|
on Experimental Economics |
|
Issue of 2015‒02‒16
forty-two papers chosen by |
| By: | Daniel Houser; John A. List; Marco Piovesan; Anya Savikhin Samek; Joachim Winter |
| Abstract: | Acts of dishonesty permeate life. Understanding their origins, and what mechanisms help to attenuate such acts is an underexplored area of research. This study takes an economics approach to explore the propensity of individuals to act dishonestly across different economic environments. We begin by developing a simple model that highlights the channels through which one can increase or decrease dishonest acts. We lend empirical insights into this model by using an experiment that includes both parents and their young children as subjects. We find that the highest level of dishonesty occurs in settings where the parent acts alone and the dishonest act benefits the child rather than the parent. In this spirit, there is also an interesting effect of children on parents’ behavior: in the child’s presence, parents act more honestly, but there are gender differences. Parents act more dishonestly in front of sons than daughters. This finding has the potential of shedding light on the origins of the widely documented gender differences in cheating behavior observed among adults. |
| JEL: | C9 C91 C93 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:nbr:nberwo:20897&r=exp |
| By: | Dwenger, Nadja; Kleven, Henrik; Rasul, Imran; Rincke, Johannes |
| Abstract: | Is tax compliance driven only by extrinsic motivations such as deterrence and tax policy or is there also a role for intrinsic motivations such as morals, norms and psychology? Agents may comply based on moral sentiments, social norms, guilt and shame (Andreoni et al. 1998), all of which are non-deterrence driven reasons for compliance. The importance of such intrinsically motivated compliance is hard to study empirically and therefore the least understood. This study uses a unique setting for making progress on this question: the local church tax in Germany. As we show in the paper, tax evaders, compliers, and donors can coexist in the local church tax system and be precisely distinguished from each other. Since there is zero deterrence in the baseline, baseline compliance provides a direct measure of intrinsically motivated tax compliance. Starting from the zero deterrence baseline we use a randomized field experiment to inject deterrence or recognition into the system. This allows us to study if policies aimed at either extrinsic motivation (deterrence) or intrinsic motivation (recognition) have qualitatively different effects on agents who have revealed each of those motivations in the baseline. Our main empirical findings are the following. First, a significant fraction of agents (23%) comply in the zero deterrence baseline where compliance would be zero absent intrinsic motivation, while the remaining 77% evade the tax. Intrinsic motivation is therefore substantial, although the majority behaves as rational, self-interested taxpayers. Second, announcing a zero audit probability (the status quo) has a small and insignificant effect on the compliance rate, showing that there is very little misperception on average. Third, tax salience and deterrence have strong effects on compliance for baseline evaders, but small and insignificant effects for baseline donors. This is consistent with the fact that the enforcement constraint is not binding for the intrinsically motivated and therefore they are naturally unresponsive to deterrence. Fourth and finally, recognition through social and monetary rewards for compliance has fundamentally different effects on baseline donors (who increase their payments) and baseline evaders (who reduce their payments). Hence, whether recognition helps or hurts depends crucially on what motivates taxpayers in the first place, with positive effects on the intrinsically motivated and negative effects on the extrinsically motivated. All of our findings can be explained by a model of tax compliance that unifies the standard Becker-Allingham-Sandmo approach (strengthening extrinsic motives for tax compliance) and the Andreoni (1989, 1990) warm-glow model of pro-social behaviour. |
| JEL: | C93 D03 H26 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100389&r=exp |
| By: | Kölle, Felix; Gächter, Simon; Quercia, Simone |
| Abstract: | We study the nature of cooperation in the provision of public goods (a "Give" game) and the appropriation of a common resource (a "Take" game). We introduce the "abc-framework" to analyze how cooperative attitudes and beliefs determine cooperation. Our experimental results establish that Give and Take dilemmas are different games even under equivalent incentives. We find striking differences in attitudes: people are substantially less likely to cooperate conditionally in Take than Give. Our experiments and simulations show that attitudes and beliefs, rather than "framing effects", can explain the variation of cooperation observed in the literature. Our results also suggest that cooperation is harder in commons problems than in the provision of public goods. |
| JEL: | C92 H41 D03 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100417&r=exp |
| By: | Stefan Dercon; Tanguy Bernard; Kate Orkin; Alemayehu Seyoum Taffesse |
| Abstract: | Poor people often do not make investments, even when returns are high. One possible explanation is that they have low aspirations and form mental models which ignore some options for investment. This paper reports on findings of an innovative experiment to test this in rural Ethiopia. Firstly, individuals were randomly invited to watch documentaries about people from similar communities who had succeeded in agriculture or small business, without help from government or NGOs. A placebo group watched an Ethiopian entertainment programme and a control group were simply surveyed. Secondly, the number of invitees was varied by village to assess the impotance of peer effects in the formation of aspirations. Six months after the screening of the documentaries, aspirations had improved among treated individuals but did not change in the placebo or control groups. Effects were larger for those with higher aspirations at baseline. We also find evidence of treatment effects on savings and credit behaviour, children's school enrolment and investments in children's schooling, suggesting that changes in aspirations can translate into changes in forward-looking behaviour. There are also positive treatment effects on a set of related measures from psychology and sociology, including a measure of locus of control, which theory predicts should behave in similar ways to aspirations. We also find that peer effects result in further impact on educational spending and induce more work and less leisure. That a one-house documentary shown six months earlier induces such actual behaviour change offers challenging and promising areas for further research and the design of poverty-related interventions. |
