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on Experimental Economics |
| By: | John A. List; Daan Van Soest; Jan Stoop; Haiwen Zhou |
| Abstract: | Both private and public organizations constantly grapple with incentive schemes to induce maximum effort from agents. We begin with a theoretical exploration of optimal contest design, focusing on the number of competitors. Our theory reveals a critical link between the distribution of luck and the number of contestants. We find that if there is considerable (little) mass on good draws, equilibrium effort is an increasing (decreasing) function of the number of contestants. Our first test of the theory implements a laboratory experiment, where important features of the theory can be exogenously imposed. We complement our lab experiment with a field experiment, where we rely on biological models complemented by economic models to inform us of the relevant theoretical predictions. In both cases we find that the theory has a fair amount of explanatory power, allowing a deeper understanding of how to effectively design tournaments. From a methodological perspective, our study showcases the benefits of combining data from both lab and field experiments to deepen our understanding of the economic science. |
| JEL: | C9 C91 C93 H41 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20008&r=exp |
| By: | Oechssler, Jörg; Roomets, Alex |
| Abstract: | We implement an experiment to elicit subjects’ ambiguity attitudes in the spirit of Ellsberg’s three-color urn. The procedure includes three design elements that (together) have not been featured in similar experiments: Strict ambiguity preferences, a single decision, and a mechanical randomization device with an unknown distribution (to both subjects and experimenters). We use this device in order to eliminate possible ‘strategic’ ambiguity related to subjects’ beliefs about the experimenters’ motivations. In addition, we survey 40 experimental studies on Ellsberg’s two- and three-color problems, and find that, on average, slightly more than half of subjects are classified as ambiguity averse. Our results, with our new design, fall on the low end of the range of results in the surveyed studies, and are comparable to a control test where “strategic” ambiguity was induced. |
| Keywords: | ambiguity aversion; uncertainty; experiment; Ellsberg. |
| Date: | 2014–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0555&r=exp |
| By: | Giacomo Degli Antoni (University of Parma, Department of Law) |
| Abstract: | Trust in strangers is key for economic development. Social capital theory posits that participation in associations is essential to propagate trust in society, because membership instils trust both towards other members and generalised others. We provide an experimental test for this thesis. We measure members' trust and trustworthiness when interacting with fellow members or with people from the general population, who are not association members. We find that members trust and reward trust more than non- members, and do not discriminate between members and the general population. However, we find no correlation between the intensity of associational participation and increased pro-sociality.Length: 17 |
| Keywords: | trust; voluntary associations; ingroup favouritism; field experiment |
| JEL: | C93 D71 D69 D03 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:ent:wpaper:wp51&r=exp |
| By: | Gaudeul, A.; Crosetto, P.; Riener, G. |
| Abstract: | We explore in an experiment what leads to the breakdown of partnerships. Subjects are assigned a partner and participate in a repeated public good game with stochastic outcomes. They can choose each period between staying in the public project or working on their own. There is excessive exit as subjects overestimate the likelihood their partner will leave. High barriers to exit thus improve welfare. We observe that exit is driven by failure within the common project but also by pay-off comparisons across options and beliefs about being exploited. Those considerations increasingly matter as we lower exit costs across treatments. |
| Keywords: | BREAKUP;COLLABORATION;COOPERATION;EXIT;IMPERFECT PUBLIC MONITORING;MORAL HAZARD;PARTNERSHIP;PUNISHMENT;PUBLIC GOOD;REPEATED GAME;SOCIAL RISK;TEAM |
| JEL: | C23 C92 H41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gbl:wpaper:2014-02&r=exp |
| By: | Sebastian J. Goerg (Department of Economics, Florida State University); David B. Johnson (Department of Economics, University of Calgary); Jonathan D. Rogers (New York University, Abu Dhabi) |
| Abstract: | Traditionally, allocations by dictators in Dictator Games (gifts) have been explained by aspects of altruism, reciprocity, and fairness. However, this assumes the gift to be desirable to the dictators and responder. Giving may also be driven by the source of the endowment. We examine this by using three sources to generate the endowment in a Dictator Game:(1) undergraduate students, (2) Amazon Mechanical Turk workers, and (3) users of a racially/ethnically charged web forum. This endowment is provided to subjects in a traditional laboratory experiment. We find dictator similarity with the source of the endowment influences their allocation decision; the more similar subjects feel to the source the more of the endowment they keep. Our results suggest that decisions can be strongly influenced by the provider of income shocks. |
