New Economics Papers
on Experimental Economics
Issue of 2014‒06‒02
43 papers chosen by

  1. Economic Behavior under Alcohol Influence: An Experiment on Time, Risk, and Social Preferences By Corazzini, Luca; Filippin, Antonio; Vanin, Paolo
  2. Keep Up With the Winners: Experimental Evidence on Risk Taking, Asset Integration, and Peer Effects By Fafchamps, Marcel; Kebede, Bereket; Zizzo, Daniel John
  3. Fairness Ideals, Hidden Selfishness and Opportunist Behavior:An Experimental Approach By Natsuka Tokumaru
  4. The Impact of Inequality on Cooperation: An Experimental Study By Annarita COLASANTE; Alberto RUSSO
  5. Viral Altruism? Generosity and Social Contagion in Online Networks By Lacetera, Nicola; Macis, Mario; Mele, Angelo
  6. Charitable Giving and Nonbinding Contribution-level Suggestions: Evidence from a Field Experiment By Adena, Maja; Huck, Steffen; Rasul, Imran
  7. Risking Other People’s Money By Andersson, Ola; Holm, Håkan J.; Tyran, Jean-Robert; Wengström, Erik
  8. Experimenter Demand Effects and Altruism towards the Experimenter By Piers Fleming; Daniel John Zizzo
  9. On the Robustness of Emotions and Behavior in a Power-to-Take Game Experiment By Fabio Galeotti
  10. An experiment on retail payments systems By Camera, Gabriele; Casari, Marco; Bortolotti, Stefania
  11. Reminders, payment method and charitable giving: evidence from an online experiment By Axel Sonntag; Daniel John Zizzo
  12. How Did Distributional Preferences Change During the Great Recession? By Raymond Fisman; Pamela Jakiela; Shachar Kariv
  13. Promises and Image Concerns By Schütte, Miriam; Thoma, Carmen
  14. The Price of Prejudice By Hedegaard, Morten; Tyran, Jean-Robert
  15. Measuring Ratchet Effects within a Firm: Evidence from a Field Experiment varying Contractual Commitment By Charles Bellemare; Bruce Shearer
  16. A Revealed Preference Approach to the Elicitation of Political Attitudes: Experimental Evidence on Anti-Americanism in Pakistan By Leonardo Bursztyn; Michael Callen; Bruno Ferman; Ali Hasanain; Noam Yuchtman
  17. Microcredit Impacts: Evidence from a Randomized Microcredit Program Placement Experiment by Compartamos Banco By Angelucci, Manuela; Karlan, Dean S.; Zinman, Jonathan
  18. Informational asymmetries in laboratory asset markets with state-dependent fundamentals By Keser, Claudia; Markstädter, Andreas
  19. Understanding Honesty: An Experiment Regarding Heterogeneous Responses to Situational Social Norms By Gibson, Rajna; Tanner, Carmen; Wagner, Alexander F
  20. The Distributional Preferences of Americans By Raymond Fisman; Pamela Jakiela; Shachar Kariv
  21. Threshold Level Public Goods Provision with Multiple Units: Experimental Effects of Disaggregated Groups with Rebates By Liu, Pengfei; Swallow, Stephen K.; Anderson, Christopher M.
  22. The Difficult Case of Persuading Women: Experimental Evidence from Childcare By Billari, Francesco C.; Galasso, Vincenzo; Profeta, Paola; Pronzato, Chiara
  23. Asset Prices and Asymmetric Reasoning By Elena Asparouhova; Peter Bossaerts; Jon Eguia; William Zame
  24. Tuition fees as a commitment device By Ketel, Nadine; Linde, Jona; Oosterbeek, Hessel; van der Klaauw, Bas
  25. Recreating the South Sea Bubble: Lessons from an Experiment in Financial History By Giusti, Giovanni; Noussair, Charles; Voth, Hans-Joachim
  26. Community mobilization around social dilemmas: evidence from lab experiments in rural Mali By Maria Laura Alzua; Juan Camilo Cardenas; Habiba Djebbari
  27. Unstructured Bargaining over an Endogenously Produced Surplus and Fairness Ideals: An Experiment By Wolfgang Luhan; Odile Poulsen; Michael Roos
  28. Comparing Charitable Fundraising Schemes: Evidence from a Natural Field Experiment and a Structural Model By Huck, Steffen; Rasul, Imran; Shephard, Andrew
  29. Effects of religiosity on social behaviour: Experimental evidence from a representative sample of Spaniards By Brañas-Garza, Pablo; Espín, Antonio M.; Neuman, Shoshana
  30. Audit rates and compliance: A field experiment in long-term care By Lindeboom, Maarten; van der Klaauw, Bas; Vriend, Sandra
  31. A Reconsideration of Gender Differences in Risk Attitudes By Filippin, Antonio; Crosetto, Paolo
  32. The effect of effectiveness: Donor response to aid effectiveness in a direct mail fundraising experiment By Karlan, Dean S.; Wood, Daniel H.
