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on Experimental Economics |
| By: | Omar Al-Ubaydli; John A. List |
| Abstract: | A commonly held view is that laboratory experiments provide researchers with more “control” than natural field experiments, and that this advantage is to be balanced against the disadvantage that laboratory experiments are less generalizable. This paper presents a simple model that explores circumstances under which natural field experiments provide researchers with more control than laboratory experiments afford. This stems from the covertness of natural field experiments: laboratory experiments provide researchers with a high degree of control in the environment which participants agree to be experimental subjects. When participants systematically opt out of laboratory experiments, the researcher’s ability to manipulate certain variables is limited. In contrast, natural field experiments bypass the participation decision altogether and allow for a potentially more diverse participant pool within the market of interest. We show one particular case where such selection is invaluable: when treatment effects interact with participant characteristics. |
| JEL: | C9 C91 C92 C93 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20877&r=exp |
| By: | Ciril Bosch-Rosa; Thomas Meissner; Antoni Bosch-Domènech |
| Abstract: | Smith et al. (1988) reported large bubbles and crashes in experimental asset markets, a result that has been replicated by a large literature. Here we test whether the occurrence of bubbles depends on the experimental subjects' cognitive sophistication. In a two-part experiment, we first run a battery of tests to assess the subjects' cognitive sophistication and classify them into low or high levels of cognitive sophistication. We then invite them separately to two asset market experiments populated only by subjects with either low or high cognitive sophistication. We observe classic bubble- crash patterns in the sessions populated by subjects with low levels of cognitive sophistication. Yet, no bubbles or crashes are observed with our sophisticated subjects. This result lends strong support to the view that the usual bubbles and crashes in experimental asset markets are caused by subjects' confusion and, therefore, raises some doubts about the external validity of this type of experiments. |
| Keywords: | Asset Market Experiment, Bubbles, Cognitive Sophistication. |
| JEL: | C91 D12 D84 G11 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:upf:upfgen:1464&r=exp |
| By: | Brocas, Isabelle; Carrillo, Juan D; Giga, Aleksandar; Zapatero, Fernando |
| Abstract: | We conduct a controlled laboratory experiment where subjects dynamically choose their portfolio allocation between a safe and a risky asset. We first derive analytically the optimal allocation of an expected utility maximizer with HARA utility function. We then fit the experimental choices to this model to assess the risk attitude of our subjects. Despite the substantial heterogeneity across subjects, decreasing absolute risk aversion and increasing relative risk aversion are the most prevalent risk types, and we can classify more than 50% of the subjects in this combined category. We also find evidence of increased risk taking after a gain but the effect is small in magnitude. Overall, our robustness tests show that the behavior of subjects is generally well accounted for by the HARA expected utility model. Finally, the analysis at the session level suggests that the behavior of the representative agent is less heterogeneous and closer to (though statistically different from) constant relative risk aversion. |
| Keywords: | CRRA; HARA; laboratory experiments; portfolio allocation; risk aversion |
| JEL: | C91 D03 D81 G11 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10332&r=exp |
| By: | Yoshio Kamijo (School of Economics and Management, Kochi University of Technology); Takehito Masuda (Research Center for Social Design Engineering, Kochi University of Technology); Hiroshi Uemura (School of Economics and Management, Kochi University of Technology) |
| Abstract: | In this study, we employ a game theoretic framework to formulate and analyze tax audit schemes; we test the theoretical predictions in a laboratory experiment. We compare five audit schemes including three rule-based audits: random audit rule, cut-off audit rule, and lowest income reporter audited rule. The cut-off audit rule is theoretically optimal but, to the best of our knowledge, it has not been experimentally examined. We also employ a novel experimental design for two schemes involving the human auditor conditions. The rule-based audits experimentally enhance tax compliance as predicted, and cut-off yields the highest tax revenue among the three rule-based audits in the lab. Moreover, beyond our prediction, the human auditor conditions maximized tax revenue among the five schemes in the lab. This suggests that auditors’ strategic ambiguity is another route to enhance tax compliance. We also show that subjects’ social norms regarding tax payment influence the choice of tax evasion, in accordance with the experimental literature. |
| Keywords: | audit schemes, tax evasion, laboratory experiment, cut-off rule, lowest income reporter audited rule, ambiguity |
| JEL: | C91 D81 H26 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:kch:wpaper:sdes-2015-9&r=exp |
| By: | Brocas, Isabelle; Carrillo, Juan D; Otamendi, F. Javier |
