New Economics Papers
on Experimental Economics
Issue of 2014‒01‒17
twenty-two papers chosen by

  1. Economic Experiments and Environmental Policy: A Review By Noussair, C.N.; Soest, D.P. van
  2. Episodes from the Early History of Experimentation in Economics By Andreas Ortman
  3. Social preferences and lying aversion in children By Valeria Maggian; Marie Claire Villeval
  4. When Parity Promotes Peace: Resolving Conflict Between Asymmetric Agents By Kimbrough, Erik; Sheremeta, Roman; Shields, Timothy
  5. Digit Ratios and Social Preferences: A Comment on Buser (2012) By Pablo Brañas-Garza; Jaromír Kovárík
  6. When best-replies are not in equilibrium: understanding cooperative behaviour By Irenaeus Wolff
  7. Private versus Public Feedback - The Incentive Effects of Symbolic Awards By Leonie Gerhards; Neele Siemer
  8. Recognizing Contributors: An Experiment on Public Goods By Anya Savikhin Samek; Roman M. Sheremeta
  9. Do Women Panic More Than Men? An Experimental Study on Financial Decision By Kiss, Hubert Janos; Rodriguez-Lara, Ismael; Rosa-García, Alfonso
  10. Birth, Death and Public Good Provision By John Duffy; Jonathan Lafky
  11. Explaining Behavior in the "11-20" Game By Choo, Lawrence C.Y; Kaplan, Todd R.
  12. Cheap Talk with Two Audiences: An Experiment By Mikhail Drugov; Roberto Hernán-González; Praveen Kujal; Marta Troya Martinez
  13. Win Some Lose Some? Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco-Working Paper 330 By Manuela Angelucci, Dean Karlan, Jonathan Zinman
  14. Mixing the Carrots with the Sticks : Third Party Punishment and Reward By Nikos Nikiforakis; Helen Mitchell
  15. Concession Bargaining - An Experimental Comparison of Protocols and Time Horizons By Federica Alberti; Sven Fischer; Werner Güth; Kei Tsutsui
  16. Long-Run Price Elasticities of Demand for Credit: Evidence from a Countrywide Field Experiment in Mexico-Working Paper 331 By Dean Karlan, Jonathan Zinman
  17. The Political Influence of Peer Groups: Experimental Evidence from the Classroom By Camila Campos; Sean Hargreaves Heap; Fernanda L L de Leon
  18. Measuring Agents' Reaction to Private and Public Information in Games with Strategic Complementarities By Camille Cornand; Frank Heinemann
  19. Leadership and conditional cooperation in public good games: What difference does the game make? By Edward J Cartwright; Denise Lovett
  20. Majoritarian Contests with Asymmetric Battlefields: An Experiment By Maria Montero; Alex Possajennikov; Martin Sefton; Theodore Turocy
  21. Discriminating between Models of Ambiguity Attitude: A Qualitative Test By Sujoy Mukerji; Robin Cubitt; Gijs van de Kuilen
  22. Context Matters for Size: Why External Validity Claims and Development Practice Don't Mix-Working Paper 336 By Lant Pritchett, Justin Sandefur

  1. By: Noussair, C.N.; Soest, D.P. van (Tilburg University, Center for Economic Research)
    Abstract: Abstract: We summarize and review the literature on two types of economic experiments. First we discuss the use of experimental laboratories to testbed market solutions to issues in environmental policy. We concentrate on experiments with one and two-sided markets, and applications in the domain of water allocation, food safety, and tradable permit systems. Second, we explore the consequences for environmental policies of the vast body of literature refuting the assumption that humans are only concerned with their own private welfare. We review the literature addressing whether government intervention is always necessary to protect the environment, and also whether it is always effective in doing so.
