nep-exp New Economics Papers
on Experimental Economics
Issue of 2014‒11‒22
seventeen papers chosen by

  1. Who do you lie to? Social identity and the cost of lying By Christoph Feldhaus; Johannes Mans
  2. Gender and economic preferences in a large random sample By Boschini, Anne; Dreber, Anna; von Essen, Emma; Muren, Astri; Ranehill, Eva
  3. Cognitive load and strategic sophistication By Allred, Sarah; Duffy, Sean; Smith, John
  4. Money talks - Paying physicians for performance By Claudia Keser; Emmanuel Peterle; Cornelius Schnitzler
  5. Predictable and Predictive Emotions: Explaining Cheap Signals and Trust Re-Extension By Schniter, Eric; Sheremeta, Roman
  6. Dishonesty under scrutiny By Jeroen van de Ven; Marie Claire Villeval
  7. Can early intervention policies improve wellbeing? Evidence from a randomized controlled trial By Michael Daly; Liam Delaney; Orla Doyle; Nick Fitzpatrick; Christine O'Farrelly
  8. Simplified approval mechanism for social dilemmas By Xiaochuan Huang; Takehito Masuda; Yoshitaka Okano; Tatsuyoshi Saijo
  9. To mitigate or to adapt? Collective action under asymmetries in vulnerability to losses By Esther Blanco; E. Glenn Dutcher; Tobias Haller
  10. Emotions-at-Risk: An Experimental Investigation into Emotions, Option Prices and Risk Perception By Roman Kräussl; Ronald Bosman; Thomas van Galen
  11. Hold on to it? An Experimental Analysis of the Disposition Effect By Matteo Ploner
  12. Exercising Empowerment in an Investment Environment By Mohamed Gomaa; KiridaranKanagaretnam; Stuart Mestelman; Mohamed Shehata
  13. A theory of sanctions: Objectives, degree of heterogeneity, and growth potential matter for optimal use of carrot or stick By Yoshio Kamijo
  14. Cognitive constraints increase estimation biases: Cognitive load and delay in judgments By Allred, Sarah; Crawford, L. Elizabeth; Duffy, Sean; Smith, John
  15. The Instability of the Nash Equilibrium in Common-Pool Resources By Tatsuyoshi Saijo; Yutaka Kobayashi
  16. What Do We Know about the Effectiveness of Leniency Policies? A Survey of the Empirical and Experimental Evidence By Marvao, Catarina; Spagnolo, Giancarlo
  17. The Effect of Cash Transfers to Schools on Voluntary Contributions By Rosangela Bando

  1. By: Christoph Feldhaus; Johannes Mans
    Abstract: We investigate whether and how an individuals' propensity to lie is affected by the social relationship between a potential liar and her/his possible victim. We argue that a shared social identity of sender and receiver increases sender's aversion to lie by raising two types of costs: the allocative and the social costs of the lie. Allocative costs should be larger in ingroup interactions because social preferences are stronger and thus losses to the receiver are weighted more heavily while social costs should be higher in closer relationships due to stricter moral rules. In contrast to our hypothesis our experimental results from a modified three-person sender-receiver game do not provide evidence that social identity affects lying behavior. While across all treatments about half of the participants send a dishonest message, we do not observe differences in lying behavior towards ingroup and outgroup members: neither with respect to allocative nor in terms of social costs. Hence, in our experiment lying behavior is robust to social identity manipulations.
    Keywords: Private information, deception, lying costs, social identity, experiment
    JEL: C91 D82
    Date: 2014–09–01
  2. By: Boschini, Anne (Linköping University); Dreber, Anna (Stockholm School of Economics); von Essen, Emma (Aarhus University); Muren, Astri (Dept. of Economics, Stockholm University); Ranehill, Eva (University of Zurich)
    Abstract: We explore gender differences in preferences related to altruism, fairness, cooperation, trust, coordination, risk and competitiveness in an experiment with a large random sample of the Swedish population. In addition to a baseline treatment, we have treatments where participants are primed with their gender or know the counterpart’s gender. We find no behavioral differences between treatments, but some gender differences within specific treatments: men are in some instances less generous, more trusting, and more competitive than women. Aside from a lack of gender differences in risk taking, our results are roughly in line with previous literature.
