New Economics Papers
on Experimental Economics
Issue of 2014‒02‒08
nineteen papers chosen by

  1. Revealed Preference, Rational Inattention, and Costly Information Acquisition By Andrew Caplin; Mark Dean
  2. Pork barrel politics, voter turnout, and inequality: An experimental study By Jens Großer; Thorsten Giertz
  3. You always meet twice: An experiment on intrinsic versus instrumental reciprocity By Johnsen, Åshild A; Kvaløy, Ola
  4. An experimental analysis from a taking game in Madagascar By Sophie Clot; Gilles Grolleau; Lisette Ibanez
  5. An Experimental Test of a Search Model under Ambiguity By Asano, Takao; Okudaira, Hiroko; Sasaki, Masaru
  6. Social comparison and risk taking behavior By Astrid Gamba; Elena Manzoni
  7. An experimental study of sorting in group contests By Philip Brookins; John Lightle; Dmitry Ryvkin
  8. Do Overconfident Workers Cooperate Less? The Relationship between Overconfidence and Cooperation in Team Production By Vanessa Mertins; Wolfgang Hoffeld
  9. Compulsory Disclosure of Private Information Theoretical and Experimental Results for the "Acquiring-a-Company" Game By Werner Güth; Kerstin Pull; Manfred Stadler; Alexandra Zaby
  10. Ambiguity on Audits and Cooperation in a Public Goods Game By Dai, Zhixin; Hogarth, Robin M.; Villeval, Marie Claire
  11. Circumstantial Risk: Impact of Future Tax Evasion and Labor Supply Opportunities on Risk Exposure By Doerrenberg, Philipp; Duncan, Denvil; Zeppenfeld, Christopher
  12. Reciprocal relationships in tax compliance decisions By Cécile Bazart; Aurélie Bonein
  13. Boundedly Rational Opinion Dynamics in Directed Social Networks: Theory and Experimental Evidence By Pietro Battiston; Luca Stanca
  14. The hidden costs of tax evasion: collaborative tax evasion in markets for expert services By Loukas Balafoutas; Adrian Beck; Rudolf Kerschbamer; Matthias Sutter
  15. Present Bias in Payments for Ecosystem Services: Insights from a Behavioural Experiment in Uganda By Sophie Clot; Charlotte Stanton
  16. Organizational Coordination and Costly Communication with Boundedly Rational Agents By Dietrichson, Jens; Jochem, Torsten
  17. A reconsideration of gender differences in risk attitudes By Filippin, A.; Crosetto, P.
  18. Optimal Altruism in Public Good Provision By Robert Hahn; Robert Ritz
  19. Accuracy of proposers' beliefs in an allocation-type game By Federica Alberti; Anna Conte; Kei Tsutsui

  1. By: Andrew Caplin; Mark Dean
    Abstract: We develop a revealed preference test for optimal acquisition of costly information. The test encompasses models of rational inattention, sequential signal processing, and search. We provide limits on the extent to which attention costs can be recovered from choice data. We experimentally elicit state dependent stochastic choice data of the form the tests require. In simple cases, tests confirm that subjects adjust their attention in response to incentives as the theory dictates.
    JEL: D80
    Date: 2014–01
  2. By: Jens Großer; Thorsten Giertz
    Abstract: We experimentally study pork barrel politics in two-candidate majoritarian elections. Candidates form distinct supporter groups by favoring some voters in budget spending at the expense of others. We compare voluntary and compulsory costly voting and find that, on average, the former mode induces more narrowly targeted favors and therefore more inequality among otherwise identical voters. When the same candidates act over many elections, such as with parties, they tend to cultivate policy polarization by frequently favoring their exclusive supporters again and avoiding those of the opponent, and with compulsory voting we find additional frequent policy overlap for a separate subset of voters. Our findings are important for understanding how an inclination towards a sustained "divided society" can arise purely from the political process, absent of any coordination devices such as ideological preferences.