| Abstract: | We conduct a laboratory experiment where groups of 4 subjects constrained to obtain at most one good each, sequentially bid for 3 goods in first and second price auctions. Subjects learn at the beginning of each auction their valuation for the good and exit the auction once they have obtained one good. We show that, contrary to equilibrium predictions, subjects’ bidding behavior is excessively similar across units and across mechanisms at the aggregate level. We provide two (complementary) explanations for these departures. One is bounded rationality. Subjects do not fully comprehend subtle differences between mechanisms. The other is self-selection. Subjects are very heterogeneous and some of them deviate more from equilibrium than others. Since deviations take mostly the form of overbidding, these subjects win the first or second good and exit the auction, leaving those who play closer to theoretical predictions to bid for the third good. Support for this hypothesis comes from the documented higher bidding, lower efficiency and lower profits associated with the first and second unit compared to the third one. |
| Keywords: | auctions; laboratory experiment |
| JEL: | C92 D44 D82 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10340&r=exp |
| By: | Paul Dolan; Matteo M. Galizzi |
| Abstract: | We conduct a controlled lab-field experiment to directly test the short-run spillover effects of one-off financial incentives in health. We consider how incentives affect effort in a physical activity task – and then how they spillover to subsequent eating behaviour. Compared to a control group, we find that low incentives increase effort and have little effect on eating behaviour. High incentives also induce more effort but lead to significantly more excess calories consumed. The key behavioural driver appears to be the level of satisfaction associated with the physical activity task, which ‘licensed’ highly paid subjects to indulge in more energy-dense food. |
| Keywords: | Incentives in health; spillover effects; licensing; hidden costs of incentives |
| JEL: | C91 C93 D0 I10 |
| Date: | 2014–07 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:60356&r=exp |
| By: | Muehlheusser, Gerd; Roider, Andreas; Wallmeier, Niklas |
| 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: | experiment; gender effects; group decisions; lying; unethical behaviour |
| JEL: | C91 C92 J16 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10317&r=exp |
| By: | Eriksen, Kristoffer W (UiS); Kvaløy, Ola (UiS) |
| Abstract: | We study risk-taking behavior in tournaments where the optimal strategy is to take no risk. By keeping the optimal strategy constant, while varying the competitiveness in the tournaments, we are able to investigate the relationship between competitiveness and excessive risk-taking. In the most competitive tournament, less than 10% of the subjects played the optimal strategy in the first rounds. The majority playing dominated strategies increased their risk-taking during game of play. When we removed feedback about winner’s decisions each round, and when we reduced the number of contestants in the tournaments, subjects significantly reduced their risk-taking. We also find strong peer group effects. In particular, the winner’s decision in round t-1 had a strong and significant effect on the competitor’s risk-taking in round t. |
| Keywords: | Experiment; risk-taking; tournaments; peer effects |
| JEL: | C91 D80 M52 |
| Date: | 2015–01–19 |
| URL: | http://d.repec.org/n?u=RePEc:hhs:stavef:2015_001&r=exp |
| By: | Kamei, Kenju |
| Abstract: | People are interacting more with strangers thanks to recent technological advancement in online platforms. Online interactions can be characterized by infinitely-repeated games. Recent studies have shown that institutions that make people’s decisions open to others may enhance cooperation in these situations. But it is still unknown whether people can successfully cooperate with each other by choosing to show their identities and building good reputation when there is an option to hide them. We deal with this question using an experimental laboratory. Our experiment shows that a non-negligible fraction of people conceal their identities and people fail to cooperate with each other if hiding identities is free. However, almost all show their identities and successfully achieve cooperation with their partners if a small explicit cost is charged for act of hiding. |
| Keywords: | experiment, cooperation, reputation, prisoner dilemma game, internet, infinitely-repeated games |
| JEL: | C73 C92 D70 M21 |
| Date: | 2015–01–27 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61657&r=exp |
| By: | Altmann, Steffen; Falk, Armin; Heidhues, Paul; Jayaraman, Raji |
| Abstract: | We study how website defaults affect consumer behavior in the domain of charitable giving. In a field experiment that was conducted on a large platform for making charitable donations over the web, we exogenously vary the default options in two distinct choice dimensions. The first pertains to the primary donation decision, namely, how much to contribute to the charitable cause. The second relates to an "add-on" decision of how much to contribute to supporting the online platform itself. We find a strong impact of defaults on individual behavior: in each of our treatments, the modal positive contributions in both choice dimensions invariably correspond to the specified default amounts. Defaults, nevertheless, have no impact on aggregate donations. This is because defaults in the donation domain induce some people to donate more and others to donate less than they otherwise would have. In contrast, higher defaults in the secondary choice dimension unambiguously induce higher contributions to the online platform. |
| Keywords: | charitable giving; default options; field experiment; online platforms |
| JEL: | C93 D03 D64 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10303&r=exp |