    Keywords: Gender differences; Random sample; Social preferences; Risk-taking; Competitiveness; Dictator games; Priming; Experiment
    JEL: C91 C93 J16
    Date: 2014–10–23
  3. By: Allred, Sarah; Duffy, Sean; Smith, John
    Abstract: We study the relationship between the cognitive load manipulation and strategic sophistication. The cognitive load manipulation is designed to reduce the subject's cognitive resources that are available for deliberation on a choice. In our experiment, subjects are placed under a high cognitive load (given a difficult number to remember) or a low cognitive load (given a number that is not difficult to remember). Subsequently, the subjects play a one-shot game then they are asked to recall the number. This procedure is repeated for various games. We find a nuanced and nonmonotonic relationship between cognitive load and strategic sophistication. This relationship is consistent with two effects. First, subjects under a high cognitive load tend to exhibit behavior consistent with the reduced ability to compute the optimal decision. Second, the cognitive load tends to affect the subject's perception of their relative standing in the distribution of the available cognitive resources. The net result of these two opposing effects depends on the strategic setting. Our experiment provides evidence on the literature that examines the relationship between measures of cognitive ability and strategic sophistication.
    Keywords: bounded rationality, experimental economics, working memory load, cognition, strategic sophistication, rational inattention
    JEL: C72 C91
    Date: 2014–10–22
  4. By: Claudia Keser; Emmanuel Peterle; Cornelius Schnitzler
    Abstract: Pay-for-performance attempts to tie physician payment to quality of care. In a controlled laboratory experiment, we investigate the effect of pay-for-performance on physician provision behavior and patient benefit. For that purpose, we compare a traditional fee-for-service payment system to a hybrid system that blends fee-for-service and pay-for-performance incentives. Physicians are found to respond to pay-for-performance incentives. Approximately 89 percent of the participants qualify for a pay-for-performance bonus payment in the experiment. It follows that a patient treated under the hybrid payment system is significantly more likely to receive optimal treatment than a similar fee-for-service patient. Pay-for-performance generally tends to alleviate over- and under-provision of medical treatment relative to fee-for-service. Irrespective of the payment system, we observe unethical treatment behavior, i.e., the provision of medical services with zero benefit to the patient.
    Keywords: Experimental economics; physician remuneration; pay-for-performance (P4P).,
    Date: 2014–10–01
  5. By: Schniter, Eric; Sheremeta, Roman
    Abstract: Despite normative predictions from economics and biology, unrelated strangers will often develop the trust necessary to reap gains from one-shot economic exchange opportunities. This appears to be especially true when declared intentions and emotions can be cheaply communicated. Perhaps even more puzzling to economists and biologists is the observation that anonymous and unrelated individuals, known to have breached trust, often make effective use of cheap signals, such as promises and apologies, to encourage trust re-extension. We used a pair of trust games with one-way communication and an emotion survey to investigate the role of emotions in regulating the propensity to message, apologize, re-extend trust, and demonstrate trustworthiness. This design allowed us to observe the endogenous emergence and natural distribution of trust-relevant behaviors, remedial strategies used by promise-breakers, their effects on behavior, and subsequent outcomes. We found that emotions triggered by interaction outcomes are predictable and also predict subsequent apology and trust re-extension. The role of emotions in behavioral regulation helps explain why messages are produced, when they can be trusted, and when trust will be re-extended.
