nep-exp New Economics Papers
on Experimental Economics
Issue of 2015‒01‒26
thirty-two papers chosen by

  1. Turning a blind eye, but not the other cheek: on the robustness of costly punishment By Peter H. Kriss; Roberto A. Weber; Erte Xiao
  2. The Short Arm of Guilt: Does it only hit who is close? By Alexander Morell
  3. On Self Selection of the Corrupt into the Public Sector By Ritwik Banerjee; Tushi Bau; Tanya Rosenblat
  4. Limited backward induction: foresight and behavior in sequential games By Marco Mantovani
  5. I will never switch sides: an experimental approach to determine drivers for investment decisions of conventional and organic hog farmers By Hermann, Daniel; Musshoff, Oliver; Agethen, Katrin
  6. A Methodological Note on a Weighted Voting Experiment By Eric Guerci Author-Name: Nobuyuki Hanaki Author-Name: Naoki Watanabe; Gabriele Esposito Author-Name: Xiaoyan Lu
  7. Quality Versus Quantity in Information Transmission: Theory and Experimental Evidence By Alistair Wilson; Jonathan Lafky
  8. On the External Validity of Social- Preference Games: A Systematic Lab-Field Study By Matteo M. Galizzi; Daniel Navarro-Martínez
  9. Leveling Up: Early Results from a Randomized Evaluation of Post-Secondary Aid By Joshua Angrist; David Autor; Sally Hudson; Amanda Pallais
  10. Do members derive value from cooperative growth? Experimental evidence on farmers’ horizon and willingness to invest By Alho, Eeva Kristiina
  11. Nudging parental health behavior with and without children's pestering power: fat tax, subsidy or both? By Papoutsi, Georgia S.; Nayga, Rodolfo M. Jr.; Lazaridis, Panagiotis; Drichoutis, Andreas C.
  12. Time Preferences and Risk Aversion: Tests on Domain Differences By Ioannou , Christos A.; Sadeh, Jana
  13. On the external validity of social-preference games: A systematic lab-field study By Matteo M. Galizzi; Daniel Navarro Martinez
  14. An Experimental Study of Money Illusion in Intertemporal Decision Making By Tetsuo Yamamori Author-Name: Kazuyuki Iwata; Akira Ogawa
  15. Labelling and consumer behaviour: experimental evidence from a Belgian supermarket By Vlaeminck, Pieter; Jiang, Ting; Vranken, Liesbet
  16. Trust and trustworthiness in experimental organizations By Giuseppe Danese; Luigi Mittone
  17. Intellectual property rights hinder sequential innovation: experimental evidence By Brueggemann, J.; Crosetto, P.; Meub, L.; Bizer, K.
  18. Externalities in appropriation: Responses to probabilistic losses By Esther Blanco; Tobias Haller; James M. Walker
  19. Would I Care if I Knew? Image Concerns and Social Confirmation in Giving By Alexander S. Kritikos; Jonathan H. W. Tan
  20. Using Field Experiments to Address Environmental Externalities and Resource Scarcity: Major Lessons Learned and New Directions for Future Research By Michael Price
  21. Feedback and Emotions in the Trust Game By Ivo Bischoff; Özcan Ihtiyar
  22. Social Interaction Effects and Connection to Electricity: Experimental Evidence from Rural Ethiopia By Bernard, Tanguy; Torero, Maximo
  23. The House Money Effect and Negative Reciprocity By Katarína Danková; Maroš Servátka
  24. D- and I-optimal design of mixture experiments in the presence of ingredient availability constraints By SYAFITRI, Utami; SARTONO, Bagus; GOOS, Peter
