New Economics Papers
on Experimental Economics
Issue of 2014‒05‒24
thirty-one papers chosen by

  1. Beware of Popular Kids Bearing Gifts: A Framed Field Experiment By Chen, Jingnan; Houser, Daniel; Montinari, Natalia; Piovesan, Marco
  2. Preferences and beliefs in a sequential social dilemma: A within-subjects analysis By Blanco, Mariana; Engelmann, Dirk; Koch, Alexander K.; Normann, Hans-Theo
  3. The Behavioralist as Nutritionist: Leveraging Behavioral Economics To Improve Child Food Choice and Consumption By John A. List; Anya Savikhin Samek
  4. Peers at work: From the field to the lab By van Veldhuizen, Roel; Oosterbeek, Hessel; Sonnemans, Joep
  5. When Pay Increases are Not Enough: The Economic Value of Wage Delegation in the Field By Vanessa Mertins; Sabrina Jeworrek
  6. Trading Participation Rights to the “Red Hat Puzzle”. An Experiment By Lawrence C. Y. Choo
  7. Experience in Public Goods Experiments By Conte, Anna; Levati, Vittoria; Montinari, Natalia
  8. Overbidding and overspreading in rent-seeking experiments: Cost structure and prize allocation rules By Subhasish M. Chowdhury; Roman M. Sheremeta; Theodore L. Turocy
  9. Small Victories: Creating Intrinsic Motivation in Savings and Debt Reduction By Alexander L. Brown; Joanna N. Lahey
  10. Elicitation formats and the WTA/WTP gap: A study of climate neutral foods By Andreas C. Drichoutis; Jayson L. Lusk; Valentina Pappa
  11. Can Variation in Subgroups' Average Treatment Effects Explain Treatment Effect Heterogeneity? Evidence from a Social Experiment By Marianne P. Bitler; Jonah B. Gelbach; Hilary W. Hoynes
  12. A Hybrid Game with Conditional and Unconditional Veto Power By Güth, Werner; Levati, Vittoria; Montinari, Natalia; Nardi, Chiara
  13. The Future in Mind: Aspirations and Forward-Looking Behaviour in Rural Ethiopia By Tanguy Bernard; Stefan Dercon; Kate Orkin; Alemayehu Seyoum Taffesse
  14. Do Consumers Pay More Using Debit Cards than Cash? An Experiment By Runnemark, Emma; Hedman, Jonas; Xiao, Xiao
  15. Cognitive Dissonance, Confirmatory Bias and Inadequate Information Processing: Evidence from Experimental Auctions By Cao, Ying; Just, David R.; Wansink, Brian
  16. Estimating the impact of microcredit on those who take it up: Evidence from a randomized experiment in Morocco By Bruno CREPON; Florencia DEVOTO; Esther DUFLO; William PARIENTE
  17. Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension By Eric Schniter; Roman M. Sheremeta
  18. Unpacking the determinants of life satisfaction: A survey experiment By Corazzini, Luca; Bertoni, Marco; Angelini, Viola
  19. Endophilia or Exophobia: Beyond Discrimination By Feld, Jan; Salamanca, Nicolás; Hamermesh, Daniel S.
  20. Does the heterogeneity of project implementers affect the program participation of beneficiaries? : Evidence from rural Cambodia By Ayako Wakano; Hiroyuki Yamada; Daichi Shimamoto
  21. Organizational coordination and costly communication with boundedly rational agents By Dietrichson, Jens; Jochem, Torsten
  22. Flipping a coin: Theory and evidence By Dwenger, Nadja; Kübler, Dorothea; Weizsäcker, Georg
  23. Loss and Other-Regarding Preferences: Evidence From Dictator Game By Armenak Antinyan
  24. Boys' Cognitive Skill Formation and Physical Growth: Long-term Experimental Evidence on Critical Ages for Early Childhood Interventions By Tania Barham; Karen Macours; John A. Maluccio
  25. Should conservation contracts include incentive payments and also be put up for tender? By Schilizzi, Steven; Latacz-Lohmann, Uwe
  26. An experimental approach to assessment of trading and allocation mechanisms for nutrient trading By Marsh, Dan; Tucker, Steve; Doole, Graeme
  27. Do Social Networks Improve the Effectiveness of Incentive-Based Health Programs By Schroeter, Christiane; Richards, Tim; Hamilton, Steve
  28. More Schooling and More Learning?: Effects of a Three-Year Conditional Cash Transfer Program in Nicaragua after 10 Years By Tania Barham; Karen Macours; John A. Maluccio