| Keywords: | aspirations, expectations, future-oriented behaviour, media interventions |
| JEL: | D03 I31 |
| Date: | 2014–04–22 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:wps/2014-16&r=exp |
| By: | Schmidt, Ulrich; Birnbaum, Michael |
| Abstract: | The present paper reports a repeated experiment on decision making under risk where subjects have to tackle the same choice problems in several rounds. We fit a simple error model and investigate how behavior changes in the course of the experiment. Our analysis complements and extends Hey (2001) who analyzes for each subject the fit of several preference functionals from round to round. Instead, we focus on choice problems allowing for direct tests of independence and coalescing. We show that variability of responses as well as violations of independence and coalescing decrease from earlier to later rounds. Our results provide evidence in favor of expected utility in conjunction with the discovered preference hypothesis. |
| JEL: | C91 D81 C19 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100463&r=exp |
| By: | Delavallade, Clara; Dizon, Felipe; Hill, Ruth Vargas; Petraud, Jean Paul |
| Abstract: | Although there is fast-growing policy interest in offering financial products to help rural households manage risk, the literature is still scant as to which products are the most effective. This paper uses a randomized field experiment in Senegal and Burkina Faso to compare male and female farmers who are offered index-based agricultural insurance with those who are offered a variety of savings instruments. The paper finds that female farm managers were less likely to purchase agricultural insurance and more likely to invest in savings for emergencies, even controlling for access to informal insurance and differences in crop choice. It is hypothesized that this finding results from the fact that, although men and women are equally exposed to yield risk, women face additional sources of lifecycle risk -- particularly health risks associated with fertility and childcare -- that men do not. In essence, the basis risk associated with agricultural insurance products is higher for women. Purchasing insurance increased input spending and use more than savings. Those who purchased more insurance realized higher average yields and were better able to manage food insecurity and shocks. This finding suggests that gender differences in demand for financial products can have an impact on productivity, resilience, and welfare. |
| Keywords: | Emerging Markets,Hazard Risk Management,Insurance&Risk Mitigation,Rural Poverty Reduction,Financial Intermediation |
| Date: | 2015–01–01 |
| URL: | http://d.repec.org/n?u=RePEc:wbk:wbrwps:7176&r=exp |
| By: | Lergetporer, Philipp; Sutter, Matthias; Angerer, Silvia; Glätzle-Rützler, Daniela |
| Abstract: | The ability of children to control the desire for immediate gratification is very important to achieve long-term beneficial goals (such as higher education or better health conditions). We show that the language children speak is significantly related to their ability to wait in a simple, incentivized experiment. We are thus providing controlled evidence for a recently developed linguistic-savings hypothesis, stating that languages which grammatically separate the future and the present (like English or Italian) induce less future-oriented behavior than languages in which speakers can refer to the future by using present tense (like German). In our unique experiment, we let practically all primary school children, aged 6 to 11 years, in a bilingual city in Northern Italy make intertemporal choices. We find that German-speaking children are about 46% more likely than Italian-speaking children to wait for a larger reward in the future. Controlling for several factors, including IQ or family background, the difference between German- and Italian-speaking children remains highly significant. Furthermore we provide survey evidence that this effect is unlikely to be driven by difference in cultural attitudes towards patience. Interestingly, language is not related to another important domain of economic decision making, risk taking, which is often associated with intertemporal preferences. Controlling for risk taking, the relation between language and patience persists. |
| JEL: | C91 D90 D03 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100350&r=exp |
| By: | Torero, Maximo; Viceisza, Angelino |
| Abstract: | We conduct a remittance field experiment among Salvadoran migrants in the metro DC area. Migrants need to decide whether or not to remit funds to a recipient in El Salvador and if so how much. We maintain a (2x2) design in which the remittance budget has a value of $400 or $200, and the remitted funds arrive as cash or grocery vouchers that are non-transferable and applicable to basic necessities that do not include alcohol and cigarettes. Each migrant is randomly allocated to one of the resulting four treatments. We test across these treatments whether control over remittance spending in the form of grocery vouchers affects remittance behavior. We find the following. Our quantitative findings suggest that migrants prefer a remittance to arrive as cash than as groceries when stakes are high. This result is robust to inclusion of a wide set of covariates and is consistent with a conceptual framework in which migrants have preferences over how recipients spend remittances. Our qualitative findings suggest that migrants integrate amounts sent in the experiment with the external environment for sending remittances. We explore the mechanisms underlying the main effect and find that migrants who more recently sent a remittance and, in certain specifications, male migrants exhibit a greater preference for cash. Some implications of our findings are discussed. |
