nep-exp New Economics Papers
on Experimental Economics
Issue of 2014‒12‒19
eighteen papers chosen by

  1. Improving voluntary public good provision by a non-governmental, endogenous matching mechanism: Experimental evidence By Reif, Christiane; Rübbelke, Dirk; Löschel, Andreas
  2. A Test of Dual-Process Reasoning in Charitable Giving By Grossman, Zachary; van der Weele, Joël
  3. Leaders as Role Models for the Voluntary Provision of Public Goods By Gächter, Simon; Renner, Elke
  4. Awareness Programs and Change in Taste-based Caste Prejudice By Banerjee, Ritwik; Datta Gupta, Nabanita
  5. Pricing decisions in an experimental dynamic stochastic general equilibrium economy By Noussair, Charles N.; Pfajfar, Damjan; Zsiros, Janos
  6. The willingness to sell personal data By Benndorf, Volker; Normann, Hans-Theo
  7. Medical insurance and free choice of physician shape patient overtreatment: A laboratory experiment By Huck, Steffen; Lünser, Gabriele; Spitzer, Florian; Tyran, Jean-Robert
  8. College admissions with entrance exams: Centralized versus decentralized By Hafalir, Isa E.; Hakimov, Rustamdjan; Kübler, Dorothea; Kurino, Morimitsu
  9. Anchoring Effects in an Experimental Auction By Holst, Gese Sophie; Hermann, Daniel; Mußhoff, Oliver
  10. Trust, trust attitudes and group participation in rural development activities By Peralta, M. Alexandra; Shupp, Robert
  11. Learning, Words and Actions: Experimental Evidence on Coordination-Improving Information By Nicolas Jacquemet; Adam Zylbersztejn
  12. Do Employer Preferences Contribute to Sticky Floors? By Baert, Stijn; De Pauw, Ann-Sophie; Deschacht, Nick
  13. Concern for Relative Standing and Deception By Galanis, Spyros; Vlassopoulos, Michael
  14. A Survey of Experimental Research on Contests, All-Pay Auctions and Tournaments By Dechenaux, Emmanuel; Kovenock, Dan; Sheremeta, Roman
  15. Remittance Responses to Temporary Discounts: A Field Experiment among Central American Migrants By Kate Ambler; Diego Aycinena; Dean Yang
  16. (Measured) Profit is Not Welfare: Evidence from an Experiment on Bundling Microcredit and Insurance By Abhijit Banerjee; Esther Duflo; Richard Hornbeck
  17. Accounting for Context: Separating Monetary and Social Incentives By Andreas Bergh; Philipp C. Wichardt
  18. Behavioral Economics of Education: Progress and Possibilities By Adam M. Lavecchia; Heidi Liu; Philip Oreopoulos

  1. 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 selfintroduced punishment and reward scheme. We analyse if subjects achieve to implement a normenforcement mechanism at their own expense by applying the theory of non-governmental normenforcement by Buchholz et al. (2014) in a laboratory experiment. Based on their theory without central authority and endogenously determined enforcement mechanism, we implement a twostage 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
  2. By: Grossman, Zachary; van der Weele, Joël
    Abstract: Previous economic experiments on dual-process reasoning in altruistic decisions have yielded inconclusive results. However, these studies do not create a conflict between affective and cognitive motives, resulting in imperfect identification. We interact standard cognitive and affective manipulations in a giving task, and hypothesize that the affective manipulation has stronger effects when we simultaneously put the cognitive system under load. In line with earlier results, we find little evidence for dual-process reasoning in giving. Our independent treatment checks cast doubt on the effectiveness of standard treatment manipulations and show that both cognitive and affective manipulations consistently have opposite effects on the two sexes. We discuss the implications of our findings for economic experiments in this nascent research field.
    Keywords: Social and Behavioral Sciences, dual-process reasoning, charitable giving, dictator games, experimental economics
    Date: 2014–11–07
  3. By: Gächter, Simon (University of Nottingham); Renner, Elke (University of Nottingham)
    Abstract: We investigate the link between leadership, beliefs and pro-social behavior. This link is interesting because field evidence suggests that people's behavior in domains like charitable giving, tax evasion, corporate culture and corruption is influenced by leaders (CEOs, politicians) and beliefs about others' behavior. Our framework is an experimental public goods game with a leader. We find that leaders strongly shape their followers' initial beliefs and contributions. In later rounds, followers put more weight on other followers' past behavior than on the leader's current action. This creates a path dependency the leader can hardly correct. We discuss the implications for understanding belief effects in naturally occurring situations.