  25. Cracking Down on Bribery By Banuri, Sheheryar; Eckel, Catherine
  26. Non-cooperative games By van Damme, E.E.C.
  27. Health Insurance and the Labor Market with Wage Rigidities: Insights from a Laboratory Experiment By Katerina Sherstyuka; Dolgorsuren Dorjb; Gerard Russo
  28. Directing Remittances to Education with Soft and Hard Commitments: Evidence from a Lab-in-the-field Experiment and New Product Take-up Among Filipino Migrants in Rome By Giuseppe De Arcangelis; Majlinda Joxhe; David McKenzie; Erwin Tiongson; Dean Yang
  29. Choice, Deferral and Consistency By Miguel Costa-Gomes; Carlos Cueva; Georgios Gerasimou
  30. Does Group Identity Prevent Inefficient Investment in Outside Options? An Experimental Investigation By Hodaka Morita; Maroš Servátka
  31. Are ranking preferences information methods comparable with the choice experiment information in predicting actual behavior? By Yangui, Ahmed1; Akaichi, Faiçal; Costa-Font, Montserrat; Gil, Jose Maria
  32. The Impact of Announcing Future Punishment Opportunities in a Public Goods Game By Martine Visser, Alex Child, Jamil Moorad and Wisdom Akpalu

  1. By: Peter H. Kriss; Roberto A. Weber; Erte Xiao
    Abstract: Prior research demonstrates a willingness to incur costs to punish norm violators. But, how strong are the motives underlying such acts? Will people rely on "excuses" to avoid acting on costly punishment intentions, as with other costly pro-social acts? In a laboratory experiment, we find that third parties punish reluctantly: they state a preference to punish, but avoid the opportunity when doing so does not reveal this as their preference. In contrast, second parties - those directly wronged - are resolute punishers: they actively seek out the opportunity to punish. Our findings highlight important differences in motives underlying second- and third-party punishment.
    Keywords: Experiment, third-party punishment, second-party punishment, fairness
    JEL: C72 C92 D64
    Date: 2015–01
  2. By: Alexander Morell (Max Planck Institute for Research on Collective Goods)
    Abstract: In a laboratory experiment, I test whether guilt aversion, i.e., a preference to fulfill other people’s expectations, plays out stronger if agents are socially close. I induce two different minimal group identities in participants and randomly assign participants to one of two treatments. Senders either play a dictator game with a receiver from their own group (ingroup treatment) or from the other group (outgroup treatment). I let senders condition their amount sent on second-order beliefs. I find that, in the realm of realistic beliefs (i.e., the sender expects the receiver to expect the sender to send no more than half of the pie), the positive influence of second-order beliefs on how much the sender sends is stronger in the ingroup treatment. In both treatments, about half of the senders remain unaffected by second-order beliefs. In the ingroup treatment, unaffected senders identify less with their group than affected senders do. This is not true for the outgroup treatment.
    Date: 2014–11
  3. By: Ritwik Banerjee (Department of Economics and Business, Aarhus University, Denmark); Tushi Bau (Department of Economics, New York University, Abu Dhabi); Tanya Rosenblat (School of Information, University of Michigan, USA)
    Abstract: Do corrupt people self select themselves in professions where the scope of corruption is high? We conduct a corruption experiment with private sector job aspirants and aspirants of Indian bureaucracy. The game models embezzlement of resources in which “supervisors” evaluate the performance of “workers” and then pay them. We find that aspirant bureaucrats indulge in more corruption than private sector aspirants but the likelihood of being corrupt is same across two sectors.
    Keywords: Corruption, Experiments, Bureaucracy
    JEL: C91 D73 O12 K42
    Date: 2015–06–01
  4. By: Marco Mantovani
    Abstract: The paper tests experimentally for limited foresight in sequential games. We develop a general out-of-equilibrium framework of strategic thinking based on limited foresight. It assumes the players take decisions focusing on close-by nodes, following backward induction – what we call limited backward induction (LBI). The main prediction of the model is tested in the context of a modified Game of 21. In line with the theoretical hypotheses, our results show most players think strategically only on close-by nodes without reasoning backwards from the end of the game. A small fraction of subjects play close to equilibrium, while few others try to exploit the limited foresight of their opponent. The results provide strong support for LBI, and cannot be accounted for using the most popular models of strategic thinking, let alone equilibrium analysis.
    Keywords: Behavioral game theory, sequential games, strategic thinking, level-k, limited foresight.
    JEL: D03 C72 C91
    Date: 2015–01
  5. By: Hermann, Daniel; Musshoff, Oliver; Agethen, Katrin
    Abstract: Despite the economic benefits of organic farming, the conversion rates to this production method are low. The reasons for this reluctance are largely unknown; however, they are important for policy recommendations. Therefore, we experimentally investigate and compare the investment behavior of organic and conventional hog farmers. We examine the question of whether the investment behavior depends on the framing of the investment possibility as organic or conventional. The results provide evidence that investment decisions depend on the framing of an investment possibility and thus reveal that current subsidy structures may be inefficient for encouraging farmers to convert.