  29. Social Learning and Communication By Ariel BenYishay; A. Mushfiq Mobarak
  30. Contingent Valuation: A Comparison of Referendum and Voluntary Contribution Mechanisms By Johnston, Marie
  31. Planning or Doing? By Rohde, K.I.M.

  1. By: Chen, Jingnan (ICES, Department of Economics, George Mason University); Houser, Daniel (ICES, Department of Economics, George Mason University); Montinari, Natalia (Department of Economics, Lund University); Piovesan, Marco (Department of Economics, University of Copenhagen)
    Abstract: The literature on pro-social behavior shows that older children are more generous than younger children; however, the level of individual generosity is heterogeneous even between children of the same age. This paper investigates whether a child’s popularity affects a child’s generosity. Our participants – 231 children, six to twelve years old – decide how many of their four colored wristbands they want to share with another anonymous child. We manipulate the visibility of this decision: in treatment Public, the decisions are revealed to the entire class at the end of the game, whereas in treatment Private children’s decisions remain secret. In addition, we elicited each child’s network of friends using an innovative “seating map” mechanism. Our results reveal that more popular children are more generous in Public than Private decision environments, while less popular children behave similarly in both cases. Moreover, older children in Public display greater generosity than (i) older children in Private and (ii) younger children in either Public or Private. Finally, in Public, older and more popular children share more than less popular older children, and more than younger children regardless of popularity; whereas, in Private there is no effect of popularity on children of any age.
    Keywords: popularity; children; field experiment; public decision making; pro-social behavior
    JEL: C93 J13
    Date: 2014–05–21
  2. By: Blanco, Mariana; Engelmann, Dirk; Koch, Alexander K.; Normann, Hans-Theo
    Abstract: In empirical analyses of games, preferences and beliefs are typically treated as independent. However, if beliefs and preferences interact, this may have implications for the interpretation of observed behavior. Our sequential social dilemma experiment allows us to separate different interaction channels. When subjects play both roles in such experiments, a positive correlation between first- and second-mover behavior is frequently reported. We find that the observed correlation primarily originates via an indirect channel, where second-mover decisions influence beliefs through a consensus effect, and the first-mover decision is a best response to these beliefs. Specifically, beliefs about second-mover cooperation are biased toward own second-mover behavior, and most subjects best respond to stated beliefs. However, we also find evidence for a direct, preference-based channel. When first movers know the true probability of second-mover cooperation, subjects' own second moves still have predictive power regarding their first moves. --
    Keywords: Beliefs,consensus effect,social dilemma,experimental economics
    JEL: C72 C90
    Date: 2014
  3. By: John A. List; Anya Savikhin Samek
    Abstract: Childhood obesity has reached epidemic proportions in the U.S., with now almost a third of children ages 2-19 deemed overweight or obese. In this study, we leverage recent findings from behavioral economics to explore new approaches to tackling one aspect of childhood obesity: food choice and consumption. Using a field experiment where we include more than 1,500 children, we report several key insights. First, we find that individual incentives can have large influences: in the control, only 17% of children prefer the healthy snack, whereas the introduction of small incentives increases take-up of the healthy snack to roughly 75%, more than a four-fold increase. There is some evidence that the effects continue after the treatment period, consistent with a model of habit formation. Second, we find little evidence that the framing of incentives (loss versus gain) matters. While incentives work, we find that educational messaging alone has little influence on food choice. Yet, we do observe an important interaction effect between messaging and incentives: together they provide an important influence on food choice. For policymakers, our findings show the power of using incentives to combat childhood obesity. For academics, our approach opens up an interesting combination of theory and experiment that can lead to a better understanding of theories that explain healthy decisions and what incentives can influence them.
    JEL: C93 I15
    Date: 2014–05
  4. By: van Veldhuizen, Roel; Oosterbeek, Hessel; Sonnemans, Joep
    Abstract: In an in influential study, Mas and Moretti (2009) found that worker effort is positively related to the productivity of workers who see him, but not workers who do not see him. They interpret this as evidence that social pressure can reduce free riding. In this paper we report an attempt to reproduce the findings of Mas and Moretti in a lab experiment. Lab experiments have the advantage of being able to shut down alternative channels through which workers can influence the productivity of colleagues whom they observe. Although the subjects in our experiment are aware of the productivity of others and although there is sufficient scope for subjects to vary their productivity, we find no evidence of the type of peer effects reported by Mas and Moretti. This suggests that their findings are less generalizable than has been assumed. --
    Keywords: peer effects,experiment,laboratory experiment
    JEL: C91 J24
    Date: 2014
  5. By: Vanessa Mertins (Institute for Labour Law and Industrial Relations in the EU, University of Trier); Sabrina Jeworrek (Institute for Labour Law and Industrial Relations in the EU, University of Trier)
    Abstract: By conducting a natural field experiment, we test whether a managerial policy of allowing employees to self-determine their wages is as successful as recently suggested by laboratory evidence. We find that this policy indeed enhances performance. However, our data is clearly at odds with the conjecture of Pareto improvements, since labor costs grow even faster. Admittedly, the performance change is remarkable given that a considerable pay increase has no effect at all. Surprisingly, the data suggests that explicitly denying parts of the workforce this choice boosts performance, too. Additional experimental and survey data provides important insights into employees' underlying motivations.