  33. The value of top-down communication for organizational performance By Leif Brandes; Donja Darai
  34. Institutional Authority and Collusion By Axel Sonntag; Daniel John Zizzo
  35. Trust and In-Group Favoritism in a Culture of Crime By Meier, Stephan; Pierce, Lamar; Vaccaro, Antonino
  36. To Charge or Not to Charge: Evidence from a Health Products Experiment in Uganda By Greg Fischer; Dean Karlan; Margaret McConnell; Pia Raffler
  37. Eliciting Taxpayer Preferences Increases Tax Compliance By Jan-Emmanuel De Neve; Cait Lamberton; Michael I. Norton
  38. Sensitive Questions in Online Surveys: An Experimental Evaluation of the Randomized Response Technique and the Crosswise Model By Marc Höglinger; Ben Jann; Andreas Diekmann
  39. Recognizing and Conducting Opportunistic Experiments in Education: A Guide for Policymakers and Researchers. By Alexandra Resch; Jillian Berk; Lauren Akers
  40. Inequality and Effort: An Experiment on Competition Between Teams By Sean P. Hargreaves Heap; Abhijit Ramalingam; Siddharth Ramalingam; Brock V. Stoddard
  41. Probability weighting in different domains: the role of stakes, fungibility, and affect By Michał Krawczyk
  42. Monopoly Profit Maximization: Success and Economic Principles By Korbinian von Blanckenburg; Milena Neubert
  43. Reputation and Entry in Procurement By Butler, Jeff; Carbone, Enrica; Conzo, Pierluigi; Spagnolo, Giancarlo

  1. By: Corazzini, Luca (University of Padova); Filippin, Antonio (University of Milan); Vanin, Paolo (University of Bologna)
    Abstract: We report results from an incentivized laboratory experiment to provide controlled evidence on the causal effects of alcohol consumption on risk preferences, time perception and altruism. Our design allows disentangling the pharmacological effects of alcohol intoxication from those mediated by expectations, as we compare behaviors of three groups of subjects: those participating to an experiment with no reference to alcohol, those exposed to the possibility of consuming alcohol but assigned to a placebo and those having effectively consumed alcohol. Once randomly assigned to one treatment, subjects were administered a series of consecutive economic tasks, being the sequence kept constant across treatments. After controlling for both the willingness to pay and the potential misperception of probabilities as elicited in the experiment, we do not detect any effect of alcohol in depleting subjects' risk tolerance. On the contrary, we find that alcohol intoxication increases impatience. Moreover, we find that alcohol makes subjects less generous as we detect a negative relationship between the blood alcohol concentration and the amount of money donated to NGOs.
    Keywords: alcohol, risk preferences, impatience, laboratory experiment
    JEL: D03 I10 C91
    Date: 2014–05
  2. By: Fafchamps, Marcel; Kebede, Bereket; Zizzo, Daniel John
    Abstract: The paper reports the result of an experimental game on asset integration and risk taking. We find evidence that winnings in earlier rounds affect risk taking in subsequent rounds, but no evidence that real life wealth outside the experiment affects risk taking. We find some evidence of imitation of the risk taking behavior of others that is distinct from learning. Controlling for past winnings, participants who receive a low endowment in a round engage in more risk taking. We also test a `keeping-up-with-the-Joneses' hypothesis and find some evidence that subjects seek to keep up with winners. Taken together, the evidence is consistent with risk taking tracking a reference point that is affected by social comparisons.
    Keywords: asset integration; prospect theory; risk; social comparisons
    JEL: C91 D12 D81
    Date: 2013–11
  3. By: Natsuka Tokumaru
    Abstract: Economic experiments have shown that human incentives are not only limited to the profit-maximizing principle but also motivated by fairness. Those studies presuppose that individuals commit to fixed value systems and that experimental institutions invoke fairness ideals. This paper shows that participants strategically select fairness ideals advantageous for self-distribution. Participants whose relative earnings are higher than those of their pairs adhere to a liberalist fairness ideal, whereas those with lower relative earnings prefer an egalitarian distribution of money. This reflects that individuals commit opportunistic behavior as a result of resolving a cognitive dissonance between material utility and fairness.
    Keywords: Economic Experiment, Fairness Ideals, Cognitive Dissonance, Hidden Selfishness, Opportunistic Behavior
    Date: 2014–04
  4. By: Annarita COLASANTE (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali); Alberto RUSSO (Universit… Politecnica delle Marche, Dipartimento di Scienze Economiche e Sociali)
    Abstract: This paper analyzes the impact of inequality in the distribution of endowments on contributions. We conduct a lab experiment using the well-known Public Good Game to test the relation between inequality and contribution to a public fund. We introduce the possibility to choose among three different redistribution rules: equidistribution, proportional to contribution and progressive to endowment. This novelty, combined with a payoff function that depends also on previous period behavior, allows us to verify the hypothesis that players show inequity averse preferences. Results show that inequality has a negative impact on individual contribution. Since inequality is decreasing during repetitions, we deduce that players show inequity averse preferences.
    Keywords: Inequality, Public Good Game, Reciprocity
    JEL: C9 D7 H41
    Date: 2014–05
  5. By: Lacetera, Nicola (University of Toronto); Macis, Mario (Johns Hopkins University); Mele, Angelo (Johns Hopkins University)
    Abstract: How do the social media affect the success of charitable promotional campaigns? We use individual-level longitudinal data and experimental data from a social-media application that facilitates donations while broadcasting donors' activities to their contacts. We find that broadcasting is positively associated with donations, although some individuals appear to opportunistically broadcast a pledge, and then delete it. Furthermore, broadcasting a pledge is associated with more pledges by a user's contacts. However, results from a field experiment where broadcasting of the initial pledges was randomized suggest that the observational findings were likely due to homophily rather than genuine social contagion effects. The experiment also shows that, although our campaigns generated considerable attention in the forms of clicks and “likes,” only a small number of donations (30 out of 6.4 million users reached) were made. Finally, an online survey experiment showed that both the presence of an intermediary and a fee contributed to the low donation rate. Our findings suggest that online platforms for charitable giving may stimulate costless forms of involvement, but have a smaller impact on actual donations, and that network effects might be limited when it comes to contributing real money to charities.