    Keywords: experimental economics, investment behavior, framing, organic farming, hog production, Farm Management,
    Date: 2014–08
  6. By: Eric Guerci Author-Name: Nobuyuki Hanaki Author-Name: Naoki Watanabe; Gabriele Esposito Author-Name: Xiaoyan Lu
    Abstract: We conducted a sensitivity analysis of the results of weighted voting experiments by varying two features of the experimental protocol by Montero et al. (2008): (1) the way in which the roles of subjects are reassigned in each round (random role, RR, versus fixed role, FR) and (2) the number of proposals that subjects can simultaneously approve (multiple approval, MA, versus single approval, SA). It was observed that the differences in these protocols had impacts on the relative frequencies of minimum winning coalitions as well as how negotiations proceed. Our analysis favors a protocol with FR-SA for future research, because this protocol induces subjects to commit fewer errors in their decision making than the protocol with RR-MA, and because proposal-objection dynamics are more frequently observed under FR-SA than under RR-MA.
    Date: 2013–12
  7. By: Alistair Wilson; Jonathan Lafky
    Abstract: Information sharing has become increasingly important in helping consumers make better, more informed choices over competing products. Our project uses a novel theoretical framework and laboratory experiments to analyze three simple, commonly used incentive schemes against an unincentivized baseline. Each incentive scheme has qualitatively different theoretical predictions for behavior and efficiency, while our laboratory experiments examine the degree to which these differences manifest themselves, and the best-cast theory`s robustness to human behavior. Our findings indicate the possibility for substantial efficiency gains by introducing incentives that reward information sharing, even where those incentives drive a wedge between those sending and those receiving information.
    Keywords: Ratings, Information Sharing, Dishonesty, Incentives
    JEL: C71 C92 D82 D83
    Date: 2015–01
  8. By: Matteo M. Galizzi; Daniel Navarro-Martínez
    Abstract: We present a lab-field experiment designed to assess systematically the external validity of social preferences elicited in a variety of experimental games. We do this by comparing behavior in the different games with a number of behaviors elicited in the field and with self-reported behaviors exhibited in the past, using the same sample of participants. Our results show that the experimental social-preference games do a poor job in explaining both social behaviors in the field and social behaviors from the past.
    Keywords: social preferences, experimental games, external validity, field behavior
    JEL: C92 C93 D03
    Date: 2015–01
  9. By: Joshua Angrist; David Autor; Sally Hudson; Amanda Pallais
    Abstract: Does financial aid increase college attendance and completion? Selection bias and the high implicit tax rates imposed by overlapping aid programs make this question difficult to answer. This paper reports initial findings from a randomized evaluation of a large privately-funded scholarship program for applicants to Nebraska's public colleges and universities. Our research design answers the challenges of aid evaluation with random assignment of aid offers and a strong first stage for aid received: randomly assigned aid offers increased aid received markedly. This in turn appears to have boosted enrollment and persistence, while also shifting many applicants from two- to four-year schools. Awards offered to nonwhite applicants, to those with relatively low academic achievement, and to applicants who targeted less-selective four-year programs (as measured by admissions rates) generated the largest gains in enrollment and persistence, while effects were much smaller for applicants predicted to have stronger post-secondary outcomes in the absence of treatment. Thus, awards enabled groups with historically-low college attendance to ʽlevel up,ʼ largely equalizing enrollment and persistence rates with traditionally college-bound peers, particularly at four-year programs. Awards offered to prospective community college students had little effect on college enrollment or the type of college attended.
    JEL: H52 I21 I22 I23 I28 J24
    Date: 2014–12
  10. By: Alho, Eeva Kristiina
    Abstract: Globalisation of food markets pressures agricultural cooperatives to seek growth strategies to safeguard competitiveness and the capacity to maintain services. Farmers as the owners of the cooperative are the principal party to provide investment capital. The availability of member financing is however undermined by structural changes in agriculture. The capital intensity of farming discourages voluntary contributions if farmers do not have incentives to commit capital to the cooperative. Choice experiment is employed to uncover preferences for investment attributes among Finnish milk producers. Results indicate that farmers prefer reserving control rights to members, but they could be incentivised to contribute capital on terms which include capital-based residual rights, low-risk return, and compensate for appreciation of firm value. Policy implications of the findings describe the need to redefine member capital instruments innovatively in growing producer cooperatives.