| Keywords: | Experiment; Inequality; Approval |
| JEL: | C78 C91 C99 D31 D64 D74 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:fsu:wpaper:wp2014_03_01&r=exp |
| By: | Kettner , Sara Elisa; Ceccato , Smarandita |
| Abstract: | We show that social context matters in gender-paired dictator decisions. Our experiment investigates the influence of gender-pairing and framing on monetary transfers in a 2x2x2 design where sender gender, recipient gender, and frame, i.e. give or take, are varied. We are the first to combine all three variables and uncover that giving information about the gender of the recipient accommodates framing effects. If each of the three manipulated variables were to be analyzed independently, our data would confirm previous findings where females transfer more than males and framing has no effect (Eckel and Grossman, 1998; Dreber et al., 2013). However, we investigate the manipulated variables in interaction and find that framing matters when information about recipient gender is salient. For both genders, transfers in opposite-sex pairs are always higher than in same-sex pairs, but signicantly higher in the take frame. We thus suggest that the gender composition of the sample, gender-pairing, or beliefs about the counterpart's gender should be controlled for in experiments testing gender differences in social interaction. |
| Keywords: | Framing; Gender Differences; Gender-Pairing; Dictator Game; Experiment |
| Date: | 2014–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0557&r=exp |
| By: | Buckert, Magdalena; Oechssler, Jörg; Schwieren, Christiane |
| Abstract: | Imitating the best strategy from the previous period has been shown to be an important heuristic, in particular in relatively complex environments. In this experiment we test whether subjects are more likely to use imitation if they are under stress. Subjects play a repeated Cournot oligopoly. Treatments are time pressure within the task and distractions through a second task (a Stroop-task) that has to be performed as well and influences payment. We measure stress levels through salivary cortisol measurements and through measuring the heart rate. Our main findings are that time pressure and distraction can indeed raise physiological stress levels of subjects within our task. More importantly from an economic perspective, we can also observe a corresponding behavioral change that is indicative of imitation. |
| Keywords: | stress; cortisol; heart rate; imitation; experiment. |
| Date: | 2014–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0556&r=exp |
| By: | David Hugh-Jones; David Reinstein |
| Abstract: | In public goods environments, the threat to punish non-contributors may increase contributions. However, this threat may make players' contributions less informative about their true social preferences. This lack of information may lead to lower contributions after the threat disappears, as we show in a two stage model with selfish and conditionally cooperatives types. Under specified conditions welfare may be improved by committing not to punish or exclude. Our laboratory evidence supports this. Contributions under the threat of targeted punishment were less informative of subjects' later choices than contributions made anonymously. Subjects also realised that these were less informative, and their incentivized predictions reflected this understanding. We find evidence of conditional cooperation driven by beliefs over other's contributions. Overall, our anonymous treatment led to lower first-stage contributions but significantly higher second-stage contributions than our revealed treatment. Our model and evidence may help explain why anonymous contributions are often encouraged in the real world. |
| Date: | 2014–03–01 |
| URL: | http://d.repec.org/n?u=RePEc:esx:essedp:750&r=exp |
| By: | Ward, Patrick S.; Singh, Vartika |
| Abstract: | Advances in agricultural development have largely been a direct result of increased usage of new technologies. Among other important factors, farmers’ perceptions of risks associated with the new technology as well as their ability or willingness to take risks greatly influences their adoption decisions. In this paper we conduct a series of field experiments in rural India in order to measure preferences related to risk, potential loss, and ambiguity. Disaggregating by gender, we find that on average women are significantly more risk averse and loss averse than men, though the higher average risk aversion arises due to a greater share of women who are extremely risk averse. |
| Keywords: | Technology adoption, rural population, Agricultural technology, uncertainty, propect theory, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:fpr:ifprid:1324&r=exp |
| By: | Michael Hallsworth; John A. List; Robert D. Metcalfe; Ivo Vlaev |