| By: | Ghazala Azmat; Barbara Petrongolo |
| Abstract: | We discuss the contribution of the experimental literature to the understanding of both traditional and previously unexplored dimensions of gender differences and discuss their bearings on labor market outcomes. Experiments have offered new findings on gender discrimination, and while they have identified a bias against hiring women in some labor market segments, the discrimination detected in field experiments is less pervasive than that implied by the regression approach. Experiments have also offered new insights into gender differences in preferences: to gain less from negotiation, women appear to have lower preferences than men for risk and competition and may be more sensitive to social cues. These gender differences in preferences also have implications in group settings, whereby the gender composition of a group affects team decisions and performance. Most of the evidence on gender traits comes from the lab, and key open questions remain as to the source of gender preferences—nature versus nurture, or their interaction—and their role, if any, in the workplace. |
| Keywords: | gender; field experiments; lab experiments; discrimination; gender preferences |
| JEL: | J01 J16 |
| Date: | 2014–03 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:57977&r=exp |
| By: | Kunte, Sebastian; Wollni, Meike; Keser, Claudia |
| Abstract: | Contracts may be subject to strategic default, particularly if public enforcement institutions are weak. In a lab experiment, we study behavior in a contract farming game without third-party enforcement but with an external spot market as outside option. Two players, farmer and company, may conclude a contract but also breach it by side-selling or arbitrary payment reductions. We examine if and how relational contracts and personal communication can support private-order enforcement. Moreover, we investigate whether company players offer price premiums to extend the contract’s self-enforcing range. We find mixed evidence for our private ordering hypothesis. Although contract breach can be reduced by relational contracts, direct bargaining communication does not additionally improve the outcome. Price premiums are offered if other enforcement mechanisms are absent, but turn out to be only an “allurement”. Most subjects are not willing to sacrifice short-term gains in favor of a well-functioning relationship that (as we show) would be beneficial for both contract parties in the long run. |
| Keywords: | contract farming, private ordering, enforcement, contract breach, economic experiments, relational contracts, communication, price premiums, Industrial Organization, Institutional and Behavioral Economics, D02, L14, Q13, |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:ags:gagfdp:186136&r=exp |
| By: | Erlend Berg; R Manjula |
| Abstract: | This paper studies the interaction of incentive pay and social distance in the dissemination of information. We analyse theoretically as well as empirically the effect of incentive pay when agents have pro-social objectives, but also preferences over dealing with one social group relative to another. In a randomised field experiment undertaken across 151 villages in South India, local agents were hired to spread information about a public health insurance programme. Relative to at pay, incentive pay improves knowledge transmission to households that are socially distant from the agent, but not to households similar to the agent. |
| Keywords: | public services; information constraints; incentive pay; social proximity; knowledge transmission |
| JEL: | N0 |
| Date: | 2013–03–29 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58167&r=exp |
| By: | Grund, Christian (RWTH Aachen University); Harbring, Christine (RWTH Aachen University); Thommes, Kirsten (RWTH Aachen University) |
| Abstract: | In organizations, some team members are assigned to a team for a predefined short period of time, e.g., as they have a temporary contract, while others are permanent members of the same team. In a laboratory experiment we analyze the cooperation levels resulting from diverse teams, where some team members remain with a team and others are switching teams. Our results reveal that teams consisting partly of members with temporary membership display a lower productivity compared to teams of permanent team members only. First, temporary team members cooperate less than permanent team members. Second, individual effort decisions increase with the number of team mates who are of the same type. This second effect holds for both temps and permanents. We argue that social identity is affected by team composition and the individuals' role in a team. |
| Keywords: | cooperation, economic experiment, public good, team |
| JEL: | C9 M5 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8761&r=exp |
| By: | Duflo, Esther; Dupas, Pascaline; Kremer, Michael |
| Abstract: | A seven-year randomized evaluation suggests education subsidies reduce adolescent girls’ dropout, pregnancy, and marriage but not sexually transmitted infection (STI). The government’s HIV curriculum, which stresses abstinence until marriage, does not reduce pregnancy or STI. Both programs combined reduce STI more, but cut dropout and pregnancy less, than education subsidies alone. These results are inconsistent with a model of schooling and sexual behavior in which both pregnancy and STI are determined by one factor (unprotected sex), but consistent with a two-factor model in which choices between committed and casual relationships also affect these outcomes. |
| Keywords: | education; fertility; HIV; Kenya; pregnancy |
| JEL: | I12 I25 I38 O12 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:cpr:ceprdp:10338&r=exp |