    Keywords: Field experiment, Delegation, Reciprocity, Responsibility alleviation, Compensation, Worker empowerment, Workplace democracy
    JEL: C91 C93 J33 M52 M54
    Date: 2014–05
  6. By: Lawrence C. Y. Choo (Department of Economics, University of Exeter)
    Abstract: This paper investigates the conventional wisdom that markets should allocate the rights for performing decisional tasks to those players who might be best suited to perform the task. I embed the decisional tasks in a stylised setting of a game, motivated by Littlewood (1953) Red Hat Puzzle, where the optimal choices in the game require players to employ logical and epistemological reasoning. I present a treatment where players are permitted to trade their participation rights to the game. The payo?s are furthermore calibrated such that those players who know the optimal choices in the game should value the participation rights strictly more than those who do not. However, aggregated performances in this treatment were found to be significantly lower than the control treatments where players were not permitted to trade their participation rights, providing little support for the conventional wisdom. I show that this finding could be attributed to price “bubbles” in the markets for participations rights.
    Keywords: Game Theory, Trading Markets, Experimental Economics, Red Hat Puzzle.
    JEL: C92 C72 G02 G12
    Date: 2014
  7. By: Conte, Anna (Max Planck Institute of Economics); Levati, Vittoria (University of Verona, Department of Economics); Montinari, Natalia (Department of Economics, Lund University)
    Abstract: We use information on students' past participation in economic experiments, as stored in our database, to analyze whether behavior in public goods games is affected by experience (i.e., previous participation in social dilemma-type experiments) and history (i.e., participation in experiments of a different class than the social dilemma). We have three main results. First, at the aggregate level, the amount subjects contribute and expect others to contribute decrease with experience. Second, a mixture model reveals that the proportion of unconditional cooperators decreases with experience, while that of selfish individuals increases. Finally, history also influences behavior, although to a lesser extent than experience. Our findings have important methodological implications for researchers, who are urged to control for subjects' experience and history in their experiments if they want to improve the external validity and replicability of their results.
    Keywords: Public goods experiments; Social preferences; Mixture models; Experience; History
    JEL: C35 C51 C72 H41
    Date: 2014–05–18
  8. By: Subhasish M. Chowdhury (University of East Anglia); Roman M. Sheremeta (Case Western Reserve University and Economic Science Institute, Chapman University); Theodore L. Turocy (University of East Anglia)
    Abstract: We study experimentally the effects of cost structure and prize allocation rules on the performance of rent-seeking contests. Most previous studies use a lottery prize rule and linear cost, and ?nd both overbidding relative to the Nash equilibrium prediction and signi?cant variation of efforts, which we term ‘overspreading.’ We investigate the effects of allocating the prize by a lottery versus sharing it proportionally, and of convex versus linear costs of effort, while holding ?xed the Nash equilibrium prediction for effort. We ?nd the share rule results in average effort closer to the Nash prediction, and lower variation of effort. Combining the share rule with a convex cost function further enhances these results. We can explain a signi?cant amount of non-equilibrium behavior by features of the experimental design. These results contribute towards design guidelines for contests based on behavioral principles that take into account implementation features of a contest.
    Keywords: rent-seeking, contest, contest design, experiments, quantal response, overbidding
    JEL: C72 C91 D72
    Date: 2014
  9. By: Alexander L. Brown; Joanna N. Lahey
    Abstract: Saving when faced with the immediate option to spend is an unpleasant but not conceptually difficult task. One popular approach contradicts traditional economic theory by suggesting that people in debt should pay off their debts from smallest size to largest regardless of interest rate, to realize quick motivational gains from eliminating debts. We more broadly define this idea as “small victories” and discuss, model, and empirically examine alternative behavioral theories that might explain it. Using a laboratory computer task, we test the validity of these predictions by breaking down this approach into component parts and examining their efficacy. Consistent with the idea of small victories, we find that when a mildly unpleasant task is broken down into parts of unequal size, subjects complete these parts faster when they are arranged in ascending order (i.e, from smallest to largest) rather than descending order (i.e., from largest to smallest). Yet when subjects are given the choice over three different orderings, subjects choose the ascending ordering least often. Given the magnitude of our results, we briefly discuss the possible efficacy of these alternative methods in actual debt repayment scenarios.