    Keywords: producer cooperatives, investments, choice experiment, Institutional and Behavioral Economics,
    Date: 2014–08
  11. By: Papoutsi, Georgia S.; Nayga, Rodolfo M. Jr.; Lazaridis, Panagiotis; Drichoutis, Andreas C.
    Abstract: We study the effect of several food fiscal policies as a way of nudging consumers towards a healthier way of eating. Our experimental design varies prices of healthier and unhealthier alternatives of food products for children. We also examine the interplay of children’s pestering power. Results from our lab experiment suggest that (a) implementing a fat tax and a subsidy simultaneously can nudge parents to choose healthier products, (b) providing information regarding the fiscal policies in place can further increase the impact of the intervention, and (c) kid’s pestering power is one of the causes of the policies’ moderate effectiveness.
    Keywords: Choice experiment, Fat tax, Subsidy, Information, Pestering power, Health Economics and Policy,
    Date: 2014–08
  12. By: Ioannou , Christos A.; Sadeh, Jana
    Abstract: The design and evaluation of environmental policy requires the incorporation of time and risk elements as many environmental outcomes extend over long time periods and involve a large degree of uncertainty. Understanding how individuals discount and evaluate risks with respect to environmental outcomes is a prime component in designing effective environmental policy to address issues of environmental sustainability, such as climate change. Our objective in this study is to investigate whether subjects' time preferences and risk aversion across the monetary domain and the environmental domain differ. Crucially, our experimental design is incentivized: in the monetary domain, time preferences and risk aversion are elicited with real monetary payoffs, whereas in the environmental domain, we elicit time preferences and risk aversion using real (bee-friendly) plants. We find that subjects' time preferences are not significantly different across the monetary and environmental domains. In contrast, subjects' risk aversion is significantly different across the two domains. More specifically, subjects (men and women) exhibit a higher degree of risk aversion in the environmental domain relative to the monetary domain. Finally, we corroborate earlier results, which document that women are more risk averse than men in the monetary domain. We show this finding to, also, hold in the environmental domain.
    Date: 2014–12–28
  13. By: Matteo M. Galizzi; Daniel Navarro Martinez
    Abstract: We present a lab-field experiment designed to assess systematically the external validity of social preferences elicited in a variety of experimental games. We do this by comparing behavior in the different games with a number of behaviors elicited in the field and with self-reported behaviors exhibited in the past, using the same sample of participants. Our results show that the experimental social-preference games do a poor job in explaining both social behaviors in the field and social behaviors from the past.
    Keywords: Social preferences, experimental games, external validity, field behavior.
    JEL: C92 C93 D03
    Date: 2015–01
  14. By: Tetsuo Yamamori Author-Name: Kazuyuki Iwata; Akira Ogawa
    Abstract: To examine the degree to which price fluctuations affect how individuals approach an intertemporal decision-making problem, we conduct a laboratory experiment in which subjects spend their savings on consumption over 20 periods. In the control treatment, the commodity price is constant across all periods. In the small (large) price-fluctuation treatment, the price rate of change is always 1% (20%), and the rate of change of savings is always the same as the commodity price. Therefore, the optimal amount of consumption is the same in all three treatments. Our main findings are threefold. First, the magnitude of misconsumption (i.e., the deviation from optimal consumption) is significantly high in order of the control, small price-fluctuation, and large price-fluctuation treatments. Second, in the control treatment, the magnitude of misconsumption shrinks over time, whereas it gradually increases in the small and large price-fluctuation treatments. Finally, regardless of the presence of price fluctuations, subjects exhibit under-consumption (over-saving) behavior, and the presence of price fluctuations strengthens such a tendency.
    Date: 2014–11
  15. By: Vlaeminck, Pieter; Jiang, Ting; Vranken, Liesbet
    Abstract: Using an incentive-compatible framed field experiment, we investigate whether consumers’ food consumption is more eco-friendly when the information about a product’s environmental impact is more easily accessible. Through an online choice experiment, we identify a food label that is perceived to be the most easily accessible for assessing a product’s eco- friendliness among six alternatives. This new graded food label is subsequently tested in an experimental food market embedded in a Belgium supermarket. We find that the presence of the new graded food label leads to more eco-friendly food consumption relative to the label currently used in the supermarket, i.e. the graded label increases the overall eco-friendliness of our subjects’ food consumption by about 10%.