| By: | Gali Noti; Noam Nisan; Ilan Yaniv |
| Abstract: | We performed controlled experiments of human participants in a continuous sequence of ad auctions, similar to those used by Internet companies. The goal of the research was to understand users' strategies in making bids. We studied the behavior under two auction types: (1) the Generalized Second-Price (GSP) auction and (2) the Vickrey--Clarke--Groves (VCG) payment rule, and manipulated also the participants' knowledge conditions: (1) explicitly given valuations and (2) payoff information from which valuations could be deduced. We found several interesting behaviors, among them are: - No convergence to equilibrium was detected; moreover the frequency with which participants modified their bids increased with time. - We can detect explicit "better-response" behavior rather than just mixed bidding. - While bidders in GSP auctions do strategically shade their bids, they tend to bid higher than theoretically predicted by the standard VCG-like equilibrium of GSP. - Bidders who are not explicitly given their valuations but can only deduce them from their gains behave a little less "precisely" than those with such explicit knowledge, but mostly during an initial learning phase. - VCG and GSP yield approximately the same (high) social welfare, but GSP tends to give higher revenue. |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp676&r=exp |
| By: | Ellen Helsper |
| Abstract: | This study examines whether the impact of offline identities on computer-mediated communication is stable across different social contexts or whether it depends on which identity aspect is salient. Field experiments with 206 teenagers tested the influence of gendered, ethnic, youth and personalized identities on teenagers' chat behaviour and cognitions. The findings show that offline identity varies in its relation to Internet self-efficacy but not chat partner selection. Self-efficacy differed significantly between boys and girls when youth and gender identities were emphasized but not when stressing personal identity. Across conditions, teenagers were most likely to choose chat partners from similar ethnic and opposite sex backgrounds. This partly supports the Social Identification and Deindividuation framework and argues that offline identities impact online behaviour and self-perception but that this effect depends on which identity aspect is activated. |
| Keywords: | chat; computer-mediated communication; ethnicity; experiment; gender; internet self-efficacy; social identity |
| JEL: | L91 L96 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:51116&r=exp |
| By: | Jonathan de Quidt |
| Abstract: | Empirically, labor contracts that financially penalize failure induce higher effort provision than economically identical contracts presented as paying a bonus for success, an effect attributed to loss aversion. This is puzzling, as penalties are infrequently used in practice. The most obvious explanation is selection: loss averse agents are unwilling to accept such contracts. I formalize this intuition, then run an experiment to test it. Surprisingly, I find that workers were 25 percent more likely to accept penalty contracts, with no evidence of adverse or advantageous selection. Consistent with the existing literature, penalty contracts also increased performance on the job by 0.2 standard deviations. I outline extensions to the basic theory that are consistent with the main results, but argue that more research is needed on the long-term effects of penalty contracts if we want to understand why firms seem unwilling to use them. |
| Keywords: | loss aversion; reference points; framing; selection; mechanical turk |
| JEL: | J1 |
| Date: | 2014–04–02 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58208&r=exp |
| By: | Barañano Mentxaka, Ilaski; Kovarik, Jaromir; Uriarte Ayo, José Ramón |
| Abstract: | Roughly one half of World's languages are in danger of extinction. The endangered languages, spoken by minorities, typically compete with powerful languages such as En- glish or Spanish. Consequently, the speakers of minority languages have to consider that not everybody can speak their language, converting the language choice into strategic,coordination-like situation. We show experimentally that the displacement of minority languages may be partially explained by the imperfect information about the linguistic type of the partner, leading to frequent failure to coordinate on the minority language even between two speakers who can and prefer to use it. The extent of miscoordination correlates with how minoritarian a language is and with the real-life linguistic condition of subjects: the more endangered a language the harder it is to coordinate on its use, and people on whom the language survival relies the most acquire behavioral strategies that lower its use. Our game-theoretical treatment of the issue provides a new perspective for linguistic policies. |
| Keywords: | bilingualism, coordination, experiments, language choice, minority languages, imperfect information, game theory |
| JEL: | C72 C91 D80 |
| Date: | 2014–10–08 |
| URL: | http://d.repec.org/n?u=RePEc:ehu:ikerla:13990&r=exp |
| By: | Holford, Angus J. (University of Essex); Pudney, Stephen (ISER, University of Essex) |
| Abstract: | We analyse the results of experiments on questionnaire design and interview mode in the first four waves (2008-11) of the UK Understanding Society Innovation Panel survey. The randomised experiments relate to job, health, income, leisure and overall life-satisfaction questions and vary the labeling of response scales, mode of interviewing, and location of questions within the interview. We find significant evidence of an influence of interview mode and question design on the distribution of reported satisfaction measures, particularly for women. Results from the sort of conditional modeling used to address real research questions appear less vulnerable to design influences. |