    JEL: C91 D03 D14
    Date: 2014–05
  10. By: Andreas C. Drichoutis (Department of Agricultural Economics,, Agricultural University of Athens); Jayson L. Lusk (Department of Agricultural Economics, Oklahoma State University); Valentina Pappa (Department of Economics, University of Ioannina)
    Abstract: We conduct a field valuation experiment where we vary the valuation method (contingent valuation vs. inferred valuation) as well as the payment format (dichotomous choice vs. payment card). Willingness-to-accept and willingness-to-pay valuations are elicited in a within-subjects design for foods with climate neutral labels. We find a similar gap for valuations elicited with the contingent or the inferred valuation method. However, we also find that the gap can be muted by using a payment card elicitation format.
    Keywords: willingness to pay; willingness to accept; contingent valuation; inferred valuation; payment card; single bounded
    JEL: D12 C93
    Date: 2014
  11. By: Marianne P. Bitler; Jonah B. Gelbach; Hilary W. Hoynes
    Abstract: In this paper, we assess whether welfare reform affects earnings only through mean impacts that are constant within but vary across subgroups. This is important because researchers interested in treatment effect heterogeneity typically restrict their attention to estimating mean impacts that are only allowed to vary across subgroups. Using a novel approach to simulating treatment group earnings under the constant mean-impacts within subgroup model, we find that this model does a poor job of capturing the treatment effect heterogeneity for Connecticut’s Jobs First welfare reform experiment using quantile treatment effects. Notably, ignoring within-group heterogeneity would lead one to miss evidence that the Jobs First experiment’s effects are consistent with central predictions of basic labor supply theory.
    JEL: H75 I38 J18
    Date: 2014–05
  12. By: Güth, Werner (Max Planck Institute of Economics); Levati, Vittoria (University of Verona); Montinari, Natalia (Department of Economics, Lund University); Nardi, Chiara (University of Verona)
    Abstract: In the hybrid game, one proposer confronts two responders with veto power: one responder can condition his decisions on his own offer but the other cannot. We vary what the informed responder knows about the offers as well as the uninformed responder's conflict payoff. Neither variation affects behavior: proposers always favor informed responders, who frequently accept minimal offers.
    Keywords: Ultimatum; Yes/No game
    JEL: C72 C92
    Date: 2014–05–19
  13. By: Tanguy Bernard; Stefan Dercon; Kate Orkin; Alemayehu Seyoum Taffesse
    Abstract: Poor people often do not make investments, even when returns are high. One possible explanation is that they have low aspirations and form mental models which ignore some options for investment. This paper reports on findings of an innovative experiment to test this in rural Ethiopia. Firstly, individuals were randomly invited to watch documentaries about people from similar communities who had succeeded in agriculture or small business, without help from government or NGOs. A placebo group watched an Ethiopian entertainment programme and a control group were simply surveyed. Secondly, the number of invitees was varied by village to assess the importance of peer effects in the formation of aspirations. Six months after the screening of the documentaries, aspirations had improved among treated individuals but did not change in the placebo or control groups. Effects were larger for those with higher aspirations at baseline. We also find evidence of treatment effects on savings and credit behaviour, children’s school enrolment and investments in children’s schooling, suggesting that changes in aspirations can translate into changes in forward-looking behaviour. There are also positive treatment effects on a set of related measures from psychology and sociology, including a measure of locus of control, which theory predicts should behave in similar ways to aspirations. We also find that peer effects result in further impact on educational spending and induce more work and less leisure. That a one-hour documentary shown six months earlier induces such actual behavioural change offers challenging and promising areas for further research and the design of poverty-related interventions.
    Keywords: aspirations, expectations, future-oriented behaviour, media interventions
    JEL: D03 I31
    Date: 2014
  14. By: Runnemark, Emma (Department of Economics, Lund University); Hedman, Jonas (Department of IT Management, Copenhagen Business School); Xiao, Xiao (Department of IT Management, Copenhagen Business School)
    Abstract: We conduct an incentivized experiment to test whether the willingness to pay is higher for debit cards compared to cash for three consumer products. Our findings support this conjecture also after controlling for cash availability, spending type, price familiarity and consumption habits of the products. The evidence thus suggests that different representations of money matters for consumer behavior.
