nep-exp New Economics Papers
on Experimental Economics
Issue of 2014‒12‒24
sixteen papers chosen by

  2. Endogenous cartel formation: Experimental evidence By Fonseca, Miguel A.; Normann, Hans-Theo
  3. Directed Giving: Evidence from an Inter-Household Transfer Experiment By Catia Batista; Dan Silverman; Dean Yang
  4. An ultimatum game with multidimensional response strategies By Werner Gueth; Maria Vittoria Levati; Chiara Nardi; Ivan Soraperra
  5. Gender & High Frequency vs. Low Frequency tasks in a context of Joint-Liability Incentives. By Marianne Bernatzky; José María Cabrera; Alejandro Cid
  6. Randomizing Endowments: An Experimental Study of Rational Expectations and Reference-Dependent Preferences By Götte, Lorenz; Harms, Annette; Sprenger, Charles
  7. Stochastic Intrinsic Kriging for Simulation Metamodelling By Mehdad, E.; Kleijnen, Jack P.C.
  8. A Future Market Reduces Bubbles but Allows Greater Profit for More Sophisticated Traders By Noussair, C.N.; Tucker, S.; Xu, Yilong
  9. Experimental evidence on inflation expectation formation By Pfajfar, D.; Zakelj, B.
  10. How do risk attitudes affect measured confidence? By Zahra Murad; Chris Starmer; Martin Sefton
  11. Toward an Understanding of Reference-Dependent Labor Supply: Theory and Evidence from a Field Experiment By Steffen Andersen; Alec Brandon; Uri Gneezy; John A. List
  12. Money is More than a Memory By Maria Bigoni; Gabriele Camera; Marco Casari
  13. The Emotional Consequences of Donation Opportunities By Lara B. Aknin; Guy Mayraz; John F. Helliwell
  14. Preschools and early childhood development in a second best world: Evidence from a scaled-up experiment in Cambodia By Bouguen, Adrien; Filmer, Deon; Macours, Karen; Naudeau, Sophie
  15. Milking the data : measuring income from milk production in extensive livestock systems -- experimental evidence from Niger By Zezza, Alberto; Federighi, Giovanni; Adamou, Kalilou; Hiernaux, Pierre
  16. Ideals should not be too ideal: Identity and public good contribution By Fuhai HONG

  1. By: Sven Fischer (Max Planck Institute of Economics, Germany); Werner Guth (Max Planck Institute of Economics, Germany); Todd R. Kaplan (University of Exeter, Exeter, EX4 4PU, UK, and University of Haifa, Israel.); Ro'i Zultan (BGU)
    Keywords: auctions, espionage, collusion, laboratory experiments.
    JEL: C72 C91 D44
    Date: 2014
  2. By: Fonseca, Miguel A.; Normann, Hans-Theo
    Abstract: In a Bertrand-oligopoly experiment, firms choose whether or not to engage in cartel-like communication and, if so, they may get fined by a cartel authority. We find that four-firm industries form cartels more often than duopolies because they gain less from a hysteresis effect after cartel disruption.
