nep-exp New Economics Papers
on Experimental Economics
Issue of 2015‒02‒22
forty papers chosen by

  1. Competition for status creates superstars: An experiment on public good provision and network formation By Offerman, Theo; Schram, Arthur; Van Leeuwen, Boris
  2. Sharing as Risk Pooling in a Social Dilemma Experiment By Todd L. Cherry; E. Lance Howe; James J. Murphy
  3. Teams Contribute More and Punish Less By Thum, Marcel; Auerswald, Heike; Schmidt, Carsten; Torsvik, Gaute
  4. The curse of knowledge increases self-selection into competition: Experimental evidence By Danz, David
  5. Corruption, Norm Violation and Decay in Social Capital By Ritwik Banerjee
  6. Who Is Coming to the Artefactual Field Experiment? Participation Bias among Chinese Rural Migrants By Frijters, Paul; Kong, Tao Sherry; Liu, Elaine M.
  7. Do employers trust workers too little? An experimental study of trust in the labour market By Paolo Falco; Stefano A. Caria
  8. Who Is Coming to the Artefactual Field Experiment? Participation Bias among Chinese Rural Migrants By Paul Frijters; Tao Sherry Kong; Elaine M. Liu
  9. The Social Value of Transparency and Accountability: Experimental Evidence from Asymmetric Public Good Games By Nicklisch, Andreas; Khadjavi, Menusch
  10. Collective Action: Experimental Evidence By María Victoria Anauati; Brian Feld; Sebastian Galiani; Gustavo Torrens
  11. How do Non-Monetary Performance Incentives for Physicians Affect the Quality of Medical Care? A Laboratory Experiment By Kairies-Schwarz, Nadja; Krieger, Miriam
  12. Networks and Manufacturing Fims in Africa: Results from a Randomized Field Experiment By Marcel Fafchamps; Simon Quinn
  13. Unequal Incentives and Perceived Fairness in Groups By Gerald Eisenkopf
  14. Measuring Ambiguity Aversion: A Systematic Experimental Approach By Wilde, Christian; Krahnen, Jan Pieter; Ockenfels, Peter
  15. Identification of Altruism among Team Members: Empirical Evidence from the Classroom and Laboratory By Griffiths, Barry
  16. Do Self-Determined Wages Really Improve Employees Performance? Evidence from a Randomized Field Experiment By Jeworrek, Sabrina; Mertins, Vanessa
  17. Endogenous Social Identity and Group Choice By Mechtel, Mario; Hett, Florian; Kröll, Markus
  18. Heterogeneity in Rent-Seeking Contests with Multiple Stages: Theory and Experimental Evidence By Stracke, Rudi; Höchtl, Tanja; Kerschbamer, Rudolf; Sunde, Uwe
  19. The Power of Transparency: Information, Identification Cards and Food Subsidy Programs in Indonesia By Abhijit Banerjee; Rema Hanna; Jordan C. Kyle; Benjamin A. Olken; Sudarno Sumarto
  20. The Price of Empowerment: Experimental Evidence on Land Titling in Tanzania By Stefan Dercon; Daniel Ayalew; Klaus Deininger; Justin Sanefur; Andrew Zeitlin
  21. Eliciting utility curvature and time preference By Cheung, Stephen L.
  22. Health information, treatment, and worker productivity: Experimental evidence from Malaria testing and treatment among Nigerian sugarcane cutters By Andrew Dillon; Jed Friedman; Pieter Serneels
  23. The dynamics of coalition formation - a multilateral bargaining experiment with free timing of moves By Tremewan, James; Vanberg, Christoph
  24. Two Sides of the Same Rupee? Comparing Demand for Microcredit and Microsaving in a Framed Field Experiment in Rural Pakistan By Marcel Fafchamps; Simon Quinn; Uzma Afzal; Giovanna d'Adda; Farah Said
  25. The Winner’s Curse: Conditional Reasoning & Belief Formation By Koch, Christian; Penczynski, Stefan P.
  26. Curbing Adult Student Attrition: Evidence from a Field Experiment By Raj Chande; Michael Luca; Michael Sanders; Xian-Zhi Soon; Oana Borcan; Netta Barak-Corren; Elizabeth Linos; Elspeth Kirkman; Sean Robinson
  27. Conspicuous Consumption and Peer Effects among the Poor: Evidence From a Field Experiment By Christopher P. Roth
  28. The CCCTB option an experimental study By Keser, Claudia; Kimpel, Gerrit; Oestreicher, Andreas
  29. Buy-it-Now Prices in eBay Auctions The Field in the Lab By Ivanova-Stenzel, Radosveta; Grebe, Tim; Kröger, Sabine
  30. Gender Effects, Culture and Social Influence in the Dictator Game: An Italian Study By Niall O'Higgins; Arturo Palomba; Patrizia Sbriglia
  31. Measuring Ambiguity Preferences By Schröder, David; Cavatorta, Elisa
  32. Deception Choice and Audit Design - The Importance of Being Earnest By Lohse, Tim; Konrad, Kai A.; Qari, Salmai
  33. Price Competition in an Inflationary Environment By Dürsch, Peter; Eife, Thomas
  34. Does Money Impede Convergence? By John D Hey; Daniela Di Cagno
  35. Behaving kindly, talking about it, and being rewarded for it?! By Walkowitz, Gari; Gürtler, Oliver; Wiesen, Daniel
  36. Cooperation and Trustworthiness in Repeated Interaction By Glogowsky, Ulrich; Cagala, Tobias; Rincke, Johannes; Grimm, Veronika
  37. The Desire to Influence Others By Schröder, Marina; Sadrieh, Abdolkarim
  38. Risk taking for oneself and others: A structural model approach By Vieider, Ferdinand; Villegas-Palacio, Clara; Martinsson, Peter; Mejía, Milagros
  39. Do investors rely too much on public information to be justified by its accuracy? An experimental study By Alfarano, Simone; Camacho, Eva; Morone, Andrea
  40. To pay or not to pay? Evidence from whole blood donations in Germany By Niesse-Ruenzi, Alexandra; Weber, Martin; Becker, David Michael

  1. By: Offerman, Theo; Schram, Arthur; Van Leeuwen, Boris
    Abstract: We investigate a mechanism that facilitates the provision of public goods in a network formation game. We show how competition for status encourages a core player to realize efficiency gains for the entire group. In a laboratory experiment we systematically examine the effects of group size and status rents. The experimental results provide very clear support for a competition for status dynamic that predicts when, and if so which, repeated game equilibrium is reached. Two control treatments allow us to reject the possibility that the supergame effects we observe are driven by social motives.
