nep-exp New Economics Papers
on Experimental Economics
Issue of 2014‒07‒28
24 papers chosen by
Daniel Houser
George Mason University

  1. Third-Party Punishment: Retribution or Deterrence? By Fangfang Tan; Erte Xiao
  2. The Causal Effect of Market Priming on Trust: An Experimental Investigation Using Randomized Control By Al-Ubaydli, Omar; Houser, Daniel; Nye, John; Paganelli, Maria Pia; Pan, Xiaofei
  3. Behavior in Contests By Sheremeta, Roman
  4. Alternative Payoff Mechanisms for Choice under Risk By James C. Cox; Vjollca Sadiraj; Ulrich Schmidt
  5. Loss Aversion in the Laboratory By Morrison, William G.; Oxoby, Robert J.
  6. Deterrence Works for Criminals By Menusch Khadjavi
  7. Employee Recognition and Performance: A Field Experiment By Bradler, Christiane; Dur, Robert; Neckermann, Susanne; Non, Arjan
  8. Setting the Bar - An Experimental Investigation of Immigration Requirements By Menusch Khadjavi; Jasper D. Tjaden
  9. Using Cognitive Dissonance to Manipulate Social Preferences By Oxoby, Robert J.; Smith, Alexander
  10. What Goes Up Must Come Down? Experimental Evidence on Intuitive Forecasting By Beshears, John Leonard; Choi, James J; Fuster, Andreas; Laibson, David I.; Madrian, Brigitte
  11. Do Personality Traits Affect Productivity? Evidence from the Lab By Cubel, Maria; Nuevo-Chiquero, Ana; Sanchez-Pages, Santiago; Vidal-Fernández, Marian
  12. Social Structure and Institutional Design: Evidence from a Lab Experiment in the Field By Emily Breza; Arun G. Chandrasekhar; Horacio Larreguy
  13. Who cooperates in repeated games: The role of altruism, inequity aversion, and demographics By Dreber-Almenberg, Anna; Fudenberg, Drew; Rand, David G.
  14. Is Ethnic Discrimination Due to Distaste or Statistics? By Baert, Stijn; De Pauw, Ann-Sophie
  15. I Cannot Cheat on You after We Talk By Cristina Bicchieri; Alessandro Sontuoso; ;
  16. The Importance of Being Marginal: Gender Differences in Generosity By Stefano DellaVigna; John List; Ulrike Malmendier; Gautam Rao
  17. Are Non-Expected Utility individuals really Dynamically Inconsistent? Experimental Evidence By Antoine Nebout; Marc Willinger
  18. Unemployment or Overeducation: Which is a Worse Signal to Employers? By Baert, Stijn; Verhaest, Dieter
  19. Wage Subsidies and Hiring Chances for the Disabled: Some Causal Evidence By STIJN BAERT
  20. Testimonials Do Not Convert Patients from Brand to Generic Medication By Laibson, David I.; Madrian, Brigitte; Reynolds, Gwendolyn; Beshears, John Leonard; Choi, James J.
  21. Reconsidering the common ratio effect: The roles of compound independence, reduction, and coalescing By Ulrich Schmidt; Christian Seidl
  22. First Depressed, Then Discriminated Against? By Baert, Stijn; De Visschere, Sarah; Schoors, Koen; Omey, Eddy
  23. Self-Selection into Credit Markets: Evidence from Agriculture in Mali By LORI BEAMAN; DEAN KARLAN; BRAM THUYSBAERT; CHRISTOPHER UDRY
  24. Time Preferences and Consumer Behavior By David Bradford; Charles Courtemanche; Garth Heutel; Patrick McAlvanah; Christopher Ruhm

  1. By: Fangfang Tan; Erte Xiao
    Abstract: We conduct an experiment to examine the role of retribution and deterrence in motivating third party punishment. In particular, we consider how the role of these two motives may differ according to whether a third party is a group or an individual. In a one-shot prisoner’s dilemma game with third party punishment, we find groups punish more when the penalty embeds deterrence than when it can only be retributive. In contrast, individual third parties’ punishment decisions do not vary on whether the punishment has any deterrent effect. In general, third party groups are less likely to impose punishment than individuals even though the punishment is costless for third parties.