    Keywords: Pork barrel politics, voter turnout, inequality, Colonel Blotto games, laboratory experiments
    Date: 2014–01–31
  3. By: Johnsen, Åshild A (UiS); Kvaløy, Ola (UiS)
    Abstract: In repeated games, it is hard to distinguish true prosocial behavior from strategic instrumental behavior. In particular, a player does not know whether a reciprocal action is intrinsically or instrumentally motivated. In this paper, we experimentally investigate the relationship between intrinsic and instrumental reciprocity by running a two-period repeated trust game. In the `strategic treatment' the subjects know that they will meet twice, while in the `non-strategic treatment' they do not know and hence the second period comes as a surprise. We find that subjects anticipate instrumental reciprocity, and that intrinsic reciprocity is rewarded. In fact, the total level of cooperation, in which trust is reciprocated, is higher in the non-strategic treatment. Instrumental reciprocity thus seems to crowd out intrinsic reciprocity: If one takes the repeated game incentives out of the repeated game
    Keywords: Trust; Reciprocity; Repeated Games; Experiment
    JEL: C72 C91 D03
    Date: 2014–01–28
  4. By: Sophie Clot; Gilles Grolleau; Lisette Ibanez
    Abstract: This paper explores whether previous good deeds may license non-cooperative behavior such as damaging a social surplus for private benefits in Madagascar. We designed a two steps framed experiment, with one control and three treatments. In the first step, the three treatments consist in a task that enables subjects to earn moral credit, whereas the control group just has a neutral task (i.e. unscrambling sentences). The three treatments differ in the framing of the “moral boosting” task. In the second step, subjects are given the possibility to take an amount from a fund allocated to their University. We show that participants in the license condition adopt higher anti-social behavior than participants in control. First, the number of participants who decide to take money from the University’s fund increases under the license condition, and second, the average amount taken is significantly higher than in the control condition, even when only takers are considered. The framing of the preceding task seems to have little impact on self-licensing. However, a low degree of implication encourages greater morally dubious behavior. Finally, we found that license effect exists both for men and women, while the increase of anti-social behavior after a good deed is more pronounced for men.
    Date: 2014–01
  5. By: Asano, Takao (Okayama University); Okudaira, Hiroko (Okayama University); Sasaki, Masaru (Osaka University)
    Abstract: This paper's objective is to design a laboratory experiment to explore the effect of ambiguity on a subject's search behavior in a finite-horizon sequential search model. In so doing, we employ a new approach to observe the potential trend of reservation points that is usually unobserved. We observe a significant dip in a trend of reservation points when subjects are faced with ambiguity over wage distributions.
    Keywords: experiment, search model, ambiguity, reservation wage
    JEL: C91 D81
    Date: 2014–01
  6. By: Astrid Gamba (Department of Economics, University of Milan Bicocca); Elena Manzoni (Department of Economics, University of Milan Bicocca)
    Abstract: We study theoretically and experimentally decision making under uncertainty in a social environment. We introduce an interdependent preferences model that assumes that the decision maker evaluates monetary outcomes in relation both with his individual and his social reference point. In the experiment we reproduce a workplace environment whereby subjects interact in an effort task, earn (possibly) different wages from this task and then undertake a risky decision that may give them an extra bonus. Controlling for intrinsic risk attitudes, we find that both downward and upward social comparison strongly influence risk attitudes and that they both generate more risk loving behavior. Moreover, we find that a propension to envy counterposes such effect, by increasing risk aversion.