    JEL: C91 D85 H41
    Date: 2014–12
  2. By: Todd L. Cherry (Appalachian State University, CICERO Center for International Climate and Environmental Research); E. Lance Howe (University of Alaska Anchorage); James J. Murphy (University of Alaska Anchorage, Nankai University, Chapman University)
    Abstract: In rural economies with missing or incomplete markets, idiosyncratic risk is frequently pooled through informal networks. Idiosyncratic shocks, however, are not limited to private goods but can also restrict an individual from partaking in or benefiting from a collective activity. In these situations, a group must decide whether to provide insurance to the affected member. In this paper, we describe results of a laboratory experiment designed to test whether a simple sharing institution can sustain risk pooling in a social dilemma with idiosyncratic risk. We test whether risk can be pooled without a commitment device and, separately, whether effective risk pooling induces greater cooperation in the social dilemma. We find that even in the absence of a commitment device or reputational considerations, subjects voluntarily pool risk thereby reducing variance in individual earnings. In spite of effective risk pooling, however, cooperation in the social dilemma is unaffected.
    Keywords: collective action; experimental economics; idiosyncratic risk; income smoothing; insurance; lab experiment; public goods; risk pooling; resource sharing; social dilemma; social-ecological systems; team production
    JEL: C92 D81 O13 Q20
    Date: 2015
  3. By: Thum, Marcel; Auerswald, Heike; Schmidt, Carsten; Torsvik, Gaute
    Abstract: Many decisions in politics and business are made by teams rather than by single individuals. In contrast, economic models typically assume an individual rational decision maker. A rapidly growing body of (experimental) literature investigates team decisions in different settings. We study team decisions in a public goods contribution game with a costly punishment option and compare it to the behavior of individuals in a laboratory experiment. We also consider different team decision-making rules (unanimity, majority). We find that teams contribute significantly more and punish less than individuals, regardless of the team decision rule. Overall, teams yield higher payoffs than individuals.
    JEL: C72 C92 H41
    Date: 2014
  4. By: Danz, David
    Abstract: The psychology literature provides ample evidence that people have difficulties taking the perspective of less informed others. This paper presents a controlled experiment showing that this "curse of knowledge" can cause comparative overconfidence and overentry into competition. In a broader context, the results provide an explanation for the overconfidence of nascent entrepreneurs and the substantial rate of failure among new businesses.
    Keywords: curse of knowledge,hindsight bias,information projection,overconfidence,sorting,incentive schemes,competition,beliefs,experiments
    JEL: C91 D80 D82 D83 D84
    Date: 2014
  5. By: Ritwik Banerjee (Department of Economics and Business, Aarhus University, Denmark)
    Abstract: The paper studies the interplay between corruption and social trust, using data from a lab experiment. Subjects play either a harassment bribery game or a strategically identical but differently framed ultimatum game, followed by a trust game. In the second phase, the trust game is followed by the bribery game. We also use the design to study the association between behavior in trust game and response to the World Value Survey trust question. Our results show that a) there is a negative spillover effect of corruption on trust, but not vice-versa, and the effect increases with a decrease in social appropriateness norm of the bribe demand; b) lower trust in the bribery game treatment is explained by lower expected return on trust; c) surprisingly, for both the treatments, social appropriateness norm violation engenders the decay in trust through its adverse effect on belief about trustworthiness; d) the WVS-trust question captures expectations about others’ trustworthiness, however, response to the WVS-trust is stable while behavior in the trust game is susceptible to short term fluctuations.
    Keywords: Corruption, Social Capital, Social Norm, Trust Games
    JEL: C91 C92 D03
    Date: 2015–11–02
  6. By: Frijters, Paul (University of Queensland); Kong, Tao Sherry (Peking University); Liu, Elaine M. (University of Houston)
    Abstract: In this paper, we compare participants in an artefactual field experiment in urban China with the survey population of migrants from which they were recruited. The experimental participants were more educated, more likely to lend money to friends, and worked fewer hours than the general population. They differ significantly from non-participants in terms of regression coefficients, such as the effects of wealth and marital status on the probability of being self-employed and distance migrated. We thus find that there was selection into our experiments on the basis of both observable characteristics and on unobserved differences in behavioral relations.