    Keywords: Food labelling, Field Experiment, Environmental Information Provision, Consumer Behaviour, Consumer/Household Economics, Institutional and Behavioral Economics,
    Date: 2014–08
  16. By: Giuseppe Danese; Luigi Mittone
    Abstract: In this paper we discuss two instruments through which corporate law attempts to promote trust and trustworthiness in business organizations: (i) monitoring of the manager by a principal, as in the agency approach; (ii) moral suasion, as in the approach according to which managers are “fiduciaries”. We present the results of a laboratory experiment designed to investigate the effectiveness of these two instruments in promoting: (i) profitable, but at the same time risky, entrustments of assets to a manager from a group of investors earning their endowment through real effort; (ii) a higher payback for those investors who entrust more assets to the manager. The first is a measure of trust of the investors in the manager, while the second is a measure of the manager’s trustworthiness. We find that moral suasion increases the investors’ trust. Monitoring also increases the investors’ trust, but only in the case in which the manager is not aware of the experimental identity of his/her principal. The manager is trustworthy up to a certain degree, regardless of the governance structure of the organization and of the accuracy with which she observes each investor’s entrustment. Finally, we find a modest positive effect of noise on trust, but no strong effect of noise on effort or trustworthiness.
    JEL: K22 C92 L21
    Date: 2015
  17. By: Brueggemann, J.; Crosetto, P.; Meub, L.; Bizer, K.
    Abstract: In this paper we contribute to the discussion on whether intellectual property rights foster or hinder innovation by means of a laboratory experiment. We introduce a novel Scrabble-like creativity task that captures most essentialities of a sequential innovation process. We use this task to investigate the effects of intellectual property allowing subjects to assign license fees to their innovations. We find intellectual property to have an adverse effect on welfare as innovations become less frequent and less sophisticated. Communication among innovators is not able to prevent this detrimental effect. Introducing intellectual property results in more basic innovations and subjects fail to exploit the most valuable sequential innovation paths. Subjects act more self-reliant and non-optimally in order to avoid paying license fees. Our results suggest that granting intellectual property rights hinders innovations, especially for sectors characterized by a strong sequentiality in innovation processes.
    JEL: C91 D89 K39
    Date: 2015
  18. By: Esther Blanco; Tobias Haller; James M. Walker
    Abstract: We examine behavior in one-shot appropriation games with deterministic and probabilistic degradation externalities, where the marginal net benefit from appropriation is endogenous, dependent on individuals' expectations of group appropriation. The experimental design involves a menu of games where the magnitude of a loss parameter associated with probabilistic degradation varies across games. On average, as the loss parameter increases we observe a significant reduction in group appropriation. There is, however, considerable heterogeneity in behavior. First, subjects who are more pessimistic (optimistic) about group appropriation significantly increase (decrease) appropriation as the loss parameter increases. Second, relative to subjects with more optimistic expectations regarding group appropriation, the appropriation of subjects who are more pessimistic is more closely tied to changes in expected marginal benefits.
    Keywords: Social dilemma, Laboratory experiment, Endogenous externality, Strategic uncertainty
    JEL: D70 D81 H41 C90
    Date: 2014–12
  19. By: Alexander S. Kritikos; Jonathan H. W. Tan
    Abstract: This paper experimentally investigates the nature of image concerns in gift giving. For this, we test variants of dictator and impunity games where the influences of social preferences on behavior are kept constant across all games. Givers maximize material payoffs by pretending to be fair when receivers do not know the actual surplus size, implying that portraying an outward appearance of norm compliance matters more than actual compliance. In impunity games, receivers can reject gifts with no payoff consequence to givers. In the face of receivers’ feedback, some givers ensure positive feedback by donating more while some avoid negative feedback by not giving at all. Removing feedback reduces the incentive to give altogether. Differing behavior in the four games implies that social confirmation plays a crucial role in the transmission of image concerns in giving.
