nep-exp New Economics Papers
on Experimental Economics
Issue of 2014‒07‒13
eighteen papers chosen by
Daniel Houser
George Mason University

  1. Loss Aversion in the Laboratory By Morrison, William G. and Robert Oxoby
  2. When Ignorance is Bliss* : Information Asymmetries Enhance Prosocial Behavior in Dicator Games By Winschel, Evguenia; Zahn, Philipp
  3. Peers at Work: From the Field to the Lab By Roel van Veldhuizen; Hessel Oosterbeek; Joep Sonnemans
  4. The Effect of Conflict History on Cooperation Within and Between Groups: Evidence from a Laboratory Experiment By Beekman, Gonne; Cheung, Stephen L.; Levely, Ian
  5. Bidding for Nothing? The Pitfalls of overly Neutral Framing By Peter D�rsch; Julia Muller
  6. Auction Format and Auction Sequence in Multi-Item Multi-Unit Auctions - An experimental study By Regina Betz; Ben Greiner; Sascha Schweitzer; Stefan Seifert
  7. Do Employers Prefer Workers Who Attend For-Profit Colleges? Evidence from a Field Experiment By Cory Koedel; Rajeev Darolia; Paco Martorell; Katie Wilson; Francisco Perez-Arce
  8. Risk Taking and Information Aggregation in Groups By Spiros Bougheas; Jeroen Nieboerr; Martin Sefton
  9. How Individual Preferences are Aggregated in Groups: An Experimental Study By Attila Ambrus; Ben Greiner; Parag A. Pathak
  10. Ability Dispersion and Team Performance By Sander Hoogendoorn; Simon C. Parker; Mirjam van Praag
  11. Detecting false positives in experimental auctions: A case study of projection bias in food consumption By Briz, Teresa; Drichoutis, Andreas C.; Nayga, Rodolfo M.
  12. A Theory of Representative Behavior in the Dictator Game By Giménez Gómez, José M. (José Manuel); Osório, António (António Miguel)
  13. Screening for Honesty By Ruffle, Bradley; Tobol, Yossi
  14. "And lead us not into temptation": Presentation formats and the choice of risky alternatives By Glenzer, Franca; Gründl, Helmut; Wilde, Christian
  15. A Rationale for Non-Monotonic Group-Size Effect in Repeated Provision of Public Goods By Wang, Chengsi; Zudenkova, Galina
  16. Social norms, morals and self-interest as determinants of pro-environment behaviour By Mikołaj Czajkowski; Nick Hanley; Karine Nyborg
  17. The anatomy of failure : an ethnography of a randomized trial to deepen democracy in rural India By Ananthpur, Kripa; Malik, Kabir; Rao, Vijayendra
  18. Money or ideas ? a field experiment on constraints to entrepreneurship in rural Pakistan By Gine, Xavier; Mansuri, Ghazala

  1. By: Morrison, William G. and Robert Oxoby (Wilfrid Laurier University)
    Abstract: We report the results of a laboratory experiment testing for the existence of loss aversion in a standard risk aversion protocol (Holt and Laury, 2002). In our experiment, participants earn and retain money for a week before using it in an incentivized risk preference elicitation task. We find loss aversion, distinct from risk aversion, has a significant effect on behavior resulting in participants requiring higher compensation to bear risk.
    Keywords: risk aversion, loss aversion, experiments
    JEL: C91 D91
    Date: 2014–06–30
  2. By: Winschel, Evguenia; Zahn, Philipp
    Abstract: In most laboratory experiments concerning prosocial behavior subjects are fully informed how their decision influences the payoff of other players. Outside the laboratory, however, individuals typically have to decide without such detailed knowledge. To asses the effect of information asymmetries on prosocial behavior, we conduct a laboratory experiment with a simple non-strategic interaction. A dictator has only limited knowledge about the benefits his prosocial action generates for a recipient. We observe subjects with heterogenous social preferences. While under symmetric information only individuals with the same type of preferences transfer, under asymmetric information different types transfer at the same time. As a consequence and the main finding of our experiment, uninformed dictators behave more prosocially than informed dictators.
    Keywords: Asymmetric Information , Prosocial Behavior , Efficiency Concern , Inequality Aversion , Dictator Game
    JEL: D82 C91
    Date: 2014
  3. By: Roel van Veldhuizen (WZB Berlin Social Science Center); Hessel Oosterbeek (Universiteit van Amsterdam); Joep Sonnemans (Universiteit van Amsterdam)
    Abstract: In an influential study, Mas and Moretti (2009) find 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 that they can 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: 2014–04–29
  4. By: Beekman, Gonne (Wageningen University); Cheung, Stephen L. (University of Sydney); Levely, Ian (Charles University, Prague)
    Abstract: We study cooperation within and between groups in the laboratory, comparing treatments in which two groups have previously been (i) in conflict with one another, (ii) in conflict with a different group, or (iii) not previously exposed to conflict. We model conflict using an inter-group Tullock contest, and measure its effects upon cooperation using a multi-level public good game. We demonstrate that conflict increases cooperation within groups, while decreasing cooperation between groups. Moreover, we find that cooperation between groups increases in response to an increase in the efficiency gains from cooperation only when the two groups have not previously interacted.
