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on Experimental Economics |
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Issue of 2014‒02‒15
fifteen papers chosen by |
| By: | Joy Buchanan (Interdisciplinary Center for Economic Science and Department of Economics, George Mason University); Bart Wilson (Economic Science Institute, Chapman University) |
| Abstract: | We conduct a laboratory experiment to explore whether the protection of intellectual property (IP) incentivizes people to create non-rivalrous knowledge goods, foregoing the production of other rivalrous goods. In the contrasting treatment with no IP protection, participants are free to resell and remake non-rivalrous knowledge goods originally created by others. We find that creators reap substantial profits when IP is protected and that rampant pirating is common when there is no IP protection, but IP protection in and of itself is neither necessary nor sufficient for generating wealth from the discovery of knowledge goods. Rather, individual entrepreneurship is the key. Length: 36 |
| Keywords: | intellectual property, experimental economics |
| JEL: | C92 D89 K39 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:gms:wpaper:1044&r=exp |
| By: | Stefano Caria; Paolo Falco |
| Abstract: | We conduct a field experiment to investigate employers’ trust in workers. A sample of real entrepreneurs and workers from urban Ghana are respectively assigned to the roles of employers and employees. Employers have the option to hire (trust) an employee, who can in turn choose whether to exert effort (trustworthiness) in a real-effort task. By comparing employers’ expectations to workers’ revealed trustworthiness, we are able to detect potential misperceptions leading to sub-optimal hiring. We further devise two randomized treatments to test for the existence of expectation bias against specific worker categories and estimate the elasticity of employers’ beliefs with respect to new information. We find that employers significantly underestimate workers’ trustworthiness and this reduces their profit. Employees are aware of employers’ sub-optimal trust. Expectations are largely inelastic with respect to news and negative signals have a stronger (downward) effect than positive ones. Our results suggest that raising employers’ expectations would have a strong impact on hiring. |
| Keywords: | trust, trustworthiness, expectations, effort, hiring, microenterprise, learning, discrimination, experiment, African labour markets |
| JEL: | J23 J71 O15 C9 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2014-07&r=exp |
| By: | Kohei Nitta (Department of Economics, University of Hawaii at Manoa) |
| Abstract: | Public goods such as national defense or climate change mitigation affect people in multiple locations. We report on a linear public goods experiment, where subjects can contribute not only to a local public good but also to a global public good. We study the effects of endowment heterogeneity by comparing a setting where two localities have the same income (homogeneous treatment) with a setting where the localities differ in income (heterogeneous treatment). We find that: 1) social efficiency is higher in the homogeneous treatment than in the heterogeneous treatment; 2) the efficiency difference comes from two aspects: the shift from global to local public good contribution and lower total public goods provision in the heterogeneous treatment; and 3) inequality aversion and reciprocity play a role in contribution behavior in the heterogeneous treatment; however these social preferences do not fully counter the efficiency loss caused by the endowment heterogeneity. Our findings suggest that policy interventions may be necessary to increase social efficiency with heterogeneous wealth and multiple public goods. |
| Keywords: | Voluntary contribution mechanism; Multiple public goods; Income heterogeneity; Inequality; Reciprocity |
| JEL: | C92 D63 D64 H41 |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201403&r=exp |
| By: | Katarína Danková; Maroš Servátka (University of Canterbury) |
| Abstract: | In the vast majority of experiments documenting the existence of reciprocity subjects are endowed with windfall funds. In some situations such endowments might create a so-called “house money effect”. We identify two reasons why the source of endowment might matter for negative reciprocity: (1) Using earned – as opposed to windfall money – might increase the costs of negative reciprocity due to this money being in a different mental account and thus lead to less retaliation. (2) Decreasing a decision-maker’s endowment consisting of earned money might be considered a stronger violation of property rights and lead to more retaliation. We test our conjectures in an experiment and find that subjects retaliate more in both cases. |
| Keywords: | Real Effort; Experiment; House money; Reciprocity; Taking Game |
| JEL: | C71 C91 D03 D64 |
| Date: | 2014–02–07 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:14/06&r=exp |
