New Economics Papers
on Experimental Economics
Issue of 2014‒03‒30
eighteen papers chosen by

  1. To Win or Not to Lose: an Experiment on Communication Efforts By Olivier Body; Régine Kolinsky
  2. Strategic Communication: An Experimental Investigation By Katharina Eckartz; Christiane Ehses-Friedrich
  3. Effects of stress on economic decision-making: Evidence from laboratory experiments By Delaney, Liam; Fink, Gunther; Harmon, Colm
  4. On the Interpretation of Giving, Taking, and Destruction in Dictator Games and Joy-of-Destruction Games. By Le Zhang; Andreas Ortmann
  5. Happy-go-lucky. Positive emotions boost demand for lotto. By Zuzanna Halicka; Michał Krawczyk
  6. Asymmetrically Dominated Choice Problems, the Isolation Hypothesis and Random Incentive Mechanisms By Cox, James C.; Sadiraj, Vjollca; Schmidt, Ulrich
  7. Transaction Costs, the Opportunity Cost of Time and Inertia in Charitable Giving By Stephen Knowles; Maros Servatka
  8. Does Classroom Time Matter? A Randomized Field Experiment of Hybrid and Traditional Lecture Formats in Economics By Theodore J. Joyce; Sean Crockett; David A. Jaeger; Onur Altindag; Stephen D. O'Connell
  9. Gender differences and stereotypes in the beauty contest By María Cubel; Santiago Sanchez-Pages
  10. Cross Cultural Differences in Decisions from Experience: Evidence from Denmark, Israel and Taiwain By Sibilla Di Guida; Ido Erev; Davide Marchiori
  11. Concern for relative standing and deception By Galanis, Spyros; Vlassopoulos, Michael
  12. Facts and Figuring: An Experimental Investigation of Network Structure and Performance in Information and Solution Spaces By Jesse Shore; Ethan Bernstein; David Lazer
  13. Impact of Playworks on Play, Physical Activity, and Recess: Findings from a Randomized Controlled Trial. By Susanne James-Burdumy
  14. Should I Stay or Should I Go? Public Provision of a Private Good with an Exit Option By Neil Buckley; Katherine Cuff; Jeremiah Hurley; Stuart Mestelman; Stephanie Thomas; David Cameron
  15. Group size and decision rules in legislative bargaining By Vanberg, Christoph; Miller Moya, Luis Miguel
  16. The Causal Effects of Competition on Innovation: Experimental Evidence By Philippe Aghion; Stefan Bechtold; Lea Cassar; Holger Herz
  17. Payments Infrastructure and the Performance of Public Programs: Evidence from Biometric Smartcards in India By Karthik Muralidharan; Paul Niehaus; Sandip Sukhtankar
  18. Equilibrium Selection in Sequential Games with Imperfect Information By Jon X. Eguia; Aniol Llorente-Saguer; Rebecca Morton; Antonio Nicolò

  1. By: Olivier Body; Régine Kolinsky
    Keywords: communication; experiment; information acquisition; effort
    JEL: C91 D83
    Date: 2014–03
  2. By: Katharina Eckartz (Friedrich-Schiller-University Jena, International Max Planck Research School on Adapting Behavior in a Fundamentally Uncertain World); Christiane Ehses-Friedrich (Max Planck Institute of Economics, Jena, International Max Planck Research School on Adapting Behavior in a Fundamentally Uncertain World, and Paris School of Economics (University Paris I).)
    Abstract: In this paper we attempt to compare theoretically and experimentally three models of strategic information transmission. In particular we focus on the models by Crawford & Sobel (1982), Lai (2010) and Ehses-Friedrich (2011). These three models differ in the information that the receiver possesses and the sender's knowledge about these information. Lai, 2010 introduce a partially informed decision maker into Crawford & Sobel's model. Ehses-Friedrich (2011) makes the decision maker's knowledge public knowledge. The experiment replicates the results of earlier experimental studies (Dickhaut et al., 1995, Cai & Wang, 2006, Wang et al., 2010): on the one hand experts usually give a too truthful advice, they overcommunicate. On the other hand the decision makers rely too much on the received information. Moreover, communication as well as payoffs decrease with increasing preference differences. We find that when decision makers are privately informed the messages from the expert to the decision maker are less precise than in the baseline setting. In the public information treatment, the communication is less biased. In all treatments, however, the messages are more precise than theoretically predicted.