    Keywords: Social comparison, risk aversion, interdependent preferences, reference point
    JEL: C91 D03 D81
    Date: 2014–01–29
  7. By: Philip Brookins (Department of Economics, Florida State University); John Lightle (Department of Economics, Florida State University); Dmitry Ryvkin (Department of Economics, Florida State University)
    Abstract: We study experimentally the effects of sorting in contests between groups of heterogeneous players whose within-group efforts are perfect substitutes. The theory predicts that higher aggregate effort will be reached when variation in ability between groups is lower, i.e., by a more balanced sorting. In the experiment, we assign subjects to four types -- A, B, C, and D -- ranked by their cost of effort, with A having the lowest and D having the highest cost, and conduct contests between two groups of two players each. In the Balanced treatment, (A,D) groups (i.e., groups comprised of a type A and a type D player) compete with (B,C) groups, whereas in the Unbalanced treatment, (A,B) groups compete with (C,D) groups. We find substantial heterogeneity and overinvestment of efforts by all types in both treatments, including the "underdog" (C,D) group which surprisingly is not demoralized by the unbalanced matching. Despite strong overbidding, relative aggregate efforts are remarkably close to equilibrium predictions both between treatments and between groups within each treatment. The results confirm the prediction that balanced sorting leads to higher aggregate effort.
    Keywords: contest, group, sorting, heterogeneous players, experiment
    JEL: C72 C91 M54 D72
    Date: 2014–01
  8. By: Vanessa Mertins (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Wolfgang Hoffeld (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: The tendency to underestimate others’ relative performance compared to one’s own is widespread among individuals in all work environments. We examine the relationship between, and the driving forces behind, individual overconfidence and voluntary cooperation in team production. Our experimental data suggest an indirect and gender-specific link: Overconfident men hold more optimistic beliefs about coworkers’ cooperativeness than men who lack confidence, and are accordingly significantly more cooperative, whereas overconfidence, beliefs, and cooperativeness are not correlated in women.
    Keywords: team production, public good, experiment, real effort, cooperation, gender, overconfidence, belief
    JEL: M52 J33 J16 J24 C91
    Date: 2013–12
  9. By: Werner Güth (Max Planck Institute of Economics, Strategic Interaction Group); Kerstin Pull (University of Tübingen, School of Business and Economics); Manfred Stadler (University of Tübingen, School of Business and Economics); Alexandra Zaby (University of Tübingen, School of Business and Economics)
    Abstract: Based on the "acquiring-a-company" game of Samuelson and Bazerman (1985), we theoretically and experimentally analyze the acquisition of a firm. Thereby we compare cases of symmetrically and asymmetrically informed buyers and sell- ers. This setting allows us to predict and test the effects of information disclosure as prescribed by two recently implemented directives of the European Union, the Transparency and the Takeover-Bid Directive. Our theoretical and experimental results suggest a welfare-enhancing effect of compulsory information disclosure. Hence, the EU Transparency and the EU Takeover-Bid Directive should both be welfare enhancing.
    Keywords: Acquisition of firms, disclosure of private information, experimental economics
    JEL: C91 D61 D82
    Date: 2014–02–04
  10. By: Dai, Zhixin (CNRS, GATE); Hogarth, Robin M. (Universitat Pompeu Fabra); Villeval, Marie Claire (CNRS, GATE)
    Abstract: We investigate the impact of various audit schemes on the future provision of public goods, when contributing less than the average of the group is sanctioned exogenously and the probability of an audit is unknown. We study how individuals update their beliefs about the probability of being audited, both before and after audits are definitely withdrawn. We find that when individuals have initially experienced systematic audits, they decrease both their beliefs and their contributions almost immediately after audits are withdrawn. In contrast, when audits were initially less frequent and more irregular, they maintain high beliefs about the probability of being audited and continue cooperating long after audits have been withdrawn. Inconsistency in experiencing audits across time clearly increases the difficulty of learning the true audit probabilities. Thus, conducting less frequent and irregular audits with higher fines can increase efficiency dramatically.