    Keywords: Dictator, impunity, experiment, image, social confirmation
    JEL: C78 C92
    Date: 2014
  20. By: Michael Price
    Abstract: This article provides an overview of the use of field experiments in energy and resource economics. I concentrate on two areas of study; field experiments that (i) speak to the use of dynamic pricing plans to manage the use of electricity and water and (ii) explore the adoption of energy saving technologies. Viewed in its totality, this work suggests that both neo-classical factors such as prices or search costs and behavioral constructs such as salience or social norms influence the use of energy and water. For academics, the studies reviewed provide a deeper understanding of individual behavior and the factors that drive the private provision of public goods. For policy makers, the studies reviewed provide a blueprint outlining ways to combine insights from neo-classical and behavioral economics to manage energy/water demand and mitigate externalities generated through their use.
    JEL: D03 D04 D62 D83 H41 Q41 Q48
    Date: 2015–01
  21. By: Ivo Bischoff (University of Kassel); Özcan Ihtiyar (University of Kassel)
    Abstract: We conduct an experiment on the impact of feedback in the Trust Game. In our treatment group, the Trustee has the opportunity to give feedback to the Investor (free in choice of wording and contents). The feedback option is found to reduce the share of Investors who sent no resources to the Trustee, while the impact on average behavior is less pronounced. The notion proposed by Xiao and Houser (2005, PNAS) according to which verbal feedback and monetary sanctions are substitutes is not supported. We use the PANAS-scale (Mackinnon et al., 1999) to capture change in subjects’ short-run affective state during the experiment. Receiving feedback has an impact on the Investors’ short-run affective state but giving feedback is not found to have an effect on Trustees’ short-run affective state.
    Keywords: Trust Game, Feedback, Short-run affect, Emotions
    JEL: C91 D03 D63
    Date: 2015
  22. By: Bernard, Tanguy; Torero, Maximo
    Abstract: This paper assesses the importance of social interactions in determining an individual’s choice to connect to an electrical grid, using an original dataset on a new rural electrification program in Ethiopia. Combining GPS information with random allocation of discount vouchers for connection to the grid, we show that neighbors’ connection behaviors have large effects on a household’s connection decision. This effect is also shown to decrease by distance: no peer effect is found for neighbors living farther than 100 meters away. Evidence also suggests that expectation interactions (through social learning of the benefits of electricity) or constraint interactions (through direct externalities of one’s connection on others’ wellbeing) are unlikely to fully account for these effects, and that preference interactions (through a ‘keeping up with neighbors’ type of mechanism) appear to be a plausible explanation. We discuss implications for further research and the design of development interventions.
    Keywords: Ethiopia, Rural Electrification, Social Interactions
    JEL: C9 C93 O12 O33
    Date: 2014–09
  23. By: Katarína Danková; Maroš Servátka (University of Canterbury)
    Abstract: In the vast majority of laboratory experiments documenting the existence of reciprocity subjects are endowed with windfall funds. In many environments with salient fairness considerations such endowments are known to inflate subjects’ other-regarding behavior, thereby creating a so-called “house money effect.” This suggests that laboratory experiments might also overestimate reciprocal behavior. In this study we identify two reasons why the source of endowment might matter for negative reciprocity: (1) Using earned – as opposed to windfall money – might increase the costs of negative reciprocity due to this money being in a different mental account and therefore lead to less retaliation. (2) Appropriating some of the decision-maker’s endowment consisting of earned money might be considered a stronger violation of property rights and lead to more retaliation. While we find experimental support for the latter conjecture, we also observe that subjects actually retaliate more with their earned money than with windfall money as long as at least a part of their endowment is earned. However, conditional of earning a part of their endowment, subjects do not seem to distinguish between situations when they retaliate using earned money versus using windfall, suggesting that their main motivation is the violation of property rights established by performing a real-effort task. Our results thus point out that endowing subjects with windfall funds, absent of clearly established property rights, deflates their negatively reciprocal responses.
    Keywords: Experiment; House Money; Real Effort, Reciprocity; Taking Game
    JEL: C71 C91 D03 D64
    Date: 2014–12–05
  24. By: SYAFITRI, Utami; SARTONO, Bagus; GOOS, Peter
    Abstract: Mixture experiments usually involve various constraints on the proportions of the ingredients of the mixture under study. In this paper, inspired by the fact that the available stock of certain ingredients is often limited, we focus on a new type of constraint, which we refer to as an ingredient availability constraint. This type of constraint substantially complicates the search for optimal designs for mixture experiments. One difficulty, for instance, is that the optimal number of experimental runs is not known a priori. We show that the optimal design problem in the presence of ingredient availabililty constraints is a nonlinear multidimensional knapsack problem and propose a variable neighborhood descent algorithm to identify D- and I-optimal designs for mixture experiments in case there is a limited stock of certain ingredients.