    Keywords: cartels,collusion,communication,experiments,repeated games
    JEL: C7 C9 L41
    Date: 2014
  3. By: Catia Batista; Dan Silverman; Dean Yang
    Abstract: We investigate the determinants of giving in a lab-in-the-field experiment with large stakes. Study participants in urban Mozambique play dictator games where their counterpart is the closest person to them outside their household. Dictators share more with counterparts when they have the option of giving in kind (in the form of goods), compared to giving that must be in cash. Qualitative post-experiment responses suggest that this effect is driven by a desire to control how recipients use gifted resources. Standard economic determinants such as the rate of return to giving and the size of the endowment also affect giving, but the effects of even large changes in these determinants are significantly smaller than the effect of the in-kind option. Our results support theories of giving where the utility of givers depends on the composition (not just the level) of gift-recipient expenditures, and givers thus seek control over transferred resources. JEL codes: C92, C93, D01, D03, D64, O17
    Keywords: sharing, altruism, giving, dictator game, inter-household transfers, Mozambique
    Date: 2013
  4. By: Werner Gueth (Max Planck Institute of Economics); Maria Vittoria Levati (Department of Economics (University of Verona)); Chiara Nardi (Department of Economics (University of Verona)); Ivan Soraperra (Department of Economics (University of Verona))
    Keywords: Ultimatum; Social preferences; Incomplete information; Experiments
    JEL: C72 C91 D63 D74
    Date: 2014–08
  5. By: Marianne Bernatzky; José María Cabrera; Alejandro Cid
    Abstract: We study the impact of high and low frequency incentives in a joint-liability framework on six academic outcomes of undergraduate students using a randomized field experiment. As recently documented in health literature, incentives to exercise are effective in developing healthy habits. Therefore, we design groups of three students and provide a premium to the homework’s grade if all the members of the group (three) meet some requirements. We investigate how the frequency of these take home tests affect the students study habits and thus, the academic outcomes. We find that there are no differences in the student’s educational outcomes between the high and low frequency groups. We also explore if male and female students respond differently to a joint-liability incentives scheme. We find that this treatment improves the accumulated grade average of male students, but not for females. This finding is in line with previous research on joint-liability and gender behavior, but now we present it in a new context. Finally, the paper outlines the main evaluation challenges associated with a field experiment in the classroom and provide some lessons in order to improve evaluation designs and to foster future randomized controlled trials in this area.
    Keywords: gender; field experiment; classroom incentives; evaluation; joint-liability incentives
    Date: 2014
  6. By: Götte, Lorenz (University of Lausanne); Harms, Annette (University of Lausanne); Sprenger, Charles (Stanford University)
    Abstract: An important advance in the study of reference-dependent preferences is the discipline provided by coherent accounts of reference point formation. Kőszegi and Rabin (2006) provide such discipline by positing a reference point grounded in rational expectations. We examine the predictions of Kőszegi and Rabin (2006) in the context of market experiments with probabilistic forced exchange. The experiment tightly tests the predictions of Kőszegi and Rabin (2006), as when the probability of forced exchange increases, individuals should grow more willing to exchange. This mechanism has the theoretical potential to eliminate and even reverse the 'endowment effect' (Knetsch and Sinden, 1984; Knetsch, 1989; Kahneman et al., 1990). Our results uniformly reject these theoretical predictions. In a series of experiments with a total of 930 subjects, sellers' valuations exceed buyers' valuations under all probabilities of forced exchange. In robustness tests where attention is drawn specifically to the forced exchange mechanism, the results are directionally more promising for buyers, but still reject the main thrust of the theoretical predictions. Our findings suggest a potential path forward incorporating failures to completely forecast sensations of gain and loss into models of expectations-based reference dependence.
    Keywords: reference-dependent preferences, rational expectations, personal equilibrium, endowment effect, expectations-based reference points
    JEL: D81 D84 D12 D03
    Date: 2014–11
  7. By: Mehdad, E. (Tilburg University, Center For Economic Research); Kleijnen, Jack P.C. (Tilburg University, Center For Economic Research)
    Abstract: We derive intrinsic Kriging, using Matherons intrinsic random functions which eliminate the trend in classic Kriging. We formulate this intrinsic Kriging as a metamodel in deterministic and random simulation models. For random simulation we derive an experimental design that also specifies the number of replications that varies with the input combinations. We compare intrinsic Kriging and classic Kriging in several numerical experiments with deterministic and random simulations. These experiments suggest that intrinsic Kriging gives more accurate metamodel, in most experiments.
    Keywords: Gaussian process; Kriging; intrinsic Kriging; metamodel; computer experiment; simulation
    JEL: C0 C1 C9 C15 C44
    Date: 2014
  8. By: Noussair, C.N. (Tilburg University, Center For Economic Research); Tucker, S.; Xu, Yilong (Tilburg University, Center For Economic Research)
    Abstract: We study the effect of the addition of a futures market, in which contracts maturing in the last period of the life of the asset can be traded. Our experiment has two treatments, one in which a spot market operates on its own, and a second treatment in which a spot and futures market are active simultaneously. We find that the futures market reduces spot market mispricing among a trader population prone to bubbles, while having no effect on pricing in a group not prone to it. Thus, overall, futures markets aid price discovery in the spot market, although the futures markets themselves exhibit considerable overpricing. Individuals with higher cognitive reflection test (CRT) scores achieve greater earnings, as they tend to sell in the overpriced futures market, while traders with lower CRT score make purchases in the futures market. We also consider the predictive power of an enhanced CRT measure (ECRT), which weights two types of incorrect answers differently .