    Keywords: leadership, beliefs, experiments, public goods, path dependency, public policy, management
    JEL: C72 C90 H41 Z13
    Date: 2014–10
  4. By: Banerjee, Ritwik (Aarhus University); Datta Gupta, Nabanita (Aarhus University)
    Abstract: Becker's theory of taste-based discrimination predicts that relative employment of the discriminated social group will improve if there is a decrease in the level of prejudice for the marginally discriminating employer. In this paper we experimentally test this prediction offered by Becker (1971) in the context of caste in India, with management students (potential employers in the near future) as subjects. First, we measure caste prejudice and show that awareness through a TV social program reduces implicit prejudice against the lower caste and the reduction is sustained over time. Second, we find that the treatment reduces the prejudice levels of those in the left tail of the prejudice distribution - the group which can potentially affect real outcomes as predicted by the theory. And finally, a larger share of the treatment group subjects exhibit favorable opinion about reservation in jobs for the lower caste.
    Keywords: caste prejudice, taste-based discrimination, implicit association test, laboratory experiment, media influence
    JEL: C91 O1 J15
    Date: 2014–08
  5. By: Noussair, Charles N. (University of Tilburg); Pfajfar, Damjan (Board of Governors of the Federal Reserve System (U.S.)); Zsiros, Janos (Cornell University)
    Abstract: We construct experimental economies, populated with human subjects, with a structure based on a nonlinear version of the New Keynesian Dynamic Stochastic General Equilibrium (DSGE) model. We analyze the behavior of firms' pricing decisions in four different experimental economies. We consider how well the experimental data conform to a number of accepted empirical stylized facts. Pricing patterns mostly conform to these patterns. Most price changes are positive, and inflation is strongly correlated with average magnitude, but not the frequency, of price changes. Prices are affected negatively by the productivity shock and positively by the output gap. Lagged real interest rate has a negative effect on prices, unless human subjects choose the interest rate, or firms sell perfect substitutes in the output market. There is inertia in price setting, firms integrate wage increases into their prices, and there is evidence of adaptive behavior in price-setting in our laboratory economy. The hazard function for price changes, however, is upward-sloping, in contrast to most empirical studies.
    Keywords: Experimental economics; DSGE economy; pricing behavior; menu costs
    JEL: C91 C92 E31 E32
    Date: 2014–10–24
  6. By: Benndorf, Volker; Normann, Hans-Theo
    Abstract: We elicit the willingness to sell personal data (contact information, Facebook details, preferences) in laboratory experiments, using a BDM and take-it-or-leave-it offers. Our experiments are novel in that (i) the experiments are incentivized, (ii) the focus on privacy issues is salient, and (iii) the use of the data - marketing purposes - is transparent and unambiguous. We find that only a minority of about 10% to 20% of the participants are unwilling to sell personal data, a share which is roughly constant across both the type of personal data and elicitation method. Subjects willing to sell request about € 15 for their contact details and € 19 for Facebook details.
    Keywords: privacy,preference elicitation,valuation of personal data
    JEL: C90 C91 C81
    Date: 2014
  7. By: Huck, Steffen; Lünser, Gabriele; Spitzer, Florian; Tyran, Jean-Robert
    Abstract: In a laboratory experiment designed to capture key aspects of the interaction be-tween physicians and patients in a stylized way, we study the effects of medical insurance and competition in the guise of free choice of physician. Medical treat-ment is an example of a credence good: only the physician (but not the patient) knows the appropriate treatment, and even after consulting, the patient is not sure whether he got proper treatment or got an unnecessary treatment, i.e. was overtreated. We find that with insurance, moral hazard looms on both sides of the market: patients consult more often and physicians overtreat more often than in the baseline condition. Competition decreases overtreatment compared to the baseline and patients therefore consult more often. When the two institutions are combined, competition is found to partially offset the adverse effects of insur-ance: most patients seek treatment, but overtreatment is moderated.
    Keywords: Credence good,Patient,Physician,Overtreatment,Competition,Insurance,Moral hazard
    JEL: C91 I11 I13
    Date: 2014
  8. By: Hafalir, Isa E.; Hakimov, Rustamdjan; Kübler, Dorothea; Kurino, Morimitsu
    Abstract: We theoretically and experimentally study a college admissions problem in which colleges accept students by ranking students' efforts in entrance exams. Students hold private information regarding their ability level that affects the cost of their efforts. We assume that student preferences are homogeneous over colleges. By modeling college admissions as contests, we solve and compare the equilibria of "centralized college admissions" (CCA) in which students apply to all colleges, and "decentralized college admissions" (DCA) in which students can only apply to one college. We show that lower ability students prefer DCA whereas higher ability students prefer CCA. The main qualitative predictions of the theory are supported by the experimental data, yet we find a number of behavioral differences between the mechanisms that render DCA less attractive than CCA compared to the equilibrium benchmark.