| Keywords: | survey design, wellbeing, satisfaction, response bias, Understanding Society |
| JEL: | C23 C25 C81 J28 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8760&r=exp |
| By: | Ofri Raviv; Itay Lieder; Yonatan Loewenstein; Merav Ahissar |
| Abstract: | Biases such as the preference of a particular response for no obvious reason, are an integral part of psychophysics. Such biases have been reported in the common two-alternative forced choice (2AFC) experiments, where participants are instructed to compare two consecutively presented stimuli. However, the principles underlying these biases are largely unknown and previous studies have typically used ad-hoc explanations to account for them. Here we consider human performance in the 2AFC tone frequency discrimination task, utilizing two standard protocols. In both protocols, each trial contains a reference stimulus. In one (Reference-Lower protocol), the frequency of the reference stimulus is always lower than that of the comparison stimulus whereas in the other (Reference protocol), the frequency of the reference stimulus is either lower or higher than that of the comparison stimulus. We find substantial interval biases. Namely, participants perform better when the reference is in a specific interval. Surprisingly, the biases in the two experiments are opposite: performance is better when the reference is in the first interval in the Reference protocol, but is better when the reference is second in the Reference-Lower protocol. This inconsistency refutes previous accounts of the interval bias, and is resolved when experiments statistics is considered. Viewing perception as incorporation of sensory input with prior knowledge accumulated during the experiment accounts for the seemingly contradictory biases both qualitatively and quantitatively. The success of this account implies that even simple discriminations reflect a combination of sensory limitations, memory limitations, and the ability to utilize stimuli statistics. |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:huj:dispap:dp672&r=exp |
| By: | Timothy Besley; Maitreesh Ghatak |
| Abstract: | When social benefits cannot be measured, a hybrid organization which selects managers based on motivation can be used to balance profi…ts with a social purpose. This paper develops a model of social enterprise based on selection of citizen-managers with this goal in mind. It develops the implications of matching between founders and managers based on their preferences for the mission. The main trade-offs suggested by the theory are tested experimentally and these are used to calibrate a matching outcome. This makes precise the parameter range in which social enterprises based on selection will be observed in a market setting; we show that they achieve gains in proficiency of around 10% over non-pro…fit enterprise. |
| Keywords: | social enterprise; motivated agents; non-profits |
| JEL: | J1 |
| Date: | 2013–11–06 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:58181&r=exp |
| By: | Booij, Adam S. (University of Amsterdam); Leuven, Edwin (University of Oslo); Oosterbeek, Hessel (University of Amsterdam) |
| Abstract: | This paper estimates peer effects originating from the ability composition of tutorial groups for undergraduate students in economics. We manipulated the composition of groups to achieve a wide range of support, and assigned students – conditional on their ability – randomly. The data support a specification in which the group composition is captured by the mean and standard deviation of prior ability and their squares and interactions. Estimates from this specification imply that students of low and medium ability gain on average 0.2 SD units of achievement from switching from ability mixing to three-way tracking. Their dropout rate is reduced by 15 percentage points (relative to a mean of 0.6). High-ability students are unaffected. Analysis of survey data indicates that in tracked groups, low-ability students have more positive interactions with other students, and are more involved. We find no evidence that teachers adjust their teaching to the composition of groups. |
| Keywords: | peer effects, tracking, post-secondary education, field experiment |
| JEL: | I22 I28 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8769&r=exp |
| By: | Tara C. Reich; M. Sandy Hershcovis |
| Abstract: | Abstract Interpersonal mistreatment at work often occurs in the presence of others; however, these “others” are rarely examined in empirical research despite their importance to the context of the negative interaction. We conducted 2 experiments to examine how witnessing incivility affects observer reactions toward instigators and targets. In Study 1, participants (N = 60) worked virtually with an ostensible instigator and target. In Study 2, participants (N = 48) worked in vivo with confederates (hired actors) on a job task. Across these 2 studies, we found that observers of incivility tend to punish instigators while their reactions to targets were generally unaffected. Further, the effect of witnessing incivility was mediated by observers’ negative emotional reaction toward the instigator. |
| Keywords: | Incivility; Observers; Third-parties; Organizational Justice; Social Undermining; Workplace aggression; Deontic justice; Affective Events Theory |
| JEL: | R14 J01 J50 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:ehl:lserod:57943&r=exp |