    Keywords: payment methods; debit cards; cash; willingness-to-pay
    JEL: D03 D10 E42
    Date: 2014–05–21
  15. By: Cao, Ying; Just, David R.; Wansink, Brian
    Abstract: Using psychological terms such as cognitive dissonance and confirmation bias, this study reveals how individual consumers inadequately process (food safety) information, pay limited attention to signals, and make purchase decisions that are bias towards their initial choices. While it is expected that reading extra information about potential risk associated with the food decreases consumers' willingness to pay (WTP), the magnitude of the impact varies across individuals. In general, consumer's judgment and information processing depend a lot on their initial beliefs or consumption status. They tend to use higher bidding prices to justify previous behaviors and selectively pay attention to information in favor of their initial choices. Using an incentive compatible auction mechanism, this study elicited consumers' WTP under different informational settings. Results showed that consumers bid much higher when they chose to commit to food items (treatment) than when they were randomly assigned (control), suggesting cognitive dissonance. On average, the bidding premium was about 13 cents (roughly 30%) higher for low-risk food item and 30 cents (almost 60%) higher for high-risk item. The bidding premiums were further enlarged as food safety information was revealed to consumers. Confirmatory bias hypothesis was supported by the finding that those who made commitment earlier were more reluctant to change the bids despite of increased risk perceptions. In terms of market responses, due to psychological biases among consumers, demand curves were less possible to shift down under food safety risk. Results in this study implied that consumers were less responsive to public information due to their existing habits. Extra strategies would be needed to increase the efficiency of public communication to promote health.
    Keywords: Cognitive Dissonance, Conrmatory Bias, Risk Perception, Self-Justication, Consumer/Household Economics, Institutional and Behavioral Economics, D03, D12, D44,
    Date: 2014–04
  16. By: Bruno CREPON (ENSAE and J-PAL); Florencia DEVOTO (Paris School of Economics); Esther DUFLO (MIT Department of Economics and J-PAL); William PARIENTE (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES) and J-PAL)
    Abstract: This paper reports the results from a randomized evaluation of a microcredit program introduced in rural areas of Morocco starting in 2006 by Al Amana, the country’s largest microfinance institution. Al Amana was the only MFI operating in the study areas during the evaluation period. Thirteen percent of the households in treatment villages took a loan, and none in control villages. Among households identified as more likely to borrow based on ex-ante characteristics, microcredit access led to a significant rise in investment in assets used for self-employment activities (mainly animal husbandry and agriculture), and an increase in profit. But this increase in profit was offset by a reduction in income from casual labor, so overall there was no gain in measured income or consumption. We find suggestive evidence that these results are mainly driven by effects on borrowers, rather than by externalities on households that do not borrow. This implies that among those who chose to borrow, microcredit had large, albeit very heterogeneous, impacts on assets and profits from self-employment activities, but small impact on consumption: we can reject an increase in consumption of more than 10% among borrowers, two years after initial rollout.
    Date: 2014–05–14
  17. By: Eric Schniter (Economic Science Institute, Chapman University); Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and Economic Science Institute, Chapman University)
    Abstract: Despite normative predictions from economics and biology, unrelated strangers can often develop the trust necessary to reap gains from one-shot economic exchange opportunities. This appears to be especially true when declared intentions and emotions can be cheaply communicated. Perhaps even more puzzling to economists and biologists is the observation that anonymous and unrelated individuals, known to have breached trust, often make effective use of cheap signals, such as promises and apologies, to encourage trust re-extension. We used a pair of trust games with one-way communication and emotion surveys to investigate the role of emotions in regulating the propensity to message, apologize, re-extend trust, and demonstrate trustworthiness. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors, remedial strategies used by promise-breakers, their effects on behavior, and subsequent outcomes. We found that emotions triggered by interaction outcomes are predictable and also predict subsequent apology and trust re-extension. The role of emotions in behavioral regulation helps explain why messages are produced, when they can be trusted, and when trust will be re-extended.
    Keywords: emotions, promises, apologies, trust game, reciprocity, experiments
    Date: 2014
  18. By: Corazzini, Luca; Bertoni, Marco; Angelini, Viola (Groningen University)
    Abstract: We present results of a survey experiment aimed at assessing context effects on subjects' reported life satisfaction, exerted by raising awareness of fundamental life domains - income, family, job, friends, sentimental relationships and health - through questionnaire manipulations. While simply presenting subjects with the list of the domains before evaluating overall life satisfaction has no effect on the distribution of life satisfaction, asking subjects to report their satisfaction with each life domain strongly affects overall evaluations. In particular, we detect a robust unpacking effect, whereby reporting satisfaction with life domains signifcantly increases the subsequent overall life satisfaction evaluations. In addition, raising awareness of life domains significantly increases precision (as it reduces the dispersion of responses) and accuracy (by increasing the association between life satisfaction and life domain evaluations) of self-reported levels of life satisfaction.