    Keywords: within- and between-group cooperation, inter-group conflict, group identity, multi-level public good experiment, Tullock contest, other-regarding preferences
    JEL: C92 D64 D74 H41
    Date: 2014–06
  5. By: Peter D�rsch (University of Heidelberg, Germany); Julia Muller (Erasmus University Rotterdam, the Netherlands.)
    Abstract: Neutral framing is a standard tool of experimental economics. However, overly neutral instructions, which lack any contextual clues, can lead to strange behavior. In a contextless second price auction for a meaningless good, a majority of subjects enter positive bids - a case of cognitive experimenter demand effect. Subjects bid positive amounts because this is what they think they are tasked with in the experiment. Adding a second auction that has a context drastically reduces the positive bids in the meaningless first auction by reducing the cognitive experimenter demand effect.
    Keywords: Context, Neutral Framing, Experimenter Demand Effect, Experiment, Second-Price Auction
    JEL: C90 D44
    Date: 2014–05–25
  6. By: Regina Betz (Australian School of Business, the University of New South Wales); Ben Greiner (School of Economics, Australian School of Business, the University of New South Wales); Sascha Schweitzer (University of Bayreuth); Stefan Seifert (University of Bayreuth)
    Abstract: We experimentally study the effect of auction format (sealed-bid vs. closed clock vs. open clock) and auction sequence (simultaneous vs. sequential) on bidding behaviour and auction outcomes in auctions of multiple related multi-unit items. Prominent field applications are the sale of emission permits, fishing rights, and electricity. We find that, when auctioning simultaneously, clock auctions outperform sealed-bid auctions in terms of efficiency and revenues. This advantage disappears when the items are auctioned sequentially. In addition, auctioning sequentially has positive effects on total revenues across all auction formats, resulting from fiercer competition on the item auctioned first.
    Keywords: emission permits, auction design, laboratory experiment
    JEL: C90 D44 Q53
    Date: 2014–06
  7. By: Cory Koedel (Department of Economics, University of Missouri-Columbia); Rajeev Darolia; Paco Martorell; Katie Wilson; Francisco Perez-Arce
    Abstract: This paper reports results from a resume-based field experiment designed to examine employer preferences for job applicants who attended for-profit colleges. For-profit colleges have seen sharp increases in enrollment in recent years despite alternatives such as public community colleges being much cheaper. We sent almost 9,000 fictitious resumes of young job applicants who recently completed their schooling to online job postings in six occupational categories and tracked employer callback rates. We find no evidence that employers prefer applicants with resumes listing a for-profit college relative to those whose resumes list either a community college or no college at all.
    Keywords: for profit college, 2-year college, returns to education, resume field experiment, sub-baccalaureate degree
    JEL: J24 H52 I28
    Date: 2014–06–28
  8. By: Spiros Bougheas (School of Economics, University of Nottingham); Jeroen Nieboerr (Department of Social Policy, London School of Economics and Political Science); Martin Sefton (School of Economics, University of Nottingham)
    Abstract: We report an experiment examining risk taking and information aggregation in groups. Group members come to the table with an individual preference for a choice under risk, based on privately received information, and can share this information with fellow group members. They then make a decision under risk on behalf of the group using a random dictatorship mechanism, as well as an individual decision. Our analysis reveals that, while the behavior of many subjects is consistent with Bayesian rationality, a considerable number of subjects exhibited ‘reverse confirmation bias’: they place less weight on information from others that agrees with their private signal and more weight on conflicting information. We also observe a striking degree of consensus: in most groups all members made the same choice on behalf of the group. The pattern of individual choices after group deliberation suggests that the high degree of group consensus is due to persuasive arguments of other group members.