    Keywords: college admissions,incomplete information,student welfare,contests,all-pay auctions,experiment
    JEL: C78 D78 I21
    Date: 2014
  9. By: Holst, Gese Sophie; Hermann, Daniel; Mußhoff, Oliver
    Abstract: Auctioning goods is a widespread practice, particularly in the agricultural sector. The out-come of auctions can be affected by various factors. One of these factors can be anchoring effects, which describe the influence of present available information on numerical values in human decisions. However, the influence of anchoring effects in auctions carried out offline is largely unknown. For this reason, we analyze anchoring effects of exogenously provided values using an experimental auction with farmers. In total, 48 groups of five farmers each participate in a series of four auctions for envelopes containing a €10 banknote with a 50% probability of occurrence. Our results indicate that anchoring based on exogenously presented values can result either in negative adjustment or no adjustment depending on the auction characteristic. Furthermore, the results show that previous bids affect following bids, which might also be an anchoring effect.
    Keywords: anchoring effect, experimental auction, extra-laboratory experiment, agricultural decision maker, previous sale price., Agricultural Finance, Farm Management,
    Date: 2014–09
  10. By: Peralta, M. Alexandra; Shupp, Robert
    Abstract: Development projects frequently use the strategy of group formation to promote project interventions such as producer groups and savings and lending groups. These groups are formed and encouraged by development projects for two primary reasons: 1) because the success of the intervention in some way relies on group participation and cooperation (e.g., savings and lending groups or sustainable management of a resource), or 2) because groups make it easier to disseminate the intervention and possibly improve its effectiveness via information sharing among participants. But for groups to be formed, high levels of trust and trustworthdiness among group members are considered a requirement. Implying that more trusting/trustworthy community members selfselect into forming these groups. However, it is also possible that the frequent interaction among group participants lead to higher levels of trust and cooperation. Then the question becomes whether group-based interventions take advantage of the social capital and social ties already existing in the communities or improves it. We apply the trust game to investigate whether farmers involved in group-based interventions promoted by a rural development project in Nicaragua, “Agriculture for Basic Needs” (A4N), reveal different levels of trust than farmers who were not exposed to the A4N group interventions. The A4N program, data and methods. The overarching strategy for the A4N project was to promote group organization and interaction, to build capacity in saving and lending, to introduce enhanced agricultural technologies, and provide technical assistance to farmers. As such, farmers in the A4N villages were invited and encouraged to form groups focused on one or more of the following project-supported objectives: saving and lending, learning sustainable agricultural technologies, and innovation and learning. We apply the trust game and survey questions to investigate whether farmers involved in group-based interventions promoted by A4N reveal different levels of trust than farmers who did not participate in the A4N group interventions. We explore these effects on trust levels among farmers in the same village. To achieve this objective, our experimental design involves two treatments that vary only in whether participants were involved in the A4N project or not. Specifically, we implement trust experiments in eight communities in Nicaragua – half of these communities where involved in the A4N project while the other half were not. Eight A4N and non-A4N villages were selected such that they had similar socio-economic characteristics, and selected A4N villages that had more than one A4N group with the goal of avoiding only having participants from a single group in a given session. A total of eight sessions – one session in each village – were conducted during May of 2012 with between 17 and 22 farmers participating in each session, for a total of 153 participants. For sessions in A4N villages, farmer-participants were recruited randomly from lists of farmers participating in groups promoted and supported by the A4N project. Similarly, for sessions in non-A4N villages, farmer-participants were chosen randomly from lists of farmers with similar demographic characteristics to the A4N farmers. This version of the trust game is a one-shot game, with no communication where all participants remain anonymous in that they do not know whom they are playing with. As in most trust games, participants are divided into two types – senders and receivers – and each sender is paired with one receiver. In addition, both senders and receivers are given equal initial endowments. The sender is then asked to decide what portion of their endowment they would like to send to the receiver. The sender can send all or none and knows that whatever portion they do not send they will get to keep. The sender – and receiver – also knows that the amount sent (or invested) is, in this case, tripled before it is given to the receiver. The receiver will now have their endowment plus three times what the sender sent. In the second step of the game, the receiver can return some amount of what they