| Keywords: | remittance, field experiment, remittance spending, El Salvador |
| JEL: | C93 D03 D13 |
| Date: | 2014–10 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61786&r=exp |
| By: | Hughes, Niall E (Department of Economics, University of Warwick); Fehrler, Sebastian (University of Konstanz) |
| Abstract: | We investigate the potential of transparency to influence committee decisionmaking. We present a model in which career concerned committee members receive private information of different type-dependent accuracy, deliberate and vote. We study three levels of transparency under which career concerns are predicted to affect behavior differently, and test the model’s key predictions in a laboratory experiment. The model’s predictions are largely borne out - transparency negatively affects information aggregation at the deliberation and voting stages, leading to sharply different committee error rates than under secrecy. This occurs despite subjects revealing more information under transparency than theory predicts. Key words: Committee Decision-Making; Deliberation; Transparency; Career Concern; Information Aggregation; Experiments; Voting; Strategic Communication JEL classification: C92; D71; D83 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:wrk:warwec:1057&r=exp |
| By: | Tahereh Rezaei Khavas; Stephanie Rosenkranz; Gustav Weitzel; Bastian Westbrock |
| Abstract: | Experimental economics has provided evidence for fairness concerns, but their relative strength and even their stability is still under debate. We reconcile the seemingly inconsistent results by presenting a theory of marginal fairness concerns. The key assumption is that fairness concerns are stable across various decision situations, but individuals care only marginally about other individuals’ payoffs. This produces inequitable outcomes when the decision situation is ’unfair’ but equitable outcomes when the structure itself is ’fair’. An experimental horse race with competing theories of pure selfishness, pure fairness, and power-/need-based norms, applied across a range of (a)symmetric and (in)transitive experimental decision settings, supports our theory: 80% of the subjects in our experiment appear to be at most marginally fairness concerned. |
| Keywords: | fairness, lab experiment, local public goods game, heterogeneous influence stracture |
| Date: | 2014–09 |
| URL: | http://d.repec.org/n?u=RePEc:use:tkiwps:1413&r=exp |
| By: | Gallier, Carlo; Kesternich, Martin; Sturm, Bodo |
| Abstract: | In this experiment, we endogenize the choice of which contribution scheme is implemented in a public good game. We investigate three rule-based contribution schemes and a voluntary contribution mechanism (VCM). The game is implemented either as a Single- or a Multi-Phase Game. In the Single-Phase Game, the contribution schemes are exogenously implemented. In the Multi-Phase Game, we let subjects vote on the rule-based contribution schemes. If a scheme gets a sufficient majority it is implemented. In case a sufficient majority is failed, subjects have to make their contributions to the public good using the VCM. We find that the endogenous choice of a contribution scheme has an impact on the level of contributions. In case of a rule-based contribution scheme which equalizes payoffs, contributions are higher if subjects chose the scheme for themselves than in case the scheme is implemented exogenously. The contrary holds for the VCM. Contributions are higher if the VCM is implemented exogenously than in case a sufficient majority is failed and, therefore, subjects have to play the VCM. |
| JEL: | C72 C92 H41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100421&r=exp |
| By: | Fehrler, Sebastian; Hughes, Niall |
| Abstract: | We show theoretical and experimental results that demonstrate the potential of transparency to influence committee decision making and deliberation. We present a model in which committee members have career concerns and unanimity is needed to change the status quo. We study three scenarios - secrecy, where votes and communication are secret, mild transparency, where individual votes are public, and full transparency, where both communication and individual votes are public. The two transparency regimes affect deliberation in different ways but lead both to a breakdown of information aggregation. However, transparency lowers the probability of an error if maintaining the status quo is the correct choice. As a consequence, the principal is better off in expectation under transparency than under secrecy if the cost of wrongly changing the status quo is high enough. We test the model's key predictions in a laboratory experiment varying the level of transparency between treatments. We observe strong effects of transparency on committee error rates that are largely consistent with the model. On the individual level, we observe strong effects on deliberative behavior which go in the predicted direction but are less pronounced than in theory. |
| JEL: | C92 D71 D72 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100440&r=exp |
| By: | Laurin Janes |
| Abstract: | Using data from a randomized control trail in Sri Lanka, this paper explores whether cash and in-kind grants helped microenterprises approach the productivity level of SMEs. The paper first estimates production functions and subsequently treatment effects on TFP levels. Most significantly, more able and more risk-averse owners benefit from the larger in-kind grant. Also, the larger in-kind grants allowed for increases in productivity to the least productive firms. The paper then uses data from a representative sample of formal firms to put the TFP levels and treatment effects in the microenterprises into perspective. The results suggest that the least productive firms were able to catch up with the average microenterprise and formal SMEs, while a gap remains with large firms. This finding encourages a positive view of the potential for productivity growth in microenterprises. |