    Keywords: Group behavior; Teams; Decision Making; Risk; Experiment
  9. By: Attila Ambrus (Department of Economics, Duke University); Ben Greiner (School of Economics, Australian School of Business, the University of New South Wales); Parag A. Pathak (Department of Economics, MIT)
    Abstract: This paper experimentally investigates how individual preferences, through unrestricted deliberation, are aggregated into a group decision in two contexts: reciprocating gifts and choosing between lotteries. In both contexts, we find that median group members have a significant impact on the group decision, but the median is not the only influential group member. Non-median members closer to the median tend to have more influence than other members. By investigating the same individual’s influence in different groups, we find evidence for relative position in the group having a direct effect on influence. These results are consistent with predictions from a spatial model of dynamic bargaining determining group choices. We also find that group deliberation involves bargaining and compromise as well as persuasion: preferences tend to shift towards the choice of the individual’s previous group, especially for those with extreme individual preferences.
    Keywords: group decision-making, role of deliberation, social influence
    JEL: C72 C92 H41
    Date: 2014–06
  10. By: Sander Hoogendoorn (CPB Netherlands Bureau for Economic Policy Analysis, the Netherlands); Simon C. Parker (Ivey Business School, Western University, London, Canada); Mirjam van Praag (Copenhagen Business School, Denmark)
    Abstract: What is the effect of dispersed levels of cognitive ability of members of a (business) team on their team’s performance? This paper reports the results of a field experiment in which 573 students in 49 teams start up and manage real companies under identical circumstances. We ensured exogenous variation in — otherwise random — team composition by assigning students to teams based on their measured cognitive abilities (Raven test). Each team performs a variety of tasks, often involving complex decision making. The key result of the experiment is that the performance of business teams first increases and then decreases with ability dispersion. We seek to understand this finding by developing a model in which team members of different ability levels form sub-teams with other team members with similar ability levels to specialize in different productive tasks. Diversity spreads production over different tasks in order to escape diminishing marginal returns under specialization. The model comes with a boundary condition: our experimental finding is most likely to emerge in settings where different tasks exhibit moderate differences in their productive contributions to total output.
    Keywords: Ability dispersion, team performance, field experiment, entrepreneurship
    JEL: C93 D83 J24 L25 L26 M13 M54
    Date: 2014–05–06
  11. By: Briz, Teresa; Drichoutis, Andreas C.; Nayga, Rodolfo M.
    Abstract: In this paper we argue that valuable information can be conveyed by looking at data coming from the training rounds of experimental auctions. As a case study, we use data from an experiment that seeks to elaborate on the mediating role of mood states on projection bias. Following a mood induction procedure, subjects are found to bid more under negative mood (as compared to positive mood) for products that are delivered in the future but bid less under negative mood for products that are delivered in present time. We show that if one had neglected insights gained from the training auction data, the researcher would have fallen prey to a case of a false positive result.
    Keywords: projection bias; experimental auctions; type I error; false positive
    JEL: C12 C90
    Date: 2014–07–02
  12. By: Giménez Gómez, José M. (José Manuel); Osório, António (António Miguel)
    Abstract: In this paper we present a model of representative behavior in the dictator game. Individuals have simultaneous and non-contradictory preferences over monetary payoffs, altruistic actions and equity concerns. We require that these behaviors must be aggregated and founded in principles of representativeness and empathy. The model results match closely the observed mean split and replicate other empirical regularities (for instance, higher stakes reduce the willingness to give). In addition, we connect representative behavior with an allocation rule built on psychological and behavioral arguments. An approach consistently neglected in this literature. Key words: Dictator Game, Behavioral Allocation Rules, Altruism, Equity Concerns, Empathy, Self-interest JEL classification: C91, D03, D63, D74.
    Keywords: Disseny d'experiments, Microeconomia, Economia del benestar, Decisió de grup, 33 - Economia,
    Date: 2014
  13. By: Ruffle, Bradley (Ben Gurion University); Tobol, Yossi (Jerusalem College of Technology (JTC))
    Abstract: We report the results of a field experiment on honesty conducted on 427 Israeli soldiers fulfilling their mandatory military service. Each soldier rolled a six-sided die in private and reported the outcome to the unit's cadet coordinator. For every point reported, the soldier received an additional half hour early release from the army base on Thursday afternoon. We find that the higher a soldier's military entrance score, the more honest he is on average. Moreover, to the extent that honesty is a valued trait, regression discontinuity analysis reveals that the Israeli military has optimally set the threshold score to qualify to be an officer. Our results bear important implications for the design of screening tests that evaluate employee honesty.