    Keywords: artefactual field experiment, participation bias, rural migrants
    JEL: C81 C93 C90
    Date: 2015–02
  7. By: Paolo Falco; Stefano A. Caria
    Abstract: We conduct a field experiment to investigate employers' trust in workers.  A sample of real entrepreneurs and workers from urban Ghana are respectively assigned to the roles of employers and employees.  Employers have the option to hire (trust) an employee, who can in turn choose whether to exert effort (trustworthiness) in the real-effort task.  By comparing employers' expectations to workers' revealed trustworthiness, we are able to detect potential misperceptions leading to sub-optimal hiring.  We further devise two randomized treatments to test for the existence of expectation bias against specific workers categories and estimate the elasticity of employers' beliefs with respect to new information.  We find that employers significantly underestimate workers' trustworthiness and this reduces their profit.  Employees are aware of employers' sub-optimal trust.  Expectations are largely inelastic with respect to news and negative signals have a strong (downward) effect than positive ones.  Our results suggest that raising employers' expectations would have a strong impact on hiring.
    Keywords: trust, trustworthiness, expectations, effort, hiring, microenterprise, learning, discrimination, experiment, African labour markets
    JEL: J23 J71 O15 C9
    Date: 2014–01–15
  8. By: Paul Frijters; Tao Sherry Kong; Elaine M. Liu
    Abstract: In this paper, we compare participants in an artefactual field experiment in urban China with the survey population of migrants from which they were recruited. The experimental participants were more educated, more likely to lend money to friends, and worked fewer hours than the general population. They differ significantly from non-participants in terms of regression coefficients, such as the effects of wealth and marital status on the probability of being self-employed and distance migrated. We thus find that there was selection into our experiments on the basis of both observable characteristics and on unobserved differences in behavioral relations.
    JEL: C81 C90 C93
    Date: 2015–02
  9. By: Nicklisch, Andreas; Khadjavi, Menusch
    Abstract: Transparency and accountability are often regarded as crucial for good governance and the efficient organization of public affairs. To systematically explore the impact of transparency and accountability on cooperation, we conduct a series of laboratory experiments on a variation of the public good game with agents that differ in their action space. While some agents may only contribute to the public good, one (special) agent has the additional option to exploit the existing public good stock. In the absence of a sanction mechanism, we identify a surprising, yet intuitive effect: transparency backfires as special agents extract significantly more resources. Introducing a peer punishment mechanism sustains contributions to the public good if types or actions of agents are made transparent. When actions are not known we however identify a stigmatization effect for the special agent as he receives substantially more peer punishment while contributions by other agents do not change. Finally full transparency of all agents actions creates full accountability as it allows targeted punishment and thereby increases contributions by all agents.
    JEL: H41 C91 C92
    Date: 2014
  10. By: María Victoria Anauati; Brian Feld; Sebastian Galiani; Gustavo Torrens
    Abstract: We conducted a laboratory experiment to test the comparative statics predictions of a new approach to collective action games based on the method of stability sets. We find robust support for the main theoretical predictions. As we increase the payoff of a successful collective action (accruing to all players and only to those who contribute), the share of cooperators increases. The experiment also points to new avenues for refining the theory. We find that, as the payoff of a successful collective action increases, subjects tend to upgrade their prior beliefs as to the expected share of cooperators. Although this does not have a qualitative effect on comparative static predictions, using the reported distribution of beliefs rather than an ad hoc uniform distribution reduces the gap between theoretical predictions and observed outcomes. This finding also allows to decompose the mechanism that leads to more cooperation into a ”belief effect” and a ”range of cooperation effect”.
    JEL: C92 D72 H0 O0
    Date: 2015–02
  11. By: Kairies-Schwarz, Nadja; Krieger, Miriam
    Abstract: In recent years, several countries have introduced non-monetary performance incentives for health care providers to improve the quality of medical care. Evidence on the effect of non-monetary feedback incentives, predominantly in the form of public quality reporting, on the quality of medical care is, however, ambiguous. This is often because empirical research to date has not succeeded in distinguishing between the effects of monetary and non-monetary incentives, which are usually implemented simultaneously. We use a controlled laboratory experiment to isolate the impact of non-monetary performance incentives: subjects take on the role of physicians and make treatment decisions for patients, receiving feedback on the quality of their treatment. The subjects decisions result in payments to real patients. By giving either private or public feedback we are able to disentangle the motivational effects of self-esteem and social reputation. Our results reveal that public feedback incentives have a significant and positive effect on the quality of care that is provided. Private feedback, on the other hand, has no impact on treatment quality. These results hold for medical students and for other students.
    JEL: I11 C91 L15
    Date: 2014
  12. By: Marcel Fafchamps; Simon Quinn
    Abstract: We run a novel field experiment to link managers of African manufacturing firms.  The experiment features exogenous link formation, exogenous seeding of information and exogenous assignment to treatment and placebo.  We study the impact of the experiment on firm business practices outside of the lab.  We find that the experiment successfully created new variation in social networks.  We find some limited evidence of diffusion of management practices, particularly in terms of firm formalisation and innovation.  Such diffusion appears to be a combination of diffusion of innovation and simple imitation.