    Keywords: third-party punishment, group decision making, retribution, deterrence, social dilemmas, experiment
    JEL: C72 C92 D63 D70
    Date: 2014–05
  2. By: Al-Ubaydli, Omar; Houser, Daniel; Nye, John; Paganelli, Maria Pia; Pan, Xiaofei
    Abstract: We report data from laboratory experiments where participants were primed using phrases related to markets and trade. Participants then participated in trust games with anonymous strangers. The decisions of primed participants are compared to those of a control group. We find evidence that priming for market participation affects positively the beliefs regarding the trustworthiness of anonymous strangers and increases trusting decisions.
    Date: 2013
  3. By: Sheremeta, Roman
    Abstract: Standard theoretical prediction is that rational economic agents participating in rent-seeking contests should engage in socially inefficient behavior by exerting costly efforts. Experimental studies find that the actual efforts of participants are significantly higher than predicted and that over-dissipation of rents (or overbidding or over-expenditure of resources) can occur. Although the standard theory cannot explain over-dissipation, this phenomenon can be explained by incorporating behavioral dimensions into the rent-seeking contest, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are not exhaustive, but they provide a coherent picture of important behavioral dimensions that should be considered when studying rent-seeking behavior in theory and in practice.
    Keywords: rent-seeking, contests, experiments, overbidding, over-dissipation
    JEL: C72 C91 C92 D72 D74
    Date: 2014–07–01
  4. By: James C. Cox; Vjollca Sadiraj; Ulrich Schmidt
    Abstract: Most experiments on decision theory ask individual subjects to make more than one decision. The isolation hypothesis is commonly used to justify the choice of the random lottery incentive mechanism as the preferred payoff protocol. This research note reports on the main findings on the theoretical and empirical performance of different payoff mechanisms on eliciting individuals’ attitudes toward risk. It challenges the conventional view that the random lottery incentive mechanism introduces no biases in inducing risk preferences
    Keywords: experiments, risk, payoff mechanisms, paradoxes, cross-task contamination
    JEL: C91 D81
    Date: 2014–06
  5. By: Morrison, William G. (Wilfrid Laurier University); Oxoby, Robert J. (University of Calgary)
    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: 2014–07
  6. By: Menusch Khadjavi
    Abstract: Criminal law and economics rests on the expectation that deterrence incentives can be employed to reduce crime. Prison survey evidence however suggests that a majority of criminals are biased and may not react to deterrence incentives. This study employs an extra-laboratory experiment in a German prison to test the effectiveness of deterrence. Subjects either face potential punishment when stealing, or they can steal without deterrence. We confirm Gary Becker’s deterrence hypothesis that deterrence works for criminals
    Keywords: Crime, Stealing, Deterrence, Prison, Extra-laboratory experiment, Artefactual field experiment
    JEL: C72 C91 C93 K42
    Date: 2014–07
  7. By: Bradler, Christiane (ZEW Mannheim); Dur, Robert (Erasmus University Rotterdam); Neckermann, Susanne (Erasmus University Rotterdam); Non, Arjan (ROA, Maastricht University)
    Abstract: This paper reports the results from a controlled field experiment designed to investigate the causal effect of unannounced, public recognition on employee performance. We hired more than 300 employees to work on a three-hour data-entry task. In a random sample of work groups, workers unexpectedly received recognition after two hours of work. We find that recognition increases subsequent performance substantially, and particularly so when recognition is exclusively provided to the best performers. Remarkably, workers who did not receive recognition are mainly responsible for this performance increase. Our results are consistent with workers having a preference for conformity and being reciprocal at the same time.
    Keywords: employee motivation, recognition, reciprocity, conformity, field experiment
    JEL: C93 M52
    Date: 2014–07
  8. By: Menusch Khadjavi; Jasper D. Tjaden
    Abstract: Many Western countries face the challenge of reconciling future labor demand with growing public opposition to immigration. The dynamics and underlying processes of setting immigration requirements remain unclear as research so far mainly focuses on context-specific empirical studies. We use a public good game experiment with endogenous groups to investigate how different levels of perceived migrant potential and public debate shape immigration requirements. We employ the minimal group paradigm and immigration requirements are set by in-group voting. Our results suggest that fairness and efficiency of immigration requirements may best be described by the relationship between average population indicators and required contributions of immigrants. Public debate appears to foster fair and efficient requirements if perceived migrant potential is high
    Keywords: Immigration, Public Good, Endogenous Groups, Experiment
    JEL: C91 C92 H41 O15
    Date: 2014–07
  9. By: Oxoby, Robert J. (University of Calgary); Smith, Alexander (Worcester Polytechnic Institute)
    Abstract: We explore the role of cognitive dissonance in dictator and public goods games. Specifically, we motivate cognitive dissonance between one's perception of “fair treatment” and self-interested behaviour by having participants answer a question about fairness. Utilizing two manipulations (reminding participants about their answer to the fairness question and publicly reporting aggregate answers to the question), we find that there is greater cognitive dissonance and behavioural change when there is a social component (i.e., reporting of aggregate answers). When a participant's answer to the fairness question is private, there is less dissonance and hence no behavioural change.