    Keywords: experimental methods, honesty, personnel selection, soldiers, high non-monetary stakes, regression discontinuity design
    JEL: C93 M51
    Date: 2014–06
  14. By: Glenzer, Franca; Gründl, Helmut; Wilde, Christian
    Abstract: This paper uses laboratory experiments to provide a systematic analysis of how different presentation formats affect individuals' investment decisions. The results indicate that the type of presentation as well as personal characteristics influence both, the consistency of decisions and the riskiness of investment choices. However, while personal characteristics have a larger impact on consistency, the chosen risk level is determined more by framing effects. On the level of personal characteristics, participants' decisions show that better financial literacy and a better understanding of the presentation format enhance consistency and thus decision quality. Moreover, female participants on average make less consistent decisions and tend to prefer less risky alternatives. On the level of framing dimensions, subjects choose riskier investments when possible outcomes are shown in absolute values rather than rates of return and when the loss potential is less obvious. In particular, reducing the emphasis on downside risk and upside potential simultaneously leads to a substantial increase in risk taking. --
    Keywords: Behavioral finance,Decision under risk,Framing effects
    Date: 2014
  15. By: Wang, Chengsi; Zudenkova, Galina
    Abstract: This paper analyzes the impact of a group-size change on contributing incentives in repeated provision of pure public goods. We develop a model in which the group members interact repeatedly and might be temporarily constrained to contribute to the public goods production. We show that an increase in the group size generates two opposite effects - the standard free-riding effect and the novel large-scale effect, which enhances cooperative incentives. Our results indicate that the former effect dominates in relatively large groups whilethe latter in relatively small groups. We provide therefore a rationale for nonmonotonic group-size effect which is consistent with the previous empirical and experimental findings.
    Keywords: pure public goods , repeated game , non-monotonic group-size effect
    JEL: H40 D73
    Date: 2014
  16. By: Mikołaj Czajkowski (Faculty of Economic Sciences, University of Warsaw); Nick Hanley (School of Geography and Sustainable Development, University of St Andrews); Karine Nyborg (Department of Economics, University of Oslo)
    Abstract: This paper considers the role which selfish, moral and social incentives and pressures play in explaining the extent to which stated choices over pro-environment behaviours vary across individuals. The empirical context is choices over household waste contracts and recycling actions in Poland. A theoretical model is used to show how cost-based motives and the desire for a positive self- and social image combine to determine the utility from alternative choices of recycling behaviour. We then describe a discrete choice experiment designed to empirically investigate the effects such drivers have on stated choices. Using a latent class model, we distinguish three types of individual who are described as duty-orientated recyclers, budget recyclers and homo oeconomicus. These groups vary in their preferences for how frequently waste is collected, and the number of categories into which household waste must be recycled. Our results have implications for the design of future policies aimed at improving participation in recycling schemes.
    Keywords: recycling, motives of pro-environment behaviour, social norms, discrete choice experiment
    JEL: Q51 Q53 D01 D03
    Date: 2014
  17. By: Ananthpur, Kripa; Malik, Kabir; Rao, Vijayendra
    Abstract: Programs that induce citizen participation to improve the quality of government at the local level are the subjects of large amounts of funding and intense debate. This paper combines a randomized control trial of a citizenship training and facilitation program in rural India, with an in-depth, four-year ethnography of the intervention to understand the underlying mechanisms of change. The quantitative data show no impact from the intervention. Household and village survey data from 100 treatment and 100 control villages show considerable improvement across a wide variety of governance and participation indicators over time, but the differences in the changes between treatment and control villages are not statistically significant. The detailed qualitative data from a 10 percent subsample allow us to unpack the reasons why the intervention"failed,"highlighting the role of variations in the quality of facilitation, lack of top-down support, and difficulties with confronting the stubborn challenge of persistent inequality. However, the qualitative investigation also uncovered subtle treatment effects that are difficult to observe in structured surveys. The paper thus demonstrates that a concerted effort to use"thick description"to uncover the process of change using careful and detailed qualitative work can add value to standard impact evaluations.
    Keywords: Social Accountability,Housing&Human Habitats,Poverty Monitoring&Analysis,Governance Indicators,Public Sector Corruption&Anticorruption Measures
    Date: 2014–06–01
  18. By: Gine, Xavier; Mansuri, Ghazala
    Abstract: This paper identifies the relative importance of human and physical capital for entrepreneurship. A subset of rural microfinance clients were offered eight full time days of business training and the opportunity to participate in a loan lottery of up to Rs. 100,000 (USD 1,700), about seven times the average loan size. The study finds that business training increased business knowledge, reduced business failure, improved business practices and increased household expenditures by about $40 per year. It also improved financial and labor allocation decisions. These effects are concentrated among male clients, however. Women improve business knowledge but show no improvements in other outcomes. A cost-benefit analysis suggests that business training was not cost-effective for the microfinance institution, despite having a positive impact on clients. This may explain why so few microfinance institutions offer training. Access to the larger loan, in contrast, had little effect, indicating that existing loan size limits may already meet the demand for credit for these clients.
    Keywords: Access to Finance,Competitiveness and Competition Policy,Business in Development,Business Environment,E-Business
    Date: 2014–06–01

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