    Keywords: Survey;experiment;environment;social dilemma
    JEL: C92 Q20 Q30 Q50
    Date: 2014
  2. By: Andreas Ortman (School of Economics, Australian School of Business, the University of New South Wales)
    Keywords: Experimental methods, Early History of Experimentation in Economics
    JEL: B41 C9
    Date: 2013–12
  3. By: Valeria Maggian (Università degli studi di Milano-Bicocca - UNIVERSITÀ DEGLI STUDI DI MILANO-BICOCCA); Marie Claire Villeval (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon)
    Abstract: While previous research has shown that social preferences develop in childhood, we study whether this development is accompanied by reduced use of deception when lies would harm others, and increased use of deception to benefit others. In a sample of children aged between 7 and 14, we find strong aversion to lying at all ages. Lying is driven mainly by selfish motives and envy. Children with stronger social preferences are less prone to deception, even when lying would benefit others at no monetary cost. Older children lie less than younger children and require more selfjustification to lie.
    Keywords: Lie aversion; deception; social preferences; children; experiment
    Date: 2014–01–07
  4. By: Kimbrough, Erik; Sheremeta, Roman; Shields, Timothy
    Abstract: Due to the high costs of conflict both in theory and practice, we examine and experimentally test the conditions under which conflict between asymmetric agents can be resolved. We model conflict as a two-agent rent-seeking contest for an indivisible prize. Before conflict arises, both agents may agree to allocate the prize by fair coin flip to avoid the costs of conflict. The model predicts that “parity promotes peace”: in the pure-strategy equilibrium, agents with relatively symmetric conflict capabilities agree to resolve the conflict by using a random device; however, with sufficiently asymmetric capabilities, conflicts are unavoidable because the stronger agent prefers to fight. The results of the experiment confirm that the availability of the random device partially eliminates conflicts when agents are relatively symmetric; however, the device also reduces conflict between substantially asymmetric agents.
    Keywords: contest, asymmetries, conflict resolution, experiments
    JEL: C72 C91 D72 D74
    Date: 2013–12–20
  5. 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
  6. By: Irenaeus Wolff
    Abstract: To understand cooperative behaviour in social-dilemma experiments, we need to understand the game participants play not only in monetary but in preference terms. Does a Nash-prediction based on participants' actual preferences describe their behaviour in a public-good experiment well? And if not, where does the observed behaviour diverge from the prediction? This study provides an environment which allows to answer these questions: when making their contribution decision, participants are informed about their co-playersÕ priorly-elicited conditional contribution preferences. This induces common knowledge of preferences and thereby leads to direct experimental control over the game participants play. Results show that most people play best-responses to their beliefs. At the same time, beliefs in a third of the cases do not correspond to an equilibrium prediction that is based on the elicited conditional-cooperation preferences. Moreover, more often than not, beliefs are empirically inaccurate. This holds true even in a treatment that gives participants the option to look up the set of equilibria of their game.
    Keywords: Public good, social dilemma, Nash-equilibrium, rational beliefs, conditional cooperation, social preferences.
    Date: 2013
  7. By: Leonie Gerhards (Department of Economics and Business, Aarhus University, Denmark); Neele Siemer (Goethe-University Frankfurt)
    Abstract: We experimentally compare the incentive effects of rewarding individuals for outstanding performance publicly versus privately. We implement two real-effort tasks, which differ in how prestigious subjects perceive working on them. In both tasks private and public feedback similarly enhances subjects' performance compared to the control treatment. Also high ability and a positive interim feedback increase performance. Competitive preferences matter only in the less prestigious task. Subjects' gender and overconfidence can in neither of the tasks explain performance. In a supplementary field experiment at a secondary school we furthermore compare the incentive effects of different forms of public recognition.
    Keywords: Private feedback, public feedback, relative performance, competitive preferences, laboratory experiment, field experiment
    JEL: C91 C93 D03 J33 M12
    Date: 2014–01–10
  8. By: Anya Savikhin Samek (School of Human Ecology, University of Wisconsin-Madison); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and the Economic Science Institute, Chapman University)
    Abstract: We experimentally investigate the impact of recognizing contributors on public good contributions. We vary recognizing all, highest or lowest contributors. Consistent with previous studies, recognizing all contributors significantly increases contributions relative to the baseline. Recognizing only the highest contributors does not increase contributions compared to not recognizing contributors, while recognizing only the lowest contributors is as effective as recognizing all contributors. These findings support our conjecture that aversion from shame is a more powerful motivator for giving than anticipation of prestige.