    Keywords: altruism, fundraising, social media, network effects, field experiments
    JEL: D64 C93
    Date: 2014–05
  6. By: Adena, Maja; Huck, Steffen; Rasul, Imran
    Abstract: When asking for donations, charitable organizations often suggest a potential amount to contribute. However, the evidence concerning the effects of such suggestions is scarce and inconsistent. Unlike the majority of earlier studies concerned with small-money solicitations, we examine the effect of larger nonbinding suggestions in the context of middle-range donations which are relevant in practice. In a randomized field experiment conducted in conjunction with the Bavarian State Opera, opera visitors received solicitation letters asking to support a social youth project organized by the opera house. The three different treatments were: no suggestion and suggestions of €100 and €200, respectively. Both suggestions were larger than average and median donations in this context. We find that suggested contribution levels substantially influence the distribution of donations actually received. The mean amounts given increase significantly if a suggestion is made. The increase is stronger in the €200 treatment. On the other hand, the participation rate decreases if a suggestion is made. Overall, the returns from the campaign increase non-significantly when a suggestion is made. The solicitation was repeated a year later, without any suggestion. There is weak evidence that suggestions have a long-term effect on individual contribution-level decisions.
    Keywords: charitable giving; field experiment; reference point
    JEL: C93 D12 D64
    Date: 2014–02
  7. By: Andersson, Ola; Holm, Håkan J.; Tyran, Jean-Robert; Wengström, Erik
    Abstract: We study risk taking on behalf of others in an experiment on a large random sample. The decision makers in our experiment are facing high-powered incentives to increase the risk on behalf of others through hedged compensation contracts or with tournament incentives. Compared to a baseline condition without such incentives, we find that the decision makers respond strongly to these incentives that result in an increased risk exposure of others. However, we find that the increase in risk taking is mitigated by altruistic preferences and pro-social personality traits.
    Keywords: Competition; Hedging; Incentives; Risk Taking; Social Preferences
    JEL: C72 C90 D30 D81
    Date: 2013–11
  8. By: Piers Fleming (University of East Anglia); Daniel John Zizzo (University of East Anglia)
    Abstract: As a stress test of experimenter demand effects, we run an experiment where subjects can physically destroy coupons awarded to them. About one subject out of three does. Giving money back to the experimenter is possible in a separate task but is more consistent with an experimenter demand effect than an explanation based on altruism towards the experimenter. A measure of sensitivity to social pressure helps predict destruction when social information is provided.
    Date: 2013
  9. By: Fabio Galeotti (University of East Anglia)
    Abstract: An important branch of economic research on emotions has used power-to-take game experiments to study the impact of negative emotions, such as anger, irritation and contempt, on the decision to punish. We investigate experimentally to what extent the findings of this literature are driven by the particular punishment technology adopted, and whether the experience and background of the participants affect behavior and emotions in this context. We found that (a) negative emotions do still play an important role when the potential relevant confound is removed from the punishment technology; (b) subjects display a similar behavior under a punishment technology with a constant and variable ‘fine-to-fee’ ratio; (c) previous experience mediates how contempt impacts on the decision to punish; and (d) non-UK students experience similar emotions to UK students, but generally appropriate more resources than UK students.
    Date: 2013
  10. By: Camera, Gabriele; Casari, Marco; Bortolotti, Stefania
    Abstract: We study the behavioral underpinnings of adopting cash versus electronic payments in retail transactions. A novel theoretical and experimental framework is developed to primarily assess the impact of sellers' service fees and buyers' rewards from using electronic payments. Buyers and sellers face a coordination problem, independently choosing a payment method before trading. In the experiment, sellers readily adopt electronic payments but buyers do not. Eliminating service fees or introducing rewards significantly boosts the adoption of electronic payments. Hence, buyers' incentives play a pivotal role in the diffusion of electronic payments but monetary incentives cannot fully explain their adoption choices. Findings from this experiment complement empirical findings based on surveys and field data. --
    Keywords: money,coordination,pricing,transactions
    JEL: E1 E4 E5
    Date: 2014
  11. By: Axel Sonntag (University of East Anglia); Daniel John Zizzo (University of East Anglia)
    Abstract: We present the results of an experiment testing whether different methods of payment in combination with different reminder intervals affect the amounts of charitable donations. Following a lab session, participants could make online donations to charity for a total duration of three months. Reminder intervals and payment methods did not affect the total amounts donated, although participants were more likely to donate at least once when receiving monthly (and not weekly) email reminders.
    Date: 2014
  12. By: Raymond Fisman; Pamela Jakiela; Shachar Kariv
    Abstract: We compare behavior in experiments measuring distributional preferences during the “Great Recession” to behavior in identical experiments conducted during the preceding economic boom. Subjects are drawn from a diverse pool of students whose socioeconomic composition is largely held constant by the university, mitigating concerns about differential selection across macroeconomic conditions. Subjects exposed to the recession are more selfish and more willing to sacrifice equality to enhance efficiency. Reproducing recessionary conditions inside the laboratory by confronting subjects with losses has the same impact on distributional preferences, bolstering the interpretation that economic circumstances, rather than other factors, are driving our results.