    Date: 2014
  19. By: Feld, Jan (Department of Economics, School of Business, Economics and Law, Göteborg University); Salamanca, Nicolás (Ph.D. candidate in economics, Maastricht University); Hamermesh, Daniel S. (Sue Killam Professor of Economics, University of Texas at Austin; prof in economics, Royal Holloway University of London; and research assoc, IZA and NBER)
    Abstract: The discrimination literature treats outcomes as relative. But does a differential arise because agents discriminate against others—exophobia—or because they favor their own kind—endophilia? Using a field experiment that assigned graders randomly to students' exams that did/ did not contain names, on average we find favoritism but no discrimination by nationality, and some evidence of favoritism for the opposite gender. We identify distributions of individuals' preferences for favoritism and discrimination. We show that a changing correlation between them generates perverse changes in market differentials and that their relative importance informs the choice of a base group in adjusting wage differentials.
    Keywords: favoritism; discrimination; field experiment; wage differentials; economics of education
    JEL: B40 I24 J71
    Date: 2014–05
  20. By: Ayako Wakano (Graduate School of Economics, Osaka University, JAPAN); Hiroyuki Yamada (Osaka School of International Public Policy, Osaka University, JAPAN); Daichi Shimamoto (School of Political Science and Economics, Waseda University, JAPAN)
    Abstract: Using the dataset collected for assessment of a post-harvest technology project in rural Cambodia, we focused on the heterogeneous social preferences of project implementers, often overlooked in the literature of Randomized Controlled Trials (RCT). Our study focuses on the gimplementer effecth on program participation for the treated farmers. We show the possibility that heterogeneous program participation of ordinary farmers across the treated villages could be induced due to heterogeneity in the characteristics of project staff. In particular, we show the altruism of project staff, measured by the dictator game, consistently increases participation and the number of participations in the training sessions of beneficiaries. This type of heterogeneity in project staffsf preferences across treatment sites might yield noises in mean effects estimated using RCT methods conducted at a certain cluster level, which undermines the external validity of the estimated results. While RCT methods are very powerful tools for many program and policy evaluations, we cannot emphasize too much the importance of the way how an actual project is implemented.
    Keywords: social preference, program evaluation, heterogeneity in treatment effects
    JEL: O22 C93 D03
    Date: 2014–05
  21. By: Dietrichson, Jens (Department of Economics, Lund School of Economics and Management, 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: 2014–04–09
  22. By: Dwenger, Nadja; Kübler, Dorothea; Weizsäcker, Georg
    Abstract: We investigate the possibility that a decision-maker prefers to avoid making a decision and instead delegates it to an external device, e.g., a coin flip. In a series of experiments our participants often choose a stochastically dominated lottery between outcomes, contradicting most theories of choice such as expected utility. A large data set on university applications in Germany shows a choice pattern that is consistent with a preference for randomization, entailing substantial allocative consequences. The findings are consistent with our theory of responsibility aversion. --
    Keywords: Stochastic dominance violations,individual decision making,university choice,matching
    JEL: D03 D01
    Date: 2014
  23. By: Armenak Antinyan (Dept. of Management, Università Ca' Foscari Venice)
    Abstract: The paper aims at studying other-regarding preferences of decision makers in the domain of losses. For this purpose the framework of the Dictator Game is adopted, with two research questions under investigation. First, how will the dictator divide the pie with an anonymous recipient, after a bi-directional loss of equal amount? Second, how will the dictator divide the pie with a poor recipient from a third world country after a bidirectional loss, where the loss of the recipient is bigger than that of the dictator? Interestingly, the data illustrate that other-regarding motives of the dictators do not vanish in any of the treatments in which losses are introduced. The results are explained from the perspective of power-dependence relationship between the dictator and the recipient (Handgraaf et al., 2008, van Dijk and Vermunt, 2000).
    Keywords: Dictator Games, Loss, Other-Regarding Preferences
    JEL: C90 D63 D64 I30
    Date: 2014–03
  24. By: Tania Barham; Karen Macours; John A. Maluccio
    Abstract: The effects of early life circumstances on cognitive skill formation are important for later human capital development, labor market outcomes and well-being. In this paper, we test the hypothesis that the first 1,000 days are the critical window for both cognitive skill formation and physical development by exploiting a randomized conditional cash transfer (CCT) program in Nicaragua. We find that boys exposed in utero and during the first 2 years of life, have better cognitive, but not physical, outcomes when they are 10 years old compared to those also exposed, but in their second year of life or later. These results confirm that interventions that improve nutrition and/or health during the first 1,000 days of life can have lasting positive impacts on cognitive development for children. The finding that the results differ for cognitive functioning and anthropometrics highlights the importance of explicitly considering cognitive tests, in addition to anthropometrics, when analyzing impacts on early childhood development.