    Keywords: public-goods, information, experiments
    JEL: C72 C91 H41
    Date: 2013
  9. By: Kiss, Hubert Janos; Rodriguez-Lara, Ismael; Rosa-García, Alfonso
    Abstract: We report experimental evidence on gender differences in financial decision that involves three depositors choosing between waiting or withdrawing their money from a common bank. We find that the position in the line, the fact of being observed and the observed decisions are key determinants to explain subjects’ behavior. Although both men and women value being observed, it has a greater effect on women’s decisions. Observing a withdrawal increases the likelihood of withdrawal but women and men do not react differently to what is observed, so they are equally likely to panic if a bank run is already underway. Interestingly, risk aversion has no predictive power on depositors’ behavior.
    Keywords: bank run; gender difference; strategic uncertainty; experimental evidence; coordination
    JEL: C91 D03 D8 G02 J16
    Date: 2014–01–13
  10. By: John Duffy; Jonathan Lafky
    Abstract: We explore the effect of fixed versus dynamic group membership on public good provision. In a novel experimental design, we modify the traditional voluntary contribution mechanism (VCM) by periodically replacing old members of a group with new members over time. Under this dynamic, overlapping generations matching protocol we find that average contributions experience significantly less decay over time relative to a traditional VCM environment with fixed group membership. These findings suggest that the traditional pattern of contribution and decay seen in many public goods experiments may not accurately reflect behavior in groups with changing membership, as is the case in many real-world environments.
    Keywords: Public goods, Overlapping generations, Voluntary contribution mechanism, Experimental economics
    JEL: C72 C92 D64 H41
    Date: 2014–01
  11. By: Choo, Lawrence C.Y; Kaplan, Todd R.
    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, the Cognitive Hierarchy 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: 2014–01–09
  12. By: Mikhail Drugov (Universidad Carlos III de Madrid, University of Warwick and CEPR); Roberto Hernán-González (Departamento de Teoría e Historia Económica, Universidad de Granada); Praveen Kujal (Middlesex University Business School); Marta Troya Martinez (Department of Economics, University of Oxford)
    Abstract: In this paper we experimentally test strategic information transmission between one informed and two uninformed agents in a cheap-talk game. We find evidence of the "disciplining" effect of public communication as compared to private; however, it is much weaker than predicted by the theory. Adding a second receiver naturally increases the complexity of strategic thinking when communication is public. Using the level-k model, we exploit the within subject design to show how individuals decrease their level-k in public communication. Surprisingly, we find that individuals become more sophisticated when they communicate privately with two receivers rather than one.
    Keywords: Cheap Talk, Communication, Experiment, Level-k, Cognitive ability, Cognitive Reflection Test
    JEL: C72 C92 D83
    Date: 2013
  13. By: Manuela Angelucci, Dean Karlan, Jonathan Zinman
    Abstract: Theory and evidence have raised concerns that microcredit does more harm than good, particularly when offered at high interest rates. We use a clustered randomized trial, and household surveys of eligible borrowers and their businesses, to estimate impacts from an expansion of group lending at 110% APR by the largest microlender in Mexico. Average effects on a rich set of outcomes measured 18-34 months post-expansion suggest some good and little harm. Other estimators identify heterogeneous treatment effects and effects on outcome distributions, but again yield little support for the hypothesis that microcredit causes harm.