| Keywords: | Economic development, microenterprises, formal informal, total factor productivity, embodied technology |
| JEL: | L25 O12 O14 O17 O33 |
| Date: | 2013–11–20 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:wps/2013-18&r=exp |
| By: | Markstädter, Andreas; Keser, Claudia |
| Abstract: | We investigate the formation of market prices in a new experimental setting involving multi-period asset markets with state-dependent fundamentals. We are particularly interested in two informational aspects: (1) the role of traders who are informed about the true state and (2) the provision of Bayesian updates of the assets state-dependent fundamental value (BFVs) to all traders. We find that bubbles are a rare phenomenon in all our treatments. Markets with asymmetrically informed traders converge faster toward the fundamentals of the underlying state and exhibit smaller price deviations from fundamentals, suggesting higher efficiency of markets with asymmetrically informed traders. The provision of BFVs has little to no effect. Behavior of informed and uninformed traders differs at the beginning but converges during the course of the markets. On average offers of uninformed traders are lower (higher) than offers of informed traders in the good ( bad ) state resulting in that uninformed traders hold less (more) assets in good ( bad ) state markets compared to informed traders. Informed traders earn superior profits. |
| JEL: | C92 D53 D82 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100359&r=exp |
| By: | Hoffmann, Timo |
| Abstract: | The assumptions that subjects hold beliefs and that the chosen actions are not altered by a proper elicitation of these beliefs are widely used in economics. In this paper I experimentally test whether the second assumption is correct. Especially controlling for different game properties, I nd that in dominance solvable two-player normal-form games belief elicitation results in a signi cant increase of equilibrium play. Therefore the elicitation of beliefs can affect the choices made by subjects and lead to more equilibrium actions being chosen. Surprisingly one major reason for this effect is the decreased play of own dominated actions. The results indicate that belief elicitation induces subjects to think harder about the presented decision situation, which results in a better understanding of the given situation and consequently in a modi cation of their beliefs. Therefore, in certain decision situations, belief elicitation affects the decisions made by subjects. |
| JEL: | C72 C91 D83 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100483&r=exp |
| By: | Anne-Célia Disdier; Stéphan Marette; Guy Millet |
| Abstract: | A lab experiment evaluates the consequences of the palm oil controversy on consumers’ willingness to pay (WTP) for food products. Palm oil production induces environmental damages, and its consumption presents a health risk. However, the production of alternative oils raises land use issues. In the experiment, successive messages emphasizing the controversial nature of palm oil and palm oil-free products are delivered to participants. Information has a significant influence on WTP when it underlines the negative impact of the related product. This effect is stronger for the palm oil product than for the palm oil-free product. The experiment also compares the welfare effects of two regulatory instruments, namely a consumer information campaign versus a per-unit tax. Because of the controversial nature of both products, the information campaign improves welfare with a much larger impact than the tax. |
| JEL: | H23 |
| URL: | http://d.repec.org/n?u=RePEc:fsc:fspubl:7&r=exp |
| By: | Samek, Anya; Sheremeta, Roman |
| Abstract: | Studies show that identifying contributors increases contributions to public goods. In practice, viewing identifiable information is costly, which may discourage people from accessing it. We design a public goods experiment in which participants can pay to view information about identities and contributions of group members. We compare this to a treatment in which there is no identifiable information, and a treatment in which all contributors are identified. Our main findings are that: (1) contributions in the treatment with costly information are as high as those in the treatment with free information, (2) participants rarely choose to view the information, and (3) being a high contributor is correlated with choosing to view information about others. |
| Keywords: | public-goods, information, recognition, laboratory experiment |
| JEL: | C72 C91 H41 |
| Date: | 2015–02–02 |
| URL: | http://d.repec.org/n?u=RePEc:pra:mprapa:61903&r=exp |
| By: | Dirk Engelmann, Dirk; Grüner, Hans Peter |
| Abstract: | Optimal voting rules have to be adjusted to the underlying distribution of preferences. However, in practice there usually is no social planner who can perform this task. This paper shows that the introduction of a stage at which agents may themselves choose voting rules according to which they decide in a second stage may increase the sum of individuals' payoffs if players are not all completely selfish. We run three closely related experimental treatments (plus two control treatments) to understand how privately informed individuals decide when they choose voting rules and when they vote. Efficiency concerns play an important role on the rule choice stage whereas selfish behavior seems to dominate at the voting stage. Accordingly, in an asymmetric setting groups that can choose a voting rule do better than those who decide with a given simple majority voting rule. |
| JEL: | C91 D70 D82 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100600&r=exp |
| By: | Marcel Fafchamps; A. Stefano Caria |