    Keywords: emotion, cheap signal, promise, apology, trust game, reciprocity, experiment
    JEL: C9 C91 C92
    Date: 2014–10–15
  6. By: Jeroen van de Ven (ACLE (University of Amsterdam) and Tinbergen Institute. Address: Valckeniersstraat 65-67, 1018 XE Amsterdam, The Netherlands); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France)
    Abstract: We investigate how different forms of scrutiny affect dishonesty, using Gneezy’s (2005) deception game. We add a third player whose interests are aligned with those of the sender. We find that lying behavior is not sensitive to revealing the sender’s identity to the observer. The option for observers to communicate with the sender, and the option to reveal the sender’s lies to the receiver also do not affect lying behavior. Even more striking, senders whose identity is revealed to their observer do not lie less when their interests are misaligned with those of the observer.
    Keywords: Deception, lies, dishonesty, social image, experiment
    JEL: C91 D83
    Date: 2014
  7. By: Michael Daly (Behavioural Science Centre, Stirling Management School, Stirling University); Liam Delaney (Behavioural Science Centre, Stirling Management School, Stirling University, UCD School of Economics and UCD Geary Institute, University College Dublin); Orla Doyle (UCD School of Economics and UCD Geary Institute, University College Dublin); Nick Fitzpatrick (UCD Geary Institute, University College Dublin); Christine O'Farrelly (UCD Geary Institute, University College Dublin)
    Abstract: Many authors have proposed incorporating measures of well-being into evaluations of public policy. Yet few evaluations use experimental design or examine multiple aspects of well-being, thus the causal impact of public policies on well-being is largely unknown. In this paper we examine the effect of an intensive early intervention program on maternal well-being in a targeted disadvantaged community. Using a randomized controlled trial design we estimate and compare treatment effects on global well-being using measures of life satisfaction, experienced well-being using both the Day Reconstruction Method (DRM) and a measure of mood yesterday, and also a standardized measure of parenting stress. The intervention has no significant impact on negative measures of well-being, such as experienced negative affect as measured by the DRM and global measures of well-being such as life satisfaction or a global measure of parenting stress. Significant treatment effects are observed on experienced measures of positive affect using the DRM, and a measure of mood yesterday. The DRM treatment effects are primarily concentrated during times spent without the target child which may reflect the increased effort and burden associated with additional parental investment. Our findings suggest that a maternal-focused intervention may produce meaningful improvements in experienced well-being. Incorporating measures of experienced affect may thus alter cost-benefit calculations for public policies.
    Keywords: Wellbeing, Randomised Controlled Trial, Early Intervention
    JEL: I00 I39
    Date: 2014–10–23
  8. By: Xiaochuan Huang (DT Captical Management Co., LTD.); Takehito Masuda (Research Center for Social Design Engineering, Kochi University of Technology); Yoshitaka Okano (Kochi University of Technology); Tatsuyoshi Saijo (Kochi University of Technology)
    Abstract: We develop the simplified approval mechanism (SAM) for n-player public good provision with binary choice. The SAM provides each cooperator a chance to revise his choice when players’ choices are not unanimous. Hence, players can easily retaliate against defection as widely proposed in repeated game theory or conditionally cooperate as observed in voluntary contribution game experiments. The SAM implements the cooperative outcome in backward elimination of weakly dominated strategies (BEWDS). The implementation result also holds in limit logit agent quantal response equilibrium (LAQRE). The average cooperation rate in the SAM experiment is 86.6% across 15 periods, which increases to 96.0% after period 5. Analyzing choice data and responses to the pre-play questionnaires reveals that subjects defect because of free-riding motivations or feelings of uncertainty in others’ cooperation. After observing defections, cooperators switch to defection, which decreases cooperation rates between the first and second stages of each period.