    Keywords: microcredit; microcredit impact; microentrepreneurship; Compartamos Banco
    JEL: D12 D22 G21 O12
    Date: 2013–07
  14. By: Nikos Nikiforakis (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon); Helen Mitchell (Department of Foreign Affairs and Trade - Australian Government Department of Foreign Affairs and Trade)
    Abstract: While the opportunity to punish selfish and reward generous behavior coexist in many instances in daily life, in most laboratory studies, the demand for punishment and reward are studied separately from one another. This paper presents the results from an experiment measuring the demand for reward and punishment by 'unaffected' third parties, separately and jointly. We find that the demand for costly punishment is substantially lower when individuals are also given the ability to reward. Similarly, the demand for costly reward is lower when individuals can also punish. The evidence indicates the reason for this is that costly punishment and reward are not only used to alter the material payoff of others as assumed by recent economic models, but also as a signal of disapproval and approval of others' actions, respectively. When the opportunity exists, subjects often choose to withhold reward as a form of costless punishment, and to withhold punishment as a form of costless reward. We conclude that restricting the available options to punishing (rewarding) only, may lead to an increase in the demand for costly punishment (reward).
    Keywords: punishment; reward; social norms; norm enforcement; third party
    Date: 2014–01–07
  15. By: Federica Alberti (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Sven Fischer (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group, Jena); Kei Tsutsui (Frankfurt School of Finance & Management, Frankfurt am Main)
    Abstract: Concessions try to avoid conflict in bargaining and can finally lead to an agreement. Although they usually are seen as unfolding in time, concessions can also be studied in normal form or by conditioning only on failure of earlier agreement attempts. We experimentally compare three protocols of concession bargaining, the normal form or static one, the one where concessions only condition on earlier failures and the truly dynamic one. In spite of their considerable differences in conditioning, the three protocols do not differ in agreement ratio, efficiency and inequality of agreements. There are, however, effects of the maximal number of trials to reach an agreement by concession making and of protocol on when to abstain from conceding.
    Keywords: concession bargaining, dynamic interaction, emotions, deadline, conflict, experiment
    JEL: C72 C78
    Date: 2014–01–06
  16. By: Dean Karlan, Jonathan Zinman
    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: credit; microcredit
    JEL: E51 G21
    Date: 2013–07
  17. By: Camila Campos (Insper); Sean Hargreaves Heap (King's College London); Fernanda L L de Leon (University of East Anglia)
    Abstract: People who belong to the same group often behave alike. Is this because people with similar preferences naturally associate with each other or because group dynamics cause individual preferences and/or the information that they have to converge? This is the question that we address with a natural experiment. We focus on the possible influence of peers on two types of individual political behaviour: political identification on a left-right spectrum and political engagement. We find no evidence that peer political identification affects individual identification. But we do find that peer engagement affects individual engagement, individual political knowledge and political identification among those who are initially least engaged. We argue this (and other evidence) is most likely to arise from peer effects on the information that individuals have and not their preferences.
    Date: 2013–12
  18. By: Camille Cornand (GATE Lyon Saint-Étienne - Groupe d'analyse et de théorie économique - CNRS : UMR5824 - Université Lumière - Lyon II - École Normale Supérieure (ENS) - Lyon - PRES Université de Lyon); Frank Heinemann (Fachgebiet Makroökonomik - Technische Universität Berlin)
    Abstract: In games with strategic complementarities, public information about the state of the world has a larger impact on equilibrium actions than private information of the same precision, because public signals are more informative about the likely behavior of others. We present an experiment in which agents' optimal actions are a weighted average of the fundamental state and their expectations of other agents' actions. We measure the responses to public and private signals. We find that, on average, subjects put a larger weight on the public signal. In line with theoretical predictions, as the relative weight of the coordination component in a player's utility increases, players put more weight on the public signal when making their choices. However, the weight is smaller than in equilibrium, which indicates that subjects underestimate the information contained in public signals about other players' beliefs.
    Keywords: coordination games; strategic uncertainty; private information; public information
    Date: 2014–01–07
  19. By: Edward J Cartwright; Denise Lovett
    Abstract: We investigate experimentally whether the extent of conditional cooperation in public good games depends on the marginal return to the public good and type of game. The marginal return is varied from 0.2 to 0.4 to 0.8. The 'standard' game, in which three players contribute before a follower, is compared with a leader-follower game, in which one player leads and three follow. We find no strong evidence that the marginal return or type of game makes a difference to the extent of conditional cooperation. We also find no evidence that the type of game makes a difference to unconditional contributions. The level of marginal return does, however, have a strong effect on unconditional contributions. Our results highlight the critical role that can be played by leaders in a public good game.