    JEL: D22 L26 O33
    Date: 2014–06–19
  13. By: Gerald Eisenkopf (Department of Economics, University of Konstanz, Germany; National Institute for Health and Welfare (THL), P.O. Box 30, 00271 Helsinki, Finland)
    Abstract: In many groups heterogeneous incentives induce people to make unequal contributions to a common pool. This paper studies whether people consider the random assignment of such unequal incentives as unequal opportunities and demand more egalitarian distributions of the pool. The aggregate experimental results show that low contributors do not make such consideration if their incentive scheme provided opportunities for private gains in case of low contributions. When incentives induce lower contributions in order to avoid private losses, some people increase their claim but these increases are lower than in the case of unequal opportunities. Meanwhile high contributors reward low contributors if they do not follow incentives.
    Keywords: Distributive Justice, Unequal Incentives, Experiment, Entitlements
    JEL: C78 C91 D03 D31 M52
    Date: 2015–01–29
  14. By: Wilde, Christian; Krahnen, Jan Pieter; Ockenfels, Peter
    Abstract: This paper provides a systematic analysis of individual attitudes towards ambiguity, based on laboratory experiments. The design of the analysis allows to capture individual behavior across various levels of ambiguity, ranging from low to high. Attitudes towards risk and attitudes towards ambiguity are disentangled, providing pure measures of ambiguity aversion. Ambiguity aversion is captured in several ways, i.e. as a discount factor net of a risk premium, and as an estimated parameter in a generalized utility function. We find that ambiguity aversion varies across individuals, and with the level of ambiguity, being most prominent for intermediate levels. Around one third of subjects show no aversion, one third show maximum aversion, and one third show intermediate levels of ambiguity aversion, while there is almost no ambiguity seeking. While most theoretical work on ambiguity builds on maxmin expected utility, our results provide evidence that MEU does not adequately capture individual attitudes towards ambiguity for the majority of individuals. Instead, our results support models that allow for intermediate levels of ambiguity aversion. Moreover, we find risk aversion to be statistically unrelated to ambiguity aversion on average. Taken together, the results support the view that ambiguity is an important and distinct argument in decision making under uncertainty.
    JEL: D81 C91 D03
    Date: 2014
  15. By: Griffiths, Barry
    Abstract: It is difficult to identify acts that are purely altruistic, and do not have some level of egoism or self-interest involved. By considering situations where team members seemingly have nothing to gain by the way they distribute points to others with regard to peer evaluation, and where their acts of giving are anonymous, can never be verified, and cannot guarantee reciprocity, we see that there is still significant evidence of altruism, which we then confirm using laboratory experiments.
    Keywords: Altruism, individual behavior, group behavior, laboratory experiments, reciprocity
    JEL: A13 C91 C92 D03 D63 D64 D71
    Date: 2010–05–07
  16. By: Jeworrek, Sabrina; Mertins, Vanessa
    Abstract: Recent laboratory evidence suggests that employees who have the extraordinary right to self-determine their wages perform better. By conducting a natural field experiment, we aim to test whether this policy actually has the predicted positive effects in a real-labor market. Employees were hired to file business reports for a half-day job. After one hour of working time, a random sample of employees was allowed to choose their own wage, whereas another control group was denied this right, while being paid the same wages as the first group. We find that performance is about 12% higher when employees self-determine their wage, whereas self-determined wages are about 20% higher . A last treatment group differed from the former only in that employees were aware that others have been granted this extraordinary right. Surprisingly, we observe here no performance decrease. An online follow-up survey reveals that the surprisingly high level of performance seems to be driven by individuals scoring high on agreeableness and wanting to prove to be trustworthy.
    JEL: C93 J33 M52
    Date: 2014
  17. By: Mechtel, Mario; Hett, Florian; Kröll, Markus
    Abstract: This paper tests social identity theory with respect to individuals' self-identification behavior. We report results from a laboratory experiment in which subjects choose their group membership, which is interpreted as decision to identify with the respective group. Inducing a trade-off between monetary payoffs and different group identification choices we elicit the respective implicit valuations of identifying with different groups. The variation of these valuations is in line with the predictions from social identity theory: Subjects have a higher valuation for identifying with groups with a higher status and with groups to which they have a smaller social distance. Finally, we show that this behavior predicts individual out-group discrimination in allocation decisions, which has previously been shown to be associated with social identity. Overall our results provide strong support for the notion that individuals optimize behavior with respect to social identity.
    JEL: D01 D03 C90
    Date: 2014
  18. By: Stracke, Rudi; Höchtl, Tanja; Kerschbamer, Rudolf; Sunde, Uwe
    Abstract: This paper investigates how heterogeneity in contestants' investment costs affects the competition intensity in a dynamic elimination contest. Theory predicts that the absolute level of investment costs has no effect on the competition intensity in homogeneous interactions. Relative cost differences in heterogeneous interactions, however, reduce equilibrium expenditures. Evidence from lab experiments for treatments with homogeneous participants is qualitatively in line with the theoretical prediction. The effect of cost differences on expenditures is positive rather than negative, however, in all heterogeneous treatments.