    JEL: C79 C91 D63 D64
    Date: 2014–05
  13. By: Schütte, Miriam; Thoma, Carmen
    Abstract: According to several psychological and economic studies, non-binding communication can be an effective tool to increase trust and enhance cooperation. This paper focuses on reasons why people stick to a given promise and analyzes to what extent image concerns of being perceived as a promise breaker play a role. In a controlled laboratory experiment, we vary the ex post observability of the promising party's action in order to test for social image concerns. We observe that slightly more promises are kept if the action is revealed than if it is not, yet the difference is not significant. However, a variation in the selection of pre-defined messages across treatments delivers another interesting finding. While most of the promises are kept, statements of intent tend to be broken.
    Keywords: Promises; communication; social image concerns; guilt; shame; behavioral economics; experiment
    JEL: C70 C91 D03 D82
    Date: 2014–05–18
  14. By: Hedegaard, Morten; Tyran, Jean-Robert
    Abstract: We present a new type of field experiment to investigate ethnic prejudice in the workplace. Our design allows us to study how potential discriminators respond to changes in the cost of discrimination. We find that ethnic discrimination is common but remarkably responsive to the "price of prejudice", i.e. to the opportunity cost of choosing a less productive worker on ethnic grounds. In addition, we find that the standard theory of statistical discrimination fails to explain observed choices, and that taking ethnic prejudice into account helps to predict the incidence of discrimination.
    Keywords: discrimination; field experiment; labor market
    JEL: C93 J71
    Date: 2014–04
  15. By: Charles Bellemare; Bruce Shearer
    Abstract: We present results from a field experiment designed to measure the importance of managerial commitment to a contract within a firm that pays its workers piece rates. In the tree planting industry the piece rate paid to workers is determined as a function of the difficulty of the terrain to be planted. During the experiment, workers began planting a terrain at a trial piece rate, but were told this rate would be revised upwards if, after a few work days, average productivity was below that observed on a similar (control) terrain on which the firm had committed to the contract. Our results suggest that worker productivity was 20% to 40% lower in the absence of commitment. The reduction was less pronounced when workers had less time to benefit from any subsequent increase in the piece rate. This provides support for models of worker turnover as a means of overcoming ratchet effects.
    Keywords: Ratchet effect, piece rates, incentive contracts, field experiments
    JEL: J33 M52 C93
    Date: 2014
  16. By: Leonardo Bursztyn; Michael Callen; Bruno Ferman; Ali Hasanain; Noam Yuchtman
    Abstract: We develop an indirect, revealed preference method of eliciting attitudes and apply it in an experiment in Pakistan designed to understand the expression of anti-American views. Following the completion of a personality survey, we offer subjects a bonus payment for completing the survey. We find that around one-quarter of subjects forgo a 100 Rupee payment (roughly one-fifth of a day's wage) to avoid anonymously checking a box indicating gratitude toward the United States government for providing funds. We experimentally vary the identity of the funder, the payment size, and subjects' expectations of privacy, and find that rejection of the payment is responsive to all of these treatments. Rejection of the U.S. government bonus payment is an indirect measure of anti-American attitudes. This approach mitigates concerns with experimenter demand, social desirability, and other biases, which can distort reported attitudes. We discuss and present suggestive evidence of the advantages of our methodology.
    JEL: C90 P16
    Date: 2014–05
  17. By: Angelucci, Manuela; Karlan, Dean S.; Zinman, Jonathan
    Abstract: Theory and evidence have raised concerns that microcredit does more harm than good, particularly when offered at high interest rates. We use a clustered randomized trial, and household surveys of eligible borrowers and their businesses, to estimate impacts from an expansion of group lending at 110% APR by the largest microlender in Mexico. Average effects on a rich set of outcomes measured 18-34 months postexpansion suggest no transformative impacts, but more positive than negative impacts.
    Keywords: Compartamos Banco; microcredit; microcredit impact; microentrepreneruship
    JEL: D12 D22 G21 O12
    Date: 2014–02
  18. By: Keser, Claudia; Markstädter, Andreas
    Abstract: We investigate the formation of market prices in a new experimental setting involving multi-period call-auction asset markets with state-dependent fundamentals. We are particularly interested in two informational aspects: (1) the role of traders who are informed about the true state and/or (2) the impact of the provision of Bayesian updates of the assets´ state-dependent fundamental values (BFVs) to all traders. We find that bubbles are a rare phenomenon in all of our treatments. Markets with asymmetrically informed traders exhibit smaller price deviations from fundamentals than markets without informed traders. The provision of BFVs has little to no effect. Behavior of informed and uninformed traders differs in early periods but converges over time. On average, uninformed traders offer lower (higher) limit prices and hold less (more) assets than informed traders in good-state (bad-state) markets. Informed traders earn superior profits. --
    Keywords: experimental economics,asset markets,informational asymmetries
    JEL: C92 D53 D82 G14
    Date: 2014
  19. By: Gibson, Rajna; Tanner, Carmen; Wagner, Alexander F
    Abstract: We conduct a laboratory experiment in which we expose participants to situational social norms of approval or disapproval of lying. Participants conform to the situational pressure, but there are important differences in individual reactions. We collect data on a number of individual characteristics, including proxies for intrinsic costs of lying (ICOL). Because different ICOL proxies tap into different motives for honesty, the extent of the interaction of these proxies with situational norms and with economic incentives sheds new light on why people act more truthfully than predicted by standard economic models. This analysis also helps to determine which characteristics explain individuals’ resistance to situational norms.
