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on Experimental Economics |
| By: | David L. Dickinson (Appalachian State University, CA, USA); David Masclet (CREM UMR CNRS 6211, University of Rennes 1, France and CIRANO, Montréal, Canada) |
| Abstract: | Experimental studies have shown that sanctions effectively deter free riding within groups. However, the over-use of costly punishment may actually harm overall welfare. A main reason for over-punishment is that free-riders generate negative emotions that likely favor excessive punishments. In this paper we ask whether the venting of one’s emotions in different ways can reduce the level of excessive punishment in a standard VCM-with-punishment environment while preserving the norm enforcement properties of punishment. We find that venting emotions reduces (excessive) punishment, and under certain conditions the net effect is an increase in final payoffs (i.e., welfare) to the group. |
| Keywords: | sanctions, public good, experiment, venting emotions |
| JEL: | C92 H41 D63 |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:tut:cremwp:201414&r=exp |
| By: | Bellemare, Charles (Université Laval); Bissonnette, Luc (Laval University); Kröger, Sabine (Université Laval) |
| Abstract: | This paper discusses the choice of the number of participants for within-subjects (WS) designs and between-subjects (BS) designs based on simulations of statistical power allowing for different numbers of experimental periods. We illustrate the usefulness of the approach in the context of field experiments on gift exchange. Our results suggest that a BS design requires between 4 to 8 times more subjects than a WS design to reach an acceptable level of statistical power. Moreover, the predicted minimal sample sizes required to correctly detect a treatment effect with a probability of 80% greatly exceed sizes currently used in the literature. Our results suggest that adding experimental periods in an experiment can substantially increase the statistical power of a WS design, but have very little effect on the statistical power of the BS design. Finally, we discuss issues relating to numerical computation and present the powerBBK package programmed for STATA. This package allows users to conduct their own analysis of power for the different designs (WS and BS), conditional on user specified experimental parameters (true effect size, sample size, number of periods, noise levels for control and treatment, error distributions), statistical tests (parametric and nonparametric), and estimation methods (linear regression, binary choice models (probit and logit), censored regression models (tobit)). |
| Keywords: | within-subjects design, between-subjects design, sample sizes, statistical power, experiments |
| JEL: | C8 C9 D03 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8583&r=exp |
| By: | Arbel, Yuval (School of Business, Carmel Academic Center); Bar-El, Ronen (Open University of Israel); Schwarz, Mordechai E. (Open University of Israel); Tobol, Yossi (Jerusalem College of Technology (JTC)) |
| Abstract: | We study the dynamics of the private provision of a public good that requires both capacity buildup and ongoing operating costs. We show that setting a time limit for the collection of contributions dedicated to capacity buildup minimizes the utility loss at the Nash equilibrium. We test the theoretical model empirically by conducting contribution game experiments with religious Jewish students for the procurement of sustainable supplies for their campus synagogues and ongoing operations. The empirical findings support the model's prediction and demonstrate that the theory fairly describes the pattern of contributions when the group of contributors attributes high intrinsic value to the public good. More specifically, we find that total contributions increase over time, contributions to the capacity buildup increase with the time limit and with the number of contributors, and contributions to the capacity buildup decrease with ongoing operating costs. Additionally, we determine that gender and culture affect the pattern of contributions. We also find that individuals prefer to contribute to sustainable supplies, rather than to their ongoing operations. Our paper has practical implications for the financing of public goods through voluntary provisions. |
| Keywords: | differential games, experiment, public goods, voluntary provision |
| JEL: | C73 C91 C92 H41 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8532&r=exp |
| By: | Wenner, Lukas |
