nep-exp New Economics Papers
on Experimental Economics
Issue of 2014‒11‒12
twenty papers chosen by

  1. Peers at Work: From the Field to the Lab By Roel van Veldhuizen; Hessel Oosterbeek; Joep Sonnemans
  2. De Gustibus Non Est Disputandum: An Experimental Investigation By Utteeyo Dasgupta; Lata Gangadharan; Pushkar Maitra; Subha Mani
  3. Whom are you talking with? An experiment on credibility and communication structure By Gilles Grandjean; Marco Mantovani; Ana Mauleon; Vincent Vannetelbosch
  4. Payment Scheme Changes and Effort Provision: The Effect of Digit Ratio By Neyse, Levent; Friedl, Andreas; Schmidt, Ulrich
  5. Reexamination of teams play in mixed-strategy game experiment By Yoshitaka Okano
  6. Race and Gender Effects on Employer Interest in Job Applicants: New Evidence from a Resume Field Experiment By Cory Koedel; Rajeev Darolia; Paco Martorell; Katie Wilson; Francisco Perez-Arce
  7. The Influence of Transparency on Investments in Climate Protecting - An Economic Experiment By Elmar A. Janssen
  8. Auctions and Leaks: A Theoretical and Experimental Investigation By Fischer, Sven; Guth, Werner; Kaplan, Todd; Zultan, Roi
  9. Do Women Panic More Than Men? An Experimental Study on Financial Decision By Hubert J. Kiss; Ismael Rodriguez-Lara; Alfonso Rosa-Garcia
  10. Consensus vs. Conformity in Mixed-Motive Games By Michael Naef; Alessandro Sontuoso
  11. The Impact of Losing in a Competition on the Willingness to seek Further Challenges By Thomas Buser
  12. Ability Dispersion and Team Performance By Sander Hoogendoorn; Simon C. Parker; Mirjam van Praag
  13. Conditioning on What? Heterogeneous Contributions and Conditional Cooperation By Björn Hartig; Bernd Irlenbusch; Felix Kölle
  14. The Perception of Lethal Risks - Evidence from a Laboratory Experiment By Tilman Brück; Manuel Schubert
  15. Dishonesty and Selection into Public Service By Hanna, Rema; Wang, Shing-Yi
  16. Focal Points Revisited: Team Reasoning, the Principle of Insufficient Reason and Cognitive Hierarchy Theory By Bardsley, Nicholas; Ule, Aljaz
  17. Choosing whether to compete: Price and format competition with consumer confusion By Paolo Crosetto; Alexia Gaudeul
  18. Effects of Threshold Uncertainty on Common-Pool Resources By Adler Mandelbaum, Sara E
  19. Trust, Leniency and Deterrence By Bigoni, Maria; Fridolfsson, Sven-Olof; Le Coq, Chloé; Spagnolo, Giancarlo
  20. Ambiguity Preferences and Portfolio Choices: Evidence from the Field. By Milo Bianchi; Jean-Marc Tallon

  1. 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
  2. By: Utteeyo Dasgupta (Wagner College); Lata Gangadharan (Monash University); Pushkar Maitra (Monash University); Subha Mani (Fordham University)
    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
  3. By: Gilles Grandjean; Marco Mantovani; Ana Mauleon; Vincent Vannetelbosch
    Abstract: The paper analyzes the role of the structure of communication - i.e. who is talking with whom - on the choice of messages, on their credibility and on actual play. We run an experiment in a three-player coordination game with Pareto ranked equilibria, where a pair of agents has a profitable joint deviation from the Pareto-dominant equilibrium. According to our analysis of credibility, the subjects should communicate and play the Pareto optimal equilibrium only when communication is public. When pairs of agents exchange messages privately, the players should play the Pareto dominated equilibrium and disregard communication. The experimental data conform to our predictions: the agents reach the Pareto-dominant equilibrium only when announcing to play it is credible. When private communication is allowed, lying is prevalent, and players converge to the Pareto-dominated equilibrium. Nevertheless, at the individual level, players’ beliefs and choices tend to react to messages even when these are non-credible.