    Keywords: cognitive dissonance, experiments, social preferences
    JEL: C91 D64 H41
    Date: 2014–07
  10. By: Beshears, John Leonard; Choi, James J; Fuster, Andreas; Laibson, David I.; Madrian, Brigitte
    Abstract: Do laboratory subjects correctly perceive the dynamics of a mean-reverting time series? In our experiment, subjects receive historical data and make forecasts at different horizons. The time series process that we use features short-run momentum and long-run partial mean reversion. Half of the subjects see a version of this process in which the momentum and partial mean reversion unfold over ten periods ("fast"), while the other subjects see a version with dynamics that unfold over 50 periods ("slow"). Typical subjects recognize most of the mean reversion of the fast process and none of the mean reversion of the slow process.
    Date: 2013
  11. By: Cubel, Maria (University of Barcelona); Nuevo-Chiquero, Ana (University of Sheffield); Sanchez-Pages, Santiago (University of Barcelona); Vidal-Fernández, Marian (University of New South Wales)
    Abstract: While survey data supports a strong relationship between personality and labor market outcomes, the exact mechanisms behind this association remain unexplored. In this paper, we take advantage of a controlled laboratory set-up to test whether this relationship operates through productivity, and isolate this mechanism from other channels such as bargaining ability or self-selection into jobs. Using a gender neutral real-effort task, we analyse the impact of the Big Five personality traits on performance. We find that more neurotic subjects perform worse, and that more conscientious individuals perform better. These findings are in line with previous survey studies and suggest that at least part of the effect of personality on labor market outcomes operates through productivity. In addition, we find evidence that gender and university major affect the impact of the Big Five personality traits on performance.
    Keywords: Big-Five, personality traits, experiment, labour productivity, performance
    JEL: C91 D03 J3 M5
    Date: 2014–07
  12. By: Emily Breza; Arun G. Chandrasekhar; Horacio Larreguy
    Abstract: In settings with poor formal contract enforcement, profitable investments are likely unrealized. While social closeness can mitigate contractual incompleteness, we examine how to improve the preponderance of cases where contracting parties cannot rely upon social ties. We ask if a community can enlist members to monitor transactions or punish offending parties. We conduct a laboratory experiment in 40 Indian villages, with 960 non-anonymized subjects, where we have social network data. Participants play modified sender-receiver investment games, with and without third-party monitors and punishers. We examine whether network centrality of the third party increases efficiency of interaction. Furthermore, we decompose the efficiency increase into a monitoring channel (central third parties are valuable since they may influence reputations) and an enforcement channel (central third parties may be more able to punish without fear of retaliation). Assigning a third party at the 75th percentile of the centrality distribution (as compared to the 25th) increases efficiency by 21% relative to the mean: we attribute 2/5 of the effect to monitoring and 3/5 to enforcement. The largest efficiency increase occurs when senders and receivers are socially distant, unable to maintain efficient levels autonomously. Results cannot be explained by demographics such as elite status, caste, wealth or gender. Our findings show not every member is equally well-equipped to be part of a local institution. Knowing that a central third party observes their interaction increases sender-receiver efficiency. More importantly, to be able to punish someone, the third party must be important in the community.
    JEL: D02 L14 O17 Z13
    Date: 2014–07
  13. By: Dreber-Almenberg, Anna; Fudenberg, Drew; Rand, David G.
    Abstract: We explore the extent to which altruism, as measured by giving in a dictator game (DG), accounts for play in a noisy version of the repeated prisoner's dilemma. We find that DG giving is correlated with cooperation in the repeated game when no cooperative equilibria exist, but not when cooperation is an equilibrium. Furthermore, none of the commonly observed strategies are better explained by inequity aversion or efficiency concerns than money maximization. Various survey questions provide additional evidence for the relative unimportance of social preferences. We conclude that cooperation in repeated games is primarily motivated by long-term payoff maximization and that even though some subjects may have other goals, this does not seem to be the key determinant of how play varies with the parameters of the repeated game. In particular, altruism does not seem to be a major source of the observed diversity of play.