    JEL: C72 D72 C99
    Date: 2014
  19. By: Abhijit Banerjee; Rema Hanna; Jordan C. Kyle; Benjamin A. Olken; Sudarno Sumarto
    Abstract: Can governments improve aid programs by providing information to beneficiaries? In our model, information can change how much aid citizens receive as they bargain with local officials who implement national programs. In a large-scale field experiment, we test whether mailing cards with program information to beneficiaries increases their subsidy from a subsidized rice program. Beneficiaries received 26 percent more subsidy in card villages. Ineligible households received no less, so this represents lower leakage. The evidence suggests that this effect is driven by citizen bargaining with local officials. Experimentally adding the official price to the cards increased the subsidy by 21 percent compared to cards without price information. Additional public information increased higher-order knowledge about eligibility, leading to a 16 percent increase in subsidy compared to just distributing cards. In short, increased transparency empowered citizens to reduce leakages and improve program functioning.
    JEL: D73 I38 O12
    Date: 2015–02
  20. By: Stefan Dercon; Daniel Ayalew; Klaus Deininger; Justin Sanefur; Andrew Zeitlin
    Abstract: We report on a randomized field experiment using price incentives to address both economic and gender inequality in land tenure formalization.  During the 1990s and 2000s, nearly two dozen African countries proposed de jure land reforms extending access to formal, freehold land tenure to milions of poor households.  Many of these reforms stalled.  Titled land remains the de facto preserve of wealthy households and, within householsd, men.  Beginning in 2010, we tested whether price instruments alone can generate greater inclusion by offering formal titles to residents of a low-income, unplanned settlement in Dar es Salaam at a range of subsidized prices, as well as additional price incentives to include women as owners or co-owners of household land.  Estimated price elasticities of demand confirm that prices - rather than other implementation failures or features of the titling regime - are a key obstacle to broader inclusion in the land registry, and that some decree of pro-poor price discrimination is justified even from a narrow budgetary perspective.  In terms of gender inequality, we find that even small price incentives for female co-titling achieve almost complete gender parity in land ownership with no reduction in demand.
    Keywords: land titling, formalization, gender, field experiment, Tanzania
    JEL: J16 K11 O12 O18 Q15
    Date: 2014–06–05
  21. By: Cheung, Stephen L.
    Abstract: In both standard and behavioral theory, as well as experimental procedures to elicit time preference, it is commonly assumed that a single utility function is used to evaluate payoffs both under risk and over time. I introduce a novel experimental design to examine this assumption, by transposing the well-known Holt-Laury risk preference experiment from state-payoff space into time-dated payoff space. I find that the curvature of utility elicited directly from choices over time is significantly concave, but far closer to linear than utility elicited under risk. As a result, the effect of correcting discount rates for this curvature is modest.
    Keywords: Risk preference, time preference, measurement of utility, discounted utility, choice list.
    Date: 2015–01
  22. By: Andrew Dillon; Jed Friedman; Pieter Serneels
    Abstract: Agricultural and other physically demanding sectors are important sources of growth in developing countries but prevalent diseases such as malaria adversely impact the productivity, labor supply, and occupational choice of workers in these sectors by reducing physical capacity.  This study identifies the impact of malaria on worker earnings, labor supply, and daily productivity by randomizing the temporal order at which piece-rate workers at a large sugarcane plantation in Nigeria are offered malaria testing and treatment.  The results indicate a significant and substantial intent to treat effect of the intervention - the offer of a workplace based malaria testing and treatment program increases worker earnings by approximately 10% over the weeks following the mobile clinic visit.  The study further investigates the effect of health information by contrasting program effects by workers revealed health status.  For workers who test positive for malaria, the treatment of illness increases labor supply, leading to higher earnings.  For workers who test negative, and especially for those workers most likely to be surprised by the healthy diagnosis, the health information also leads to increased earnings via increased productivity.  Possible mechanisms for this response include selection into higher return occupations as a result of changes in the perceived cost of effort.  A model of the worker labor decision that includes health perceptions in the decisions to supply effort suggests that, in endemic settings with poor quality health services, inaccurate health perceptions may lead workers to misallocate labor thus resulting in sub-optimal production and occupational choice.  The results underline the importance of medical treatment but also of access to improved information about one's health status, as the absence of either may lead workers to deliver lower than optimal effort levels in lower return occupations.
    Keywords: malaria, labor supply, labor productivity, randomized experiment
    JEL: I12 J22 J24 O12
    Date: 2014–03–02
  23. By: Tremewan, James; Vanberg, Christoph
    Abstract: We experimentally study behavior in a finitely repeated coalition formation game played in real time. Subjects interact in groups of three, bargaining over the distribution of payments which occur at regular time intervals. During a given interval, payments occur if and only if a majority is in agreement about their allocation. Aside from these rules, we purposefully impose little structure on the bargaining process. We investigate the frequency and stability of different types of agreements, as well as transitions between them. The most frequent agreement is an equal split between two players, leaving the third with nothing. The most stable is the three-way equal split. Transitions between agreements are frequent and generally consistent with myopic payoff maximization. We find evidence that both fairness concerns and risk aversion may explain the prevalence of the three-way equal split, and that loyalty can play a role in cementing coalitions.