    Keywords: asset market experiment; market institution; futures market
    JEL: C91 C13
    Date: 2014
  9. By: Pfajfar, D. (Tilburg University, School of Economics and Management); Zakelj, B.
    Abstract: Using laboratory experiments within a New Keynesian sticky price framework, we study the process of inflation expectation formation. We focus on adaptive learning and rational expectations contrary to the previous literature that mostly studied simple heuristics. Using a test for rational expectations that allows heterogeneity of expectations we find that we cannot reject rationality for about 40% of subjects. More than 20% of subjects are also best described by adaptive learning models, where they behave like econometricians and update their model estimates every period. However, rather than using a single forecasting model, switching between models describes their behavior better. Switching is more likely to occur when experimental economy is in a recession.
    Date: 2014
  10. By: Zahra Murad (School of Economics, University of Nottingham; Department of Health Care Management and Policy, University of Surrey); Chris Starmer (Department of Economics, University of Amsterdam); Martin Sefton (School of Economics, University of Nottingham)
    Abstract: We examine the relationship between confidence in own absolute performance and risk attitudes using two elicitation procedures: self-reported (non-incentivised) confidence and an incentivised procedure that elicits the certainty equivalent of a bet based on performance. The former procedure reproduces the “hard-easy effect†(overconfidence in easy tasks and underconfidence in hard tasks) found in a large number of studies using non-incentivised self-reports. The latter procedure produces general underconfidence, which is significantly reduced, but not eliminated when we filter out the effects of risk attitudes. Finally, we find that self-reported confidence correlates significantly with features of individual risk attitudes including parameters of individual probability weighting.
    Keywords: Overconfidence, Underconfidence, Experiment, Risk Preferences
  11. By: Steffen Andersen; Alec Brandon; Uri Gneezy; John A. List
    Abstract: Perhaps the most powerful form of framing arises through reference dependence, wherein choices are made recognizing the starting point or a goal. In labor economics, for example, a form of reference dependence, income targeting, has been argued to represent a serious challenge to traditional economic models. We design a field experiment linked tightly to three popular economic models of labor supply—two behavioral variants and one simple neoclassical model—to deepen our understanding of the positive implications of our major theories. Consistent with neoclassical theory and reference-dependent preferences with endogenous reference points, workers (vendors in open air markets) supply more hours when presented with an expected transitory increase in hourly wages. In contrast with the prediction of behavioral models, however, when vendors earn an unexpected windfall early in the day, their labor supply does not respond. A key feature of our market in terms of parsing the theories is that vendors do not post prices rather they haggle with customers. In this way, our data also speak to the possibility of reference-dependent preferences over other dimensions. Our investigation again yields results that are in line with neoclassical theory, as bargaining patterns are unaffected by the unexpected windfall.
    JEL: C93 D01
    Date: 2014–11
  12. By: Maria Bigoni (University of Bologna); Gabriele Camera (Economic Science Institute, Chapman University and University of Basel); Marco Casari (University of Bologna and IZA)
    Abstract: Impersonal exchange is the hallmark of an advanced society. One key institution for impersonal exchange is money, which economic theory considers just a primitive arrangement for monitoring past conduct in society. If so, then a public record of past actions—or memory—supersedes the function performed by money. This intriguing theoretical postulate remains untested. In an experiment, we show that the suggested functional equality between money and memory does not translate into an empirical equivalence. Monetary systems perform a richer set of functions than just revealing past behaviors, which proves to be crucial in promoting large-scale cooperation.