| By: | Stephen Knowles; Maroš Servátka (University of Canterbury) |
| Abstract: | We conduct a laboratory experiment to analyze the effect transactions costs and inertia have on charitable giving. We conjecture that transaction costs will have a greater effect on donations if the solicitation is received when the opportunity cost of time is high. Inertia could become a factor if people intend to give, but postpone making the payment until they have more time, and having postponed making the donation once, keep doing so. We find evidence of a transaction cost effect, with the size of this effect depending on the opportunity cost of time, but no statistically significant inertia effect. |
| Keywords: | Charitable giving; dictator game; transaction costs; opportunity cost of time; inertia |
| JEL: | C91 D64 |
| Date: | 2014–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:cbt:econwp:14/05&r=exp |
| By: | Zhixin Dai (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Robin M. Hogarth (Department of Economics and Business, Universitat Pompeu Fabra and Barcelona Graduate School of Economics, Ramon Trias Fargas, 25–27, 08005 Barcelona, Spain); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France) |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1403&r=exp |
| By: | Adam Zylbersztejn (Department of Economics, Vienna University of Economics and Business) |
| Abstract: | Several experimental studies show that ex post communication mitigates opportunistic behavior in social dilemmas. The source of this effect, especially in a repeated interaction, is nonetheless still obscure. This study provides a novel empirical testbed for two channels by which ex post communication may affect behavior in a repeated public goods game. One is related to strategic signaling. The other involves emotions induced by others' expressed disapproval. The presence of ex post communication strongly fosters pro-social behavior. The data do not support the signaling hypothesis, favouring the emotion-based explanation instead. |
| Keywords: | Public goods game, Voluntary Contribution Mechanism, Ex post communication |
| JEL: | C72 D83 |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp161&r=exp |
| By: | Rud, I.; Van Klaveren, C.; Groot, W., and Maassen van den Brink, H. |
| Keywords: | Restorative Justice, Education, Juvenile Crime, Field Experiment |
| JEL: | I2 K4 C93 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:tir:wpaper:49&r=exp |
| By: | Dorsett, Richard (National Institute of Economic and Social Research); Oswald, Andrew J (Department of Economics, University of Warwick) |
| Abstract: | Many politicians believe they can intervene in the economy to improve people’s lives. But can they? In a social experiment carried out in the United Kingdom, extensive in-work support was randomly assigned among 16,000 disadvantaged people. We follow a sub-sample of 3,500 single parents for 5 ensuing years. The results reveal a remarkable, and troubling, finding. Long after eligibility had ceased, the treated individuals had substantially lower psychological wellbeing, worried more about money, and were increasingly prone to debt. Thus helping people apparently hurt them. We discuss a behavioral framework consistent with our findings and reflect on implications for policy Key words: JEL classification: I31 ; D03 ; D60 ; H11 ; J38 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1038&r=exp |
| By: | Breaban, A.; Noussair, C.N. (Tilburg University, Center for Economic Research) |
| Abstract: | Abstract: We report results from an asset market experiment, in which we investigate how the time path of the fundamental value trajectory affects the level of adherence to fundamentals. In contrast to previous experiments with long-lived assets, there is a phase in which fundamental values are constant before the onset of a trend. The trend is either increasing or decreasing, depending on the treatment. We compare the level of mispricing between the decreasing and increasing fundamental value trajectories. Before the market begins, risk aversion, loss aversion, and cognitive reflection protocols are administered to traders. We find evidence for closer adherence to fundamental values when the trajectory follows a decreasing, than when it has an increasing, trend. Greater average risk aversion on the part of traders in the market predicts lower market prices. The greater the level of loss aversion of the trader cohort, the lower the quantity traded. The greater the average cognitive reflection test score, the smaller the differences between market prices and fundamental values. The variation between groups in risk aversion, loss aversion, and CRT score, explains an additional 44% and 18% of the cohort-level variation in price level and mispricing, respectively, compared to a model including only treatment, experience level, and subject pool. |
| Keywords: | Bubble;Experiment;Risk Aversion;Loss Aversion;Cognitive Reflection |
| JEL: | C9 G12 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:dgr:kubcen:2014010&r=exp |
| By: | Mark Dean; Anja Sautmann |