| Abstract: | Tax collection problems date back to the earliest recorded history of mankind. This paper begins with a simple theoretical construct of paying (rather than declaring) taxes, which we argue has been an overlooked aspect of tax compliance. This construct is then tested in two large natural field experiments. Using administrative data from more than 200,000 individuals in the UK, we show that including social norms and public goods messages in standard tax payment reminder letters considerably enhances tax compliance. The field experiments increased taxes collected by the Government in the sample period and were cost-free to implement, demonstrating the potential importance of such interventions in increasing tax compliance. |
| JEL: | C93 H2 H26 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20007&r=exp |
| By: | Schnedler, Wendelin; Vanberg, Christoph |
| Abstract: | Anecdotal, empirical, and experimental evidence suggests that offering extrinsic rewards for certain activities can reduce people's willingness to engage in those activities voluntarily. We propose a simple rationale for this 'crowding out' phenomenon, using standard economic arguments. The central idea is that the potential to earn rewards in return for an activity may create incentives to play 'hard to get' in an effort to increase those rewards. We discuss two specic contexts in which such incentives arise. In the first, refraining from the activity causes others to attach higher value to it because it becomes scarce. In the second, restraint serves to conceal the actor's intrinsic motivation. In both cases, not engaging in the activity causes others to offer larger rewards. Our theory yields the testable prediction that such effects are likely to occur when a motivated actor enjoys a sufficient degree of 'market power.' |
| Keywords: | intrinsic motivation; crowding out; behavioral economics; market power; hidden information |
| Date: | 2014–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0559&r=exp |
| By: | Andrew Dillon; Jed Friedman; Pieter Serneels |
| Abstract: | Agricultural and other physically demanding sectors are important sources of growth in developing countries but prevalent diseases such as malaria adversely impact the productivity, labor supply, and occupational choice of workers in these sectors by reducing physical capacity. This study identifies the impact of malaria on worker earnings, labor supply, and daily productivity by randomizing the temporal order at which piece-rate workers at a large sugarcane plantation in Nigeria are offered malaria testing and treatment. The results indicate a significant and substantial intent to treat effect of the intervention – the offer of a workplace based malaria testing and treatment program increases worker earnings by approximately 10% over the weeks following the mobile clinic visit. The study further investigates the effect of health information by contrasting program effects by workers revealed health status. For workers who test positive for malaria, the treatment of illness increases labor supply, leading to higher earnings. For workers who test negative, and especially for those workers most likely to be surprised by the healthy diagnosis, the health information also leads to increased earnings via increased productivity. Possible mechanisms for this response include selection into higher return occupations as a result of changes in the perceived cost of effort. A model of the worker labor decision that includes health perceptions in the decision to supply effort suggests that, in endemic settings with poor quality health services, inaccurate health perceptions may lead workers to misallocate labor thus resulting in sub-optimal production and occupational choice. The results underline the importance of medical treatment but also of access to improved information about one’s health status, as the absence of either may lead workers to deliver lower than optimal effort levels in lower return occupations. |
| Keywords: | malaria, labor supply, labor productivity, randomized experiment |
| JEL: | I12 J22 J24 O12 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:csa:wpaper:2014-13&r=exp |
| By: | Daniel Hellersteina (USDA Economic Research Service); Nathaniel Higginsa (USDA Economic Research Service); Michael J. Roberts (Department of Economics, University of Hawaii at Manoa & Sea Grant) |