    Keywords: Bargaining; group choice; experiments; coalition formation
    Date: 2015–02–10
  24. By: Marcel Fafchamps; Simon Quinn; Uzma Afzal; Giovanna d'Adda; Farah Said
    Abstract: Standard models often predict that people should either demand to save or demand to borrow, but not both.  We hypothesise instead that saving and borrowing among microfinance clients are substitutes, satisfying the same underlying demand: for a regular schedule of deposits and a lump-sum withdrawal.  We test this using a framed field experiment among women participating in group lending arrangements in rural Pakistan.  The experiment - inspired by the rotating structure of a ROSCA - involves randomly offering credit products and savings products to the same subject pool.  We find high demand both for credit products and for savings products, with the same individuals often accepting both a credit product and a savings product over the three experiment waves.  This behavior can be rationalised by a model in which individuals prefer lump-sum payments (for example, to finance a lumpy investment), and in which individuals struggle to hold savings over time.  We complement our experimental estimates with a structural analysis, in which different 'types' of participants face different kinds of constraints.  Our structural framework rationalises the behaviour of 75% of participants; of these 'rationalised' participants, we estimate that two-thirds have high demand for lump-sum payments coupled with savings difficulties.  These results imply that the distinction between microlending and microsaving may be largely illusory; participants value a mechanism for regular deposits and lump-sum payments, whether that is structured in the credit or the debt domain.
    Date: 2015–02–05
  25. By: Koch, Christian; Penczynski, Stefan P.
    Abstract: We investigate the relevance of conditional reasoning and belief formation for the occurrence of the winner’s curse with the help of two experimental manipulations. First, we compare results from a very simple common-value auction game with results from a transformed version of this game that does not require any conditioning on future events. In human opponent settings, we observe significant differences in behavior across the two games. Second, we investigate subjects’ behavior when they face naïve computerized opponents and after they have faced them. We find that both strong and weak assistance in belief formation changes subjects’ play significantly in the auction game. Overall, the results suggest that the difficulty of conditioning on future events is at least as important in explaining frequent occurrences of the winner’s curse as is the challenge to form beliefs.
    Keywords: Auctions , Winner’s curse , Conditional Reasoning , Beliefs
    JEL: D44 D81 D82
    Date: 2015
  26. By: Raj Chande (University of Bristol); Michael Luca (Harvard Business School, Negotiation, Organizations & Markets Unit); Michael Sanders (Harvard Kennedy School of Government); Xian-Zhi Soon (Behavioural Insights Team); Oana Borcan (University of Gothenburg); Netta Barak-Corren (Harvard Law School); Elizabeth Linos (Harvard Kennedy School of Government); Elspeth Kirkman (Behavioural Insights Team); Sean Robinson (Behavioural Insights Team)
    Abstract: Roughly 20% of adults in the OECD lack basic numeracy and literacy skills. In the UK, many colleges offer fully government subsidized adult education programs to improve these skills. Constructing a unique dataset consisting of weekly attendance records for 1179 students, we find that approximately 25% of learners stop attending these programs in the first ten weeks and that average attendance rates deteriorate by 20% in that time. We implement a large?scale field experiment in which we send encouraging text messages to students. Our initial results show that these simple text messages reduce the proportion of students that stop attending by 36% and lead to a 7% increase in average attendance relative to the control group. The effects on attendance rates persist through the three weeks of available data following the initial intervention.
    Keywords: Behavioral Economics, Field Experiment, Education, Adult Education
    Date: 2015–02
  27. By: Christopher P. Roth
    Abstract: I use a randomised conditional cash transfer program from Indonesia to provide evidence on peer effects in consumption of poor households.  I combine this with consumption visibility data from Indonesia to examine whether peer effects in consumption differ by a good's visibility.  In line with a model of conspicuous consumption, I find that the expenditure share of visible (nonvisible) goods rises (falls) for untreated households in treated sub-districts, whose reference group visible consumption is exogeneously increased.  Finally, I provide evidence on the mechanisms underlying the estimated spillovers using data on social interactions and social punishment norms.  In line with Veblen's (1899) claim that conspicuous consumption is more prevalent in societies with less social capital, I show that the peer effects in visible goods are larger in villages and for households with lower levels of social activities.
    Keywords: Conspicuous Consumption, Peer Effects, Relative Concerns, Spillovers, Social Interactions, Social Norms
    JEL: D12 C21 I38
    Date: 2015–02–04
  28. By: Keser, Claudia; Kimpel, Gerrit; Oestreicher, Andreas
    Abstract: The objective of this paper is to look into the probability that, given the choice, corporate groups would opt for taxation on a consolidated basis. Consolidation would allow them to offset losses crossborder but remove the opportunity to exploit international tax-rate differentials between entities via transfer pricing. We present a laboratory experiment in which we investigate to what extent a corporation would be inclined to take up the consolidation option and how this would impact on the corporation s location of investment and its transfer pricing activities involving locations outside the consolidated group. We use a 2-by-2 treatment design with two levels of tax-rate differential between two investment locations, and two different remuneration functions allowing the participants to act as owners or managers of a company.