    Keywords: ambiguity, audits, sanctions, beliefs, cooperation, public goods, experiment
    JEL: C92 H41 D83
    Date: 2014–01
  11. By: Doerrenberg, Philipp (University of Cologne); Duncan, Denvil (Indiana University); Zeppenfeld, Christopher (University of Cologne)
    Abstract: This paper examines whether risk-taking in a lottery depends on the opportunity to respond to the lottery outcome through additional labor effort and/or tax evasion. Previous empirical attempts to answer this question face identification issues due to self-selection into jobs that facilitate tax evasion and labor effort flexibility. We address these identification issues using a laboratory experiment (N = 180). Subjects have the opportunity to invest earned income in a lottery and, depending on randomly assigned treatment states, have the opportunity to respond to the lottery outcome through evasion and/or extra labor effort. We find strong evidence that ex-post access to labor opportunities reduces ex-ante risk willingness while access to tax evasion has no effect on risk behavior. We discuss possible explanations for this result based on the existing literature.
    Keywords: tax evasion, labor supply, risk behavior, lab experiment
    JEL: G11 H21 H24 H26 J22
    Date: 2014–01
  12. By: Cécile Bazart (LAMETA - Laboratoire Montpelliérain d'Économie Théorique et Appliquée - Université Montpellier I - CNRS : UMR5474 - Institut national de la recherche agronomique (INRA) : UR1135 - Centre international de hautes études agronomiques méditerranéennes [CIHEAM]); Aurélie Bonein (CREM - Centre de Recherche en Economie et Management - CNRS : UMR6211 - Université de Rennes 1 - Université de Caen Basse-Normandie)
    Abstract: Reciprocity considerations are important to the tax compliance problem as they may explain the global dynamics of tax evasion, beyond individual tax evasion decisions, toward a downward or upward spiral. To provide evidence on reciprocity in tax compliance decisions, we have conducted a laboratory experiment in which we introduced two types of inequities. The first type of inequity is called vertical, because it refers to inequities introduced by the government when it sets different fiscal parameters for identical taxpayers, while the second type of inequity is called horizontal because it refers to the fact that taxpayers may differ in tax compliance decisions. In this setting, taxpayers may react to a disadvantageous or advantageous inequity through negative or positive reciprocal behaviors, respectively. Our results support the existence of negative and positive reciprocity in both vertical and horizontal cases. When both inequities come into play and may induce reciprocal behaviors in opposite directions, the horizontal always dominates the vertical.
    Keywords: Behavioral economics; experimental economics; fairness; tax evasion; tax compliance
    Date: 2014
  13. By: Pietro Battiston; Luca Stanca
    Abstract: This paper investigates opinion dynamics and social influence in directed communication networks. We study the properties of a generalized boundedly rational model of opinion formation in which individuals aggregate the information they receive by using weights that are a function of their neighbors' indegree. We then present an experiment designed to test the predictions of the model. We find that both Bayesian updating and boundedly rational updating à la DeMarzo et al. (2003) are rejected by the data. Consistent with our theoretical predictions, the social influence of an agent is positively and significantly affected by the number of individuals she listens to. When forming their opinions, agents do take into account the structure of the communication network, although in a sub-optimal way.
    Keywords: Social Networks, Learning, Social In uence, Bounded Rationality
    JEL: D85 D83 A14 L14 Z13
    Date: 2014–01
  14. By: Loukas Balafoutas; Adrian Beck; Rudolf Kerschbamer; Matthias Sutter
    Abstract: In markets where transactions are governed by contractual incompleteness, revealed intentions to evade taxes may affect market performance. We experimentally examine the impact of tax evasion attempts on the performance of credence goods markets, where contractual incompleteness results from asymmetric information on the welfare maximizing quality of the good. We find that tax evasion attempts – independently of whether they are successful or not – lead to efficiency losses in the form of too low quality and less frequent trade. Thus, shadow economies induce an excess burden not only by hampering the collection of tax revenues, but also by reducing market efficiency.