| Abstract: | Incentivized experiments are commonly used to estimate marginal rate of intertemporal substitution (MRS) in the lab and in the ?eld, and to make inferences about subject’s time preference. This paper considers the implications of an integrated model of behavior in which individuals are subject to ?nancial shocks and credit constraints and take those into account when making experimental choices. The model shows that measured MRS depends on the individual’s e?ective interest rate and her marginal utility of current and future consumption. Experimental responses should therefore be correlated with other variables that describe the subject’s ?nancial situation, like savings, income and consumption shocks. We test the model with a panel data set from Mali and ?nd evidence for such e?ects. We discuss how our model can be combined with repeated time preference measures to identify time preferences and other household characteristics - including credit constraints and the importance of di?erent types of ?nancial shocks. |
| Keywords: | # |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:bro:econwp:2014-1&r=exp |
| By: | Shengle Lin (Wenzhou University and San Francisco State University); Glenn Pfeiffer (Chapman University); David Porter (Chapman University) |
| Abstract: | We examine the effect on asset mispricing of different accounting methods in an experimental asset market characterized by bubbles and crashes. In particular, we study three alternative asset value reporting treatments: (1) Fair Value (also known as Mark-to-Market – M2M), (2) Historical Cost (HC) and (3) Marked to Fundamental Value (M2F). In addition, each of these treatments is replicated in two different financial leverage conditions. In the first condition (No Loan) traders must purchase assets from their available cash balances without the option of borrowing. In the second condition, (Loan), traders are given the option of taking out loans based on their balance sheet to finance asset purchases. In the No Loan condition, we find that reporting accounting values alone to subjects in a balance sheet format does not have a significant effect on mispricing for any of our alternative accounting method treatments. In the Loan conditions, however, the M2F and M2M accounting methods exacerbate asset mispricing, yet the two differ in leverage dynamics. M2F markets are completely immune to defaults, while M2M markets experience the most frequent as well as most severe defaults. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:14-03&r=exp |
| By: | Christine Exley (Stanford University) |
| Abstract: | In public settings, the impact of monetary incentives on prosocial behavior is empirically mixed. Existing theory explains these finding by noting that incentives can introduce public signals that may or may not crowd out motivation to volunteer. The strength of these public signals are normally unobserved by the researcher, so it remains unclear as to when significant crowding out is likely to occur and render incentives ineffective. I overcome this ambiguity by examining individuals for whom the signal strength is likely zero - those with strong public reputations. In a laboratory experiment, I show that the crowd out in response to public incentives is much less likely among those with public reputations as opposed to private reputations, particularly for women. |
| Date: | 2013–01 |
| URL: | http://d.repec.org/n?u=RePEc:sip:dpaper:12-022&r=exp |
| By: | Guillén, Pablo; Hakimov, Rustamdjan |
| Abstract: | We test the effect of the amount of information on the strategies played by others in the theoretically strategy-proof Top Trading Cycles (TTC) mechanism. We find that providing limited information on the strategies played by others has a negative and significant effect in truth-telling rates. Subjects report truthfully more often when either full information or no information on the strategies played by others is available. Our results have potentially important implications for the design of markets based on strategy-proof matching algorithms. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:syd:wpaper:2123/9951&r=exp |
| By: | Kalyn T. Coatney; Dale J. Menkhaus; Sherrill Shaffer |
| Abstract: | As bidders reach capacity throughout a sequential common value auction, theory predicts they will account for the option value of purchasing later units against fewer rivals. Mergers, joint purchasing arrangements, or a common bidding agent may result in a capacity advantaged bidder. Using laboratory experiments, we find that bidders account for the option value of winning later units when capacity constraints are significantly binding. Similar to the predictions of value advantaged bidder theory, the capacity advantaged bidder bids more aggressively, purchasing more units at lower prices than disadvantaged rivals. However, the creation of a capacity advantaged bidder transfers surplus to all bidders primarily due to the reduction in the number of bidders. |
| Date: | 2014–02 |
| URL: | http://d.repec.org/n?u=RePEc:een:camaaa:2014-17&r=exp |