    Keywords: social dilemma, public good, experiment
    JEL: C72 C92 D74 H41 P43
    Date: 2014–10
  9. By: Esther Blanco; E. Glenn Dutcher; Tobias Haller
    Abstract: Many policies addressing global climate change revolve around the implementation of mitigation and adaptation strategies. We experimentally examine subjects? choices in a climate change game where subjects are put into groups where they face a potential damage and have the choice to invest resources into mitigation, adaptation and/or productive funds. Resources allocated to mitigation reduce the probability of the loss to the entire group while adaptation investments reduce the magnitude of the loss to the investing agent and productive investments increases payoffs only for the investing agent. We explore subject's response to three treatment conditions; high damage, low damage and heterogeneous damage. Results show that subjects view mitigation and adaptation funds as substitutes in that they contribute higher levels to the adaptation fund if low levels of contributions to the mitigation fund exist, but free-ride on others by contributing to the productive fund if contributions to the mitigation fund are high enough. In particular, we find the highest level of contributions to the socially efficient mitigation fund when all subjects in a group face a high damage and the lowest level when all subjects face a low damage. When high-damage subjects are mixed with low-damage subjects, their contribution levels to the mitigation fund decline, but are still greater than those of their low-damage group members.
    Keywords: Collective Action, Climate Change, Economic Experiments
    JEL: H41 H87 C92
    Date: 2014–10
  10. By: Roman Kräussl; Ronald Bosman; Thomas van Galen (LSF)
    Abstract: This paper experimentally investigates how emotions are associated with option prices and risk perception. Using a binary lottery, we find evidence that the emotion ‘surprise’ plays a significant role in the negative correlation between lottery returns and estimates of the price of a put option. Our findings shed new light on various existing theories on emotions and affect. We find gratitude, admiration, and joy to be positively associated with risk perception, although the affect heuristic predicts a negative association. In contrast with the predictions of the appraisal tendency framework (ATF), we document a negative correlation between option price and surprise for lottery winners. Finally, the results show that the option price is not associated with risk perception as commonly used in psychology.
    Keywords: Risk perception, emotions, affect heuristic, option prices, experiment
    JEL: D81 D03 G17
    Date: 2014
  11. By: Matteo Ploner
    Abstract: This paper experimentally investigates a well-known anomaly in portfolio management, i.e. the fact that paper losses are realized less than paper gains (disposition effect). The existence of the disposition effect is documented in a simple risk task which demonstrates that the anomaly is most likely due to a higher degree of risk aversion of those experiencing a loss in a prior investment relative to those experiencing a gain. However, when an “emotionally colder” choice protocol is adopted, a reverse dispo- sition effect is observed. The results of the study may help design trading rules to overcome the pitfalls of the disposition effect.
    Keywords: Disposition Effect, Decision Making under Uncertainty, Behavioral Finance, Experiments, Prospect Theory
    Date: 2014
  12. By: Mohamed Gomaa; KiridaranKanagaretnam; Stuart Mestelman; Mohamed Shehata
    Abstract: Using data from a laboratory-controlled environment we analyze the decisions of principals to veto the allocations of grossed-up investments proposed by their agents in a modified trust game. We also analyze the changes in the surplus associated with the introduction of empowerment and the resulting increase in trust by principals. Using probit analysis, we find that the trust displayed by the principal and the trustworthiness of the agent are statistically significant variables in the likelihood that a principal will exercise a veto and that the notion of fairness is important in explaining these decisions. In addition, we analyze the surpluses before and after the exercise of vetoes and find that potential surpluses rise with the introduction of empowerment. However, actual gains in environments with empowerment are not different from those realized in environments in which principals are not empowered. This result is qualified by the recognition that the number of decision rounds that are played by the participants in this experiment may not be sufficient for the full effect of empowerment to be realized by the participants.
    Keywords: empowerment, trust, reciprocity, veto, social surplus
    JEL: C7 C9 D3 D8
    Date: 2014–10
  13. By: Yoshio Kamijo (Kochi University of Technology)
    Abstract: While most economic literature on punishment and reward follows an experimental study on a symmetric version of a public goods game, we theoretically study sanction institutions by focusing on an asymmetric public goods game. Using a model for a private-value all-pay auction, we find that (1) the reward (punishment) is more effective to motivate people with greater (less) ability than median ability, (2) to improve the total effort, the reward (punishment) is better for more (less) heterogeneous people, and (3) reward tends to be optimal in the long run under the dynamics of group diversity change caused by enforced sanctions.