    Keywords: Experiment, Strategic Information Transmission, Cheap talk, Communication
    JEL: C92 C72 D82 D83
    Date: 2014–03–17
  3. By: Delaney, Liam; Fink, Gunther; Harmon, Colm
    Abstract: The ways in which preferences respond to the varying stress of economic environments is a key question for behavioral economics and public policy. We conducted a laboratory experiment to investigate the effects of stress on financial decision making among individuals aged 50 and older. Using the cold pressor task as a physiological stressor, and a series of intelligence tests as cognitive stressors, we find that stress increases subjective discounting rates, has no effect on the degree of risk-aversion, and substantially lowers the effort individuals make to learn about financial decisions .
    Keywords: learning; risk aversion; discounting; financial decisions; stress
    Date: 2014–03
  4. By: Le Zhang (University of New South Wales); Andreas Ortmann (University of New South Wales)
    Abstract: The literature on dictator [D] and joy-of-destruction [JoD] games demonstrates that people can be nice and nasty. We study, by way of an experiment with between-subjects and within-subjects features, to what extent behaviors are context dependent and consistent. We find that, for one-shot D and JoD games, our participants' niceness and nastiness depend on the choice set. Contradicting the observed altruism and nastiness, participants tend to be selfish but nonetheless make choices that increase social welfare when given the opportunity.
    Keywords: Dictator game, Joy-of-Destruction game, Money burning, Altruism, Nastiness, Efficiency considerations, Mach-IV test
    JEL: A13 C79 D03 D64
    Date: 2013–11
  5. By: Zuzanna Halicka (University of Warsaw); Michał Krawczyk (Faculty of Economic Sciences, University of Warsaw)
    Abstract: The objective of this work was to investigate whether situational emotions can influence consumers’ decision to purchase lottery tickets. We conducted a field experiment in which positive or negative emotions were induced immediately prior to such a decision in 685 subjects unaware of their participation in a study. Two methods of induction—gambling related and gambling unrelated—were used to verify the robustness of the results. We found that subjects in whom positive emotions were induced, in both gambling and non-gambling contexts, bought lottery tickets significantly more often than subjects with negative emotions or those in the control group.
    Keywords: decision making, lotteries, induced emotions, gambling-related cues, field experiment
    JEL: D81 L83
    Date: 2014
  6. By: Cox, James C.; Sadiraj, Vjollca; Schmidt, Ulrich
    Abstract: This paper presents an experimental study of the random incentive mechanisms which are a standard procedure in economic and psychological experiments. Random incentive mechanisms have several advantages but are incentive-compatible only if responses to the single tasks are independent. This is true if either the independence axiom of expected utility theory or the isolation hypothesis of prospect theory holds. We present a simple test of isolation in the context of choice under risk. In the baseline (one task) treatment, we observe risk behavior in a given decision problem. We show that by adding an asymmetrically dominated choice problem in a random incentive mechanism risk behavior can be manipulated systematically; this violates the isolation hypothesis. The random incentive mechanism thus does not elicit true preferences in our example.
    Keywords: random incentive mechanism, isolation, asymmetrically dominated alternatives
    JEL: C90 D80
    Date: 2014–03–20
  7. By: Stephen Knowles (Department of Economics, University of Otago, New Zealand); Maros Servatka (Department of Economics and Finance, University of Canterbury, New Zealand)
    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
  8. By: Theodore J. Joyce; Sean Crockett; David A. Jaeger; Onur Altindag; Stephen D. O'Connell
    Abstract: We test whether students in a hybrid format of introductory microeconomics, which met once per week, performed as well as students in a traditional lecture format of the same class, which met twice per week. We randomized 725 students at a large, urban public university into the two formats, and unlike past studies, had a very high participation rate of 96 percent. Two experienced professors taught one section of each format, and students in both formats had access to the same online materials. We find that students in the traditional format scored 2.3 percentage points more on a 100-point scale on the combined midterm and final. There were no differences between formats in non-cognitive effort (attendance, time spent with online materials) nor in withdrawal from the class. Comparing our experimental estimates of the effect of attendance with non-experimental estimates using only students in the traditional format, we find that the non-experimental were 2.5 times larger, suggesting that the large effects of attending lectures found in the previous literature are likely due to selection bias. Overall our results suggest that hybrid classes may offer a cost effective alternative to traditional lectures while having a small impact on student performance.