| Abstract: | We study multiple-unit asymmetric procurement auctions wherein sellers from two classes draw costs from dierent distributions. When sellers are asymmetric, a cost-minimizing buyer discriminates among classes of sellers to enhance competition [1]. Establishing a quota|a limit on the number of oers that can be accepted from any one class|discriminates simply and eectively. The quota increases demand scarcity from the perspective of low- cost sellers, which causes them to lower their oers. To solve for approximate equilibrium strategies of asymmetric auctions with and without a quota, we develop a new method that is similar but distinctly dierent from the constrained strategic equilibrium (CSE) approach [2]. The new method nds the constrained strategies that minimize the expected gain from a randomly chosen seller unilaterally deviating from the constrained strategy. We nd quota can enhance competition and lower total procurement cost. We subject the same auctions to laboratory testing and nd savings from quota in excess of that predicted by the approximate equilibrium strategies. This study is rst to combine theory and experimental evidence of auctions with quotas, though similar mechanisms are widely used in practice. Because the mechanism is widely used to promote social goals and can also lead to better outcomes for the buyer, our ndings have both positive and normative implications. One potentially interesting application of quota auctions would be for large-scale procurement of ecosystem services like carbon sequestration. |
| Keywords: | asymmetric auction, optimal auction, experimental auction, multi-unit auction |
| JEL: | D44 C63 C91 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:hai:wpaper:201409&r=exp |
| By: | Donald J. Brown (Dept. of Economics, Yale University); Oliver Bunn (Dept. of Economics, Yale University); Caterina Calsamiglia; Donald J. Brown |
| Abstract: | This paper is an exposition of an experiment on revealed preferences, where we posit a novel discrete binary choice model. To estimate this model, we use general estimating equations or GEE. This is a methodology originating in biostatistics for estimating regression models with correlated data. In this paper, we focus on the motivation for our approach, the logic and intuition underlying our analysis and a summary of our findings. The missing technical details are in the working paper by Bunn et al. (2013). The experimental data is available from the corresponding author: donald.brown@yale.edu. The recruiting poster and informed consent form are attached as appendices. |
| Keywords: | Counterfactual outcomes, Odds ratios, Alternating logistic regression |
| JEL: | C23 C35 C91 D03 |
| Date: | 2013–03 |
| URL: | http://d.repec.org/n?u=RePEc:cwl:cwldpp:1890r&r=exp |
| By: | Miller , Luis; Vanberg, Christoph |
| 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 |
| Date: | 2014–03–21 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0558&r=exp |
| By: | Ambrosino, Angela |
| Abstract: | The paper investigates two different approaches to the analysis of institutions using game theory and discusses their methodological and theoretical implications for further research. Starting from von Neumann and Morgenstern’s theory, we investigate how game theory has been applied to the analysis of institutions, these being considered, as in Hayek (1967, 1988a) as the unplanned outcomes of self-interested individual behavior. We focus on Schotter’s (1981) and Schelling’s (1960) alternative approaches. The different ways in which these authors use von Neumann and Morgenstern’s concepts of coalition and indeterminacy of solutions play an important role in explaining the spontaneous emergence of institutions from interaction. We argue that this issue is also of importance in explaining how Schotter and Schelling’s theories fit with the main features of Hayek's theory of institutions. |
| Keywords: | Institutions, Game Theory, Cognition, Hayek, Schotter, Schelling |
| JEL: | B40 B31 B52 B20 |
| Date: | 2009 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:42752&r=exp |
| By: | Ermanno Tortia (University of Trento, Department of Economics and Management); Martha Knox Haly (University of Sydney, Business School); Anthony Jensen (University of Sydney, Business School) |
| Abstract: | The current paper is a comparative analysis of employee participation in organisational governance in Italy and Australia. Cultural values determine the expression of institutional configurations, and to this end, we have adopted Hall and Soskice's Varieties of Capitalism and the Theory of the Firm as informing theoretical frameworks for our comparative study. Hall and Soskice represent Italy as a hybrid economy, and Australia as a liberal market lead economy. The main theoretical contribution of our paper is twofold. First, we hypothesize that the Australian Liberal Market Economic Configuration offers fewer opportunities for employee participation in organisational governance. Second, we critique mainstream Theory of the Firm on the ground that it is inadequate in explaining the phenomenon of employee participation across both economic configurations. We tested our hypotheses on some crucial institutional dimensions: (i) the role of the industrial relations system; (ii) the nature of corporate law; (iii) and the relative diffusion of different organisational forms with participative vis à vis exclusionary governance (although we acknowledge that participatory organisational forms are rare in both Italy and Australia) . We find support for differential facilitation of employee participation across Australian LME and Italian Hybrid economies. |
| Keywords: | worker cooperatives; worker control; third sector; neo liberal firm; industrial relations; labour law; corporate law; Australia; Italy |
| URL: | http://d.repec.org/n?u=RePEc:ent:wpaper:wp52&r=exp |