have (endowment plus three times what the sender sent) back to the sender. Discussion and results On average, A4N and non-A4N subjects do not differ in most socioeconomic characteristics, implying that both A4N and non-A4N participants were drawn from the same population. However, these two groups do differ in terms of gender, besides having invited a similar proportion of men and women to the meeting, more women participated in the A4N sections than men. The results suggest that A4N senders sent more than non-A4N senders, A4N sent 51% of their endowment, whereas non-A4N senders sent 46% (p-value=0.10 Mann-Whitney U test for equal means). However when we conduct multivariate analysis including socioeconomic characteristics, the difference becomes not statistically significant. In particular, the variable for gender (male=1) is negative and statistically significant, suggesting that women are more trusting than men. The results also suggest that they are there were not difference in trustworthiness. A4N receivers returned 32% of their available resources, and non-A4N receivers returned 35% (p-value=0.30 Mann-Whitney U test for equal means). In the multivariate analysis the proportion returned is explained by the amount sent, socioeconomic characteristics were not statistically significant. This results contrast with other studies that have found that subjects in a group are more trusting. Indicating that not necessarily more trusting individuals self-select to participate in groups. Particularly in the case of a rural development project is possible that the motivation of obtaining project benefits encouraged group formation. However it is also possible that group formation encourages trust and social capital formation, and further research on this should be carried out.
    Keywords: Community/Rural/Urban Development, Institutional and Behavioral Economics, International Development,
    Date: 2014–05–28
  11. By: Nicolas Jacquemet (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, BETA - Bureau d'économie théorique et appliquée - CNRS : UMR7522 - Université de Strasbourg - Université Nancy II); Adam Zylbersztejn (EEP-PSE - Ecole d'Économie de Paris - Paris School of Economics - Ecole d'Économie de Paris, CES - Centre d'économie de la Sorbonne - CNRS : UMR8174 - Université Paris I - Panthéon-Sorbonne)
    Abstract: We experimentally study an asymmetric coordination game with two Nash equilibria: one is Pareto-efficient, the other is Pareto-inefficient and involves a weakly dominated strategy. We assess whether information about the interaction partner helps eliminate the imperfect equilibrium. Our treatments involve three information-enhancing mechanisms: repetition and two kinds of individual signals: messages from partner or observation of his past choices. Repetition-based learning increases the frequencies of the most efficient outcome and the most costly strategic mismatch. Moreover, it is superseded by individual signals. Like previous empirical studies, we find that signals provide a screening of partners' intentions that reduces the frequency of coordination failures. Unlike these studies, we find that the transmission of information between partners, either via messages or observation, does not suffice to significantly increase the overall efficiency of outcomes. This happens mostly because information does not restrain the choice of the dominated action by senders.
    Keywords: coordination game; communication; cheap-talk; observation
    Date: 2013–07
  12. By: Baert, Stijn (Ghent University); De Pauw, Ann-Sophie (IÉSEG School of Management); Deschacht, Nick (K.U.Leuven)
    Abstract: We investigate the importance of employer preferences in explaining Sticky Floors, the pattern that women are, compared to men, less likely to start to climb the job ladder. To this end we perform a randomised field experiment in the Belgian labour market and test whether hiring discrimination based on gender is heterogeneous by the promotion characteristics of the selected jobs. We find that women get 33% less interview invitations when they apply for jobs implying a first promotion in functional level. On the other hand, their hiring chances are not significantly affected by the job authority level of the job.
    Keywords: sticky floors, gender discrimination, hiring discrimination, labour market transitions, European labour markets
    JEL: J16 J71 M51 J41 C93
    Date: 2014–08
  13. By: Galanis, Spyros (University of Southampton); Vlassopoulos, Michael (University of Southampton)
    Abstract: We report results from a sender-receiver deception game, which tests whether an individual's decision to deceive is influenced by a concern for relative standing in a reference group. The sender ranks six possible outcomes, each specifying a payoff for him and the receiver. A message is then transmitted to the receiver, announcing that the sender has ranked the outcomes according to the receiver's payoff, from highest to lowest. The receiver, without knowing that there is conflict of interest, chooses an action that determines the payoff of both players. The sender has an incentive to deceive the receiver, in order to obtain a higher payoff. A sender is positively biased if he thinks that he is higher in the deception distribution than in reality. We show theoretically that a positively biased sender will increase cheating when presented with information about the deception of his peers. The experimental data confirm this. We conclude that concern for relative standing does play a role in the decision to deceive.