    Keywords: cheap talk, coordination, coalitions, experiment
    JEL: C72 C91 D03 D83
    Date: 2014–10
  4. By: Neyse, Levent; Friedl, Andreas; Schmidt, Ulrich
    Abstract: Economic experiments report that individuals perform better under a piece rate payment scheme in comparison to a fixed payment scheme. The reason is straightforward: incentives motivate people, and without incentives they decrease their effort. Yet women are prone to choose a fixed payment over a piece rate payment scheme. We aim to find out if this gender effect is related to prenatal exposure to testosterone, which by nature is sexually dimorphic and has permanent effects on human brain development with an impact on cognitive and physical skills, as well as behavior. We investigate the effect of prenatal testosterone exposure on performance adjustment in a real effort task. Each subject is salaried under either a fixed rate or piece rate payment scheme for five periods and subsequently encounters the alternative payment method for another five periods. To observe the prenatal testosterone levels that the participants were exposed to during pregnancy, we use the so-called digit ratio as an indirect measurement method. It uses the length-ratio between the participants’ index and ring fingers to infer about their in utero testosterone exposure. Our results confirm the previous findings indicating that individuals perform better when incentivized by a piece rate payment scheme. Subjects who are paid piece rate in the first half of the experiment immediately decrease their performance at the beginning of the second half when paid under a fixed payment scheme. In contrast, subjects increase their effort if the payment method is switched from fixed rate to piece rate in the second half of the experiment. Subjects who were exposed to higher levels of prenatal testosterone provide significantly lower effort when the payment scheme is switched from piece rate to fixed rate.
    Keywords: Digit Ratio; 2D:4D; Real Effort Task; Payment Schemes; Incentives
    JEL: C91 D87 J33
    Date: 2014–10–28
  5. By: Yoshitaka Okano (Kochi University of Technology)
    Abstract: Palacios-Huerta and Volij (2008) found that the behavior of professional soccer players in two-person zero-sum games is consistent with minimax play, while Wooders (2010) reexamined their data and found inconsistencies in several respects. This study applies a similar analysis of Wooders (2010) to the experimental data in Okano (2013), which found that the behavior of teams of two student subjects conforms closely to minimax play, and addresses whether teams exhibit the same inconsistencies as professionals. Teams were found to have consistency with minimax play, with no tendencies similar to those of professionals.
    Keywords: Experimental game, teams' decision making, minimax, zero-sum
    JEL: C72 C92
    Date: 2014–10
  6. By: Cory Koedel (Department of Economics, University of Missouri-Columbia); Rajeev Darolia; Paco Martorell; Katie Wilson; Francisco Perez-Arce
    Abstract: We sent nearly 9,000 fictitious resumes to advertisements for job openings in seven major cities in the United States across six occupational categories. We randomly assigned names to the resumes that convey race and gender but for which a strong socioeconomic connotation is not implicated. We find little evidence of systematic employer preferences for applicants from particular race and gender groups
    Keywords: Employment, Discrimination, Race/Ethnicity, Gender, Field Experiment
    JEL: J71 C93
    Date: 2014–10–20
  7. By: Elmar A. Janssen (University of Paderborn)
    Abstract: Climate change is one of the biggest problems humankind is currently facing. Therefore, there have recently been a rising number of studies which analyze the economic components of climate change. Especially experimental economics offer a promising way to circumvent the missing data problem and the lack of control in the field. The present study experimentally analyzes the influence of transparency on investments in climate protection using a collective-risk social dilemma framework. The results are as follows: There is a positive influence of transparency on investments in climate change, but it turns out to be not significant. However, the results of the present study taken together with the results of former studies using the same framework indicate that information saliency regarding climate change and climate protection have a huge promoting influence on investments in climate protection and therefore could be a part of the solution of the climate change problem.