    Date: 2014
  14. By: Baert, Stijn (Ghent University); De Pauw, Ann-Sophie (Ghent University)
    Abstract: Employing a lab experiment, we directly test the empirical importance of key attitudes underlying the models of taste-based and statistical discrimination in explaining ethnic hiring discrimination. We find evidence that employer concern that co-workers and customers will prefer collaborating with native individuals drives unequal treatment.
    Keywords: taste discrimination, statistical discrimination, hiring discrimination, economics of ethnic minorities
    JEL: J24 J60 C92
    Date: 2014–07
  15. By: Cristina Bicchieri; Alessandro Sontuoso (Philosophy, Politics and Economics, University of Pennsylvania); ;
    Abstract: This is a draft of a chapter in a planned book on the Prisoner’s Dilemma, edited by Martin Peterson, to be published by Cambridge University Press. - Experimental evidence on pre-play communication supports a “focusing function of communication” hypothesis. Relevant communication facilitates cooperative, pro-social behavior because it causes a shift in individuals’ focus towards strategies dictated by some salient social norm. After reviewing the formal foundations for a general theory of conformity to social norms, we provide an original application illustrating how a framework that allows for different conjectures about norms is able to capture the focusing function of communication and to explain experimental results.
    Keywords: social norms, social dilemmas
    JEL: C72 C92
    Date: 2014–07
  16. By: Stefano DellaVigna; John List; Ulrike Malmendier; Gautam Rao
    Abstract: Do men and women have different social preferences? Previous findings are contradictory. We�provide a potential explanation using evidence from a field experiment. In a door-to-door�solicitation, men and women are equally generous, but women become less generous when it�becomes easy to avoid the solicitor. Our structural estimates of the social preference parameters�suggest an explanation: women are more likely to be on the margin of giving, partly because of a�less dispersed distribution of altruism. We find similar results for the willingness to complete an�unpaid survey: women are more likely to be on the margin of participation.
  17. By: Antoine Nebout; Marc Willinger
    Abstract: We investigate whether non-EU agents satisfy strategic dynamic consistency (SDC), i.e. "consistent planning" according to Strotz (1955). Depending on the dynamic axiom that is violated (dynamic consistency, consequentialism or reduction of compound lottery), we categorise non-EU individuals either as naïve, sophisticated or resolute. We rely on experimental data about individual behaviour to built a two-way categorisation of our subjects: firstly, either as EU or non-EU, and secondly either as SDC or non-SDC. Our main finding is that most non-EU subjects satisfy both SDC and dynamic consistency. This result raises an interesting theoretical puzzle about the dynamically consistent behaviour of non-EU agents.
    Date: 2014–07
  18. By: Baert, Stijn (Ghent University); Verhaest, Dieter (K.U.Leuven)
    Abstract: This study aims at estimating the stigma effect of unemployment and overeducation within one framework. To this end, we conduct a field experiment in the Belgian labour market. We send out trios of fictitious male job applications to real vacancies. These applications differ only by the labour market history of the candidates. By monitoring the subsequent reactions from the employer side, we find evidence for a larger stigma effect of unemployment than overeducation. The stigma effect of overeducation is found to occur for permanent contract jobs but not temporary ones.
    Keywords: unemployment signalling, overeducation signalling, transitions in youth
    JEL: J24 J60 C93
    Date: 2014–07
  19. By: STIJN BAERT (-)
    Abstract: We evaluate the effectiveness of wage subsidies as a policy instrument to integrate disabled individuals into the labour market. To identify causal effects, we conduct a large-scale field experiment in Belgium. Our results show that the likelihood of a disabled candidate receiving a positive response to a job application is not positively influenced by revealing entitlement to the Flemish Supporting Subsidy.
    Keywords: labour market policy evaluation; wage subsidies; disability; discrimination.