    JEL: I20 I23
    Date: 2014–03
  9. By: María Cubel (Universitat de Barcelona & IEB); Santiago Sanchez-Pages (Universitat de Barcelona)
    Abstract: Recent literature has emphasized that individuals display different depths of reasoning when playing games. In this paper, we explore gender differences in strategic sophistication and study whether these differences are endogenous. We report results from two different experiments employing the beauty contest. In the first, large study, we show that females react very strongly to incentives to the extent that gender differences disappear when a monetary prize is awarded. In the second study, we use a within subject design to analyze how depth of reasoning varies with gender priming and the gender composition of the set of players. We corroborate that females display higher levels of sophistication and even overtake males when incentives are provided and gender is primed. On the other hand, males who believe that females are better in the game display higher sophistication when playing against females.
    Keywords: Guessing game, strategic sophistication, gender, beliefs, stereotype threat
    JEL: C72 C91 D81 J16
    Date: 2014
  10. By: Sibilla Di Guida; Ido Erev; Davide Marchiori
    Abstract: This paper examines the effects of different cultural backgrounds on decisions from experience. In Experiment 1, participants from Denmark, Israel, and Taiwan faced each of six binary choice problems for 200 trials. The participants did not receive prior description of the payoff distributions, but obtained complete feedback after each choice. Comparison of choice behavior across cultural groups reveals similar overall choice rates, and similar indications of underweighting of rare events and of the payoff variability effect. In addition, subjects from Taiwan exhibited a stronger tendency to chase recent outcomes. That is, subjects from East Asia behaved “as if” they expected less change in the environment than subjects from West Asia and West Europe. Experiment 2 shows that an increase in the complexity of the choice tasks (i.e. adding slight variability to the safe option, and increasing the number of replicas for each option) does not break the similarity of choice rates across cultural groups, but reverses the observed chasing pattern: In Experiment 2, Israeli participants tended to chase recent outcomes more than did the Taiwanese. These results can be summarized with the assumption that the tendency to rely of small samples of past experiences (a sufficient condition for underweighting of rare events and the payoff variability effect) is robust to cultural differences, but the exact sampling process is culture- and framing-specific. An increase in the number of possible outcomes increases the probability of sampling the most recent trial in the West, but not in the East. Thus, behavior in the East appears less sensitive to task complexity.
    Keywords: cross cultural decision making; rare events; decisions from experience; clicking paradigm; recency effect
    Date: 2014–03
  11. By: Galanis, Spyros; Vlassopoulos, Michael
    Abstract: We report results from a sender-receiver cheap talk game, which explores whether an individual's decision to deceive is influenced by a concern for relative standing in a reference group. We show theoretically that positively biased senders, who think they are higher in the deception distribution than they actually are, will correct their beliefs and increase their cheating, when presented with information on the actual deception distribution. Hence, a predominantly positively biased group of senders will increase its average deception. Moreover, within a group, being more positively biased implies cheating less. The experimental data confirm both of these hypotheses Keywords; deception, lying, sender-receiver game, concern for rank
    Date: 2014–01–14
  12. By: Jesse Shore (Boston University - Department of Information Systems); Ethan Bernstein (Harvard Business School, Organizational Behavior Unit); David Lazer (Harvard University - Harvard Kennedy School (HKS))
    Abstract: Using data from a novel laboratory experiment on complex problem solving in which we varied the network structure of 16-person organizations, we investigate how an organization's network structure shapes performance in problem-solving tasks. Problem solving, we argue, involves both search for information and search for solutions. Our results show that the effect of network structure is opposite for these two important and complementary forms of search. Dense clustering encourages members of a network to generate more diverse information, but discourages them from generating diverse theories: in the language of March (1991), clustering promotes exploration in information space, but decreases exploration in solution space. Previous research, generally focusing on only one of those two spaces at a time, has produced inconsistent conclusions about the value of network clustering. By adopting an experimental platform on which information was measured separately from solutions, we were able to reconcile past contradictions and clarify the effects of network clustering on problem-solving performance. The finding both provides a sharper tool for structuring organizations for knowledge work and reveals the challenges inherent in manipulating network structure to enhance performance, as the communication structure that helps one antecedent of successful problem solving may harm the other.
    Keywords: networks, experiments, clustering, problem solving, exploration and exploitation, knowledge, information, communication, search
    Date: 2014–03
  13. By: Susanne James-Burdumy
    Keywords: Playworks, Physical Activity, Recess, RCT, Randomized Controlled Trial
    JEL: I
    Date: 2014–03–11
  14. By: Neil Buckley; Katherine Cuff; Jeremiah Hurley; Stuart Mestelman; Stephanie Thomas; David Cameron
    Abstract: In this paper, we adapt the standard political economy models of mixed financing of private goods to allow for an exit option in which individuals can choose to neither consume nor finance the publicly provided private good. Using a controlled laboratory experiment, we empirically investigate the predictions of this model when all individuals are allow to exit (universal-exit) and when only individuals with an income at or above a threshold income level are allowed to exit (conditional-exit). Even though the incentives for high-income individuals to exit are identical under both exit schemes, high-income individuals are less likely to exit when the exit option is universal. Sensitivity treatments suggests that a number of factors may be at play in explaining this result, including learning effects and a type of endowment effect, but that other-regarding preferences do not appear to be an important factor.