| Abstract: | We play a one-shot public good game in rural India between farmers connected to an exogenous star network. Contributions by the centre of the star reach more players and have a larger impact on aggregate payoffs than contributions by the spoke players. Yet, we find that the centre player contributes just as much as the average of the spokes. We elicit expectations about the decisions of the centre player and, in randomly selected sessions, we disclose the average expectation of the farmers in the network. Farmers match the disclosed values frequently and do so more often when the monetary cost of making a contribution is reduced. However, disclosure is not associated with higher contributions. Our results support the predictions of a model of other-regarding preferences where players care about the expectations of others. This model is helpful to understand barriers to improvement in pro-social behaviour when groups expect low pro-sociality. |
| Date: | 2014–12–06 |
| URL: | http://d.repec.org/n?u=RePEc:oxf:wpaper:wps/2014-33&r=exp |
| By: | Müller, Andrea; Haucap, Justus |
| Abstract: | We analyze the behavior of 577 economics and law students in a simple binary trust experiment in class-room. While economists are both significantly less trusting and less trustworthy than law students, this difference is largely due to heterogeneity between female law and economics students. While female law and economics students are already different in nature (during the first term of study), the gap between them also widens more drastically over the course of their study compared to their male counterparts. This finding is rather critical as the detailed composition of students is typically neglected in most experiments. |
| JEL: | A12 A22 C91 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100554&r=exp |
| By: | Adam Zylbersztejn (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France) |
| Abstract: | Several experiments show that feedback transmission mechanisms mitigate opportunistic behavior in social dilemmas. The source of this effect, especially in a repeated interaction, nonetheless remains obscure. This study provides a novel empirical testbed for channels by which feedback may affect behavior in a repeated public goods game. One is related to strategic signaling. The other involves aversion to others’ expressed disapproval. The presence of feedback is found to foster pro-social behavior. The data favour the non-monetary sanctioning explanation rather than the signaling hypothesis. |
| Keywords: | Public goods game, Voluntary Contribution Mechanism, Feedback, Signaling, Non-monetary sanctioning |
| JEL: | C72 D83 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1443&r=exp |
| By: | Schmutzler, Armin; Holger, Herz; André, Volk |
| Abstract: | We study the economic consequences of opportunities for dishonesty in an environment where efficiency relevant behaviour is not contractible, but rather incentivized by informal agreements in an ongoing relationship. We document the repeated interaction between a principal and an agent who, within our main treatment, was privately informed about the costs of effort provision being either high or low. At the beginning of the interaction, an agent could either truthfully report the cost type to the principal or choose to lie about it. We find that a substantial fraction of low cost agents decided to signal high costs. Dishonest low cost and honest high cost agents pool on the complete information outcome with high costs, as measured in our control treatment. The outcome of such pooling is less efficient than for honest low cost agents. Moreover, principals who face dishonest agents earn substantially less profits than those facing honest agents. Our evidence therefore suggests that informal agreements in a repeated interaction generate less efficient outcomes if dishonesty is possible but, at the same time, are robust to substantial degrees of deception. We furthermore show that our experimental findings can be organized using the logic of repeated games. |
| JEL: | C73 D23 D82 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100363&r=exp |
| By: | Rau, Holger; Clemens, Georg |
| Abstract: | This paper experimentally analyzes the cartel coordination challenge induced by the discrimination of cartel ringleaders in leniency policies. Ringleaders often take a leading role in the coordination and formation of a cartel. A leniency policy which grants amnesty to all "whistleblowers" except for ringleaders may therefore reduce the incentive to become a ringleader and may disrupt cartel formation. We analyze discriminatory and non-discriminatory leniency policies in a multi-stage cartel formation experiment where multiple ringleaders may emerge. Although theory predicts that cartels will always be reported, whistleblowing rarely occurs. Paradoxically the discriminatory leniency policy induces more firms to become ringleaders, which ultimately facilitates coordination in the cartel. |
| JEL: | L41 K21 C92 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100509&r=exp |
| By: | Meissner, Thomas |
| Abstract: | This paper tests how subjects behave in an intertemporal consumption/saving experiment when borrowing is allowed and whether subjects treat debt differently than savings. Two treatments create environments where either saving or borrowing is required for optimal consumption. Since both treatments share the same optimal consumption levels, actual consumption choices can be directly compared across treatments. The experimental findings imply that deviations from optimal behavior are higher when subjects have to borrow than when they have to save in order to consume optimally, suggesting debt-aversion. Signifiant underconsumption is observed when subjects have to borrow in order to reach optimal consumption. Only weak evidence is found suggesting that subjects over-consume when saving is necessary for optimal consumption. |
| JEL: | C91 E21 D91 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100522&r=exp |
| By: | Schröder, Melanie; Schmitt, Norma; Mantei, Britta; Brünn, Claudia |