    Keywords: Cooperation, intertemporal trade, experiments, social norms, social dilemmas
    JEL: C70 C90 D03 E02
    Date: 2014
  13. By: Lara B. Aknin; Guy Mayraz; John F. Helliwell
    Abstract: Charities often circulate widespread donation appeals to garner support for campaigns, but what impact do these campaigns have on the well-being of individuals who choose to donate, those who choose not to donate, and the entire group exposed to the campaign? Here we investigate these questions by exploring the changes in affect reported by individuals who donate in response to a charitable request and those who do not. We also look at the change in affect reported by the entire sample to measure the net impact of the donation request. Results reveal that large donors experience hedonic boosts from their charitable actions, and the substantial fraction of large donors translates to a net positive influence on the well-being of the entire sample. Thus, under certain conditions, donation opportunities can enable people to help others while also increasing the overall well-being of the population of potential donors.
    JEL: C91 D60 D64 H3
    Date: 2014–11
  14. By: Bouguen, Adrien; Filmer, Deon; Macours, Karen; Naudeau, Sophie
    Abstract: Interventions targeting early childhood development, such as investment in preschools, are often seen as promising mechanisms to increase human capital and to reduce the intergenerational transmission of poverty and inequality. This paper presents results from a randomized evaluation of a large scale preschool construction program in Cambodia, and indicates a cautionary tale. The overall impact of the program on a wide set of children’s early childhood outcomes was small and not statistically significant, and for the cohort with highest exposure the program led to a negative impact on early childhood cognition. Moreover, for this group, the intervention increased inequality as the negative impacts are largest for children of poorer and less educated parents. The results can be explained by the frequent occurrence of underage enrollment in primary school in the absence of preschools, stricter enforcement of the minimum age for primary school entry after the intervention, substitution between primary and preschool following intervention, and difference in demand responses of more and less educated parents to the new preschools. These results indicate that the design of ECD interventions needs to start from a good understanding of parental and teacher decisions pre-program. More generally, they show how implementation and demand-side constraints might not only limit positive impacts, but could even lead to perverse effects of early childhood interventions.
    Keywords: early childhood development; preschools; RCT
    JEL: I28 O15
    Date: 2014–09
  15. By: Zezza, Alberto; Federighi, Giovanni; Adamou, Kalilou; Hiernaux, Pierre
    Abstract: Milk is an important source of cash and nutrients for many households in developing countries. Yet, the understanding of the role of dairy production in livelihoods and nutritional outcomes is hindered by the lack of decent quality household survey data. Data on milk off-take for human consumption are difficult to collect in household surveys for several reasons that make accurate recall challenging for the respondent (continuous production and seasonality, among others). As a result, the quantification and valuation of milk off-take is particularly difficult in household surveys, introducing possibly severe biases in the computation of full household incomes and farm sales, as well as in the estimation of the contribution of livestock (specifically dairy) production in agricultural value added and the livelihoods of rural households. This paper presents results from a validation exercise implemented in Niger, where alternative survey instruments based on recall methods were administered to randomly selected households and compared with a 12-month system of physical monitoring and recording of milk production. The results of the exercise show that reasonably accurate estimates via recall methods are possible and provide a clear ranking of questionnaire design options that can inform future survey operations.
    Keywords: Dairies and Dairying,Livestock and Animal Husbandry,Regional Economic Development,Rural Development Knowledge&Information Systems,Rural Poverty Reduction
    Date: 2014–11–01
  16. By: Fuhai HONG (Division of Economics, School of Humanities and Social Sciences, Nanyang Technological Univer- sity. Address: 14 Nanyang Drive, Singapore, 637332.)
    Abstract: This paper incorporates identity into a model of voluntary public good contribution. An ideal of contributing to public goods divides players to di¤erent social categories: Players who identify with the ideal become insiders, obtaining identity utility but incurring disu- tility if their contributions depart from the ideal, while players who do not identify with the ideal remain as outsiders. We show that identity could increase public good contribution; the ideal that best resolves the free-riding problem in the public good game equals either the contribution level of the most altruistic player in the absence of the identity, or a level that makes the least altruistic player indi¤erent between becoming an insider and not, depending on the size of the group. These results have implications for social policymaking.
    Keywords: Ideals, Identity, Public Goods, Social Categories
    JEL: D03 H41
    Date: 2014–11

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