    Keywords: climate change, emission reduction, public goods game, transparency, economic experiment
    JEL: Q54 H41 D03
    Date: 2014–07
  8. By: Fischer, Sven; Guth, Werner; Kaplan, Todd; Zultan, Roi
    Abstract: We study first- and second-price private value auctions with sequential bidding where second movers may discover the first movers bids. There is a unique equilibrium in the first-price auction and multiple equilibria in the second-price auction. Consequently, comparative statics across price rules are equivocal. We experimentally find that in the first-price auction, leaks benefit second movers but harm first movers and sellers. Low to medium probabilities of leak eliminate the usual revenue dominance of first-price over second-price auctions. With a high probability of a leak, second-price auctions generate higher revenue.
    Keywords: auctions, espionage, collusion, laboratory experiments
    JEL: C72 C91 D44
    Date: 2014–09–19
  9. By: Hubert J. Kiss (Momentum Game Theory Research Group, Institute of Economics, Centre for Economic and Regional Studies Hungarian Academy of Sciences); Ismael Rodriguez-Lara (Economics and international development, Middlesex University London); Alfonso Rosa-Garcia (Facultad de Ciencias Juridicas y de la Empresa, Universidad Catolica San Antonio)
    Abstract: We report experimental evidence on gender differences in financial decision that involves three depositors choosing between waiting or withdrawing their money from a common bank. We find that the position in the line, the fact of being observed and the observed decisions are key determinants to explain subjects’ behavior. Although both men and women value being observed, it has a greater effect on women’s decisions. Observing a withdrawal increases the likelihood of withdrawal but women and men do not react differently to what is observed, so they are equally likely to panic if a bank run is already underway. Interestingly, risk aversion has no predictive power on depositors’ behavior.
    Keywords: bank run, gender difference, strategic uncertainty, experimental evidence, coordination.
    JEL: C91 D03 D8 G02 J16
    Date: 2014–02
  10. By: Michael Naef; Alessandro Sontuoso (Philosophy, Politics and Economics, University of Pennsylvania)
    Abstract: A correlation between second-order beliefs and strategies – in social dilemmas – has been interpreted as evidence of guilt aversion (Charness and Dufwenberg [2006]). Ellingsen et al. [2010] hypothesize that such correlation might rather be due to consensus effects. Here we propose an additional explanation, conformity, which involves a similar belief-behavior correlation and we set out to tell these motivations apart by proposing a design such that: (i) we reduce the scope for guilt aversion by eliciting and transmitting beliefs about the behavior of other participants in the same role; (ii) we disentangle consensus from conformity by providing an exogenous variation in collective beliefs. The data show that consensus is present (and predominant) but is not the only force driving the belief-behavior correlation. In fact, we also observe “self-servingly conformist” behavior in that subjects choose to match their strategy to the transmitted information when it is in their interest to do so.
    Keywords: conformist preferences, consensus effects, guilt aversion, social norms, trust, experiment
    JEL: C72 C91
    Date: 2014–10
  11. By: Thomas Buser (University of Amsterdam)
    Abstract: How do people react to setbacks and successes? I introduce a new measure of challenge-seeking to determine the effect of winning and losing in a competition on the willingness to seek further challenges. Participants in a lab experiment compete in two-person tournaments and are then informed of their score and the outcome of the competition. Conditional on the score, winning or losing is random. Participants then have to decide on a performance target for a second round: the higher the target, the higher the potential reward, but participants who do not reach the target earn nothing. I find that, conditional on first round scores, losers go for a more challenging target but perform worse, leading to lower earnings and a higher probability of failure. These findings could have important implications for our understanding of individual career paths. Early outcomes coul d alter the probability of success and failure in the long term.