    Keywords: Conformity; Honesty; Pro-social concern; Protected values; Self-signaling; Situational social norms
    JEL: C91 G02 G30 M14
    Date: 2014–03
  20. By: Raymond Fisman; Pamela Jakiela; Shachar Kariv
    Abstract: We measure the distributional preferences of a large, diverse sample of Americans by embedding modified dictator games that vary the relative price of redistribution in the American Life Panel. Subjects' choices are generally consistent with maximizing a (social) utility function. We decompose distributional preferences into two distinct components - fair-mindedness (tradeoffs between oneself and others) and equality-efficiency tradeoffs - by estimating constant elasticity of substitution utility functions at the individual level. Approximately equal numbers of Americans have equality-focused and efficiency-focused distributional preferences. After controlling for individual characteristics, our experimental measures of equality-efficiency tradeoffs predict the political decisions of our subjects.
    JEL: C91 D64
    Date: 2014–05
  21. By: Liu, Pengfei (University of Connecticut); Swallow, Stephen K. (University of Connecticut); Anderson, Christopher M. (University of Washington)
    Abstract: We introduce two institutions that provide multiple public good units, assuming that a market-maker has the ability to establish groups of contributors. We set up a public good experiment where either all N individuals form one group to provide two units, or divide the N participants into two groups, and each group provides one unit separately, with all individuals benefiting for any unit(s) provided. Our results show that, under certain circumstances, the latter approach provides more of both units, and it encourages more contribution on average. We also explore the performance of two rebate rules under the two grouping approaches.
    Keywords: Experimental economics, Grouping approach, Provision point mechanism, Rebate, Environmental economics, Ecosystem Service Markets
    Date: 2013–11
  22. By: Billari, Francesco C.; Galasso, Vincenzo; Profeta, Paola; Pronzato, Chiara
    Abstract: Gender stereotypes are well established also among women. Yet, a recent literature suggests that learning from other women experience about the effects of maternal employment on children outcomes may increase female labor force participation. To further explore this channel, we design a randomized survey experiment, in which 1500 Italian women aged 20 to 40 are exposed to two informational treatments on the positive consequences of formal childcare on children future educational attainments. Surprisingly, we find that women reduce their intended labor supply. However, this result hides strong heterogenous effects: high educated non-mothers are persuaded by the informational treatments to increase their intended use of formal child care (and to pay more); whereas low educated non-mothers to reduce their intended labor supply. These findings are consistent with women responding to monetary incentive and/or having different preferences for maternal care. These heterogenous responses across women send a warning signal about the true effectiveness – in terms of take up rates – of often advocated public policies regarding formal child care.
    Keywords: education; female labour supply; gender culture
    JEL: C99 J13 J16 J18 J2 Z1
    Date: 2013–10
  23. By: Elena Asparouhova; Peter Bossaerts; Jon Eguia; William Zame
    Abstract: We present a theory and experimental evidence on pricing and portfolio choices under asymmetric reasoning. We show that under asymmetric reasoning, prices do not reflect all (types of) reasoning. Some agents who observe prices that cannot be reconciled with their reasoning switch from perceiving the environment as risky to perceiving it as ambiguous. If ambiguity averse, these agents become price-insensitive and no longer influence prices directly. We present the results of an experiment and report that consistent with the theory i) mispricing decreases as the fraction of price-sensitive agents increases, and ii) price-insensitive agents trade to more balanced portfolios.
    Keywords: Asset pricing theory, disagreement, reasoning models, ambiguity aversion, experimental finance, financial markets.
    JEL: G11 G12 G14
    Date: 2014–05
  24. By: Ketel, Nadine; Linde, Jona; Oosterbeek, Hessel; van der Klaauw, Bas
    Abstract: This paper reports on a field experiment testing for sunk-cost effects in an education setting. Students signing up for extra-curricular tutorial sessions randomly received a discount on the tuition fee. The sunk-cost effect predicts that students who receive larger discounts will attend fewer tutorial sessions. For the full sample, we find little support for this hypothesis, but we find a significant effect of sunk costs on attendance for the 45% of students in our sample who are categorized as sunk-cost prone based on hypothetical survey questions. For them higher tuition fees can serve as a commitment device to attend classes.
    Keywords: Field experiment; Higher education; Sunk-cost effect
    JEL: C93 D03 I22
    Date: 2014–03
  25. By: Giusti, Giovanni; Noussair, Charles; Voth, Hans-Joachim
    Abstract: Major bubble episodes are rare events. In this paper, we examine what factors might cause some asset price bubbles to become very large. We recreate, in a laboratory setting, some of the specific institutional features investors in the South Sea Company faced in 1720. Several factors have been proposed as potentially contributing to one of the greatest periods of asset overvaluation in history: an intricate debt-for-equity swap, deferred payment for these shares, and the possibility of default on the deferred payments. We consider which aspect might have had the most impact in creating the South Sea bubble. The results of the experiment suggest that the company’s attempt to exchange its shares for government debt was the single biggest contributor to the stock price explosion, because of the manner in which the swap affected fundamental value. Issuing new shares with only partial payments required, in conjunction with the debt-equity swap, also had a significant effect on the size of the bubble. Limited contract enforcement, on the other hand, does not appear to have contributed significantly.