| Abstract: | I show theoretically that applying the model of Köszegi and Rabin (2006) to a simple purchasing decision where consumers are ex-ante uncertain about the price realisation, gives - when changing the underlying distribution of expected prices - rise to counterintuitive predictions in contrast with a 'good deal model" where consumers are predicted to be disappointed (rejoice) when the realised price is perceived as being worse (better) than the other possible realisation. While the underlying ideas of both models are similar with respect to expectation-based reference points, the different results come from the concept of Personal Equilibrium in Köszegi and Rabin (2006). The experimental results show some support for the simpler good deal model for a number of different real consumption goods though the support is weaker for goods that either have a salient market price or no market price outside of the experiment. |
| Keywords: | Reference Points,Loss Aversion,Price Expectations,Experimental Consumer Choice |
| JEL: | D03 C91 D84 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbeoc:spii2014306&r=exp |
| By: | Recalde M.P.; Riedl A.M.; Vesterlund L. (GSBE) |
| Abstract: | Response time is increasingly used to shed light on the process by which individualsmake decisions. As mistakes may be correlated with response time it could, however, bemisleading to use this measure to draw inference on preferences. To demonstrate we build on arecent literature, which uses response time to determine whether individuals intuitively aregenerous or selfish. Examining public good games researchers have shown that fast decisionmakers appear more generous than slow decision makers and this has been interpreted asevidence that generosity is intuitive and impulsive while selfishness is a calculated responseRand et al. 2012; Nielsen, et al. 2014. Modifying the public good game to have an interiordominant strategy equilibrium we ask if the negative correlation between response time andgiving is sensitive to the location of the equilibrium and whether it may result from mistakes.When the equilibrium is located below the midpoint of the strategy space we replicate earlierfindings. However, when the equilibrium is located above the midpoint of the strategy space weget instead a positive correlation between response time and giving. While contributiondistributions vary significantly by treatment for slow decision makers, these differences are notsignificant for fast decision makers. Fast decision makers are in both treatments more likely tomake contributions that simultaneously lower individual and group earnings. We argue that thenegative correlation between response time and giving rather than reflecting spontaneousgiving, results from confused participants quickly selecting contributions that lie, on average, inthe middle of the strategy space. Our results demonstrate that inference on preferences fromresponse time requires that we take into account how mistakes are correlated with response time. |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:unm:umagsb:2014034&r=exp |
| By: | Conrads, Julian (University of Cologne); Reggiani, Tommaso (University of Cologne) |
| Abstract: | This paper investigates the effect of different communication channels on promise-making and promise-keeping in a helping situation. Four treatments differ with respect to the communication channel employed to solicit unincentivized cooperation, i.e., face-to-face, phone call and two different sorts of computer-mediated communication. The less anonymous (face-to-face, phone) the interpersonal interaction is due to the different communication channels, the higher the propensity of an agent to make a promise. Treatment effects, however, vanish if we then look at the actual promise-keeping rates across treatments as more anonymous channels (computer-mediated) do not perform relatively worse than more direct channels. |
| Keywords: | promises, communication, experimental economics, organizational behavior, behavioral ethics |
| JEL: | D02 D83 C91 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8534&r=exp |
| By: | Schubert, Manuel (University of Passau); Brück, Tilman (SIPRI) |
| 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 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8578&r=exp |
| By: | Reif, Christiane; Rübbelke, Dirk; Löschel, Andreas |
| Abstract: | Social norms can help to foster cooperation and to overcome the free-rider problem in private provision of public goods. This paper focuses on the enforcement of social norms by a self-introduced punishment and reward scheme. We analyse if subjects achieve to implement a norm-enforcement mechanism at their own expense by applying the theory of non-governmental norm-enforcement by Buchholz et al. (2014) in a laboratory experiment. Based on their theory without central authority and endogenously determined enforcement mechanism, we implement a two-stage public good game: At the first stage subjects determine the strength of penalty/reward on their own and in the second stage they decide on their contributions to the public good. We find that the mechanism by Buchholz et al. (2014) leads to a higher public good contribution than without the use of any mechanism. Only in a few cases groups end up with a zero enforcement mechanism. This result indicates that subjects are apparently willing to contribute funds for implementing an enforcement mechanism. Moreover, higher enforcement parameters lead to higher public good contributions in the second stage, although too high enforcement parameters lead to unreachable theoretical optima. |