    Keywords: competition, challenge seeking, career decisions, laboratory experiment, gender
    JEL: C91 D03 J16 J01
    Date: 2014–07–07
  12. 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
  13. By: Björn Hartig (Royal Holloway, University of London, Department of Economics); Bernd Irlenbusch (University of Cologne, Department of Corporate Development and Business Ethics); Felix Kölle (University of Nottingham, School of Economics)
    Abstract: We experimentally investigate how different information about others’ individual contributions affects conditional cooperators’ willingness to cooperate in a one-shot linear public goods game. We find that when information about individual contributions is provided, contributions are generally higher than when only average information is available. This effect is particularly strong when others’ individual contributions are relatively homogeneous. When both types of information are provided, this effect is moderated. In the case of individual feedback we find the willingness to contribute to be higher the lower the variation in others' contributions, but with pronounced heterogeneity in individuals’ reactions. While the majority of conditional cooperators’ are mainly guided by others’ average contributions, more people follow the bad example of a low contributor than the good example of a high contributor. Overall, we provide evidence that information (and lack thereof) about others’ individual contributions affects conditional cooperators’ willingness to cooperate in systematic ways.
    Keywords: Conditional cooperation; Information; Heterogeneity; Public goods
  14. By: Tilman Brück (Stockholm International Peace Research Institute (SIPRI), Institute for the Study of Labor (IZA) and International Security and Development Center (ISDC)); Manuel Schubert (University of Passau)
    Abstract: We run a novel experiment to explore the relationship between the perception of real-life risks and the demand for risk reduction. Subjects play a series of loss lotteries in which the odds are matched to the likelihood of lethal events in real life. For each risk, subjects can pay premiums in order to reduce the likelihood of total bankruptcy. Our results show a complex interplay of mortality perception and demand for risk reduction. We observe that perceived annual mortality positively affects the demand for risk reduction. Moreover, we find certain risk characteristics to affect perceived mortality, others to drive the demand for risk reduction, and some to alter both. Our findings suggest that 30 percent of all insurance payments are due to biased perceptions of annual mortality while perfect precaution could lower payments by 45 percent. Implications for risk management policies are discussed.
    Keywords: risk perception, lethal risks, experiment, insurance
    JEL: C9 D81
    Date: 2014–10
  15. By: Hanna, Rema (Harvard University); Wang, Shing-Yi (University of PA)
    Abstract: In this paper, we demonstrate that university students who cheat on a simple task in a laboratory setting are more likely to state a preference for entering public service. Importantly, we also show that cheating on this task is predictive of corrupt behavior by real government workers, implying that this measure captures a meaningful propensity towards corruption. Students who demonstrate lower levels of prosocial preferences in the laboratory games are also more likely to prefer to enter the government, while outcomes on explicit, two-player games to measure cheating and attitudinal measures of corruption do not systematically predict job preferences. We find that a screening process that chooses the highest ability applicants would not alter the average propensity for corruption among the applicant pool. Our findings imply that differential selection into government may contribute, in part, to corruption. They also emphasize that screening characteristics other than ability may be useful in reducing corruption, but caution that more explicit measures may offer little predictive power.
    JEL: H10 J20 O10
    Date: 2013–12
  16. By: Bardsley, Nicholas; Ule, Aljaz
    Abstract: Coordination on focal points in one shot games can often be explained by team reasoning, a departure from individualistic choice theory. However, a less exotic explanation of coordination is also available based on best-responding to uniform randomisation. We test the team reasoning explanation experimentally against this alternative, using coordination games with variable losses in the off-diagonal cells. Subjects’ responses are observed when the behaviour of their partner is determined in accordance with each theory, and under game conditions where behaviour is unconstrained. The results are more consistent with the team reasoning explanation. Increasing the difficulty of the coordination tasks produces some behaviour suggestive of response to randomisation, but this effect is not pronounced.