    JEL: I38 J14 J78
    Date: 2014–07
  20. By: Laibson, David I.; Madrian, Brigitte; Reynolds, Gwendolyn; Beshears, John Leonard; Choi, James J.
    Abstract: Objectives: To assess whether the addition of a peer testimonial to an informational mailing increases conversion rates from brand-name prescription medications to lower-cost therapeutic equivalents, and whether the testimonial’s efficacy increases when information is added about an affiliation the quoted individual shares with the recipient. Research Design and Methods: 5,498 union members were randomly assigned to receive one of three different informational letters: one without a testimonial (No Testimonial Group), one with a testimonial from a person whose shared union affiliation with the recipient was not disclosed (Unaffiliated Testimonial Group), and one with a testimonial from a person whose shared union affiliation with the recipient was disclosed (Affiliated Testimonial Group). Results: The conversion rate for the No Testimonial Group was 12.2%, which is higher than the Unaffiliated Testimonial Group rate of 11.3% and the Affiliated Testimonial Group rate of 11.7%. The differences between the groups are not statistically significant. Conclusions: Short peer testimonials do not increase the impact of a mailed communication on conversion rates to lower-cost, therapeutically equivalent medications, even when the testimonial is presented as coming from a more socially proximate peer.
    Date: 2013
  21. By: Ulrich Schmidt; Christian Seidl
    Abstract: Common ratio effects should be ruled out if subjects' preferences satisfy compound independence, reduction of compound lotteries, and coalescing. In other words, at least one of these axioms should be violated in order to generate a common ratio effect. Relying on a simple experiment, we investigate which failure of these axioms is concomitant with the empirical observation of common ratio effects.We observe that compound independence and reduction of compound lotteries hold, whereas coalescing is systematically violated. This result provides support for theories which explain the common ratio effect by violations of coalescing (i.e., configural weight theory) instead of violations of compound independence (i.e., rank-dependent utility or cumulative prospect theory)
    Keywords: common ratio effect, coalescing, reduction, compound independence, event splitting, branch splitting, isolation effect, Allais paradox
    JEL: C91 C44 D81
    Date: 2014–06
  22. By: Baert, Stijn (Ghent University); De Visschere, Sarah (Ghent University); Schoors, Koen (Ghent University); Omey, Eddy (Ghent University)
    Abstract: This study assesses hiring discrimination based on disclosed depression. We send out pairs of job applications from fictitious unemployed candidates to real vacancies in Belgium. Within each pair, one candidate cites depression as the reason for her/his unemployment, whereas the other candidate reveals no reason for unemployment. Overall, the hypothesis that applicants disclosing former depression are treated unfavourably is rejected. However, if we break up the data by the gender of the recruiter, we see that revealing former depression as a reason for unemployment is rewarded by female recruiters, whereas it affects the hiring decisions made by male recruiters in a non-positive way.
    Keywords: economics of health, depression, hiring discrimination, field experiments
    JEL: I14 J71 C93
    Date: 2014–07
    Abstract: We partnered with a micro-lender in Mali to randomize credit offers at the village level. Then, in no-loan control villages, we gave cash grants to randomly selected households. These grants led to higher agricultural investments and profits, thus showing that liquidity constraints bind with respect to agricultural investment. In loan-villages, we gave grants to a random subset of farmers who (endogenously) did not borrow. These farmers have lower – in fact zero – marginal returns to the grants. Thus we find important heterogeneity in returns to investment and strong evidence that farmers with higher marginal returns to investment self-select into lending programs.
    Keywords: credit markets; agriculture; returns to capital
    JEL: D21 D92 O12 O16 Q12 Q14
    Date: 2014–05
  24. By: David Bradford; Charles Courtemanche; Garth Heutel; Patrick McAlvanah; Christopher Ruhm
    Abstract: We investigate the predictive power of survey-elicited time preferences using a representative sample of US residents. In regressions controlling for demographics and risk preferences, we show that the discount factor elicited from choice experiments using multiple price lists and real payments predicts various health, energy, and financial outcomes, including overall self-reported health, smoking, drinking, car fuel efficiency, and credit card balance. We allow for time-inconsistent preferences and find that the long-run and present bias discount factors (δ and β) are each significantly associated in the expected direction with several of these outcomes. Finally, we explore alternate measures of time preference. Elicited discount factors are correlated with several such measures, including self-reported willpower. A multiple proxies approach using these alternate measures shows that our estimated associations between the time-consistent discount factor and health, energy, and financial outcomes may be conservative.
    JEL: D14 D91 I10 Q40
    Date: 2014–07

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