| Keywords: | laboratory experiment,public good,matching mechanism,social norms,norm enforcement |
| JEL: | H41 C92 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:zewdip:14075&r=exp |
| By: | Raszap Skorbiansky, Sharon; Wu, Steven |
| Abstract: | Many markets include communication forums (e.g. Angie's List for services, Yelp for restaurants) to facilitate trading between buyers and sellers. Some market-makers go beyond creating forums and make investments to improve the quality of communication platforms, such as by recruiting “elite” yelp members or Amazon Vine Program reviewers, in order to introduce more truthful reviews. We conduct an experiment in order to examine who benefits from providing communication forums and under what conditions should a market-maker invest in better communication. When third-party enforcement for quality is unavailable, theory predicts that communication will be especially important to facilitate reputation incentives to substitute for lack of contract enforceability. In our control treatment, buyers and sellers trade using imperfectly enforced contracts with no communication between the parties. Then we introduce two treatments with structured communication where subjects can endogenously choose to send pre-selected messages about their transaction (e.g. “the seller did not deliver desired quality”). We allow for two different types of communication: (a) send any pre-selected message regardless of trading outcomes, or (b) only send truthful messages. Our results show that compared to the control treatment, the addition of unverified communication does not have a significant impact on efficiency or social surplus, perhaps due to seller dishonesty in the communication system. Income distribution becomes more equitable, however, suggesting that unverified communication is an overall beneficial tool for development. We also find that there is much to gain from investments in improving communication over simply providing an opportunity for communication. Verifiable communication yields large increases in efficiency, and social surplus. It also alleviates, albeit mildly, income inequalities between buyers and sellers. |
| Keywords: | contracting, communication, trade, Agricultural and Food Policy, Industrial Organization, International Development, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea14:170631&r=exp |
| By: | Erik Kimbrough (Simon Fraser University); Alexander Vostroknutov (Maastricht University) |
| Abstract: | We explore the idea that prosocial behavior in experimental games is driven by social norms imported into the laboratory. Under this view, differences in behavior across subjects is driven by heterogeneity in sensitivity to social norms. We introduce an incentivized method of eliciting individual norm-sensitivity, and we show how it relates to play in public goods, trust, dictator and ultimatum games. We show how our observations can be rationalized in a stylized model of norm-dependent preferences under reasonable assumptions about the nature of social norms. Then we directly elicit norms in these games to test the robustness of our interpretation. |
| Keywords: | experimental economics, norms, social preferences, conditional cooperation, reciprocity |
| JEL: | C91 C92 D03 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:sfu:sfudps:dp14-06&r=exp |
| By: | Dertwinkel-Kalt, Markus; Köhler, Katrin |
| Abstract: | Whereas exchange asymmetries for goods are well known, we provide a first incentivized test of exchange asymmetries for bads (i.e., items yielding a negative utility). On the one hand, prospect theory predicts an endowment effect for goods and bads, on the other hand, attention-based theories such as salience theory predict an endowment effect for goods, but a reverse endowment effect (i.e., a particular high willingness to switch) for bads. Since both strands of research often make the same predictions concerning biased decision making, the investigation of exchange asymmetries for bads is a key element to distinguish between their validity. In our experiment, we find a strong endowment effect for bads, so that our results speak in favor of prospect theory. |
| Keywords: | Loss Aversion,Salience Theory,Prospect Theory,Endowment Effect |
| JEL: | D03 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:dicedp:161&r=exp |
| By: | Tamás Csermely (Department of Economics, Vienna University of Economics and Business); Alexander Rabas (Department of Economics, University of Vienna) |