| Abstract: | We investigate the determinants of couples labor supply within an experimental setting. On the one hand, we are interested in the e ect of taxes on couples labor supply, but on the other hand we focus on factors beyond purely economic incentives: the role of the social norm of a male breadwinner. 58 established cohabiting heterosexual and married couples (116 participants) perform under a piece rate payment on real e ort tasks (i.e. solving mazes) within a given time and with work e ort (i.e. number of solved mazes) serving as our proxy for labor supply. We demonstrate that gender identity and (dis)satisfaction with income opportunities dominated the e ects of taxation within a couple context. |
| JEL: | D13 C93 J16 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100375&r=exp |
| By: | Lohse, Johannes |
| Abstract: | In three different variants of an one-shot public good game I analyze the relationship between cooperation and cognitive abilities, assessed through the cognitive reflection test (CRT). In a between-subjects design, the baseline case is contrasted with two treatment conditions that allow to control for two potentially moderating factors: By employing a test for the presence of confusion, the first condition scrutinizes whether higher cognitive abilities are correlated with cooperation proper or simply grant a better understanding of the incentive structure. The second condition explores the proposition that the link between cognitive abilities and cooperation could depend on the complexity of the decision situation. To exogenously create a cognitively more demanding choice setting, subjects had to decide under time pressure. I find a strong and positive relationship between CRT-scores and cooperation, that is not driven by confusion. Time pressure has a strongly moderating effect on this relationship. |
| Keywords: | Cooperation; Cognitive Abilities; Confusion; Public Goods; Dual Process Theories. |
| Date: | 2014–12–02 |
| URL: | http://d.repec.org/n?u=RePEc:awi:wpaper:0578&r=exp |
| By: | Beblo, Miriam; Beninger, Denis |
| Abstract: | We conducted an experiment on the nature of income sharing within 95 established couples in Germany. In a first step, the partners revealed their individual preferences by making consumption choices independently. In a second step, decisions were taken jointly over five different rounds with varying resource allocations between the partners. From this design we are able to derive a female bargaining power index without structural restrictions, reflecting the sharing rule within the couple. We observe this index to increase significantly with the female partner s money allocation. This effect is robust to the inclusion of socio-economic, distributional and behavioural features of the couple. |
| JEL: | D13 C92 C71 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100628&r=exp |
| By: | Gary Charness (Department of Economics, University of California, Santa Barbara, 2127 North Hall, Santa Barbara, CA 93106-9210); David Masclet (CREM, CNRS, University of Rennes, 7 place Hoche, 35000 Rennes, France, and CIRANO, Montreal, Canada); Marie Claire Villeval (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France) |
| Abstract: | Unethical behavior within organizations is not rare. We investigate experimentally the role of status-seeking behavior in sabotage and cheating activities aiming at improving one’s performance ranking in a flat-wage environment. We find that average effort is higher when individuals are informed about their relative performance. However, ranking feedback also favors disreputable behavior. Some individuals do not hesitate to incur a cost to improve their rank by sabotaging others’ work or by increasing artificially their own performance. Introducing sabotage opportunities has a strong detrimental effect on performance. Therefore, ranking incentives should be used with care. Inducing group identity discourages sabotage among peers but increases in-group rivalry. |
| Keywords: | Status, ranking, feedback, sabotage, doping, competitive preferences, experiment |
| JEL: | C91 C92 M54 D63 J28 J31 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1431&r=exp |
| By: | Fabrice Le Lec; Ondrej Rydval; Astrid Matthey |
| Abstract: | Using a laboratory experiment, we examine whether voluntary monetary sanctions induce subjects to coordinate more efficiently in a repeated minimum effort coordination game. While most groups first experience inefficient coordination in a baseline treatment, the efficiency increases substantially once ex post sanctioning opportunities are introduced, that is, when one can assign costly punishment points to other group members in order to reduce their payoffs. We compare the effect of this voluntary punishment possibility with the effect of ex post costless communication: in contrast to the punishment treatment, the latter only temporarily increases efficiency and fails to do so permanently. This suggests that decentralized sanctions can play an important role as a coordination device in Pareto-ranked coordination settings, such as teamwork in firms and other organizational contexts. |
| Keywords: | coordination; minimum effort; order-statistic game; punishment; sanction; weakest link; |
| JEL: | C72 C91 D01 D03 |
| Date: | 2014–12 |
| URL: | http://d.repec.org/n?u=RePEc:cer:papers:wp526&r=exp |
| By: | Timothy N. Cason (Department of Economics, Krannert School of Management, Purdue University); Roman M. Sheremeta (Department of Economics, Weatherhead School of Management, Case Western Reserve University); Jingjing Zhang (Economics Discipline Group, University of Technology Sydney) |
| Abstract: | Costless pre-play communication has been shown to effectively facilitate within-group coordination. However, in competitive coordination games, such as rent-seeking contests, better within-group coordination leads to more aggressive competition and lower efficiency. We report an experiment in which two groups compete in a weakest-link contest by expending costly efforts. We find that allowing within-group communication makes groups compete more aggressively. When only one group can communicate, the communicating group coordinates better and expends higher efforts than the non-communicating group. However, the communicating group earns payoffs that are not different from the baseline contest without any communication, while the non-communicating group earns lower payoffs than in this baseline contest. Allowing within-group communication in both groups leads to even more aggressive competition and the lowest payoffs to both groups. Despite such a “harmful” effect of communication, groups vote to endogenously open communication channels even though this leads to lower payoffs and efficiency. |