    Keywords: Mixture experiment, Nonlinear multidimensional knapsack problem, D-optimality, I-optimality, Update formulas, Variable neighborhood descent algorithm, V-optimality
    Date: 2015–01
  25. By: Banuri, Sheheryar; Eckel, Catherine
    Abstract: Do crackdowns on bribery impact corrupt behavior in the long run? In this paper we observe the long-run impact of a short-term punishment institution (i.e., a crackdown) on bribery behavior in a lab setting. We conduct lab experiments in two countries with cultures that differ in corruption norms, and which experience very different levels of bribery: the US and Pakistan. Bribery is implemented in the laboratory as a repeated three-player sequential game, consisting of a firm, a government official and a citizen. The design contains three phases: pre-crackdown, crackdown, and post-crackdown. Results show that post-crackdown behavior is not significantly different from the pre-crackdown behavior in either country. We conclude that short-term crackdowns may impact behavior in the short run, depending on the strength of the existing corruption norms in the country. More importantly, in our setting crackdowns are completely ineffective in the long run, as corrupt behavior rebounds to pre-crackdown levels.
    Keywords: Bribery, Corruption, Experiments, Punishment, Culture
    JEL: C91 D73 K42 Z13
    Date: 2015
  26. By: van Damme, E.E.C. (Tilburg University, Center For Economic Research)
    Abstract: We describe non-cooperative game models and discuss game theoretic solution concepts. Some applications are also noted. Conventional theory focuses on the question ‘how will rational players play?’, and has the Nash equilibrium at its core. We discuss this concept and its interpretations, as well as refinements (perfect and stable equilibria) and relaxations (rationalizability and correlated equilibria). Motivated by experiments that show systematic theory violations, behavioral game theory aims to integrate insights from psychology to get better answers to the question ‘how do humans play?’. We provide an overview of the observed regularities and briefly sketch (beginnings of) theories of boundedly rational play.
    Keywords: Backward induction; behavioral economics; correlated equilibrium; decision; experimental economics; game; game theory; incomplete information; noncooperative,; perfect equilibrium; rationality; rationalizability; sequential equilibrium; stable equilibrium
    JEL: C72 D03
    Date: 2014
  27. By: Katerina Sherstyuka (University of Hawaii at Manoa); Dolgorsuren Dorjb (University of Hawaii at Manoa); Gerard Russo (University of Hawaii at Manoa)
    Abstract: Most individuals who have health insurance in the U.S. obtain it through their employer. In some states the government mandates employers to provide insurance to certain types of workers. We use experimental laboratory to study how employer mandates affect labor market efficiency and the level and structure of employment in the presence of wage rigidities such as minimum wage laws. We find that a binding minimum wage reduces labor market efficiency and decreases, and may fully eliminate, voluntary provision of health insurance by firms to low wage workers. Mandating health insurance for all workers guarantees insurance coverage for those employed, but reduces firms’ demand for workers and thus leads to unemployment.
    Keywords: Labor market, health insurance, minimum wages
    JEL: C92 I18 J20 J3
    Date: 2014–10
  28. By: Giuseppe De Arcangelis; Majlinda Joxhe; David McKenzie; Erwin Tiongson; Dean Yang
    Abstract: This paper tests how migrants’ willingness to remit changes when given the ability to direct remittances to educational purposes using different forms of commitment. Variants of a dictator game in a lab-in-the-field experiment with Filipino migrants in Rome are used to examine remitting behavior under varying degrees of commitment. These range from the soft commitment of simply labeling remittances as being for education, to the hard commitment of having funds directly paid to a school and the student’s educational performance monitored. We find that the introduction of simple labeling for education raises remittances by more than 15 percent. Adding the ability to directly send this funding to the school adds only a further 2.2 percent. We randomly vary the information asymmetry between migrants and their most closely connected household, but find no significant change in the remittance response to these forms of commitment as information varies. Behavior in these games is then shown to be predictive of take-up of a new financial product called EduPay, designed to allow migrants to directly pay remittances to schools in the Philippines. We find this take-up is largely driven by a response to the ability to label remittances for education, rather than to the hard commitment feature of directly paying schools.