    JEL: C91 H25 M41
    Date: 2014
  29. By: Ivanova-Stenzel, Radosveta; Grebe, Tim; Kröger, Sabine
    Abstract: In eBay s Buy-it-Now auctions sellers can post prices at which buyers can purchase a good prior to an auction. We study how sellers set Buy-it-Now prices when buyers have independent private values for a single object for sale. We test the predictions of a model by combining the real auction environment (eBay auction platform and eBay traders) with the techniques of lab experiments. We observe that the eBay auction format supports deviations from truthful bidding leading to auction prices below those expected in second price auctions. Our proposed extension of the model results not only in a better fit of the data but provides new predictions to test. We find the information that is available on eBay is correlated with the level that eBay auction prices deviate from prices based on true value bidding. Sellers adjust their Buy-it-Now prices according to this information in the direction predicted by the model. They increase their BIN price when facing a population of more experienced buyers, when observing a higher number of submitted bids or more last-minute bidding from at least one bidder. More experienced sellers also ask for higher BIN prices.
    JEL: C91 D44 D82
    Date: 2014
  30. By: Niall O'Higgins; Arturo Palomba; Patrizia Sbriglia
    Abstract: There is little consensus on whether women are more generous than men, since some research results indicate a higher propensity to giving of female dictators, whilst some others indicate the opposite. Two explanations have been put forward. According to the first one, women are more generous than men and the conflicting results are due to the way preferences are elicited (Eckel and Grossman, 2002), since women are more sensitive to “social cues” and their preferences are more “malleable” (Croson and Gneezy, 2009). According to the second one, the institutional culture and the role women have in society are key elements in shaping gender differences in preferences. In fact, in matrilineal societies (Gong et al.; 2014; Gneezy et al.; 2009), women are self-oriented, more competitive and less generous than men, since they have an important role as economic decision makers in the family and the society. We test these alternative hypotheses running Dictators experiments in Italy, a western country with a matrilineal culture, introducing – at the same time- social influence in the design. We find more support to the hypothesis on the cultural role in shaping preferences, rather than the effects of social influence.
    Keywords: social influence, gender, experiments.
    JEL: C90 C91
  31. By: Schröder, David; Cavatorta, Elisa
    Abstract: Ambiguity aversion has shown to be economically relevant and has been proposed as an explanation for many phenomena in economics and fi nance. While the literature has suggested a large variety of elicitation methods to measure ambiguity preferences, their consistency and reliability it is rarely evaluated. This is the fi rst study that systematically analyses the consistency of individual ambiguity preferences elicited using a variety of incentivized tasks, non-incentivized thought experiments and survey questions. We fi nd a high degree of aggregate consistency across elicitation methods, but large discrepancies in degrees of individual consistency in pair-wise tasks comparisons. Finally, the study identi es a set of non-incentivized tasks that predict ambiguity attitudes elicited experimentally which may serve as a viable alternative when running laboratory experiments is unfeasible.
    JEL: C91 C81 D01
    Date: 2014
  32. By: Lohse, Tim; Konrad, Kai A.; Qari, Salmai
    Abstract: We study deception choices and deception detection in a tax compliance experiment. We find large systematic differences in individual deception abilities. Tax payers are conscious about their own deception abilities. The empirical outcomes are in line with a theory suggesting that tax payers make their choices whether to underreport or report truthfully on the basis of their own deception ability. Tax payers with high deception ability are more likely to underreport. This selection effect is stronger if the fines for underreporting are higher. These results provide an (additional) reason why random audits are superior to audits based on discretionary choice.
    JEL: H31 K42 C91
    Date: 2014
  33. By: Dürsch, Peter; Eife, Thomas
    Abstract: A constant price level facilitates cooperation among firms whereas steady inflation and deflation rates lower firms' ability to cooperate. In an experimental market with price competition we show that both inflation and deflation signi cantly reduce cooperation compared to treatments with a constant price level. The diffi culties to cooperate also aff ect prices and welfare: depending on the market structure, inflation and deflation lead to signifi cantly lower real prices and higher welfare.
    JEL: C92 D43 E31
    Date: 2014
  34. By: John D Hey; Daniela Di Cagno
    Abstract: Inspired by Clower’s conjecture that the necessity of trading through money in monetised economies might hinder convergence to competitive equilibrium, and hence, for example, cause unemploment, we experimentally investigate behaviour in markets where trading has to be done through money. In order to evaluate the properties of these markets, we compare their behaviour to behaviour in markets without money, where money cannot intervene. As the trading mechanism might be a compounding factor, we investigate two kinds of market mechanism: the double auction, where bids, asks and trades take place in continuous time throughout a trading period; and the clearing house, where bids and asks are placed once in a trading period, and which are then cleared by an aggregating device. We thus have four treatments, the pairwise combinations of non-monetised/monetised trading with double auction/clearing house. We find that: convergence is faster under non-monetised trading, implying that the necessity of using money to facilitate trade hinders convergence; that monetised trading is noisier than non-monetised trading; and that the volume of trade and realised surpluses are higher with the double auction than the clearing house. As far as efficiency is concerned, monetised trading lowers both informational and allocational efficiency, and while the double auction outperforms the clearing house in terms of allocational efficiency, the clearing house is marginally better than the double auction in terms of informational efficiency when trade is through money. Crucially we confirm the conjecture that inspired these experiments: that the necessity to use money intrading hinders convergence to competitive equilibrium, lowers realised trades and surpluses, and hence may cause unemployment.
    Keywords: clearing house mechanism, double auction mechanism, experimental markets, money, monetised trading, non-monetised trading.