| Keywords: | between-group competition, within-group competition, communication, coordination, contests, experiments |
| JEL: | C70 D72 H41 |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:chu:wpaper:15-01&r=exp |
| By: | John List; Omar Al-Ubaydli |
| 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. |
| Date: | 2015 |
| URL: | http://d.repec.org/n?u=RePEc:feb:artefa:00397&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 rst 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: | 2015–02 |
| URL: | http://d.repec.org/n?u=RePEc:hum:wpaper:sfb649dp2015-006&r=exp |
| By: | Rostam-Afschar, Davud; Meissner, Thomas |
| Abstract: | This paper tests whether the Ricardian Equivalence proposition holds in a life cycle consumption laboratory experiment. This proposition is a fundamental assumption underlying numerous studies on intertemporal choice and has important implications for tax policy. Using nonparametric and panel data methods, we find that the Ricardian Equivalence proposition does not hold in general. Our results suggest that taxation has a significant and strong impact on consumption choice. Over the life cycle, a tax relief increases consumption on average by about 22% of the tax rebate. A tax increase causes consumption to decrease by about 30% of the tax increase. These results are robust with respect to variations in the difficulty to smooth consumption. In our experiment, we find the behavior of about 62% of our subjects to be inconsistent with the Ricardian proposition. Our results show dynamic effects; taxation inuences consumption beyond the current period. |
| Keywords: | Ricardian Equivalence,Taxation,Life Cycle,Consumption,Laboratory Experiment |
| JEL: | D91 E21 H24 C91 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100348&r=exp |
| By: | Werner, Peter; Ockenfels, Axel; Sliwka, Dirk |
| Abstract: | We conduct a field experiment in a naturally occurring labor environment and track whether the performance of workers responds to unexpected wage increases. Specifically, we investigate how the timing of wage increases affects efforts. We find that workers performance is about 11% higher for the same total wage when their wage is increased in two steps as opposed to a single increase at the outset. Moreover, workers are more honest and are more willing to do voluntary extra work after surprising wage increases compared to a baseline condition without increases. |
| JEL: | C93 D64 M52 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100447&r=exp |
| By: | Dittrich, Dennis A. V.; Kocher, Martin G. |
| Abstract: | We implement a laboratory experiment in which a principal has to decide on monitoring intensity and pay to investigate whether they are complements or substitutes. Wage level, monitoring intensity, and consequently the desired enforceable effort level are jointly determined by the maximization problem of the firm. As a result, theoretically monitoring and pay should be complements. The between-treatment variation in our experiment is qualitatively in line with the normative prediction of the model under standard assumptions. Also the subject-specific variation indicates that monitoring and pay are considered as complements. Yet, we also find evidence for reciprocal behavior. Our data analysis shows, however, that it does not pay for the principal to only rely on the reciprocity of his agents. |
| JEL: | C91 J31 J41 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100580&r=exp |
| By: | Camille Cornand (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Romain Baeriswyl (Swiss National Bank, Boersenstrasse 15, 8022 Zurich, Switzerland;) |
| Abstract: | The weight assigned to public information in Keynesian beauty contest depends on the signal precision and on the degree of strategic complementarities. This experimental study shows that the response of subjects to changes in the signal precision and in the degree of strategic complementarities is qualitatively consistent with theoretical predictions, though quantitatively weaker. The weaker subjects’ response to changes in the signal precision, however, mainly drives the weight observed in the experiment, making strategic complementarities and overreaction an issue of second order. |
| Keywords: | heterogeneous information, beauty contest, experiment, public information |
| JEL: | C92 D82 D84 E58 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1441&r=exp |
| By: | Maximilian Hoyer (University of Amsterdam, Faculty of Economics and Business, CREED, Roeterstraat 11, 1018 WB Amsterdam, The Netherlands); Nadège Bault (Université de Lyon, Lyon, F-69007, France ; CNRS, GATE Lyon St Etienne,F-69130 Ecully, France); Ben Loerakker (University of Amsterdam, Faculty of Economics and Business, CREED, Roeterstraat 11, 1018 WB Amsterdam, The Netherlands); Frans van Winden (University of Amsterdam, Faculty of Economics and Business, CREED, Roeterstraat 11, 1018 WB Amsterdam, The Netherlands) |
| Abstract: | Socially destructive behavior in a public good environment - like damaging public goods - is an underexposed phenomenon in economics. In an experiment we investigate whether such behavior can be influenced by the very nature of an environment. To that purpose we use a Fragile Public Good (FPG) game which puts the opportunity for destructive behavior (taking) on a level playing field with constructive behavior (contributing). We find substantial evidence of destructive decisions, sometimes leading to sour relationships characterized by persistent hurtful behavior. While positive framing induces fewer destructive decisions, shifting the selfish Nash towards minimal taking doubles its share to more than 20%. Female subjects are found to be more inclined to use destructive decisions. Finally, subjects’ social value orientation turns out to be partly predictive of (at least initial) destructive choices. |
