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on Experimental Economics |
| By: | Shachat, Jason; Wang, Hang |
| Abstract: | We evaluate how traders' asset market activities are distributed in time impacts pricing efficiency, volume, and individual portfolio holdings. Through the first controlled experiment on such timing, we find that cohorts who participate in a sequence of three markets in a single experimental session generate more mispricing and bubbles - but the same trade volume and variability in portfolio values - than cohorts whose three markets are spaced a week apart. We further find that experience gained through spaced repetitions, as opposed to massed repetitions, leads to smaller price bubbles when subjects are recruited to a new cohort and participate in a market for a different asset. |
| Keywords: | Spacing effects; learning; asset market; bubble; laboratory experiment |
| JEL: | C92 D03 G12 |
| Date: | 2014–06–29 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57672&r=exp |
| By: | Shachat, Jason; Geng, Sen; Peng, Yujia; Zhong, Huizhen |
| Abstract: | We conduct experiments with adolescent participants on repeated fixed play in three different zero-sum games which have mixed strategy minimax solutions. Further, we collect subject information on cognitive abilities and participation rates in competitive activities. We find the adolescents' correspondences with and deviations from minimax play largely consistent with previously and widely studied adult populations. Further, we find strategic sophistication in terms of implementation of the mixed minimax strategy as well as earnings are not correlated with cognitive ability nor previous experience in competitive situations. |
| Keywords: | Minimax; experimental game; adolescent; cognitive abilities |
| JEL: | C72 C93 D03 |
| Date: | 2014–08–01 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57710&r=exp |
| By: | Schotter, Andrew; Trevino, Isabel |
| Abstract: | This paper investigates the usefulness of non-choice data, namely response times, as a predictor of threshold behavior in a simple global game experiment. Our results indicate that the signal associated to the highest or second highest response time at the beginning of the experiment are both unbiased estimates of the threshold employed by subjects at the end of the experiment. This predictive ability is lost when we move to the third or higher response times. Moreover, the response time predictions are better predictors of observed behavior than the equilibrium predictions of the game. They are also robust, in the sense that they characterize behavior in an out-of-treatment exercise where we use the strategy method to elicit thresholds. This paper is the first to point out the predictive power of response times in a strategic situation. -- |
| Keywords: | response time,threshold strategies,global games |
| JEL: | C71 C9 D03 D89 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2014305&r=exp |
| By: | Luba Petersen (Simon Fraser University) |
| Abstract: | This paper explores the importance of accessible and focal information in influencing beliefs and attention in a learning-to-forecast laboratory experiment where subjects are incentivized to form accurate expectations about inflation and the output gap. We consider the effects of salient and accessible forecast error information and learning on subjects' forecasting accuracy and heuristics, and on aggregate stability. Experimental evidence indicates that, while there is considerable heterogeneity in heuristics used, subjects' forecasts can be best described by a constant-gain learning model where subjects respond to forecast errors. Salient forecast error information reduces subjects' overreaction to their errors and leads to greater forecast accuracy, coordination of expectations and macroeconomic stability. The benefits of this focal information are short-lived and diminish with learning. |
| Keywords: | experimental macroeconomics, laboratory experiment, monetary policy, expectations, learning to forecast, availability heuristic, focal points, communication, rational inattention |
| JEL: | C92 E2 E52 D50 D91 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:sfu:sfudps:dp14-05&r=exp |
| By: | Raj Chetty; Emmanuel Saez; László Sándor |
| Abstract: | We evaluate policies to increase prosocial behavior using a field experiment with 1,500 referees at the Journal of Public Economics. We randomly assign referees to four groups: a control group with a six week deadline to submit a referee report, a group with a four week deadline, a cash incentive group rewarded with $100 for meeting the four week deadline, and a social incentive group in which referees were told that their turnaround times would be publicly posted. We obtain four sets of results. First, shorter deadlines reduce the time referees take to submit reports substantially. Second, cash incentives significantly improve speed, especially in the week before the deadline. Cash payments do not crowd out intrinsic motivation: after the cash treatment ends, referees who received cash incentives are no slower than those in the 4 week deadline group. Third, social incentives have smaller but significant effects on review times and are especially effective among tenured professors, who are less sensitive to deadlines and cash incentives. Fourth, all the treatments have little or no effect on agreement rates, quality of reports, or review times at other journals. We conclude that small changes in journals’ policies could substantially expedite peer review at little cost. More generally, price incentives, nudges, and social pressure are effective and complementary methods of increasing prosocial behavior. |