    Keywords: equity issuance; experiments; financial bubbles; government debt; risk-shifting; South Sea bubble
    JEL: C92 G01 G12 G14 N23
    Date: 2013–09
  26. By: Maria Laura Alzua (CEDLAS, Universidad Nacional de La Plata and Consejo Nacional de Ciencia y Tecnologia); Juan Camilo Cardenas (Universidad de Los Andes); Habiba Djebbari (Aix-Marseille University and Laval University)
    Abstract: Community mobilization is a key feature of community-based development projects. Community mobilization requires facilitating communication between village members and between leaders and the rest of the community. Is communication an effective device through which mobilization may foster collective action? Does informing the community on how to reach a better social outcome key? Should we expect the effectiveness of community-based programs to depend on the quality of leadership in the community? In rural communities of Mali, we find evidence of high levels of cooperation as measured by a standard public good game. Communication between players increases contributions to the public good. Passing of information through a random community member also improves cooperation, and leadership skills matter. We also find suggestive evidence that changes in behavior are mediated through changes in beliefs. The experiments are embedded in a larger randomized controlled trial designed to evaluate the impact of a community-based sanitation intervention. As such, our results are relevant for a large population. Finally, we find that the program help strengthen the capacity for collective action.
    JEL: D78 C93 H41
    Date: 2014–05
  27. By: Wolfgang Luhan (Bochum University); Odile Poulsen (University of East Anglia); Michael Roos (Bochum University)
    Abstract: Fairness considerations are important determinants of behavior in unstructured bargaining situations with equal bargaining power. If the surplus over which the bargaining takes place was created by separate, individual efforts, several entitlement-related fairness ideals might be relevant. In our experiment we first elicit subjects’ fairness ideals using a questionnaire. In the following production phase each player generates output by luck, individual effort and talent. We analyze whether the elicited fairness ideals guide subjects’ behavior in the subsequent bargaining in which the joint output is distributed among to individuals. We find that bargaining claims deviate significantly from the elicited fairness ideals and are strongly related to performance if one individual had produced more than the partner. These findings contrast the previous literature on fairness ideals, but enrich the findings on self-serving fairness.
    Date: 2013
  28. By: Huck, Steffen; Rasul, Imran; Shephard, Andrew
    Abstract: We present evidence from a natural field experiment and structural model designed to shed light on the efficacy of alternative fundraising schemes. In conjunction with the Bavarian State Opera, we mailed 25,000 opera attendees a letter describing a charitable fundraising project organized by the opera house. Recipients were randomly assigned to six treatments designed to explore behavioral responses to fundraising schemes varying in two dimensions: (i) the presence of a lead donor; (ii) how individual donations would be matched using the lead donation, using either linear, non-linear and fixed-gift matching schemes. We develop and estimate a structural model that simultaneously estimates individual responses on the extensive and intensive margins of giving, and then utilize the structural model to predict giving behavior in counterfactual fundraising schemes. We find that charitable donations are maximized by simply announcing the lead donation rather than using it to match the donations of others in some way. If lead donors insist their gifts must be matched in some way, we find the fundraiser is best off announcing the existence of a lead donor and using a non-convex scheme to match the lead donation with individual donations. We conclude by providing evidence from a follow-up natural field experiment designed to probe further the question why lead donors are so effective in inducing others to give.
    Keywords: charitable giving; field experiment; structural estimation
    JEL: C93 D12 D64
    Date: 2013–09
  29. By: Brañas-Garza, Pablo; Espín, Antonio M.; Neuman, Shoshana
    Abstract: This study explores the effect of several personal religion-related variables on social behaviour, using three paradigmatic economic games: the dictator (DG), ultimatum (UG), and trust (TG) games. A large carefully designed sample of a Spanish urban adult population (N=766) is employed. From participants’ decisions in these games we obtain measures of altruism, bargaining behaviour and sense of fairness/equality, trust, and positive reciprocity. Three dimensions of religiosity are examined: (i) religious denomination; (ii) the intensity of religiosity, measured by active participation at church services; and (iii) converting out into a different denomination than the one raised in. The major results are: (i) individuals with “no religion” made decisions closer to rational selfish behaviour in the DG and the UG compared to those who affiliate with a “standard” religious denomination; (ii) among Catholics, intensity of religiosity is the key variable that affects social behaviour insofar as religiously-active individuals are generally more pro-social than non-active ones; and (iii) the religion raised in seems to have no effect on pro-sociality, beyond the effect of the current measures of religiosity. Importantly, behaviour in the TG is not predicted by any of the religion-related variables we analyse. Given the accelerating share of “no religion” individuals (in Europe and elsewhere) and the large influx of immigrants – who tend to be more religiously active compared to the native populations – our findings have significant implications for the future pro-sociality patterns in Europe.
    Keywords: church attendance; economic experiments; pro-social behaviour; religion; Spain
    JEL: C7 C9 Z12 Z13
    Date: 2013–10
  30. By: Lindeboom, Maarten; van der Klaauw, Bas; Vriend, Sandra
    Abstract: We provide evidence from a large-scale field experiment on the causal effects of audit rules on compliance in a market for long-term care. In this setting care should be provided quickly and, therefore, the gatekeeper introduced ex-post auditing. Our results do not show significant effects of variations in random audit rates and switching to a conditional audit regime on the quantity and quality of applications for care. We also do not find evidence for heterogeneous effects across care providers differing in size or hospital status. Our preferred explanation for the lack of audit effects is the absence of direct sanctions for noncompliance. The observed divergence of audit rates in the conditional audit regime is the consequence of sorting and thus identifies the quality of application behavior of providers.
    Keywords: auditing; compliance; feedback; field experiment; long-term care
    JEL: C93 H51 I18
    Date: 2014–04
  31. By: Filippin, Antonio (University of Milan); Crosetto, Paolo (Université de Grenoble)
    Abstract: This paper reconsiders the wide agreement that females are more risk averse than males providing a leap forward in its understanding. Thoroughly surveying the experimental literature we first find that gender differences are less ubiquitous than usually depicted. Gathering the microdata of an even larger sample of Holt and Laury replications we boost the statistical power of the test and show that the magnitude of gender differences, although significant, is economically unimportant. We conclude that gender differences systematically correlate with the features of the elicitation method used and in particular the availability of a safe option and fixed probabilities.