    JEL: C92 D40 E24
    Date: 2015–02
  35. By: Walkowitz, Gari; Gürtler, Oliver; Wiesen, Daniel
    Abstract: In a principal-agent setup, we investigate agents disclosure of conflict of interests revealing deliberate or undeliberate kindness and its affect on principals reciprocal behavior. To this end, we firstly introduce a theoretical model refering to Hart and Moore (2008) which captures aspects of information revelation and reciprocal behavior. Secondly, a laboratory experiment (N = 444) tests behavioral predictions derived from the model. In the experiment, nature randomly determines the agent s choice set: either the agent can deliberately choose to behave kindly towards the principal (conflict of interest situation) or behaving kindly is the default. In any case, the agent can inform the principal about the available choice set. The principal can reciprocate the agent s behavior. We find agents to reveal their state when they are deliberately kind. Moreover, revealing a conflict of interest situation strongly triggers further reciprocal behavior by the principal. Our findings are robust towards different parameter variations. Implications are discussed.
    JEL: C91 D82 D01
    Date: 2014
  36. By: Glogowsky, Ulrich; Cagala, Tobias; Rincke, Johannes; Grimm, Veronika
    Abstract: Cooperation in public good provision often depends on the trustworthiness of an administrator who may reduce contributors' returns from cooperation to her own benefit, and who herself may respond to the degree of cooperation among contributors. This paper analyses the interdependencies between cooperation and trustworthiness in a repeated game that replaces the mechanical public good administration in the Public Good Game with a human administrator. We present a new approach for visualizing conditional behavior in repeated sequential games. Our approach identifies the causal effects of cooperation on trustworthiness and vice versa by combining standard methods from time-series analysis with a design based identification strategy. We find that contributors and the administrator strongly respond to each other, resulting in cooperation and trustworthiness being strongly mutually interdependent. Furthermore, cooperation and trustworthiness are rather driven by changes in cooperation than by changes in trustworthiness.
    JEL: H41 H40 H49
    Date: 2014
  37. By: Schröder, Marina; Sadrieh, Abdolkarim
    Abstract: We introduce the give-or-destroy game that allows us to fully elicit an individual s social preference schedule. We find that about one third of the population exhibits both pro-social and anti-social preferences that are independent of payoff comparisons with those who are affected. We call this type of preference a desire to influence others. The other two thirds of the population consist to almost equal parts of payoff maximizers and pro-socials. Furthermore, we find that full information and experimenter demand may increase the extent of pro-social preferences, but do not affect the extent of anti-social preferences or the distribution of social types in the population.
    JEL: A13 C90 D63
    Date: 2014
  38. By: Vieider, Ferdinand; Villegas-Palacio, Clara; Martinsson, Peter; Mejía, Milagros
    Abstract: We examine situations in which a decision maker decides for another person as well as herself under conditions of payoff equality, and compare such decisions under responsibility to individual decisions. Estimating a structural model we find that responsibility leaves utility curvature unaffected, but accentuates the subjective distortion of very small and very large probabilities for both gains and losses. This results in an accentuation of prospect theory's four-fold pattern of risk preferences under responsibility. In addition, we also find that responsibility reduces loss aversion according to some common definitions of the latter. These results serve to reconcile some of the still largely contradictory findings in the literature on decisions for oneself and others under payoff equality.
    Keywords: risk preferences,responsibility,social preferences
    JEL: C93 D03 D80 O12
    Date: 2015
  39. By: Alfarano, Simone; Camacho, Eva; Morone, Andrea
    Abstract: The theoretical approach in dealing with the aggregation of information in markets in general, and financial markets in particular considers information as an exogenous element to the system, focusing just on conditions and consequences of the efficient incorporation of information into prices. The production and acquisition of the information is, therefore, not a major focus of the theoretical as well as the empirical analysis. We take the position that the composition of the spectrum of information sources affects the behavior of the traders in the information gathering process. In this paper we will study experimentally the information aggregation process in a market as a function of the access to different sources of information, namely an imperfect, public and costless signal into a market where the participants have access to costly and imperfect private information. We observe that the release of public information provokes a crowding-out effect on the traders' information demand for private information, it keeps constant market informativeness, but significantly reduces price efficiency in aggregating information. In particular we show that traders overweight public information that dominates the market dynamics. As a policy advise we recommend that eventual reforms on the regulation of financial institutions (for instance the credit rating agencies) should account for the complex interplay between private and public information that we have identified in our experiments and give incentives to the investors (institutional and/or private) to search for alternative sources of information.
    Keywords: experiments,financial markets,private and public information,rating agencies
    JEL: C92 D82 G14
    Date: 2015
  40. By: Niesse-Ruenzi, Alexandra; Weber, Martin; Becker, David Michael
    Abstract: This paper investigates the impact of monetary incentives on whole blood donations. The analysis is based on a uniquely large database containing virtually all voluntary whole blood donations in South-West Germany from 2005 through 2009. The sample comprises several donation sites that offer (do not offer) monetary compensation. We take advantage of a natural experiment caused by the abolishment of monetary compensation at one of the donation sites. We find a sharp decrease in blood donations after the pay drop with several donors switching to a geographically close donation site that still offers monetary compensation. Our results cast doubt on the notion that monetary incentives crowd out intrinsic motivations to donate blood. Rather, they suggest that monetary incentives increase blood supply which can help to meet increasing transfusion demand due to demographic change.
    JEL: D01 D64 I18
    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.