    Keywords: Early Childhood Education, Youth & Children, Nutrition
    Date: 2013–06
  25. By: Schilizzi, Steven; Latacz-Lohmann, Uwe
    Abstract: In order to maximize efficiency, should conversation contracts include incentive payments and also be put up for tender? This work uses laboratory experiments to investigate this question. We find that there exists an optimal share of performance payment which yields maximum total stewardship effort and expected environmental outcome. While cost-effectiveness is maximized with the totality of payments linked to outcomes, it comes at the cost of reduced participation. Tendering such contracts yields additional benefits in terms of effort extraction and cost-effectiveness, but these benefits rapidly decline with the share of performance payment. Combining high shares of performance payments with tendering runs the risk of falling far short of the environmental target.
    Keywords: Conservation tenders, auctions, incentive contracts, agricultural policy, market-based instruments, experimental economics, Agricultural and Food Policy, International Relations/Trade, C92, D44, D82, D86, H57, Q24, Q28,
    Date: 2014
  26. By: Marsh, Dan; Tucker, Steve; Doole, Graeme
    Abstract: Regional councils throughout New Zealand are in the process of drawing up plans to enable them to meet the requirements of the Resource Management Act and the National Policy Statement on freshwater. Some councils are working on targets for nutrient leaching at the catchment level and are considering alternative approaches to ensuring these targets are achieved. In this paper we investigate the farm level effects of agricultural policies by employing the methods of experimental economics to investigate alternative mechanisms for farm and catchment level regulations aimed at improving water quality. Results are presented for four cap and trade system designs in order to assess the effect of alternative approaches to allocation of nutrient discharge allowances and rules governing trade or exchange of these allowances. The objective of this study is to assess the utility of cap and trade systems through experimental economics, with a focus on the efficiency and equity of these mechanisms. Cap and trade systems are promoted as one of the major achievements of environmental economics. However, the move from theory to field implementation is a difficult transition, particularly due to the prevalence of uncertainty and the bounded cognitive ability of real agents. Data from the experiments enables comparison of the results of nutrient trading with the outcomes that would be expected based on economic theory. This assessment of the relative performance of cap and trade systems highlights important findings for environmental regulation. First, catchment profit is around 10% lower than predicted by theory. Second, the distribution of profit among farmers has little in common with that predicted by theory. Third, the trading behaviour of farmers bears little resemblance to theoretical predictions. Overall, these findings highlight the need to carefully assess the efficiency, equity and overall benefits of cap and trade systems for environmental regulation.
    Keywords: Cap and trade, environmental regulation, economic experiments, dairy farming, water quality, New Zealand, Agricultural and Food Policy, Environmental Economics and Policy,
    Date: 2014–02
  27. By: Schroeter, Christiane; Richards, Tim; Hamilton, Steve
    Abstract: Although studies have shown that financial incentives are effective in promoting healthy behaviors, existing interventions have focused on adults in the workforce (e.g. Kullgren et al. 2013). Given that the school environment can be an effective instrument for behavior change, there is a need to examine incentive-based health programs in late-adolescent age groups. Largescale observational studies with about 9,000 freshmen at California Polytechnic State University (Cal Poly) show that every year of college was associated with a 3% BMI increase, especially among minority populations. Reversing or slowing this dynamic has proven difficult because students entering university are newly independent, not experienced in making their own lifedecisions, and encounter many distractions (Nazmi et. al. 2012). On the other hand, university students are uniquely social and social networks have been shown to be effective in leading to behavioral change. Indeed, emerging evidence on peer networks suggests that health behaviors and outcomes are shared, transferred, and influenced through social ties (Christakis and Fowler, 2007; Cohen-Cohen-Cole and Fletcher, 2008). However, few interventions have been designed to capitalize on the behavioral pathways of social networks. The primary purpose of our intervention study is to determine whether financial incentives, mediated by social network effects, are effective in achieving improved diet quality outcomes as measured by the Healthy Eating Index-2010 (HEI). We will conduct a 3.5-month parallel-design, randomized controlled trial with a racially and ethnically diverse sample of participants who consume food in campus cafeterias. Our findings will provide a unique contribution by testing the efficiency of interventions in structural transmission networks. Given the ubiquitous and increasing existence of social networks, our applications are readily transferrable at relatively low cost to other largescale student populations in elementary, middle, and high schools.