| Date: | 2014–01 |
| URL: | http://d.repec.org/n?u=RePEc:qsh:wpaper:176786&r=exp |
| By: | Jordi Brandts; Christina Rott; Carles Solà |
| Abstract: | We conduct a laboratory experiment to study how, after a history of decay, cooperation in a repeated voluntary contribution game can be revived in an enduring way. Simply starting the repeated game over - a simple fresh start - leads to an initial increase of cooperation, but to a subsequent new decay. Motivated by cooperation decay in organizations we study the potential of three interventions of triggering higher and sustained cooperation taking place at the same time as a restart. Surprisingly, we find that the detailed explanation of the causes of the decay in cooperation from Fischbacher and Gaechter (2010) combined with an advice on how to prevent decay do not have an effect beyond that of just starting over. In contrast, a one-way free form communication message sent by the leader to the followers strongly revives cooperation. Repeated free form communication by the leader further strengthens the reviving effect on cooperation. Combining the two previous interventions does not outperform the pure effect of communication. Our content analysis reveals that leader communication is more people oriented and less formal than the expert advice. |
| Keywords: | leadership, cooperation, communication |
| JEL: | C71 C73 C92 D83 J63 L20 |
| URL: | http://d.repec.org/n?u=RePEc:bge:wpaper:775&r=exp |
| By: | Sheremeta, Roman |
| Abstract: | The standard theoretical description of rent-seeking contests is that of rational individuals or groups engaging in socially inefficient behavior by exerting costly effort. Experimental studies find that the actual efforts of participants are significantly higher than predicted in the models based on rational behavior and that over-dissipation of rents (or overbidding or over-expenditure of resources) can occur. Although over-dissipation cannot be explained by the standard rational-behavior theory, it can be explained by incorporating behavioral dimensions into the standard model, such as (1) the utility of winning, (2) relative payoff maximization, (3) bounded rationality, and (4) judgmental biases. These explanations are not exhaustive but provide a coherent picture of important behavioral dimensions to 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: | 2014–08–04 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:57751&r=exp |
| By: | Antonios Proestakisy (Institute for Health and Consumer Protection, Joint Research Centre, European Commission); Pablo Branas-Garza (Middlesex University Business School, Middlesex University London); Praveen Kujal (Middlesex University London) |
| Abstract: | Empirical evidence suggests that physical characteristics such as obesity can result in a salary gap in the work place. It is, however, not clear how much of this (gap) is due to factors emanating from the demand or supply side of the market. In this paper we use a field experiment to study whether a part of this wage gap can be attributed to personality traits of individuals on the supply side. Monitors randomly select individuals to respond to a questionnaire. Individuals can make money requests for completing the questionnaire. In the questionnaire they also self-report several personality chracteristics. We nd that the more obese individuals perceive themselves to be, lesser is the money they request. The negative association between money requests and obesity is mostly driven by female participants. The eect of (self-perceived) non-obese individuals is asymmetric across gender. Self perceived "normal" females, perceived thin by the monitors, request more, meanwhile, males in this category request less relative to those that do not overstate their obesity levels. Our results suggest that lower salary request may anchor obese individuals to lower thresholds and may partly explain the wage gap. |
| Keywords: | Self-reported obesity, eld experiments, willingness to accept, gender bias |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:14-13&r=exp |
| By: | Fairlie, Robert |
| Abstract: | Theories of market failures and targeting motivate the promotion of entrepreneurship training programs and generate testable predictions regarding heterogeneous treatment effects from such programs. Using a large randomized evaluation in the United States, we find no strong or lasting effects on those most likely to face credit or human capital constraints, or labor market discrimination. We do find a short-run effect on business ownership for those unemployed at baseline, but this dissipates at longer horizons. Treatment effects on the full sample are also short-term and limited in scope: we do not find effects on business sales, earnings, or employees. |