    Keywords: publicly provided private good, mixed financing, voting experiment
    JEL: H42 H44 C91 D7
    Date: 2014–03
  15. By: Vanberg, Christoph; Miller Moya, Luis Miguel
    Abstract: We conduct experiments to investigate the effects of different majority requirements on bargaining outcomes in small and large groups. In particular, we use a Baron-Ferejohn protocol and investigate the effects of decision rules on delay (number of bargaining rounds needed to reach agreement) and measures of "fairness" (inclusiveness of coalitions, equality of the distribution within a coalition). We find that larger groups and unanimity rule are associated with significantly larger decision making costs in the sense that first round proposals more often fail, leading to more costly delay. The higher rate of failure under unanimity rule and in large groups is a combination of three facts: (1) in these conditions, a larger number of individuals must agree, (2) an important fraction of individuals reject offers below the equal share, and (3) proposers demand more (relative to the equal share) in large groups.
    Keywords: majority rule, unanimity rule, legislative bargaining
    JEL: C78 D71 D72 C92
  16. By: Philippe Aghion; Stefan Bechtold; Lea Cassar; Holger Herz
    Abstract: In this paper, we design two laboratory experiments to analyze the causal effects of competition on step-by-step innovation. Innovations result from costly R&D investments and move technology up one step. Competition is inversely measured by the ex post rents for firms that operate at the same technological level, i.e. for neck-and-neck firms. First, we find that increased competition leads to a significant increase in R&D investments by neck-and-neck firms. Second, increased competition decreases R&D investments by firms that are lagging behind, in particular if the time horizon is short. Third, we find that increased competition affects industry composition by reducing the fraction of sectors where firms are neck-and-neck. All these results are consistent with the predictions of step-by-step innovation models.
    JEL: C91 L10 O31
    Date: 2014–03
  17. By: Karthik Muralidharan; Paul Niehaus; Sandip Sukhtankar
    Abstract: Anti-poverty programs in developing countries are often difficult to implement as intended; one common challenge is governments' limited capacity to deliver payments securely to targeted beneficiaries. We evaluate the impact of biometrically-authenticated payments infrastructure on public employment and pension programs in the Indian state of Andhra Pradesh, using a large-scale experiment that randomized the rollout of the new system over 158 sub-districts and 19 million people. We find that, while far from perfectly implemented, the new system delivered a faster, more predictable, and less corrupt payments process without adversely affecting program access. Distributions of key outcomes in treated areas first-order stochastically dominated those in control areas, and beneficiaries overwhelmingly favored the new payments system. The investment was cost-effective, as time savings to beneficiaries alone were equal to the cost of the intervention (in the case of the employment scheme). Overall the results suggest that investing in secure authentication and payments infrastructure can significantly add to "state capacity" to effectively implement social programs in developing countries.
    JEL: D73 H53 I38 O30 O31
    Date: 2014–03
  18. By: Jon X. Eguia (Department of Economics, Univ. of Bristol. and Department of Politics, New York Univ.); Aniol Llorente-Saguer (School of Economics and Finance, Queen Mary, Univ. of London); Rebecca Morton (Department of Politics, NYU-NYC and NYU-Abu Dhabi.); Antonio Nicolò (School of Social Sciences, Univ. of Manchester)
    Abstract: Games with imperfect information often feature multiple equilibria, which depend on beliefs off the equilibrium path. Standard selection criteria such as passive beliefs, symmetric beliefs or wary beliefs rest on ad hoc restrictions on beliefs. We propose a new selection criterion that imposes no restrictions on beliefs: we select the action profi?le that is supported in equilibrium by the largest set of beliefs. We conduct experiments to test the predictive power of the existing and our novel selection criteria in two applications: a game of vertical multi-lateral contracting, and a game of electoral competition. We fi?nd that our selection criterion outperforms the other selection criteria.
    Keywords: imperfect information, equilibrium selection, passive beliefs, symmetric beliefs, vertical contract- ing, multiple equilibria
    JEL: H41 C72 D86 D72
    Date: 2014–03

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