    Date: 2014–10
  14. By: Allred, Sarah; Crawford, L. Elizabeth; Duffy, Sean; Smith, John
    Abstract: Previous work has demonstrated that memory for simple stimuli can be biased by information about the category of which the stimulus is a member. These biases have been interpreted as optimally integrating noisy sensory information with category information. A separate literature has demonstrated that cognitive load can lead to biases in social cognition. Here we link the two, asking whether delay (Experiment 1) and cognitive load (Experiment 2) affect the extent to which observers' memories for simple line stimuli are affected by category information. We found that delay and cognitive load have similar effects: both manipulations increase the weight of category information on memory for stimuli. We discuss the broad implications of such findings on fields such as eyewitness testimony.
    Keywords: cognitive load; delay; judgment; estimation biases; memory; category effects
    JEL: C91
    Date: 2014–08–30
  15. By: Tatsuyoshi Saijo (Kochi University of Technology); Yutaka Kobayashi (Kochi University of Technology)
    Abstract: Efficient allocations in common-pool resources cannot be accomplished when appropriators are selfish. In addition to this dilemma, using a linear approximation of best response functions at the Nash equilibrium in the common-pool resource environment, we find that the system of simultaneous difference equations is locally unstable if the number of appropriators is at least four. This result indicates that the equilibrium analysis might not capture the essence of the common-pool resource problem, but provides an answer to ``some unexplained pulsing behavior'' (Ostrom, Journal of Economic Behavior and Organization, vol. 61, no.2 [2006], p. 150) of each appropriator's labor input in common-pool resource experiments.
    JEL: C62 C72 C92 Q22
    Date: 2014–10
  16. By: Marvao, Catarina (Stockholm Institute of Transition Economics); Spagnolo, Giancarlo (Stockholm Institute of Transition Economics)
    Abstract: Over the last decade a large body of economic research has emerged that has sought to empirically test the effectiveness of leniency policies as tools to enhance the detection, prosecution and deterrence of cartel conduct. This research has considerable potential value in assisting competition authorities design optimal policies by having a better understanding of the impact that such policies, their specific features and manner of administration, have on the behaviour of cartel participants. Some researchers have taken the approach of testing empirically the effects of actual policies – predominantly those administered by the United States Department of Justice (USDOJ) and the European Commission (EC) – while others have tested different hypothetical policies in the lab. This section reviews the key studies which have been undertaken to date, it highlights the main findings and compares their results. After appreciating the main contributions and limitations of these studies, it concludes with a general assessment and an agenda for future research.
    Keywords: Cartels; competition policy; Leniency Programme
    JEL: D43 K21 K42 L13 L40 L51
    Date: 2014–10–01
  17. By: Rosangela Bando
    Abstract: School-based management programs aim to improve education outcomes by involving parents in allocation decisions about external funds transferred to the school. This paper explores the effects of two school-based management programs on parental investment in schools via voluntary contributions. One program provides both a cash grant and a matching scheme for privately raised funds. Difference-in-differences estimation shows that parents in richer schools increased voluntary contributions by 28 percent, while parents in poorer schools decreased voluntary contributions by 11 percent. This implies that a matching scheme results in higher inequality in resources available to schools. The second program provides only a cash grant to poor schools. Based on a randomized control, estimation shows that parents use 83 percent of the grant to substitute for voluntary contributions. A cash grant alone for poor schools results in an increase in resources available to the school in less than the cash grant transfer.
    Keywords: Education management, Educational Assessment, School-based management programs, Parental investment, School based matching, School grants, Voluntary contributions, Mexico
    Date: 2014–09

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