    Keywords: coordination, team reasoning, cognitive hierarchy theory
    JEL: C91 D01
    Date: 2014
  17. By: Paolo Crosetto (GAEL, Universite de Grenoble); Alexia Gaudeul (DFG RTG 1411, EIC, Friedrich-Schiller-Universität Jena)
    Abstract: We run a market experiment where firms can choose not only their price but also whether to present comparable offers. They are faced with artificial demand from consumers who make mistakes when assessing the net value of products on the market. If some offers are comparable however, some consumers favor the best of the comparable offers vs. non-comparable offers. We vary the number of such consumers as well as the strength of their preferences for the best of the comparable offers. In treatments where firms observe the past decisions of their competitors, firms learn not to present comparable offers especially when many consumers prefer comparable offers. This occurs after initial periods with strong competition and leads to lower welfare for all consumers. In treatments where firms cannot monitor the competition, firms end up having to present comparable offers, which leads to an improvement in welfare for all consumers.
    Keywords: asymmetric dominance, attraction effect, collusion, competition, confusopoly, experiment, framing, industrial organization, obfuscation, oligopoly, price comparison, shrouding, spurious complexity, standardization, transparency
    JEL: C92 D18 D43 L13 L15
    Date: 2014–11–04
  18. By: Adler Mandelbaum, Sara E
    Abstract: Many natural resources and common-pool resources have inherent thresholds regarding the onset of deleterious environmental impacts or consequences. Group and individual behavior were examined in an experimental setting using three distinct games designed to model common-pools in which there existed such a threshold: one with complete information of the threshold, one with incomplete information of the threshold and one with sporadically enforced targets. By design the true threshold was unknown to the players in the role of policymaker, and the guesses of the threshold value were allowed to change during every round. Sporadically enforced targets had a significant negative effect on the lifespan of a common-pool resource and individual gains. Allowing the participants to develop and act on their own beliefs for the location of the threshold improved both individual benefit and conservation of the common-pool. Conservation of common-pool resources will be best achieved by policies which allow users of the resource access to reliable information regarding the status of the common-pool and which enable the development of their own beliefs regarding the location of threshold.
    Keywords: Common-Pool Resources, Threshold, Unenforced Policies
    JEL: C92 H41 P48 Q38
    Date: 2014–10
  19. By: Bigoni, Maria (University of Bologna); Fridolfsson, Sven-Olof (The Swedish Competition authority (Konkurrensverket), Research Institute of Industrial Economics (IFN)); Le Coq, Chloé (Stockholm School of Economics, SITE); Spagnolo, Giancarlo (Tor Vergata University, Stockholm School of Economics, SITE, and CEPR)
    Abstract: This paper presents results from a laboratory experiment studying the channels through which dierent law enforcement strategies deter cartel formation. With leniency policies oering immunity to the rst reporting party, a high ne is the main determinant of deterrence, having a strong eect even when the probability of exogenous detection is zero. Deterrence appears to be mainly driven by `distrust'; here, the fear of partners deviating and reporting. Absent leniency, the probability of detection and the expected ne matter more, and low nes are exploited to punish defections. The results appear relevant to several other forms of crimes that share cartels' strategic features, including corruption and nancial fraud.
    Keywords: Antitrust; Betrayal; Cartels; Collusion; Distrust; Fines; Leniency; Whistleblowers
    JEL: C92 D03 K21 K42 L41
    Date: 2014–09–18
  20. By: Milo Bianchi (Toulouse School of Economics); Jean-Marc Tallon (Centre d'Economie de la Sorbonne - Paris School of Economics)
    Abstract: We investigate the empirical relation between ambiguity aversion, risk aversion and portfolio choices. We match administrative panel data on portfolio choices with survey data on preferences over ambiguity and risk. We report three main findings. First, conditional on participation, ambiguity averse investors hold riskier portfolios. Second, they rebalance their portfolio in a contrarian direction relative to the market. Accordingly, their exposure to risk is more stable over time. Third, their portfolios experience higher returns, but they are also more sensitive to market trends. In several instances, the effects of ambiguity aversion stand in sharp contrast with those of risk aversion.
    Keywords: Portfolio choice, risk, uncertainty.
    JEL: G11 D81
    Date: 2014–09

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