| Keywords: | Business, entrepreneurship, training, random experiment, evaluation, self-employment |
| Date: | 2014–08–06 |
| URL: | http://d.repec.org/n?u=RePEc:cdl:ucscec:qt56k4264f&r=exp |
| By: | Jeffrey V. Butler (EIEF); Joshua B. Miller (Università Bocconi and IGIER) |
| Abstract: | Previous research has documented a behavioral distinction between "social risk" and financial risk. For example, individuals tend to demand a premium on the objective probability of a favorable outcome when that outcome is determined by a human being instead of a randomizing device (Bohnet, Greig, Herrmann, and Zeckhauser 2008; Bohnet and Zeckhauser 2004). In this paper we ask whether social risk is always aversive, answering in the negative and identifying factors that can eliminate, or even change the sign of, the social risk premium. Motivated by the stereotype content model from the social psychology literature, which we argue has straightforward predictions for situations involving social risk (Fiske, Cuddy, and Glick 2007), we focus on two factors: "warmth," synonymous with intent, and "competence." We investigate these factors using a between-subjects experimental design that implements slight modifications of the binary trust game of Bohnet and Zeckhauser across treatments. Our results indicate that having risk generated by another human being does not, on its own, lead to a social risk premium. Instead, we find that a positive risk premium is demanded when a counter-party has interests confl icting with one's own (low warmth) and, additionally, is competent. We find a negative social risk premium - i.e., social risk seeking - when the counter-party has contrary interests but lacks competence. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:eie:wpaper:1403&r=exp |
| By: | Paul Viefers; Philipp Strack |
| Abstract: | Many economic situations involve the timing of irreversible decisions. E.g. People decide when to sell a stock or stop searching for a better price. We analyze the behavior of a decision maker who evaluates his choice relative to the ex-post optimal choice in an optimal stopping task. We derive the optimal strategy under such regret preferences, and show how it is different from that of an expected utility maximizer. We also show that if the decision maker never commits mistakes the behavior resulting from this strategy is observationally equivalent to that of an expected utility maximizer. We then test our theoretical predictions in the laboratory. The results from a structural discrete choice model we fit to our data provide strong evidence that many people's stopping behavior is largely determined by the anticipation of and aversion to regret. |
| Keywords: | Optimal stopping, Dynamic behavior, Regret |
| JEL: | D3 C91 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:diw:diwwpp:dp1401&r=exp |
| By: | Irenaeus Wolff |
| Abstract: | Crawford and Iriberri (AER, 2007) show how a level-k model can be based on salience to explain behaviour in games with distinctive action labels, taking hide-and-seek games as an example. This study presents four dierent experiments designed to measure salience. When based on any of these empirical salience measures, their model does not explain behaviour. Modifying the model such that players follow salience when payos are equal, the model ts hide-and-seek data well. However, neither the original nor the modied model account for data from a discoordination game. This holds true even when incorporating the heterogeneity in measured salience perceptions. |
| Keywords: | ABAA, hide and seek, cognitive hierarchy, strategic reasoning, saliency |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:twi:respas:0094&r=exp |
| By: | Eric J. Allen; Patricia M. Dechow; Devin G. Pope; George Wu |
| Abstract: | Models of reference-dependent preferences propose that individuals evaluate outcomes as gains or losses relative to a neutral reference point. We test for reference dependence in a large dataset of marathon finishing times (n = 9,524,071). Models of reference-dependent preferences such as prospect theory predict bunching of finishing times at reference points. We provide visual and statistical evidence that round numbers (e.g., a four-hour marathon) serve as reference points in this environment and as a result produce significant bunching of performance at these round numbers. Bunching is driven by planning and adjustments in effort provision near the finish line and cannot be explained by explicit rewards (e.g., qualifying for the Boston Marathon), peer effects, or institutional features (e.g., pacesetters). We calibrate a simple model of prospect theory as well as other models of reference dependence and show that the basic qualitative shape of the empirical distribution of finishing times is consistent with parameters that have previously been estimated in the laboratory. |
| JEL: | D03 J22 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20343&r=exp |