    Keywords: Public good; conditional cooperation; reciprocity; leadership
    JEL: C72 H41
    Date: 2013–12
  20. By: Maria Montero (School of Economics, University of Nottingham); Alex Possajennikov (School of Economics, University of Nottingham); Martin Sefton (School of Economics, University of Nottingham); Theodore Turocy (University of East Anglia)
    Abstract: We investigate a version of the classic Colonel Blotto game in which individual battles may have different values. Two players allocate a fixed budget across battlefields and each battlefield is won by the player who allocates the most to that battlefield. The winner of the game is the player who wins the battlefields with highest total value. We focus on the case where there is one large and several small battlefields, such that a player wins if he wins the large and any one small battlefield, or all the small battlefields. We compute the mixed strategy equilibrium for these games and compare this with choices from a laboratory experiment. The equilibrium predicts that the large battlefield receives more than a proportional share of the resources of the players, and that most of the time resources should be spread over more battlefields than are needed to win the game. We find support for the main qualitative features of the equilibrium. In particular, strategies that spread resources widely are played frequently, and the large battlefield receives more than a proportional share in the treatment where the asymmetry between battlefields is stronger.
    Keywords: Colonel Blotto, majoritarian contests, experiment
    Date: 2013–12
  21. By: Sujoy Mukerji; Robin Cubitt; Gijs van de Kuilen
    Abstract: The exchange between Epstein (2010) and Klibanoff et al. (2012) identified a behavioral issue that sharply distinguishes between two classes of models of ambiguity sensitivity, exemplified by the�α-MEU model and the smooth ambiguity model, respectively. The issue in question is whether a subject’s preference for a randomized act (compared to its pure constituents) is influenced by a desire to hedge independently resolving ambiguities. Building on this insight, we implement an experiment whose design provides a qualitative test that discriminates between these importantly distinct classes of models. Among subjects identified as ambiguity sensitive, we find greater support for the class exemplified by the smooth ambiguity model; the relative support is stronger among subjects identified as ambiguity averse. �
    Keywords: Ambiguity sensitivity; ambiguity attitude; testing models of ambiguity sensitive preference
    JEL: C91 D01 D03 D81 G02
    Date: 2014–01–08
  22. By: Lant Pritchett, Justin Sandefur
    Abstract: In this paper we examine how policymakers and practitioners should interpret the impact evaluation literature when presented with conflicting experimental and non-experimental estimates of the same intervention across varying contexts. We show three things. First, as is well known, non-experimental estimates of a treatment effect comprise a causal treatment effect and a bias term due to endogenous selection into treatment. When non-experimental estimates vary across contexts any claim for external validity of an experimental result must make the assumption that (a) treatment effects are constant across contexts, while (b) selection processes vary across contexts. This assumption is rarely stated or defended in systematic reviews of evidence. Second, as an illustration of these issues, we examine two thoroughly researched literatures in the economics of education—class size effects and gains from private schooling—which provide experimental and non-experimental estimates of causal effects from the same context and across multiple contexts. We show that the range of “true” causal effects in these literatures implies OLS estimates from the right context are, at present, a better guide to policy than experimental estimates from a different context. Third, we show that in important cases in economics, parameter heterogeneity is driven by economy- or institution-wide contextual factors, rather than personal characteristics, making it difficult to overcome external validity concerns through estimation of heterogeneous treatment effects within a single localized sample. We conclude with recommendations for research and policy, including the need to evaluate programs in context, and avoid simple analogies to clinical medicine in which “systematic reviews” attempt to identify best-practices by putting most (or all) weight on the most “rigorous” evidence with no allowance for context.
    Keywords: external validity, treatment effects, policy evaluation, causal inference
    JEL: D04 I2 O2
    Date: 2013–08

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