result of the contract is that marginal cost downstream is effectively negative over a quantity range. Such contracts are common in many industries, and we implement a field experiment in one such industry (confections), in which we remove top-selling products from a market in order to identify the potential efficiency effect of the contract. We combine the experimental variation with a structural model of demand and a dynamic model of the retailer’s re-stocking decision to identify cases in which the contract results in either efficient or inefficient exclusion of competing products. We show how the contract allocates the cost of a stock-out between upstream and downstream firms, and find evidence of inefficient exclusion. Finally, we point out that the impact of upstream mergers in these markets is likely to be felt not through the price in the final-goods market, but rather in the wholesale market. We examine the impact of various upstream mergers on the willingness of the dominant firm to offer rebate contracts, and the impact that the rebate contracts have on social welfare.
    JEL: L0 L4 L42
    Date: 2013–12
  7. By: Greiff, Matthias; Egbert, Henrik; Xhangolli, Kreshnik
    Abstract: Pay What You Want (PWYW) pricing has received considerable attention recently. Empirical studies show that when PWYW pricing is implemented buyers do not behave selfishly in a number of cases and that some sellers are able to use PWYW to increase turnover as well as profits. In this paper we present a theoretical model of buyer behavior under asymmetric information about production costs. Our model shows that information asymmetries provide an explanation for the results found in empirical studies.
    Keywords: PWYW pricing, information asymmetry, fairness, buyer behavior
    JEL: D4 M2 M3
    Date: 2013–12–12

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