    Keywords: gender, risk, survey
    JEL: C81 C91 D81
    Date: 2014–05
  32. By: Karlan, Dean S.; Wood, Daniel H.
    Abstract: We test how donors respond to new information about a charity’s effectiveness. Freedom from Hunger implemented a test of its direct marketing solicitations, varying letters by whether they include a discussion of their program’s impact as measured by scientific research. The base script, used for both treatment and control, included a standard qualitative story about an individual beneficiary. Adding scientific impact information has no effect on whether someone donates, or how much, in the full sample. However, we find that amongst recent prior donors (those we posit more likely to open the mail and thus notice the treatment), large prior donors increase the likelihood of giving in response to information on aid effectiveness, whereas small prior donors decrease their giving. We motivate the analysis and experiment with a theoretical model that highlights two predictions. First, larger gift amounts, holding education and income constant, is a proxy for altruism giving (as it is associated with giving more to fewer charities) versus warm glow giving (giving less to more charities). Second, those motivated by altruism will respond positively to appeals based on evidence, whereas those motivated by warm glow may respond negatively to appeals based on evidence as it turns off the emotional trigger for giving, or highlights uncertainty in aid effectiveness.
    Keywords: aid effectiveness; charitable fundraising; pure altruism; warm glow
    JEL: D64 H41 L31 O12
    Date: 2014–04
  33. By: Leif Brandes; Donja Darai
    Abstract: We design a laboratory experiment to identify causal performance effects of top-down communication between managers and their subordinates. Our focus lies on communication that resolves uncertainty about the work environment but does not provide task-specific knowledge. Recent articles in the business press report a lack of such communication in real-world organizations and associate it with reduced organiza- tional performance. Our results confirm this observation. We find that top-down communication is a profitable way for managers to increase employee performance in the presence of uncertainty. Specifically, we show that non-communication is the worst option for managers. However, 50 percent of our experimental managers use top-down communication too restrictively. Overall, managers forego 30 percent of their potential profits through non-communication. We show that organizations can overcome this problem by adopting automated information procedures, which are equally effective.
    Keywords: Communication procedures, non-instrumental-information, employee motivation
    JEL: C92 D23 D83 M54
    Date: 2014–05
  34. By: Axel Sonntag (University of East Anglia); Daniel John Zizzo (University of East Anglia)
    Abstract: A `collusion puzzle' exists by which, even though increasing the number of firms reduces the ability to tacitly collude, and leads to a collapse in collusion in experimental markets with four or more firms, in natural markets there are such numbers of firms colluding successfully. We present an experiment showing that, if managers are deferential towards an authority, firms can induce more collusion by delegating production decisions to middle managers and providing suitable informal nudges. This holds not only with two but also with four firms. We are also able to distinguish compliance effects from coordination effects from the nudges.
    Date: 2014
  35. By: Meier, Stephan (Columbia University); Pierce, Lamar (Washington University, St. Louis); Vaccaro, Antonino (University of Navarra)
    Abstract: We use experiments in high schools in two neighborhoods in the metropolitan area of Palermo, Italy to experimentally demonstrate that the historical informal institution of organized crime can undermine current institutions, even in religiously and ethnically homogeneous populations. Using trust and prisoner's dilemma games, we found that students in a neighborhood with high Mafia involvement exhibit lower generalized trust and trustworthiness, but higher in-group favoritism, with punishment norms failing to resolve these deficits. Our study suggests that a culture of organized crime can affect adolescent norms and attitudes that might support a vicious cycle of in-group favoritism and crime that in turn hinders economic development.
    Keywords: organized crime, trust, in-group favoritism, Mafia
    JEL: C91 C92
    Date: 2014–05
  36. By: Greg Fischer (London School of Economics); Dean Karlan (Economic Growth Center, Yale University); Margaret McConnell (Harvard University); Pia Raffler (Yale University)
    Abstract: Pricing policy for any experience good faces a key tradeoff. On the one hand, a price reduction increases immediate demand and hence more people learn about the product. On the other hand, lower prices may serve as price anchors and, through a comparison effect, decrease subsequent demand. This tension is particularly important for the distribution of health products in low-income countries, where free or heavily subsidized distribution is a common but controversial practice. Based on a model combining the learning aspect of experience goods with reference-dependent preferences, we set up a field experiment in Northern Uganda in which three health products differing in their scope for learning were initially offered either for free or for sale at market prices. In line with prior studies, when the product has potential for positive learning, we do not find an effect of free distribution on future demand. However, for products without scope for positive learning, we find evidence of price anchors: future demand is lower after a free distribution than after a distribution at market prices.
    Keywords: subsidies, health, pricing, learning
    JEL: D11 D12 D83 I11 I18 O12
    Date: 2014–05
  37. By: Jan-Emmanuel De Neve; Cait Lamberton; Michael I. Norton
    Abstract: Two experiments show that eliciting taxpayer preferences on government spending—providing taxpayer agency--increases tax compliance. We first create an income and taxation environment in a laboratory setting to test for compliance with a lab tax. Allowing a treatment group to express nonbinding preferences over tax spending priorities, leads to a 16% increase in tax compliance. A followup online study tests this treatment with a simulation of paying US federal taxes. Allowing taxpayers to signal their preferences on the distribution of government spending, results in a 15% reduction in the stated take-up rate of a questionable tax loophole. Providing taxpayer agency recouples tax payments with the public services obtained in return, reduces general anti-tax sentiment, and holds satisfaction with tax payment stable despite increased compliance with tax dues. With tax noncompliance costing the US government $385billion annually, providing taxpayer agency could have meaningful economic impact. At the same time, giving taxpayers a voice may act as a two-way "nudge," transforming tax payment from a passive experience to a channel of communication between taxpayers and government.