| Abstract: | The question of how to measure and classify people’s risk preferences is of substantial importance in the field of Economics. Inspired by the multitude of ways used to elicit risk preferences, we conduct a holistic investigation of the most prevalent method, the multiple price list (MPL) and its derivations. In accordance with previous literature, we find that revealed preferences differ under various and even the same versions of the MPL. Thus, an arbitrary selection of a particular risk assessment method can lead to biased results especially if researchers investigate its connection to other phenomena. In order to resolve this issue, we determine the most stable version of the MPL by using multiple measures of within-method consistency, and the version with the highest forecast accuracy by using behavior in two economically relevant games as benchmarks. A derivation of the well-known method by Holt and Laury (2002), where the highest payoff is varied instead of probabilities, emerges as the best MPL method in both dimensions. |
| Keywords: | Risk, MPL, Experiment, Revealed Preferences |
| JEL: | C91 D81 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:wiw:wiwwuw:wuwp185&r=exp |
| By: | Muehlheusser, Gerd (University of Hamburg); Roider, Andreas (University of Regensburg); Wallmeier, Niklas (University of Hamburg) |
| Abstract: | Extending the die rolling experiment of Fischbacher and Föllmi-Heusi (2013), we compare gender effects with respect to unethical behavior by individuals and by two-person groups. In contrast to individual decisions, gender matters strongly under group decisions. We find more lying in male groups and mixed groups than in female groups. |
| Keywords: | unethical behavior, lying, group decisions, gender effects, experiment |
| JEL: | C91 C92 J16 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8443&r=exp |
| By: | John K. Stranlund (Department of Resource Economics, University of Massachusetts Amherst); James J. Murphy (Department of Economics, University of Alaska Anchorage; Institue of State Economy, Nankai University); John M. Spraggon (Department of Resource Economics, University of Massachusetts Amherst) |
| Abstract: | We present results from laboratory emissions markets designed to investigate the effects of price controls and permit banking on limiting permit price risk. While both instruments reduce between-period price volatility and within-period price dispersion, combining price controls and permit banking yields important benefits. Banking alone produces high permit prices in earlier periods that fall over time, but the combined policy produces lower initial prices and lower volatility. However, banking, price controls, and the combination all produce higher between-period emissions volatility. Hence, for emissions markets that seek to control flow pollutants with strictly convex damages, efforts to limit permit price risk can result in higher expected damage. |
| Keywords: | experimental economics, Emissions trading, Cap and trade, Laboratory experiments, Permit markets, Permit banking, Price controls, Price collars |
| JEL: | C91 L51 Q58 |
| Date: | 2014–04 |
| URL: | http://d.repec.org/n?u=RePEc:ala:wpaper:2014-01&r=exp |
| By: | de Melo, Gioia; Piaggio, Matías |
| Abstract: | We provide experimental evidence on the effects of non-monetary punishment by peers among communities of Uruguayan fishers exploiting a common pool resource (CPR). We combined this treatment with an in-group (groups from a single community) / mixed group (groups composed of fishers from different communities) treatment. Our aim is to compare the effects of non-monetary sanctions in a context in which individuals exploiting a CPR belong to different communities relative to the case in which only individuals from the same community are allowed to exploit the resource. We find that mixed groups—unlike in-groups—reduce their exploitation of the resource in response to the threat of punishment. We do not find any differences in behavior between in-groups and mixed groups when the possibility of being punished is not available. The effectiveness of non-monetary punishment is reduced because cooperation was not perceived as the unique social norm. In such cases there is substantial antisocial punishment, which leads to increased extraction of the CPR by those who are unfairly punished. These findings indicate that effective peer punishment requires coordination to prevent antisocial targeting and to clarify the social signal conveyed by punishment. |
| Keywords: | non-monetary punishment, in-group bias, framed field experimen, social preferences, commmon pool resource, Community/Rural/Urban Development, Environmental Economics and Policy, Institutional and Behavioral Economics, D03, O12, C93, |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ags:aaea14:170571&r=exp |
| By: | David Johnson (University of Calgary); Sebastian Goerg; Jonathan Rogers |