    Keywords: Food Consumption/Nutrition/Food Safety, Health Economics and Policy,
    Date: 2014
  28. By: Tania Barham; Karen Macours; John A. Maluccio
    Abstract: Conditional Cash Transfer (CCT) programs have become the anti-poverty program of choice in many developing countries. Numerous evaluations, often based on rigorous experimental designs, leave little doubt that such programs can increase enrollment and grades attained--in the short term. But evidence is notably lacking on whether these short-term gains translate into longer-term educational benefits needed to fully justify these programs. This paper uses the randomized phase-in of the RPS CCT program in Nicaragua to estimate the long-term effects on educational attainment and learning for boys, measured 10 years after the start of the program. We focus on a cohort of boys aged 9¿12 years at the start of the program in 2000 who, due to the program¿s eligibility criteria and prior school dropout patterns, were likely to have benefitted more in the group of localities that were randomly selected to receive the program first. We find that the short-term program effect of a half grade increase in schooling for boys was sustained after the end of the program and into early adulthood. In addition, results indicate significant and substantial gains in both math and language achievement scores, an approximately one-quarter standard deviation increase in learning outcomes for the now young men. Hence in Nicaragua, schooling and achievement gains coincided, implying important long term returns to CCT programs.
    Keywords: Social Policy & Protection, Education, Poverty
    Date: 2013–07
  29. By: Ariel BenYishay; A. Mushfiq Mobarak
    Abstract: Low adoption of agricultural technologies holds large productivity consequences for developing countries. Agricultural extension services counter information failures by deploying external agents to communicate with farmers. However, social networks are recognized as the most credible source of information about new technologies. We incorporate social learning in extension policy using a large-scale field experiment in which we communicate to farmers using different members of social networks. We show that communicator effort is susceptible to small performance incentives, and the social identity of the communicator influences learning and adoption. Farmers find communicators who face agricultural conditions and constraints most comparable to themselves to be the most persuasive. Incorporating communication dynamics can take the influential social learning literature in a more policy-relevant direction.
    JEL: O13 O33 Q16
    Date: 2014–05
  30. By: Johnston, Marie
    Abstract: Contingent valuation methods (CVM) are integral in valuating non-market environmental issues. Numerous mechanisms have been proposed and analysed, as well as numerous studies on willingness to pay (WTP) and willingness to accept (WTA) discrepancies. Despite the concentrated and persistent focus on achieving efficient mechanisms, controversies and limitations remain. This paper applies an open-ended approach to the referendum (majority voting) method for contingent valuation as advised by Green et al. (1998). This is undertaken via economic experiments with induced values, and by comparison of two novel majority voting mechanisms and one widely accredited voluntary contribution mechanism. The preliminary findings show the majority voting mechanism induce more incentive compatible values and reduce WTP WTA discrepancy compared to the voluntary contribution method. Thus, given promising results, this paper recommends further investigation into the novel open-ended referendum method, termed the undisclosed cost voting mechanism (UCVM).
    Keywords: Willingness-To-Pay, Willingness-To-Accept, Provision Point Mechanism, Undisclosed Cost Voting Mechanism, Random Price Voting Mechanism, Environmental Economics and Policy, Research and Development/Tech Change/Emerging Technologies,
    Date: 2014
  31. By: Rohde, K.I.M.
    Abstract: __Abstract__ Address delivered at the occasion of accepting the appointment of Professor of Behavioural Economics with a focus on Intertemporal Choice at the Erasmus School of Economics, Erasmus University Rotterdam, on Friday May 9, 2014. "The ageing of society and the recent financial crisis have put pressure on our system of social security. There is a tendency to shift part of the responsibility for future income and healthcare from the social security system to individuals. Yet, one may wonder to what extent individuals can bear this responsibility. Classical economics assumes that people are perfectly rational. However, research in psychology and other social sciences shows that people systematically deviate from rationality. One example is the gap between planning and doing. Many of us repeatedly postpone investing in our own future such as saving more for our pensions, quitting smoking, or going to the gym. Such a psychological bias makes it difficult for individuals to bear the responsibility for their own future income and health. Behavioural economists enrich economics by using insights from other social sciences such as psychology. They, thereby, know how people deviate from the classical rational economic models. This knowledge can be used to design decision making environments, which help people take responsibility for their own future. Libertarian paternalism proposes nudging as a tool to create such environments. A nudge is a subtle push into a particular direction and leaves people the freedom to deviate from this direction. In order to implement nudging, one needs to know whom to nudge, in which direction to nudge, and how to nudge. Behavioural economics provides answers to these questions. "
    Keywords: behavioral economics, intertemporal choice, nudge, libertarian paternalism
    JEL: D03 B3 D6 I3 Z13 E2
    Date: 2014–05–09

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.