    JEL: C9 D19 F24 O15
    Date: 2015–01
  29. By: Miguel Costa-Gomes; Carlos Cueva; Georgios Gerasimou
    Abstract: In this paper we study decision making in situations where the individual's preferences are not assumed to be complete. First, we identify conditions that are necessary and sufficient for choice behavior in general domains to be consistent with maximization of a possibly incomplete preference relation. In this model of maximally dominant choice, the agent defers/avoids choosing at those and only those menus where a most preferred option does not exist. This allows for simple explanations of conflict-induced deferral and choice overload. It also suggests a criterion for distinguishing between indifference and incomparability based on observable data. A simple extension of this model also incorporates decision costs and provides a theoretical framework that is compatible with the experimental design that we propose to elicit possibly incomplete preferences in the lab. The design builds on the introduction of monetary costs that induce choice of a most preferred feasible option if one exists and deferral otherwise. Based on this design we found evidence suggesting that a quarter of the subjects in our study had incomplete preferences, and that these made significantly more consistent choices than a group of subjects who were forced to choose. The latter effect, however, is mitigated once data on indifferences are accounted for.
    Keywords: Incomplete preferences; choice deferral; indecisiveness; preference elicitation; choice consistency
    JEL: C91 D01 D03 D11 D12
    Date: 2014–12–12
  30. By: Hodaka Morita; Maroš Servátka (University of Canterbury)
    Abstract: We study whether group identity helps mitigate inefficiencies associated with appropriable quasi-rents, which are often created by relationship-specific investments in bilateral trade relationships. Based on previous findings that group identity strengthens other-regarding preferences, we conjecture that group identity reduces agents’ incentives to undertake ex-post opportunistic behavior such as investment in an outside option. Our experimental results, however, do not support this conjecture, and contrast with our previous experimental findings that group identity mitigates the hold-up problem associated with distortion in relation-specific investment. We discuss a possible cause of the difference, and its implications for the theory of the firm.
    Keywords: altruism, appropriable quasi-rents, experiment, relation-specific investment, group identity, opportunistic behavior, other-regarding preferences, outside option, theory of the firm, transaction cost economics
    JEL: C91 D20 L20
    Date: 2014–12–18
  31. By: Yangui, Ahmed1; Akaichi, Faiçal; Costa-Font, Montserrat; Gil, Jose Maria
    Abstract: Parting from the issue which elicited value method best predict real consumer’ behavior, this study compares the ability of hypothetical and non-hypothetical choice experiment respect to incentive compatible ranking conjoint analysis and sequential best worst scaling in terms of estimated partworths, internal and external predictive power, estimated WTP, and participants’ response consistency. In general, the results reveal higher preferences regularity between the respondents across the different treatments implying not statistically difference in the marginal participants’ WTP. Additionally, the participants behave similarly whether there are asked to choose or to state their most preferred through two ranking elicitation mechanism. However, the advantage of the best worst scaling in it cognitive process which could be considered clearness for participants has been illustrated in statistical significant increment of external predictive power of the method compared with ranking conjoint analysis
    Keywords: conjoint analysis, best worst scaling, external validity, experimental economics, hypothetical bias, Consumer/Household Economics,
    Date: 2014–08
  32. By: Martine Visser, Alex Child, Jamil Moorad and Wisdom Akpalu
    Abstract: We explore the effects of announcements of future punishment opportunities in public goods games. Announcements can influence subject behaviour, through changing expectations, before the institution is implemented (adjustment effect) or after implementation (adaptation effect). Our results indicate that announcements do not lead to significant adjustment effects, nor increased free-riding before implementation. Once punishment opportunities are implemented, those forewarned with announcements exhibit positive adaptation effects. The number of contributors to the public good increases relative to the no-announcement treatment; this is partly mediated by increased utilisation of punishment, but diminished anti-social use of the institution. Announcements can therefore increase the efficacy of institutional change.
    Keywords: future punishment opportunities, public goods game
    JEL: C9 H41 H30 Q58
    Date: 2014

General information on the NEP project can be found at For comments please write to the director of NEP, Marco Novarese at <>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.