nep-exp New Economics Papers
on Experimental Economics
Issue of 2014‒08‒25
eight papers chosen by

  1. Collective choices under ambiguity By M. Vittoria Levati; Stefan Napel; Ivan Soraperra
  2. De Gustibus Non Est Disputandum: An Experimental Investigation By Dasgupta, Utteeyo; Gangadharan, Lata; Maitra, Pushkar; Mani, Subha
  3. Behind the GATE Experiment: Evidence on Effects of and Rationales for Subsidized Entrepreneurship Training By Fairlie, Robert W.; Karlan, Dean; Zinman, Jonathan
  4. Behavioral Dimensions of Contests By Roman M. Sheremeta
  5. Social Risk: the Role of Warmth and Competence By Jeffrey V. Butler; Joshua B. Miller
  6. Progressive Taxation in a Tournament Economy By Carpenter, Jeffrey P.; Matthews, Peter Hans; Tabb, Benjamin
  7. Fair Weather Avoidance: Unpacking Costs and Benefits in Replication of 'Avoiding the Ask' By Hannah Trachtman; Andrew Steinkruger; Mackenzie Wood; Adam Wooster; James Andreoni; James J. Murphy; Justin M. Rao

  1. By: M. Vittoria Levati (University of Verona and Max Planck Institute of Economics, Jena); Stefan Napel (University of Bayreuth); Ivan Soraperra (University of Verona)
    Abstract: We investigate experimentally whether collective choice matters for individual attitudes to ambiguity. We consider a two-urn Ellsberg experiment: one urn offers a 45% chance of winning a fixed monetary prize, the other an ambiguous chance. Participants choose either individually or in groups of three. Group decision rules vary. In one treatment the collective choice is taken by majority; in another it is dictated by two group members; in the third it is dictated by a single group member. We observe high proportions of ambiguity averse choices in both individual and collective decision making. Although a majority of participants display consistent ambiguity attitudes across their decisions, collective choice tends to foster ambiguity aversion, especially if the decision rule assigns asymmetric responsibilities to group members. Previous participation in laboratory experiments may miti- gate this.
    Keywords: Ambiguity aversion, majority voting, dictatorship
    JEL: C91 C92 D71 D81
    Date: 2014–08–19
  2. By: Dasgupta, Utteeyo; Gangadharan, Lata; Maitra, Pushkar; Mani, Subha
    Abstract: The goal of this paper is to examine stability in preferences using the Stigler- Becker state-dependent framework. Using a randomized intervention that changes the opportunity sets of individuals we construct a unique panel data from an artefactual field experiment and evaluate whether the change in the state space influences our selected indicators of preferences: risk, competitiveness, and confidence. We find that there is considerable heterogeneity of preferences across individuals at a point in time; risk and competitive preferences inter-temporally are consistent with state-dependent preferences, while measures of confidence seem to depend on past experiences.
    Keywords: Preference stability, State Contingent Preferences, Artefactual Field Experiment
    JEL: C9 D01 D03
    Date: 2014–08–18
  3. By: Fairlie, Robert W. (University of California, Santa Cruz); Karlan, Dean (Yale University); Zinman, Jonathan (Dartmouth College)
    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: entrepreneurship, training, random experiment, evaluation, self-employment
    JEL: L26 J24
    Date: 2014–08
  4. By: Roman M. Sheremeta (Weatherhead School of Management, Case Western Reserve University and The Economic Science Institute, Chapman University)
    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
    Date: 2014
  5. By: Jeffrey V. Butler; Joshua B. Miller
    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 con 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. JEL Classification: Z1, C91, D81 Keywords: Social Risk, Social Perception, Intention, Betrayal Aversion, Trust
    Date: 2014
  6. By: Carpenter, Jeffrey P. (Middlebury College); Matthews, Peter Hans (Middlebury College); Tabb, Benjamin (Middlebury College)
    Abstract: Not enough is known about the responsiveness of individuals, in particular those who tend to work under different incentives, to changes in marginal tax rates. We ask whether changes in marginal tax rates are less distortionary for workers engaged in a contest. To examine this potential rationale for a more progressive tax code, we first model the effort decisions of workers faced with progressive taxation under tournaments and piece rates. Because of the difficulty identifying any distortion that may be induced by the tax code in naturally occurring data, we then report on the results of a real-effort experiment based on this model. Consistent with a behavioral approach to public finance, we find that tournament workers are less sensitive, and conclude with a tentative evaluation of the welfare benefits of progressive taxation in tournament economies.
    Keywords: taxation, tournaments, public good, real effort experiment
    JEL: H20 H41 J22 J33 C91
    Date: 2014–08
  7. By: Hannah Trachtman; Andrew Steinkruger; Mackenzie Wood; Adam Wooster; James Andreoni; James J. Murphy; Justin M. Rao
    Abstract: If being asked to give to charity stimulates an emotional response, like empathy, that makes giving difficult to resist, a natural self-control mechanism might be to avoid being asked in the first place. We replicate a result from a field experiment that points to the role of empathy in giving. We conduct an experiment in a large superstore in which we solicit donations to charity and randomly allow shoppers the opportunity to avoid solicitation by using the other door. We find the rate of avoidance by store entrants to be 4.5 percent. However, we also find that the avoidance effect disappears in very cold weather, suggesting that avoidance behavior is sensitive to its cost.
    JEL: D03 D64 H41
    Date: 2014–08
  8. By: C. Bram Cadsby (Department of Economics and Finance, University of Guelph); Ninghua Du (Shanghai University of Finance and Economics); Fei Song (Ryerson University); Lan Yao (Shanghai University of Finance and Economics)
    Abstract: We experimentally investigate a new variant of the trust/investment game that captures some key features of internet peer-to-peer (P2P) lending: the borrower specifies the amount of money required and makes a contingent promise about the value of the generally higher repayment prior to the investor’s decision to lend the required sum or not. We examine the role played by two factors related to traditional Chinese culture and ethics: whether (i) relational closeness between the actors and (ii) the ability of the actors to observe each other’s identity after the repayment decision (identifiability) affect the borrowers’ decisions to make the promised repayments and ultimately the consequent aggregate realized social benefits. Using a two-by-two factorial design, we conduct four treatments in China where these factors are hypothesized to be especially salient, and also perform the identifiability treatment in New Zealand as a cultural control. We find that in China both manipulations are positively and significantly related to the probability of a repayment promise being kept. Moreover, these two factors are substitutes for each other. In New Zealand, there was no significant identifiability effect on promise keeping. The effectiveness of identifiability in China but not in New Zealand resulted in a significantly higher proportion of promises being kept when agents were identifiable in China than in New Zealand. Over time, relational closeness and identifiability both led investors in China to accept more proposals, resulting in more investment and the creation of greater social surplus.
    Keywords: Promise-keeping, P2P lending, relational closeness, identifiability, China, guanxi, mianzi, business ethics, experimental.
    Date: 2014

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