| Abstract: | Traditionally, larger than equilibrium allocations by proposers in Dictator Games (gifts) have been explained by aspects of altruism, reciprocity, and fairness. However, this assumes the gift to be mutually desirable to the proposer and responder. Giving may also be driven by a desire of the proposer to rid herself of the gift or to generate obligation on the part of the responder. We examine this by using three sources to generate the endowment in a Dictator Game:(1) undergraduate students, (2) Amazon Mechanical Turk workers, and (3) users of a racially/ethnically charged web forum. This endowment is provided to subjects in a traditional laboratory experiment. We find no significantcant differences in the proposer allocation decisions across the three sources. Rather we find that proposer affect toward the source of the endowment affects the allocation decision. Our results suggest that decision making can be strongly influenced by the provider of income shocks. |
| Keywords: | Experiment; Inequality; Approval |
| JEL: | C78 C91 C99 D31 D64 D74 |
| Date: | 2014–11–10 |
| URL: | http://d.repec.org/n?u=RePEc:clg:wpaper:2014-81&r=exp |
| By: | Jalava, Nina (Stockholm School of Economics); Joensen, Juanna Schrøter (Stockholm School of Economics); Pellas, Elin (Stockholm School of Economics) |
| Abstract: | How does effort respond to being graded and ranked? This paper examines the effects of non-financial incentives on test performance. We conduct a randomized field experiment on more than a thousand sixth graders in Swedish primary schools. Extrinsic non-financial incentives play an important role in motivating highly skilled students to exert more effort. We find significant differences in test scores between the intrinsically motivated control group and three of four extrinsically motivated treatment groups. The only treatment not increasing test performance is criterion-based grading on an A-F scale, which is the typical grading method. Test performance is significantly higher if employing rank-based grading or giving students a symbolic reward. The motivational strengths of the non- financial incentives differ across the test score distribution, across the skill distribution, with peer familiarity, and with respect to gender. Boys are only motivated by rank-based incentives, while girls are also motivated by receiving a symbolic reward. Rank-based grading and symbolic rewards tend to crowd out intrinsic motivation for students with low skills, while girls also respond less to rank-based incentives if tested with less familiar peers. |
| Keywords: | test-taking, performance incentives, effort, extrinsic and intrinsic motivation, randomized experiment |
| JEL: | I20 I21 D03 C93 |
| Date: | 2014–08 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8412&r=exp |
| By: | Chen, Roy; Chen, Yan; Liu, Yang; Mei, Qiaozhu |
| Abstract: | We investigate the effects of team competition on pro-social lending activity on Kiva.org, the first microlending website to match lenders with entrepreneurs in developing countries. Using naturally occurring field data, we find that lenders who join teams contribute 1.2 more loans ($30-$42) per month than those who do not. To further explore factors that differentiate successful teams from dormant ones, we run a large-scale randomized field experiment (n = 22, 233) by posting forum messages. Compared to the control, we find that lenders make significantly more loans when exposed to a goal-setting and coordination message, whereas goal-setting alone significantly increases lending activities of previously inactive teams. Our findings suggest that goal-setting and coordination are effective mechanisms to increase pro-social behavior in teams. |
| Keywords: | social identity,pro-social lending,microfinance,field experiment |
| JEL: | C1 C93 D64 H41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:wzbmbh:spii2014209&r=exp |
| By: | Keser, Claudia; Markstädter, Andreas; Schmidt, Martin; Schnitzler, Cornelius |
| Abstract: | We compare voluntary contributions to the financing of a public good in a symmetric setting to those in asymmetric settings, in which four players have different, randomly allocated endowments. We observe that a weak asymmetry in the endowment distribution leads to the same contribution level as symmetry. Players tend to contribute the same proportion of their respective endowment. In a strongly asymmetric setting, where one player has a higher endowment than the three other players together, we observe significantly lower group contributions than in the other settings. The super-rich player does not contribute significantly more than what the others contribute on average and thus a much lower proportion of the endowment. |
| Keywords: | experimental economics,linear public good,income heterogeneity |
| JEL: | C92 D63 H41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:cegedp:217&r=exp |