    Keywords: deception, lying, sender-receiver game, concern for rank
    JEL: C91 D03 D83
    Date: 2014–08
  14. By: Dechenaux, Emmanuel; Kovenock, Dan; Sheremeta, Roman
    Abstract: Many economic, political and social environments can be described as contests in which agents exert costly efforts while competing over the distribution of a scarce resource. These environments have been studied using Tullock contests, all-pay auctions and rank-order tournaments. This survey provides a comprehensive review of experimental research on these three canonical contests. First, we review studies investigating the basic structure of contests, including the number of players and prizes, spillovers and externalities, heterogeneity, risk and incomplete information. Second, we discuss dynamic contests and multi-battle contests. Then we review studies examining sabotage, feedback, bias, collusion, alliances, group contests and gender, as well as field experiments. Finally, we discuss applications of contests and suggest directions for future research.
    Keywords: contests, all-pay auctions, tournaments, experiments
    JEL: C7 C9 D7 H4 J4 J7 K4 L2 M5
    Date: 2014–10–27
  15. By: Kate Ambler; Diego Aycinena; Dean Yang
    Abstract: We study the impacts on remittances of offering migrants temporary discounts on remittance transaction fees. We randomly assigned migrants from El Salvador and Guatemala 10-week remittance transaction fee discounts, and assess impacts using administrative transaction data and a post-experiment survey. Temporary discounts lead to substantial increases in the number of transactions and total amount remitted during the discount period. Surprisingly, these increases persist up to 20 weeks after expiration of the discount. We find no evidence that the discounts cause migrants to shift remittances from other remittance channels, or to send remittances on behalf of other migrants. These findings are consistent with naïveté on the part of migrants regarding remittance recipients' reference-dependent preferences.
    JEL: F24 J61 O15
    Date: 2014–09
  16. By: Abhijit Banerjee; Esther Duflo; Richard Hornbeck
    Abstract: We analyze a randomized trial in which microfinance loans were bundled with an unpopular (but cheap) health insurance policy. In randomly assigned treatment villages, purchase of the insurance policy was made mandatory at the time of loan renewal. This requirement led to a 22 percentage point (or 31%) decline in loan renewal in treatment villages, compared to control villages where the insurance policy was not introduced. The insurance policy itself turned out to be useless, partly due to administrative failures in implementation. Therefore, non-renewing clients' valuation of microfinance is approximated by the modest fee to purchase the insurance; in the presence of any expected gains, the fee represents an upper bound. Comparing client businesses in treatment and control villages, however, the decline in loan renewal had negative impacts that were both economically substantial and statistically significant. Clients' decision to incur these losses, rather than pay the modest insurance premium, implies the substantial financial gains from microfinance are mostly dissipated by unmeasured costs of operating the small businesses. This result potentially reconciles the seemingly large returns to capital for microenterprises with the lack of growth and frequent business closure.
    JEL: O12 O16 O19
    Date: 2014–09
  17. By: Andreas Bergh; Philipp C. Wichardt
    Abstract: This paper proposes a simple framework to model social preferences in a game theoretic framework which explicitly separates economic incentives from social (context) effects. It is argued that such a perspective makes it easier to analyse contextual effects. Moreover, the framework is used to exemplify both theoretically and empirically how contextual variables such as social norms can worsen a social dilemma or possibly make it disappear. The empirical results of a randomised controlled classroom experiment show that women are more responsive to such contextual effects and that social agreements can also worsen economic inefficiencies
    Keywords: Context Effects, Efficiency, Social Norms, Social Preferences, Utility
    JEL: D03 D63 Z10
    Date: 2014–11
  18. By: Adam M. Lavecchia; Heidi Liu; Philip Oreopoulos
    Abstract: Behavioral economics attempts to integrate insights from psychology, neuroscience, and sociology in order to better predict individual outcomes and develop more effective policy. While the field has been successfully applied to many areas, education has, so far, received less attention - a surprising oversight, given the field's key interest in long-run decision-making and the propensity of youth to make poor long-run decisions. In this chapter, we review the emerging literature on the behavioral economics of education. We first develop a general framework for thinking about why youth and their parents might not always take full advantage of education opportunities. We then discuss how these behavioral barriers may be preventing some students from improving their long-run welfare. We evaluate the recent but rapidly growing efforts to develop policies that mitigate these barriers, many of which have been examined in experimental settings. Finally, we discuss future prospects for research in this emerging field.
    JEL: D03 D87 I2 J24
    Date: 2014–10

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