    Keywords: Tax compliance, taxpayer agency, taxpayer satisfaction, government spending
    JEL: D03 H26 H30 H50 I31
    Date: 2014–05
  38. By: Marc Höglinger; Ben Jann; Andreas Diekmann
    Abstract: Self-administered online surveys provide a higher level of privacy protection to respondents than surveys administered by an interviewer. Yet, studies indicate that asking sensitive questions is problematic also in self-administered surveys. Because respondents might not be willing to reveal the truth and provide answers that are subject to social desirability bias, the validity of prevalence estimates of sensitive behaviors from online surveys can be challenged. A well-known method to overcome these problems is the Randomized Response Technique (RRT). However, convincing evidence that the RRT provides more valid estimates than direct questioning in online surveys is still lacking. A new variant of the RRT called the Crosswise Model (CM) has recently been proposed to overcome some of the deficiencies of existing RRT designs. We therefore conducted an experimental study in which different implementations of the RRT and the CM were tested and compared to direct questioning. Our study is a large-scale online survey (N = 6,037) on sensitive behaviors by students such as cheating in exams and plagiarism. The results reveal a poor performance of the forced-response RRT, while the CM yielded significantly higher estimates of sensitive behaviors than direct questioning. We conclude that the CM is a promising approach for asking sensitive questions in self-administered surveys.
    Keywords: online survey, sensitive questions, plagiarism, exam cheating, randomized response technique, crosswise model
    JEL: C81 C83
    Date: 2014–05–22
  39. By: Alexandra Resch; Jillian Berk; Lauren Akers
    Keywords: opportunistic experiments, Education, Policymakers
    JEL: I
    Date: 2014–04–30
  40. By: Sean P. Hargreaves Heap (University of East Anglia); Abhijit Ramalingam (University of East Anglia); Siddharth Ramalingam (Cambridge Associates); Brock V. Stoddard (Indiana University)
    Abstract: At least since Adam Smith, economists have recognized the beneficial effects of competition in markets. The possible positive influence of competition between teams on the free rider problem within teams is a more recent discovery. It is important because the free rider problem exists to some degree in most teams and because many outcomes in economic and social life depend on competition between teams. However, teams are rarely endowed equally and we do not know much about how such inequality affects the influence of competition on free riding. We address this question with an experiment. It is important not only because of the connections sketched above, but also because this is an overlooked aspect of how inequality impacts on society. We find that there is less free riding within teams when there is competition, that this is robust to moderate degrees of inequality but disappears when inequality is high.
    Date: 2013
  41. By: Michał Krawczyk (Faculty of Economic Sciences, University of Warsaw)
    Abstract: This paper reports the results of a laboratory experiment in which probability weighting functions for risky gains were elicited non-parametrically in over 500 incentivized subjects. I compare probability weights for monetary rewards to two less fungible domains involving vouchers for different types of consumption, inducing stronger or weaker (positive) emotions. The level of stakes was also manipulated. I find that the probability to win monetary rewards is weighted almost linearly in the high stakes condition, the probability to win vouchers associated with positive affect is underweighted and the probability to win affect-poor vouchers is strongly underweighted. Substantial underweighting also prevails in all three domains in the low stakes condition.
    Keywords: prospect theory, probability weighting functions, fungibility, affect
    JEL: D81
    Date: 2014
  42. By: Korbinian von Blanckenburg (Hochschule Ostwestfalen-Lippe, Germany); Milena Neubert (Johannes Gutenberg-Universitaet Mainz, Germany)
    Abstract: This paper presents a classroom experiment on pricing strategies available to monopolists. Each student makes production decisions as a monopolist during the experiment; learning from his/her own experiences what it means to be a price searcher. Full information is provided on cost conditions, while the demand function remains unknown to the participants. Given a sufficient number of periods, students will be able to maximise their profits only by applying a trial-and-error strategy. However, one of the objectives of the experiment is to demonstrate to students that search strategies based on economic principles are more efficient.
    JEL: A20 A23 L12
    Date: 2014–05–16
  43. By: Butler, Jeff; Carbone, Enrica; Conzo, Pierluigi; Spagnolo, Giancarlo
    Abstract: There is widespread concern that favoring suppliers with good past performance, a standard practice in private procurement, may hinder entry by new firms in public procurement markets. In this paper we report results from a laboratory experiment exploring the relationship between reputation and entry in procurement. We implement a repeated procurement game with reputational incentives for quality and the possibility of entry. We allow also the entrant to start off with a positive reputational score. Our results suggest that while some past-performance based reputational mechanisms do reduce the frequency of entry, appropriately designed mechanisms can significantly increase it. Moreover, the reputational mechanism we investigate typically increases quality but not prices, suggesting that well designed mechanisms may generate very large gains for buyers and taxpayers.
    Keywords: bid preferences; entry; feedback mechanisms; outsourcing; past performance; procurement; quality assurance; reputation; vendor rating
    JEL: H57 L14 L15
    Date: 2013–09

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.