| Keywords: | public good, destructive behavior, spite, relationship, laboratory experiment |
| JEL: | C9 H4 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:gat:wpaper:1429&r=exp |
| By: | Astebro , Thomas; Santos-Pinto , Luís |
| Abstract: | The authors propose a task for eliciting attitudes towards risk that is close to real world risky decisions which typically involve gains and losses. The task consists of accepting or rejecting gambles that provide a gain with probability p and a loss with probability 1 p. The authors employ finite mixture models to uncover heterogeneity in risk preferences and find that (i) behavior is heterogeneous, with slightly less than one half of the subjects behaving as expected utility maximizers, (ii) for the others, reference-dependent models perform better than those where subjects derive utility from final outcomes, (iii) models with sign dependent decision weights perform better than those without, and (iv) there is no evidence for loss aversion. The procedure is sufficiently simple so that it can be easily used in field or lab experiments where risk elicitation is not the main experiment. |
| Keywords: | Individual risk taking behavior; latent heterogeneity; finite mixture models; reference-dependence; loss aversion |
| JEL: | C91 D81 |
| Date: | 2014–03–28 |
| URL: | http://d.repec.org/n?u=RePEc:ebg:heccah:1042&r=exp |
| By: | Carpenter, Jeffrey P. (Middlebury College); Matthews, Peter Hans (Middlebury College); Robbett, Andrea (Middlebury College) |
| Abstract: | The theory of compensating differentials has proven difficult to test with observational data: the consequences of selection, unobserved firm and worker characteristics, and the broader macroeconomic environment complicate most analyses. Instead, we construct experimental, real-effort labor markets and offer an evaluation of the theory in a controlled setting. We study both the wage differentials that evolve between firms with varying degrees of disamenity and how these differentials are affected by worker mobility and therefore selection. Consistent with the theory, we find that riskier firms must pay significantly higher wages to attract workers. Further, when workers are mobile, they sort into firms according to their attitudes towards risk and, as a result, the compensating differential shrinks. Last, we are also able to mimic the biases associated with observational studies. |
| Keywords: | compensating differential, sorting, experiment, real effort, risk aversion, ambiguity aversion, loss aversion |
| JEL: | J31 D01 C92 |
| Date: | 2015–01 |
| URL: | http://d.repec.org/n?u=RePEc:iza:izadps:dp8820&r=exp |
| By: | Cavatorta, Elisa; Groom, Ben |
| Abstract: | We use a series of field experiments in the Palestinian Territories to explore the impact of exposure to shocks on risk, time and ambiguity preferences. We exploit the historical episode of the construction of the separation wall between the State of Israel and the West Bank as an exogenous shock to test changes in fundamental preferences. We find that the wall affects preferences: people in isolated communities are significantly more risk-tolerant and ambiguity-averse than people who never experienced the wall. While we find insignificant differences in discount rates and loss-aversion, our results show patterns of time-varying discount rates and heterogeneity across socio-economic groups. We test alternative mechanisms linking shocks to changes in behaviour. Our evidence suggests that observed differences in risk and ambiguity are not the result of changes in subjective beliefs, learning or emotional reactions, but they are consistent with the hypothesis of a preference shift. This study suggests that large adverse shocks may have long-lasting consequences on individual decision-making with potential effects on savings, investments and consumption patterns. |
| JEL: | C93 O12 D81 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100592&r=exp |
| By: | Noussair, Charles N.; Offerman, Theo; Suetens, Sigrid; Van de Ven, Jeroen; Van Leeuwen, Boris; Van Veelen, Matthijs |
| Abstract: | Evolutionary explanations of anger as a commitment device hinge on two key assumptions. The first is that it is observable ex-ante whether someone will get angry when feeling badly treated. The second is that anger is associated with destructive behavior. We test the validity of these assumptions by studying whether observers are able to detect who rejected a low offer in an ultimatum game. We collected photos and videos of responders in an ultimatum game before they were informed about the game that they would be playing. We showed pairs of photos or videos, consisting of one responder who rejected a low offer and one responder who accepted a low offer, to an independent group of observers. We find support for the two assumptions. Observers do better than chance at detecting who rejected the low offer, especially for rejecters who get angry at low offers. |
| Keywords: | anger, commitment, ultimatum game, laboratory experiment |
| Date: | 2014–11 |
| URL: | http://d.repec.org/n?u=RePEc:tse:iastwp:28909&r=exp |
| By: | Zaby, Alexandra; Güth, Werner; Pull, Kerstin; Stadler, Manfred |
| Abstract: | Based on the acquiring-a-company game of Samuelson and Bazerman (1985), we theoretically and experimentally analyze the acquisition of a firm. Thereby we compare cases of symmetrically and asymmetrically informed buyers and sellers. This setting allows us to predict and test the effects of information disclosure as prescribed by two recently implemented directives of the European Union, the Transparency and the Takeover-Bid Directive. Our theoretical and experimental results suggest a welfare-enhancing effect of compulsory information disclosure. Hence, the EU Transparency and the EU Takeover-Bid Directive should both be welfare enhancing. |
| JEL: | C91 D82 D61 |
| Date: | 2014 |
| URL: | http://d.repec.org/n?u=RePEc:zbw:vfsc14:100520&r=exp |