    Keywords: Credence goods, expert services, tax evasion, fraud, experiment
    JEL: C72 C91 D82 H26
    Date: 2014
  15. By: Sophie Clot; Charlotte Stanton
    Abstract: Farmers are necessary agents in global efforts to conserve the environment now that croplands and pastures together constitute the largest terrestrial system on Earth – covering some 48% of (ice-free) land surface. Whereas standard economic models predict that farmers will participate in conservation programs so long as they are profitable, empirical findings from behavioral economics point to a number of normally unobservable preferences that may influence the decision-making process. This study tests whether heterogeneity in behavioral preferences correlates with decisions to participate in Payments for Environmental Services (PES) programs. We elicit individual trust and time preferences using incentivized choice experiments and link resulting measures to PES enrollment and household survey data in Uganda. We find that farmers who exhibit present-biased preferences – those who show a particular desire for proximate gains – are 44.1% more likely to self-select into PES than those who show time-consistent or future-biased preferences.
    Date: 2014–01
  16. By: Dietrichson, Jens (Department of Economics, Lund University); Jochem, Torsten (Faculty of Economics and Business, University of Amsterdam)
    Abstract: How does costly communication affect organizational coordination? This paper develops a model of costly communication based on the weakest-link game and boundedly rational agents. Solving for the stochastically stable states, we find that communication increases the possibilities for efficient coordination compared to a setting where agents cannot communicate. But as agents face a trade-off between lowering the strategic uncertainty for the group and the costs of communication, the least efficient state is still the unique stochastically stable one for many parameter values. Simulations show that this is not just a long run phenomena, the stochastically stable state is the most frequent outcome also in the short run. Making communication mandatory induces efficient coordination, whereas letting a team leader handle communication increases efficiency when the leader expects others to follow and has enough credibility. The results are broadly consistent with recent experimental evidence of communication in weakest-link games.
    Keywords: Organizational coordination; Commmunication; Stochastic stability; Bounded rationality; Simulation
    JEL: C73 D23 L22 L23
    Date: 2014–02–03
  17. By: Filippin, A.; Crosetto, P.
    Abstract: This paper reconsiders the wide agreement that females are more risk averse than males providing a leap forward in its understanding. Thoroughly surveying the literature we first find that gender differences are less ubiquitous than usually depicted. Gathering the microdata of an even larger sample of Holt and Laury replications we boost the statistical power of the test and we show that the magnitude of gender differences, although significant, is economically unimportant. We conclude that gender differences systematically correlate with the features of the elicitation method used and in particular the availability of a safe option and fixed probabilities.
    JEL: C81 C91 D81
    Date: 2014
  18. By: Robert Hahn; Robert Ritz
    Abstract: We present a model of altruistically-minded-yet rational-players contributing to a public good. A key feature is the tension between altruism and "crowding-out" effects (players' efforts are strategic substitutes). We find that more altruistic behaviour can raise or reduce welfare, depending on the fine details of the environment. It is almost always optimal for a player to act more selfishly than her true preference. We discuss applications to a range of public good problems, including global climate policy. Our results highlight that it may be difficult to infer social preferences from observed behaviour.
    Keywords: Altruism, climate policy, crowding out, public goods
    JEL: D03 H23 H41 Q58
    Date: 2014–01–29
  19. By: Federica Alberti (Strategic Interaction Group, Max Planck Institute of Economics, Jena); Anna Conte (Strategic Interaction Group, Max Planck Institute of Economics, Jena, and Department of Economics and Quantitative Methods , WBS, University of Westminster London); Kei Tsutsui (Frankfurt School of Finance and Management)
    Abstract: In the context of an allocation game, this paper analyses the proposer's reported beliefs about the responder's willingness to accept (or reject) the proposed split of the pie. The proposer's beliefs are elicited via a quadratic scoring rule. An econometric model of the proposer's beliefs is estimated. The estimated proposer's beliefs are then compared with the actual responder's choices. As a result of this comparison, we observe that the proposer tends to underestimate the empirical acceptance probability, especially when the slice of the pie allocated to the proposer is large.
    Keywords: Model construction and estimation, Allocation game, Beliefs elicitation and evaluation
    JEL: C51 C52 C72 D84
    Date: 2014–01–29

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